New Zealand Retail Property Group v Auckland Council  NZEnvC 160
This decision concerned an application for costs by Magsons Hardware Limited (“Magsons“) against the New Zealand Transport Agency (“NZTA“) and New Zealand Retail Property Group (“NZRPG“). The substantive appeal proceedings had been previously resolved by the Environment Court by consent; however, the issue of costs had not been dealt with by the parties, nor had the Court made any order as to costs as part of the consent orders resolving the proceedings.
In January 2010, the former Waitakere City Council (“Council“) granted Magsons consent to establish a “Mitre 10 Mega” in Henderson, Auckland, subject to conditions. NZRPG and NZTA subsequently appealed the grant of consent, seeking that it be declined.
At the substantive hearing the Court heard a considerable amount of evidence, with the main issue being the traffic effects of the proposal. On 1 September 2011, the Court issued an interim decision (Laidlaw College Inc v Auckland Council  NZEnvC 248) in which it emphasised that it was not yet satisfied that the traffic mitigation proposed by Magsons would be effective, particularly as Magsons had not had any prior discussions with NZTA and Auckland Transport (or its predecessor) as to whether the proposed mitigation measures would adequately avoid, remedy or mitigate the adverse traffic effects of the proposal. By issuing an interim decision (rather than a final decision in which the Court would likely have declined consent), the Court provided Magsons the opportunity to discuss the issue of appropriate traffic mitigation further with Auckland Transport and the NZTA.
Negotiations between the parties occurred following the Court’s interim decision and continued throughout 2011 and 2012. Agreement was ultimately reached on the necessary traffic mitigation measures, and on 1 November 2012 the Court issued a final decision granting Magsons’ application by consent. Magsons did not suggest to the Court at that time that it was seeking costs or that the issue of costs had not been resolved between the parties.
The Court therefore expressed surprise when Magsons subsequently sought a waiver of time under s272 of the Resource Management Act 1991 (“RMA“) to apply for costs against NZRPG and NZTA. After receiving submissions on the waiver application, the Court issued a decision granting the waiver on 14 March 2013 (New Zealand Retail Property Group v Auckland Council  NZEnvC 36). However, the Court foreshadowed in that decision that Magsons would face difficulties in establishing that a costs award was appropriate in this case. In particular, the Court noted that its interim decision giving Magsons the opportunity to discuss its proposed traffic mitigation measures with Auckland Transport and NZTA was a “significant indulgence”, given that the likely alternative was to decline the application altogether.
Following its successful waiver application, Magsons contended that NZRPG and NZTA, as unsuccessful appellants who had sought that consent for the proposal be declined, were obliged to compensate Magsons as the successful party for its reasonable costs incurred in these proceedings. Magsons sought an award of 85% of its total costs and expenses incurred during the substantive proceedings and subsequent negotiations, which the Court noted was well above its usual “comfort zone” of 25 – 33% of total costs, where costs are appropriate.
Like all applications for costs under the RMA, the critical question was whether it was reasonable in the particular circumstances of this case for the Court to exercise its discretion under s285 of the RMA to award costs to Magsons. If costs were justified, the Court would then need to consider whether a higher than normal award as sought by Magsons was justified, bearing in mind the well-known factors for significant awards of costs set out in the judgment of DFC NZ Limited v Bielby  1 NZLR 587.
A major thrust of Magsons’ argument was that, because in its final decision the Court granted consent to the proposal, the appeals by NZRPG and NZTA were without any merit and therefore costs were appropriate. In particular, Magsons submitted that its proposal was not altered in any significant way as a result of the Environment Court proceedings, other than the additional traffic mitigation measures that were subsequently agreed between the parties.
The Court rejected this submission. It considered that the evidence from witnesses called by NZTA and NZRPG demonstrated that there was an arguable case that the proposal should have been rejected. More importantly, the Court noted that, but for the progress that was made following its interim decision, the Court would have been unlikely to grant the consent due to its concerns regarding the inadequacy of the traffic mitigation measures originally proposed by Magsons.
Magsons was also critical of the approach taken by the Council to the substantive proceedings. Magsons submitted that the neutral position taken by the Council left it with the burden (and cost) of defending the Council’s first instance decision to grant consent. Despite this, Magsons did not pursue costs against the Council, and the Court agreed with NZRPG and NZTA that the Council’s neutrality on appeal was not a legitimate reason for a costs award against the other parties. In any event, the Court noted that the Council’s approach to the appeal proceedings was appropriate. The role of the Council, as the first instance decision-maker, on any subsequent appeal was to assist the Court in making its fresh determination on the application, rather than to defend its first instance decision.
Magsons also submitted that the “indulgence” granted to it by the Court in issuing its interim decision (rather than declining consent outright) was a result of the uncertainty surrounding the reorganisation of Auckland local government, and that it would be unfair to now deny its application for costs because of that indulgence. The Court rejected this submission, on the basis that it would be equally unfair and unreasonable to attribute the costs of any such uncertainty to NZTA or NZRPG. More importantly, but for the opportunity provided to Magsons to rectify the shortcomings in its original proposal by the Court’s interim decision, on the evidence before it the Court would likely have declined consent. This factor, which NZTA and NZRPG submitted weighed heavily against costs being appropriate, needed to be considered in determining Magsons’ application for costs.
As part of its application for costs, Magsons also sought to recover its expenses incurred during the negotiations with the other parties following the Court’s interim decision regarding the necessary traffic mitigation measures. NZTA submitted that it had worked actively with Magsons following the Court’s interim decision to ensure that adequate mitigation measures were agreed to address the adverse traffic effects of the proposal. NZRPG added that the need for these negotiations arose directly out of the deficiencies in Magsons’ proposal.
In these circumstances, the Court concluded that an award of costs against parties who participated with Magsons in the negotiations following the Court’s interim decision would not be just or reasonable. All the parties engaged in the lengthy and detailed assessment and negotiation process and the agreement reached allowed the application to be granted by consent. The Court held it would be unjust to penalise NZTA and NZRPG for this, and that it would send the “wrong signal” to participants in appeals by discouraging them from seeking negotiated outcomes.
Costs application declined
All matters considered, the Court held that it would be unjust to award any costs against NZTA and NZRPG and that costs should therefore lie where they fell. The arguments raised by NZTA and NZRPG at the hearing were appropriate, and it would be unjust to award costs where Magsons was able to take advantage of the opportunity following the Court’s interim decision to satisfy those parties and the Court that effective traffic mitigation measures could be put in place. As an award of costs was not justified, the Court was not required to consider any of the Bielby factors that may have justified a “significant” award of costs, as had been sought by Magsons.
The position taken by the Court reflects the discretionary nature of the jurisdiction to award costs under s285 of the RMA. While it is technically correct that Magsons was successful at both the Council level and before the Environment Court, numerous factors weighed against an award of costs in the circumstances, not least the fact that Magsons was granted a “significant indulgence” following the Court’s interim decision to work constructively with the other parties to resolve the Court’s concerns surrounding the traffic effects of the proposal.
This decision also serves as a timely reminder to parties to Environment Court appeals of the Court’s expectations where proceedings are settled by consent. In this case, the Court expressed its surprise that an application for costs had even been made by Magsons, given that Magsons did not suggest at the time the Court made its final orders that costs were still at issue. The Court suggested that the better approach would have been for Magsons to inform the Court that the parties had not reached an agreement on costs before (or at least at the same time as) the draft consent orders were filed. This would have given the Court the opportunity to seek input from all the parties on the issue of costs and deal with that issue in making its final orders granting consent.