A NSW judge has slammed the running of a Port Stephens Council legal case

A NSW judge has delivered a scathing assessment of the running of a multi-million dollar legal case involving Port Stephens Council as “myopic”, “pedantic” and “not in the interests of justice”.

NSW Supreme Court Justice Michael Pembroke criticised the council, Shoal Bay Developments and their legal representatives after noting the case involving Nelson Bay’s Lagoons Estate had been in court 14 times since May, 2016.

But he found Port Stephens Council “may well be primarily responsible” for delays in a legal dispute where there had been “an excessive focus on formality and minutiae, at the expense of the real issues in dispute”.

Justice Pembroke noted the council was “not entirely satisfied” after a court-appointed expert’s report directly challenged the council’s case and exposed it to millions of dollars in damages, legal costs and the cost of drainage works at the centre of the action by Lagoons Estate owner and Shoal Bay Developments director David Vitnell.

The damaging expert report, completed in August, 2016, and its consequences for the council’s case “may be part of the reason for the unsatisfactory conduct of these proceedings over the last year or so”, Justice Pembroke said.

The conduct of the proceedings does not reflect well on the legal representatives or their clients. It has certainly not been in the interests of the parties or in the interests of justice. The current dispute has all the hallmarks of an attitude on both sides which is both myopic and pedantic. There has been an excessive focus on formality and minutiae, at the expense of the real issues in dispute.

NSW Supreme Court Justice Michael Pembroke

Mr Vitnell is seeking a court declaration that the council has not complied with a 2006 NSW Court of Appeal decision ordering it to complete millions of dollars in drainage works near the Lagoons Estate, after Justice Roger Giles in 2006 strongly criticised the council and found it had not acted “in good faith”.

The 2006 decision came after decades of complaints from two owners of the Lagoons Estate, after the council approved a neighbouring housing development in the 1970s and carried out road drainage works which included water discharges directly onto the Lagoons Estate.

In the 1990s the council carried out further roadworks that increased the amount of discharge to the Lagoons Estate, and failed to carry out mitigation works despite written commitments to do the work.

In 2002 new owner Brien Cornwell, of Melaleuca Estate Pty Ltd, took legal action to force the council to stop the stormwater discharges, and spent $3.5 million on an internal drainage system as part of a council approval for the first two stages of the Lagoons Estate housing development. Port Stephens Council spent about $1.3 million to reduce water entering the Lagoons Estate.

Mr Cornwell won the 2006 court case, and Justice Giles blasted the council for showing “a signal disregard” of Mr Cornwell’s rights, after the council argued it had the right to “carry off water, mud and filth” from public roads, “collect and concentrate” it and put it on the estate.

Justice Giles ordered the council to undertake significant drainage work to stop stormwater “in excess of natural flow” from entering Lagoons Estate and the lagoon system that gives it its name, with an 18-month deadline.

Mr Vitnell bought the estate after Mr Cornwell’s companies went into liquidation, and launched action against the council in 2015 arguing it had not complied with the 2006 order.

Civil engineer and water engineering expert Geoff O’Loughlin, who was appointed by the court with the consent of Mr Vitnell and the council, was required to answer what Justice Pembroke described as “two relatively straightforward questions” relating to stormwater on the Lagoons Estate.

In a decision on September 8 Justice Pembroke listed the 14 dates the matter had returned to court since May, 2016, including an appearance in which he blasted the council for taking two months to concede it could not rely on a 2007 confidential agreement with Mr Cornwell to stop Mr Vitnell’s case.

The council paid Mr Cornwell $750,000 in 2007 – and approved paying $750,000 more – as “insurance” to stop him taking further legal action against it over the Lagoons Estate saga.

The “insurance” failed – and ratepayers officially wasted $750,000 – because it only applied as long as the estate wasn’t sold.

“Why would you wait to come to court and incur the costs of four barristers to have an argument about something blindly obvious?” Justice Pembroke asked a barrister for the council, before ruling an agreement with Mr Cornwell had no force against Mr Vitnell.

On September 12 Justice Pembroke set down a May, 2018 hearing date.

Mr Vitnell said the council had clearly not been happy with the court-appointed expert’s report. He expressed serious concern about the millions of dollars the case had cost so far, and future potential costs once the matter is finalised.

If the case ends in Mr Vitnell’s favour the council could be forced to pay two lots of legal expenses, with the likelihood of damages because of the five years Mr Vitnell has not been able to proceed with the third stage of the estate. If Mr Vitnell wins the council will also be forced to complete drainage works required under the 2006 order. The council in 2006 received estimates of up to $36 million to appropriately drain the area.

Mr Vitnell said he did not believe Port Stephens councillors, except for outspoken councillor Geoff Dingle, had been fully aware of the strength of the case against it.

Council general manager Wayne Wallis said it was not appropriate for the council to comment while the matter is before the courts.

“What I can say is that councillors have been fully briefed on this matter, and have been throughout the entire process,” Mr Wallis said.