The Planning and Environment Court’s expanded costs power was introduced in November 2012.  Since that time we have released four alerts (22 November 201216 September 201324 January 2014 and 28 August 2014) tracking decisions made under section 457 of the Sustainable Planning Act 2009 (SPA).

In this Alert, Partner David Nicholls and Associate Olivia Williamson consider two applications for costs against local government assessment managers which had refused development applications that were ultimately approved by the Court on appeal.  His Honour Judge Rackemann heard both appeals.  There was no order for costs in the first case, Altitude Corporation Pty Ltd v Isaac Regional Council (No. 2) [2014] QPEC 55, while in the second decision, Hydrox Nominees Pty Ltd v Noosa Shire Council (No. 2) [2014] QPEC 60 the appellant was awarded 85 percent of its costs against the Council.

Key points

  • Whether or not a local government may be exposed to an adverse costs order will depend on whether it acted reasonably in resisting an appeal, including whether the refusal was soundly based under the planning scheme, consistent with internal advice received and supportable by appropriate expert evidence.
  • Decisions that are contrary to a delegated officer’s advice, compounded by circumstances where a party has specifically put the Council on notice with respect to apparent weaknesses in its case and raised the prospect of an adverse costs order, may result in an order that the Council pay the costs of a proceeding.
  • Failure to accept and act upon a recommendation from an authorised representative who attends a settlement conference is likely to be a “turning point” in the exercise of the discretion to award costs.
  • To set up the prospect of obtaining a favourable costs order, consideration may be given to making a Calderbank offer, however, at a minimum, correspondence should be sent warning the other party of what are perceived to be apparent weaknesses in the party’s case and foreshadowing an application for costs.

Altitude Corporation Pty Ltd v Isaac Regional Council (No. 2)

In this case, the Council had refused an application for a development approval for material change of use to permit the development of multiple dwellings at Moranbah.  The Council was unsuccessful in defending the refusal of the application and the appellant sought its costs on the basis that it had been wholly successful in the appeal, in combination with the following factors:

  • the land was suitably zoned for the proposed use – urban zone;
  • the application was code assessable;
  • the proposal was supported by specific provisions with respect to the urban zone;
  • there was compliance with almost all of the relevant quantitative provisions of the planning scheme;
  • two of the Council’s expert witnesses (landscaping and traffic) conceded that approval with conditions was appropriate and (arguably) the reasons for refusal advanced by the Council’s town planning expert were unsupportable;
  • the Council rejected an offer to settle; and
  • the Council’s (alleged) “petulant” attitude to the subject appeal and a previous one in which a residential subdivision was approved by the Court.

While noting that it was a finely balanced matter overall, His Honour Judge Rackemann ultimately exercised his discretion in favour of the Council.  The factors which seemed to tip the balance in favour of the Council were:

  • it could not be said that at any stage the Council had no reasonable prospects;
  • the settlement offer made by the appellant was somewhat embryonic and there were changes and new information from the appellant which post-dated the offer;
  • the evidence was not sufficient to persuade the Court that the Council had acted unreasonably in resisting the appeal.

His Honour Judge Rackemann’s reasons contain the following instructive passage:

“[24]      I endorse the submission, on behalf of the appellant, to the effect that a local government in the position of the respondent ought:

(i)       not just identify issues, but assess whether they call for a refusal of the application or are matters for conditions only;

(ii)      be concerned not just with whether there is an expert which supports its position, but with whether that expert’s opinion is supportable, particularly by reference to the planning scheme, and

(iii)     keep its attitude under review having regard to information and developments which emerge in the course of the case.”

It is also noteworthy that the case involved the making of a “Calderbank” offer of settlement.  As His Honour observed,Calderbank offers are more relevant in cases where the usual costs rules in civil proceedings apply, but in the Planning and Environment Court there is no presumption that costs follow the event.  However His Honour noted that had he been otherwise minded to award costs to the appellant, “then the fact that it had earlier offered to settle on that basis would have been an important factor in considering the application for costs on an indemnity basis for the period from 1 February 2014.  In that event it would also have been relevant to explore the reasonableness of rejecting that offer in the circumstances which then applied.”[1]

It appears that His Honour’s approach to exercising the discretion involved considering and balancing all of the other relevant circumstances before considering the settlement offer.  That is logical as a settlement is only as good as the facts that underpin it.

It would seem that Calderbank offers are likely to be more relevant, in the Planning and Environment Court, in circumstances where very unreasonable conduct on the part of a party is evident, as a foundation for an application for indemnity costs.  Otherwise, correspondence warning the other party of what are perceived to be the apparent weaknesses in the party’s case and foreshadowing an application for costs appear to be just as effective.[2]

Hydrox Nominees Pty Ltd v Noosa Shire Council (No. 2)

The Noosa Shire Council refused Hydox’s development application to establish a Masters Home Improvement centre with a separate showroom on land within the Noosa Shire Business Centre.  The Council was unsuccessful in defending its decision in the Planning and Environment Court and the appellant sought its costs of the appeal.  Hydrox was successful on all but one of the issues which had been in dispute in the appeal, that issue being the level of conflict with the provisions of the planning scheme relating to development within relevant precincts of the Noosa Shire Business Centre. 

It is of some significance that in this case the Council decided to refuse the application contrary to advice it had received from its delegated planning officer who considered that there were sufficient grounds to overcome conflict with the planning scheme. It was also contrary to advice received from an independent economist who advised the Council that on balance the net community benefits likely to accrue to the Noosa region from the development of the proposed Masters were likely to outweigh any conflicts that may exist with the planning scheme.  The Council was subsequently advised by its lawyers that its prospects of successfully defending its decision were not strong.

The following passages from His Honour’s judgment conveniently summarises why an order for costs was made against the Council:

“[29]      I acknowledge the nature of the Council’s interest in the proceedings (discussed earlier).  I accept that the issues litigated by the Council were bona fide matters of town planning relevance and public interest.  It supported its case by evidence from independent professional expert witnesses.  It had a case which (subject to the qualifications discussed earlier) was within the bounds of arguability (a matter confirmed by the legal advice it obtained) and that its case was generally conducted in a reasonable manner, given the issues upon which it relied.  I have given weight to those matters.

[30]       I have however, also had regard to the other matters to which I have referred to, particularly the appellant’s success, the strength of its case and the corresponding weakness of the Council’s case and the circumstance that that was readily apparent in the context of the advices and warnings the Council received, not just when the development application was refused contrary to advice, but including at the time it chose not to accept a settlement proposal recommended by its own representative at the mediation (at a time when, had the proposal been accepted, it would have been protected from an adverse costs order) and at all material times thereafter.  On balance, the decision by the respondent to put the appellant to the expense of vindicating its strong position by a hearing (which it successfully did) justifies, as a matter of fairness in the particular circumstances of this case, an order that the respondent pay the successful appellant’s costs, notwithstanding the matters which were urged on the respondent’s behalf.”

It appears, reading between the lines, that the Council’s decision to prosecute the appeal was made for political reasons, namely to protect a number of traders in the relevant catchment from competition from the proposed Masters Home Improvement centre notwithstanding the absence of any definitive evidence that any business was likely to fail as a result, and in the face of advice that the proposed home improvement centre would be of overall benefit to the community.

The Hydrox judgment illustrates the risks associated with a local government making decisions to refuse development applications that are not soundly based on the town planning scheme and not supported by appropriate expert evidence.  In particular, decisions which are made contrary to a delegated officer’s advice and then compounded by the factors identified above are likely to result in adverse costs orders.