Australian Rail Train and Bus Industry Union v Hyundai Rotem Company

[2021] NSWSC 642

Supreme Court

New South Wales

Medium Neutral Citation:

Australian Rail Train and Bus Industry Union v Hyundai Rotem Company [2021] NSWSC 642

Hearing dates:

3 June 2021

Decision date:

03 June 2021

Jurisdiction:

Common Law

Before:

McCallum JA

Decision:

The plaintiff and the first defendant each bear their own costs of the proceedings

Catchwords:

COSTS — Discontinuance — Power to make an order other than that the plaintiff pay the defendant’s costs — Where plaintiff discontinued after receiving new information from the decision-maker shortly before the hearing — Where defendant could have provided similar information in response to earlier requests — Whether parties should bear their own costs

Legislation Cited:

Uniform Civil Procedure Rules 2015 (NSW) rr 42.1, 42.19

Rail Safety National Law (NSW) ss 3, 65, 99

Cases Cited:

Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622

Category:

Costs

Parties:

Australian Rail Train and Bus Industry Union (plaintiff)
Hyundai Rotem Company (first defendant)
National Rail Safety Regulator (second defendant)

Representation:

Counsel:
M Gibian SC, P Boncardo (plaintiff)
V Bosnjak (first defendant)

Solicitors:
Australian Rail Tram and Bus Industry Union (plaintiff)
Herbert Smith Freehills (first defendant)

File Number(s):

2020/00306432

Publication restriction:

Nil

Judgment (EX TEMPORE)

1. HER HONOUR: In 2014, the State Government announced that it would provide a fleet of new intercity trains. The trains were to be manufactured in South Korea by a joint venture of three companies, including Hyundai Rotem Company.

2. By late 2019, some of the trains had been delivered and the process of testing and commissioning had evidently begun. Hyundai obtained accreditation for that purpose from the National Rail Safety Regulator in December 2019. The Rail, Tram and Bus Industry Union (whose members include both drivers and guards of trains) asserts that it became aware of Hyundai’s accreditation only after the event.

3. The Union became concerned when some of its members observed test-driving of the new trains that Hyundai’s accreditation appeared to have been obtained in circumstances where the Regulator could not have been satisfied of a mandatory requirement of accreditation. The Union held that concern because it knew that it had not in fact been consulted concerning the safety management system that was to govern the operation of the trains. It held the expectation that it ought to have been consulted on that issue by virtue of the provisions of s 99(3) of the Rail Safety National Law (NSW). After making some attempts to obtain an understanding as to how the accreditation had come to be granted to Hyundai without consultation with the Union, the Union commenced proceedings for judicial review of the Regulator's decision. Hyundai was appropriately joined as a defendant to the proceedings, being the entity that had the greatest interest in the accreditation decision.

4. Those proceedings were listed for hearing before me on 15 April 2021. However, shortly before the hearing, the Court was informed that the proceedings had settled.

5. In due course, the Union discontinued the proceedings as against Hyundai, the first defendant, and the Regulator, the second defendant. The second defendant consented to the discontinuance on terms that there be no order as to costs, representing a departure from the default position that arises under the rules where a party discontinues. Hyundai, however, did not consent to that term, although it did consent to the discontinuance. The agreement between the Union and Hyundai required the question of costs to be determined by the Court. Accordingly, the Union now seeks an order other than the default order provided for under r 42.19 of the Uniform Civil Procedure Rules 2015 (NSW).

6. At the risk of the appearance of pedantry, it is appropriate to pause to make an observation concerning the form of the relief sought. The notice of motion filed by the Union seeks an order that the plaintiff not pay the first defendant's costs of the proceedings and that there be no order as to costs between the plaintiff and the first defendant, with each party to bear its own costs. In my view, the appropriate order is, simply, that each party bear its own costs. An order that the plaintiff not pay the first defendant's costs has the appearance of overreach. An order (as to costs) that there be no order as to costs is a self-referential paradox.

7. I have considered the application on the basis that the relief sought is an order that each party bear its own costs. That is the order I propose to make for the following reasons.

8. The relevant principles were not in dispute between the parties. They were conveniently summarised in the written submissions provided by the Union in advance of the hearing. In particular, it was noted that the Court has a broad discretion as to costs which is to be exercised judicially. The usual rule is that costs follow the event. However, where there has been no hearing on the merits, there is no relevant “event”. In that circumstance, the exercise of the costs discretion requires consideration of other matters.

9. The submissions noted that r 42.19(1) is a default provision in respect of costs where a proceeding is discontinued and does not create a presumption of the kind created by r 42.1 of the rules. Further, the rule does not require that the discontinuing party establish special circumstances in order to obtain an order other than the default order. Rather, the rule creates a starting point which can be displaced in the discretion of the Court. That said, Mr Gibian SC, who appeared with Mr Boncardo for the Union, acknowledged that the party seeking an order other than the default order must show a proper justification for it.

10. The Union submissions referred to the well-known analysis of the relevant principles by McHugh J in Re Minister for Immigration & Ethnic Affairs; Ex parte Lai Qin (1997) 186 CLR 622. His Honour noted in his judgment in that case that it is not appropriate for the Court, in circumstances such as the present, to undertake, effectively, a mini-hearing of the dispute or cause that has been settled. His Honour said at 624:

“The court cannot try a hypothetical action between the parties. To do so would burden the parties with the cost of a litigated action which by settlement or extra-curial action they had avoided. In some cases, however, the court may be able to conclude that one of the parties has acted so unreasonably that the other party should obtain the costs of the action.”

Neither party suggested in the present case that that circumstance had been reached. However, Mr Gibian relied on the passage on the following page of McHugh J’s judgment in Lai Qin where his Honour said at 625:

“If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled or its further prosecution became futile, the proper exercise of the cost discretion will usually mean that the court will make no order as to the cost of the proceedings.”

11. That was very much the central question in the present application. In a sense, the question of the “event” is clear in that the Union capitulated to the likelihood of being unsuccessful in the proceedings in circumstances I will explain. The real question is whether the Union acted reasonably until that point.

12. In order to explain my conclusion that it did, it is necessary to explain something about the regulatory context in which Hyundai and the Union operate.

13. I have already referred to the fact that the Regulator granted accreditation to Hyundai in December 2019. For the purpose of the testing and commissioning of the new trains, Hyundai stood in the position of a rail transport operator and accreditation by the Regulator was mandatory for that purpose.

14. Section 65 of the Rail Safety National Law provides that the Regulator must not grant accreditation to an applicant unless satisfied that the applicant has demonstrated certain matters, one of which is that the applicant has met the consultation requirements set out in Div 6 in relation to the applicant's safety management system: s 65(c)(iii).

15. As already noted, the consultation requirements are provided for in s 99(3) of the Rail Safety National Law. That section provides that, before establishing a safety management system in relation to railway operations in respect of which a rail transport operator is required to be accredited, the operator must, so far as is reasonably practicable, consult with a number of listed entities including (i), “persons likely to be affected by the safety management system”. Those persons obviously include train drivers and train guards.

16. It is appropriate to note two further matters concerning the regulatory regime addressed in Mr Gibian’s submissions. First, the obvious purpose of the legislation, as confirmed by its objects clause, s 3, is to promote the safety of the State’s rail systems. Further, Mr Gibian noted that s 3(2)(j) includes, as an object of the National Law, promoting effective involvement of stakeholders. Mr Gibian submitted, and I accept, that the nature of the judicial review proceedings was to ensure that there had been compliance with the provisions to which I have referred, having regard to the important public purpose of rail safety. Most adult citizens of Australia will recall one or another of the several rail disasters that have highlighted the importance of rail safety and its regulation by legislation.

17. Secondly, Mr Gibian noted that the consultation required by s 99(3) is consultation in relation to the safety management system. Much of the material relied upon by Hyundai in resisting any variation from the default position that the Union, having discontinued the proceedings, should pay its costs related to engagement of a broader nature between Hyundai and the Union and also between the Regulator and the Union concerning the new trains, but none of those methods of engagement specifically concerned the safety management system established by Hyundai. The safety management system was required in accordance with s 99(3) to be established only after consultation with relevant stakeholders.

18. Mr Gibian accepted that there has obviously been some consultation more broadly concerning the rolling stock. But the focus of its judicial review application was the mandatory statutory requirements for accreditation. Train drivers, perhaps not unreasonably, anticipated that they would be called upon at some stage to drive the new trains and knew that they had not been consulted as to the safety management system that was to govern the testing of the trains.

19. For reasons I will explain, the Union accepted shortly before the hearing that it was likely to be unsuccessful in establishing jurisdictional error in the decision of the Regulator. In short, the information it received indicated that the Regulator had evidently not overlooked a mandatory consideration, as previously apprehended. In those circumstances, the critical focus of the present application was the reasonableness of the Union’s conduct in commencing and prosecuting the proceedings. That in turn brought focus on the correspondence that transpired between the Union and Hyundai and, to a lesser extent, between the Union and the Regulator in the period leading up to the Union's decision to commence the proceedings.

20. Perhaps the most significant document in that context is a letter sent by the Union to the joint venture dated 18 May 2020, in which the Union set out clearly and cogently the matters to which I have referred concerning the appearance that the regulatory regime had not been complied with. That letter concluded with an assertion that Rail Connect (the joint venture of which Hyundai is one of the parties) had failed to comply with its duties under s 99(3) of the National Law by not allowing the Union, as a representative of rail safety workers likely to be affected by the safety management system, who carry out railway operations or work on or with rolling stock, to view or otherwise participate in the testing and validation processes.

21. The substantive response to that letter from Rail Connect to the Union merely asserted that the safety management system had been approved and that the mandatory criteria under the legislation had been assessed by the Regulator as being met. The letter did not provide any basis on which the Union could test or assess that assertion. The letter concluded with the observation that the appropriate method of engagement by the Union “moving forward” was to continue facilitated engagement through NSW Trains who, as the end operator of the new trains, it was asserted was likely to be best placed to engage with the Union in relation to the operation of the fleet. That may have been a perfectly reasonable contention but, again, it did not assist the Union to understand what had happened at the time of accreditation.

22. There was further engagement between the joint venture, the Union and NSW Trains, including the holding of a meeting at some point in July but, ultimately, based on my analysis of the correspondence, at no point did anyone explain to the Union why the inference it had reasonably drawn that the legislation had not been complied with (based on the fact that the Union itself had not been consulted) was wrong.

23. Ultimately, on 22 February 2021, well after the proceedings had been commenced and after the Union had taken several steps to obtain statements of reasons from the Regulator, including making an application under the rules for a further statement of reasons, the Chief Executive Officer of the Regulator swore an affidavit in which she set out, at [72], additional reasons for being satisfied on 9 December 2019 as to the mandatory requirements of the legislation.

24. I have already set out the requirement of s 99(3) of the National Law. It will be noted that the requirement to consult is qualified by the words “so far as is reasonably practicable”. In short, the decision-maker stated, in her affidavit sworn in February 2021, that on 9 December 2019 she was satisfied, amongst other things, that it was not reasonably practicable for Hyundai to consult with staff members of NSW Trains for the following reasons:

“(i)   the drivers and guards were employees of NSW Trains, and had acquired skills and experience when working for NSW Trains on the NSW rail network, and those skills and that experience were readily transferable to working for HRC [Hyundai] on HRC’s test trains;

(ii)    NSW Trains would be consulting with the RTBU in regard to the on-board work and it would be an inefficient and confusing duplication for HRC also to consult with the drivers, guards and the RTBU;

(iii)   in particular, I was concerned that parallel consultations by NSW Trains and HRC would not only be inefficient and conducive of confusion, but there would be a real risk to safety.”

25. Nothing in the correspondence, up until the receipt of that affidavit, had given the Union the smallest hint that the qualification to the mandatory obligation in s 99(3) was or would be the basis on which it was contended that the accreditation process had been conducted in accordance with the mandatory requirements of the legislation.

26. I am satisfied that the Union acted reasonably in commencing the proceedings in those circumstances. As already indicated, it has not been asserted that Hyundai acted unreasonably and I do not suggest that it did. But it certainly did not engage with the Union in correspondence on the critical question as to compliance with the mandatory requirements of accreditation in a way that would assist the Union to understand why its judicial review proceedings would be unlikely to succeed. Further, up until the point when the decision-maker's February 2021 affidavit was served, I am satisfied that there was every reason for the Union to think that it had reasonable prospects of challenging the decision.

27. There is one qualification that should be made to that last conclusion, which is that the proceedings were commenced out of time. Ms Bosnjak, who appeared for Hyundai, provided helpful and comprehensive submissions which included the point that the prospects of success of the Union in the proceedings must include consideration of its prospects of obtaining an extension of time.

28. The delay in commencing proceedings is, in some respects, explained by the Union’s reasonable attempts to obtain better understanding of the reasons for the regulator's decision and to obtain access to documents. That evidence does not fully explain the whole of the delay. However, upon reflection, I have reached the conclusion that it was reasonable to assess the prospects of success in the proceedings on the basis that the question of an extension of time for commencing the proceedings was likely to stand or fall with the substantive merit of the proceedings which, as I have endeavoured to explain, would have looked reasonable, if not good, to the Union going into the hearing until the receipt of the critical affidavit.

29. Those are my reasons for concluding that I should order that each party bear its own costs.

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Decision last updated: 07 June 2021