In brief: In the past 12 months there have been a number of important decisions of the Queensland Planning and Environment Court that provide an insight into the application of the court's discretion to award costs. Special Counsel Rosanne Meurling (view CV) and Senior Associate Michael Zissis discuss the lessons learned from these decisions, as parties increasingly seek to test the court's costs power.
As discussed in our Client Update: One year on ... the new costs rules in the Queensland Planning and Environment Court, the basis for awarding costs in the Queensland Planning and Environment Court (the P&E Court) was fundamentally changed in November 2012. Whereas under the old rules, parties generally bore their own costs (though the P&E Court had discretion to award costs in a narrow range of circumstances), under the current rules, the costs of a proceeding are in the P&E Court's discretion and there is a range of matters that the P&E Court may consider when deciding whether or not to make an order for costs.
In the past twelve months, the P&E Court has considered a number of costs applications, with the resulting decisions providing further guidance to parties about how the costs power will be applied by the P&E Court. While each costs application is decided on its particular facts, the decisions reveal some important lessons for parties currently involved in, or contemplating, litigation.
A key lesson emerging from the P&E Court's decisions is that the discretion to award costs is a broad and open one, and that it should not be presumed that costs follow the event or that there is a qualified protection against an adverse costs order. The discretion is to be exercised judicially, and having regard to all relevant circumstances, including those matters set out in the costs power in section 457 of the Sustainable Planning Act 2009 (Qld).1
The decisions of the P&E Court reiterate that the primary purpose of costs orders is not to punish an unsuccessful party, but rather to indemnify a successful party in respect of its costs of having to prosecute or defend the proceedings.2
The lessons learned from the costs decisions delivered in the past year are discussed below.
- In exercising the P&E Court's costs power, the success of a party is a relevant consideration, but not determinative.3 The issue of success is generally considered on a holistic basis, rather than by tallying the particular points ‘won’ and ‘lost’ by each party.4However, where an unsuccessful party has established some relevant points, the P&E Court may apply a reduction to the costs ordered to be paid by that party,5 or confine costs to certain parts of the proceeding.6
- Whether a party had reasonable prospects of success in prosecuting or resisting a proceeding is usually judged in terms of whether the party had an ‘arguable case’, and whether there were issues on which ‘reasonable minds may differ’, supported by professional opinions that have a rational basis.7 In development appeals, parties need to consider not only the existence and extent of conflict with planning instruments, but also the strength of any planning grounds favouring approval.8 The P&E Court may consider an adverse costs order justified if a party persists despite being forewarned of the weakness of its case, by, for example, correspondence from the another party or at a mediation.9
- The conduct of the parties leading up to and during the proceeding is relevant to the discretion to make a costs order, including, whether they engaged competent experts, solicitors and counsel, whether they acted on advice received, whether the issues raised were of relevance, and whether the proceedings were prosecuted expeditiously and efficiently.10 In some circumstances, contemptuous11, frivolous or vexatious conduct12 may even justify awarding indemnity costs.
- The failure to accept and act upon a recommendation from an authorised representative who attends a settlement conference will be a relevant factor in considering whether to award costs where the party did not have reasonable prospects.13 While settlement offers in the planning jurisdiction do not operate in the same way as in general civil proceedings (where costs usually follow the event), the fact that a party might do as well or better than a settlement offer does not, of itself, lead to the conclusion that a costs order should be made against the party who refused the offer, or that refusal of the offer was unreasonable. However, if a costs order is otherwise warranted, the existence of an earlier offer to settle, and the reasonableness of refusal of that offer in the circumstances will be a further relevant consideration.14
Two recent cases are discussed below.
Altitude Corporation Pty Ltd v Isaac Regional Council (No 2)  QPEC 55
This case concerned a developer appeal against the Isaac Regional Council's refusal of a development application for multiple dwellings. The Council was unsuccessful in defending the refusal of the application and the appellant sought its costs.
While noting that it was a finely balanced matter overall, his Honour Judge Rackemann ordered that each party bear its own costs.15
In reaching this conclusion, the following factors appeared to be relevant:
- it could not be said that at any stage the Council had no reasonable prospects of success;16
- the Council's decision to refuse the application was consistent with professional advice it had received from experienced and respected consultant town planners engaged to provide an independent assessment of the application;17
- the settlement offer made by Altitude was somewhat embryonic, and there were changes made to the application and new information submitted by Altitude which post-dated the offer;18 and
- the evidence was not sufficient to persuade the P&E Court that the Council had acted unreasonably, or for an improper purpose, in resisting the appeal.19
The case involved the making of a Calderbank offer of settlement by Altitude. As his Honour observed, Calderbank offers are more relevant in cases where the usual costs rules in civil proceedings apply.20 However, his Honour noted that had he been otherwise minded to award costs against the Council, then the settlement offer would have been an important factor in considering whether to order indemnity costs following rejection of the offer.21
Hydrox Nominees Pty Ltd v Noosa Shire Council (No 2)  QPEC 60
In this case, the Noosa Shire Council refused Hydox’s development application to build a Masters store and a separate showroom on land within the Noosa Shire Business Centre. The Council was unsuccessful in defending its decision and Hydrox sought its costs of the appeal. Hydrox was successful on all but one of the issues which had been in dispute in the appeal, being the extent of conflict with the provisions of the planning scheme relating to development within relevant precincts of the Noosa Shire Business Centre.
In ordering costs against the Council, the P&E Court focused on the weakness of the Council's case and the Council's failure to recognise the strong economic and need grounds supporting approval, notwithstanding the conflict.22
It is of some significance that the Council had decided to refuse the application contrary to advice it had received both from its internal planning officer and an independent economist, who both considered there were sufficient grounds to overcome the conflict.23 The Council was subsequently advised by its lawyers that its prospects of successfully defending its decision were not strong.24 Furthermore, a settlement agreement was reached between Hydrox and the Council's representative at a mediation, which provided, among other things, that the parties would bear their own costs, however Council failed to confirm the agreement and continued to resist the appeal.25
While there was no suggestion that the Council had acted improperly or unethically,26 its decision to put Hydrox to the expense of a hearing justified, as a matter of fairness, an order for costs against the Council.27
The P&E Court did, however, reduce the costs ordered to be paid by the Council by 15 per cent on account of Council's success in establishing a degree of conflict with the planning scheme.28
- The costs powers of the P&E Court are a serious matter to be considered prior to commencing proceedings and during the course of those proceedings.
- The relative success of the parties to a proceeding will be a significant, but not necessarily a determinative, factor in the making of a costs order by the P&E Court. The P&E Court may reduce or limit costs in a proceeding to take account of issues successfully raised by an otherwise unsuccessful party.
- Parties must carefully consider whether there are reasonable prospects of success in pursuing or resisting a proceeding. Arguments should be based on sound planning grounds, and be supported by suitably qualified expert opinions.
- Where a party is pursuing litigation without reasonable prospects of success, another party may improve its prospects of a favourable costs order by putting the first party on notice of the weaknesses in its case.
- While settlement offers do not operate in the same way in the P&E Court as in general civil proceedings, the refusal of a settlement offer may be a factor favouring an adverse costs order, in conjunction with other matters, such as a lack of reasonable prospects or a party's conduct.