IN THE MATTER BETWEEN. Environment Judge D A Kirkpatrick sitting alone under s 279(1 )(g) of the Act. On the papers DECISION ON COSTS

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1 BEFORE THE ENVIRONMENT COURT IN THE MATTER AND BETWEEN Decision No. [2017] NZEnvC ck-liof the Resource Management Act 1991 of an application under s 316 of the Act KEVIN AND SANDRA MITCHELL AS TRUSTEES OF THE MITCHELL FAMILY TRUST AND JEREMY AND EMMA BURN (ENV-2016-AKL ) Applicants AND JEAN HAMILTON AND HAMISH NOAKES AS TRUSTEES OF POINT TRUST First Respondent AND AUCKLAND COUNCIL Second Respondent Court: Hearing: Environment Judge D A Kirkpatrick sitting alone under s 279(1 )(g) of the Act On the papers Date of Decision: 4 May 2017 Date of Issue: DECISION ON COSTS A: Costs are awarded against the Applicants, Kevin and Sandra Mitchell as Trustees of the Mitchell Family Trust and Jeremy and Emma Burn, in favour of the First Respondents, Jean Hamilton and Hamish Noakes as Trustees of Point Trust, in the sum of $3,000. K & S Mitchell as Trustees of the Mitchell Family Trust and J & E Burn v J Hamilton & H Noakes as Trustees of Point Trust and Auckland Council

2 2 REASONS [1] On 16 November 2016 the Applicants lodged an application for enforcement orders, together with supporting documents, in relation to a property at Karaka North Road, Karaka, Auckland. The orders sought were to require the First Respondents as the owners of that property to comply with the requirements of the Auckland Council District Plan - Franklin Section, the Auckland Council Regional Plan: Air, Land and Water and the Auckland Unitary Plan (decisions version) and with certain resource consents, all in relation to the use of an implement shed on the property for intensive farming activities and the discharge of odour from the property. The application also sought an enforcement order requiring compliance with s 16 of the Act as well as, generally, to remedy or mitigate any adverse effects on the environment both at the property and relating to the property. The application also sought costs. [2] The application did not specify any order or other relief sought against the Second Respondent, the Auckland Council. [3] An initial judicial telephone conference was held on 8 December 2016 at which counsel for the respondents sought more time to take instructions and consider the issues arising from the application. [4] A further judicial telephone conference was scheduled for 20 January 2017, but postponed at the request of the Applicants to 3 February During that conference, an issue was raised about the meaning of the definition of "intensive farming" in the Auckland Unitary Plan. There was a suggestion that the issue might be addressed by an application for a declaration, in which case the application for enforcement orders would be put on hold. A further issue raised by the Council was whether s 20A of the Act might apply to the discharge of odour. The Court observed that a decision needed to be made about whether the application for enforcement orders would be pursued or not, and a further adjournment to enable the applicants to consider this would be reasonable. [5] A third judicial telephone conference was held on 8 March At that conference it emerged that the only part of the application which the Applicants were still pursuing was for an order seeking compliance with s 16 of the Act. On that basis, counsel for the Applicants confirmed that the other parts of the application were withdrawn and the Court recorded that costs were reserved in relation to those

3 3 withdrawn parts. A direction was made requiring the Applicants to report by 31 March 2017 setting out whether they intended to pursue or withdraw the orders sought in relation to s 16 of the Act. [6] On 10 March 2017 counsel for the Applicants advised the Court and the other parties that the entirety of the application was withdrawn. [7] The Council subsequently advised that it had no issue in relation to costs. [8] The First Respondents have sought costs in the sum of $10, (GST inclusive), being approximately 90 per cent of their legal costs of $7,475 and 100 per cent of their planning consultant fees of $3,207.35, with relevant invoices attached. The First Respondents' application states that it is made on the following grounds: (a) the proceeding was entirely without merit, with the affidavit evidence in support not alleging any breach of the consent conditions for the goat farm operated by the First Respondent; (b) no evidence of any alleged adverse environmental effect was produced; (c) the proceedings were speculative, with the Applicants seeking further information from the First Respondents as to the number of goats on the farm rather than based on evidence of any effect; (d) the Applicants showed no real intention to progress the proceeding and instead appeared to be seeking to force the First Respondents into negotiations to make changes to the conditions of the existing consent; (e) for the foregoing reasons, the application constituted an abuse of the process of the Court; (f) reference to irrelevant matters' was made, being the keeping of kid goats in the implement shed; and (g) given the nature of an enforcement proceeding, the First Respondents had no option to engage counsel and a planner to respond. [9] In response, counsel for the Applicants submitted:

4 4 (a) the application had merit, being more broadly based than in relation to a breach of resource consent conditions, but including an alleged breach of s 16 of the Act in relation to noise and of the permitted activity standards for air discharges in relation to odour; (b) evidence having not been exchanged, it is speculative to say that there would be no evidence, with assertions as to the evidence that could have been produced in reference to the affidavit evidence in support of the application; (c) the proceedings were not speculative given the allegations of breaches of s 16 of the Act, the resource consent and the Regional Plan that were set out in the affidavits; (d) the postponement of the proceedings occurred with the agreement of all parties and to allow for the proper consideration of the issues. The request to resolve the matter by mediation is something generally encouraged by the Court, but the Applicants' invitations were not responded to by the First Respondent; (e) the Applicants have not abused the process of the Court but have raised issues of genuine concern and effect, seeking to engage with the First Respondents; and (f) unauthorised use of the implement shed was a valid issue that ultimately was not heard or tested by evidence. [10] In relation to the quantum of costs sought, counsel for the Applicants submitted that the amounts seem excessive and unreasonable given that attendances included four brief judicial telephone conferences, no evidence w~s required to be prepared and counsel had not seen any other material which would justify the costs. In conclusion, counsel for the Applicants observed that the merits of the application cannot be properly assessed when the Court has had no opportunity to hear the evidence or legal submissions. [11] The Court's power to award costs is conferred by s 285 of the Act on a broadly discretionary basis. A great deal of case law exists as to the principles that apply to the exercise of that discretion. Principles that are relevant to this case are as follows: (a) There is no general rule in the Environment Court that costs follow the

5 5 event. 1 (b) (c) (d) (e) (f) Costs are ordered to require an unsuccessful party to contribute to the costs reasonably and properly incurred by a successful party. 2 Costs are awarded not as a penalty but as compensation where that is just. 3 An award may compensate parties for costs unnecessarily incurred as a result of proceedings which should not have been brought. 4 The standard level of costs in the Environment Court generally falls within a comfort zone of 25-33% of the costs actually incurred. 5 Costs at a higher level than usual party and party costs may be awarded where particular circumstances justify that, including where: (i) (ii) (iii) (iv) the process of the court has been abused; arguments are advanced that are without substance; the case is poorly presented or the hearing is unnecessarily lengthened; opportunities for compromise could reasonably have been expected but a party has failed to explore them; and (v) a party takes a technical or unmeritorious point of defence. 6 (g) (h) Indemnity costs, which depart from the predictability of the general costs regime, are exceptional and require exceptionally bad behaviour. 7 Where wasted costs have been incurred, such as where a hearing has had to be adjourned or a proceeding has been withdrawn at a very late stage, the party who is not responsible for the adjournment Culpan v Vose Decision A064/93. Hunt v Auckland CC Decision A068/94. Foodstuffs (Otago Southland) Properties Ltd v Dunedin CC [1996] NZRMA 385. Paihia and District Citizens Assn Inc v Northland RC (1995) 2 ELRNZ 23. Bunnings Ltd v Hastings DC [2012] NZEnvC 4 at [35]. Development Finance Corporation NZ Ltd v Bielby (1991) 1 NZLR 587 (HC) at See also District Court Rules R 14.6(3)(b). Bradbury v Westpac Banking Corporation [2009] NZCA 234, [2009] 3 NZLR 400 at [28]; see also District Court Rules R 14.6(4).

6 6 or withdrawal may be entitled to costs.a (i) In a clear and immediately apparent case the Court will permit a party to show that its withdrawal should not be interpreted as failure but this does not mean either just showing some merit on that party's side or embarking on an inquiry into the merits as that would be contrary to the objective of finality.9 [12] I also note that the amounts claimed in this case are stated to be GST inclusive. I note that the Court of Appeal has provided authoritative guidance on this. In relation to the GST component of costs and disbursements actually incurred by a party claiming costs, a GST-registered party will generally recover from the Commissioner of Inland Revenue a GST input credit for that GST, while this GST input credit is not available to a claimant that is not GST-registered. This is relevant for indemnity costs and increased costs where the Court should be informed whether the claimant is GST -registered so that the Court can take this into account to ensure that there is no double recovery of the GST component. Scale costs in the District and High Courts (and general awards such as in the Environment Court) are treated as GST neutral such that the successful claimant is not required to account for GST and the party paying costs is not able to claim a GST input credit. This is because the award of costs represents a reasonable contribution to the costs actually and reasonably incurred and is not a payment for service provided by the claimant or its lawyers or consultants. 1o [13] Turning to the present case, the proceedings had not advanced very far before they were withdrawn. That indicates two things: (i) on the one hand, the First Respondents were not engaged in lengthy and time-consuming processes; but (ii) on the other hand, there is an obvious but unanswered question as to why the proceedings were brought in the first place. [14] In relation to the second point, on several occasions during the judicial telephone conferences and in his submission in response to the application for costs, a 9 10 OB Holdings Ltd v Whangarei DC [2010] NZEnvC 164. Powell v Hally Labels Ltd [2014] NZCA 572 at [19]- [24]. New Zealand Venue and Event Management Ltd v Worldwide NZ LLC [2016] NZCA 282 at [6] - [16]

7 7 counsel for the Applicants referred to his clients' strong desire to engage with the First Respondents and discuss the issues. With respect to counsel, the opportunity for such engagement, if there ever was one, would have disappeared on the service of the application for enforcement orders together with affidavits made by experts in the field of air quality, noise and planning accompanying it. [15] I consider that, having made such an application, its complete and apparently unilateral withdrawal within four months is an appropriate basis on which to award costs against the Applicants. [16] Having said that, I am not satisfied that the application amounted to an abuse of the process of the Court. I am mindful that the withdrawal or settlement of a proceeding prior to a hearing can effectively prevent the Court from having any real understanding of the merits of the case 11 and I adopt the principle that this application for costs is not an appropriate basis for any inquiry into the merits. For those reasons, I do not consider that this is an appropriate case for costs to be awarded at or nearly at indemnity level, as the First Respondents seek here. [17] Instead, considering this matter and the submissions of counsel in their totality, in my judgement it is appropriate that there be an award of costs against the applicants, Kevin and Sandra Mitchell as Trustees of the Mitchell Family Trust and Jeremy and Emma Burn, in favour of the First Respondents, Jean Hamilton and Hamish Noakes as Trustees of the Point Trust, of approximately one third of the claimed actual and reasonable costs claimed, being an award in the sum of $3,000. This sum is GST neutral for the reasons given abov~ in paragraph [12]. Bridgecorp Holdings Ltd (in receivership) v Hamilton City Council, A21/08.