The Proceeding

For many years, Premier Homes (Vic) Pty Ltd (‘Premier’) operated a building business, a key part of which involved the design and construction of detached self-contained living units known informally as ‘granny flats’ and referred to in Council’s planning scheme (‘the planning scheme’) as dependent persons units (‘DPUs’).

Under the planning scheme DPUs did not require a planning permit.

Council was concerned, however, that some of the larger buildings constructed by Premier did not fall within the planning scheme’s definition of a DPU and, in particular, that they were not ‘movable buildings’ (as defined), which was a component of that definition.

A movable building was defined, relevantly, as a structure which is ‘designed to be moved from place to place on more than one occasion’.

Rather than commencing enforcement proceedings against the relevant owners, Council selected 6 examples of buildings constructed by Premier and sought declarations under section 149A of the Planning and Environment Act 1987 (‘P&E Act’) that the buildings: were not movable; were not, therefore, for the purposes of the planning scheme DPUs; and were not exempt from the need for a planning permit.

Following a 3-day hearing, the Tribunal dismissed the application, declined to make the declarations sought by Council and reserved costs.

The following elements of the Tribunal’s reasons for decision were relevant to the subsequent costs application by Premier:

1. As noted above, the Tribunal found that Council largely failed in the proceeding and that its case was not supported by the evidence it had called.
2. The Tribunal found there was a ‘gap in the regulatory process’ in that the basis upon which the planning permit exemption arose for a DPU was not clearly expressed.
3. Because of the above finding the Tribunal directed the Principal Registrar to send a copy of the decision to the Minister for Planning to consider whether any regulatory reform or clarification was warranted.
4. Premier made an offer to settle the proceeding pursuant to section 112 of the Victorian Civil and Administrative Tribunal Act 1998 (‘VCAT Act’) approximately 14 months before the hearing. The offer was for Council to discontinue the proceeding with each party to bear its own costs.
5. The Tribunal was critical of the conduct of Council’s solicitors, finding that the opinion of council’s principal expert witnesses was based upon assumptions contained in his instructions from those solicitors which was ‘at least arguably in breach of VCAT Practice Note PNVCAT2’.
6. Although the Tribunal was not satisfied that the declarations sought by Council were justified on the basis of the evidence submitted by Council, neither was it satisfied that the evidence adduced by Premier supported a clear finding that the buildings were ‘movable buildings’ within the meaning of the planning scheme.

The Costs Application

Section 109 of the VCAT Act provides that each party is to bear its own costs in a VCAT proceeding, subject to the Tribunal’s power to order that a party pay all or part of the costs of another party if it is ‘fair to do so’ having regard to a number of factors listed in section 109(3).

Notwithstanding the above principle, however, costs in contested VCAT matters frequently ‘follow the event’ as is the case in most courts.

Of the factors listed in section 109(3), Premier relied upon the following:

1. That Council conducted the proceeding in a way that unnecessarily disadvantaged Premier (section 109(3)(d));
2. The nature and complexity of the proceeding (section 109(3)(e)); and
3. Other relevant matters (section 109(3)(e)). These also related to Council’s conduct.

Premier also relied upon the fact that it had made a settlement offer under section 112 of the VCAT Act which had been rejected by Council. That section creates a presumption that costs will be awarded in favour of the offering party, from the date of the offer, in circumstances where the offer is refused but the offeree does not obtain a decision which is more favourable than the offer.

Conduct of Council 

Premier Homes relied upon the conduct of Council’s solicitor in briefing the expert whose evidence was criticised.

Senior Member Rickards noted that Council’s former solicitor was not a party to the costs application and that costs were not sought against him. She said that she was unable to conclude that Premier was unnecessarily disadvantaged by Council or its solicitor’s conduct and observed that it was able to adduce evidence and make submissions.

The Nature and Complexity of the Proceeding

The Senior Member noted that the complexity arose from the ambiguity of the planning scheme and that the Tribunal had referred this to the Minister for Planning. She did not consider that this was sufficient reason to order costs against Council.

Other Relevant Matters

Premier Homes argued that it had invited Council narrow the issues on several occasions, to which Council did not respond, and that Council had commenced the proceeding prior to obtaining expert advice.

The Senior Member rejected these arguments noting that evidence had been adduced by both parties and that it was not ‘clear cut’ that if Council had received different expert evidence, it would not have commenced the proceeding.

Presumption under section 112 of the VCAT Act

The member was not satisfied with the presumption under section 112 of the VCAT Act had been triggered, noting as follows:

‘Whilst the Council did not get the outcome it sought, namely the making of the declaration, there was a clear acknowledgement from the Tribunal that the regulatory control that the Council is tasked with administering and enforcing was difficult and complex. This resulted in the Tribunal referring the matter to the Minister for Planning for clarification or regulatory reform.

This conclusion does not suggest to me that the outcome was more favourable to the other party. It suggests the underlying regulatory provision that was to be clarified by the declaration sought could not be done by the Tribunal.’

The Senior Member also agreed with a submission of Council that the ‘walk away’ offer was ‘more of a demand to capitulate’ and not a genuine offer of compromise. She was also of the view that a proceeding for a declaration regarding the interpretation of a planning scheme ‘did not lend itself to an offer of compromise’.

Concluding Remarks of the Tribunal Member

The Senior Member concluded that it was not fair for her to make an order for costs in favour of Premier. She also noted as follows:

‘The proceeding was sought to clarify an issue rather than proceed to more litigious proceedings. Neither party was sure of their position and the proceeding allowed for this to be explored.

The determination of the Tribunal that the regulatory framework is unclear, uncertain, or difficult to apply does not result in one party being more disadvantaged than the other to warrant an order for costs.’

Conclusion 

Whilst this costs decision clearly rests upon the particular facts of the case, it does suggest that where a provision of the planning scheme is unclear or ambiguous, the better course for a council to take (at least with regard to the costs risk) is to seek a declaration, rather than commencing an enforcement proceeding.

Further information / assistance regarding the issues raised in this article is available from the Stephen George, Senior Consultant or your usual contact at Moray & Agnew.