Bailey v Director-General, Department of Natural Resources NSW - [2015] NSWCA 318

Court of Appeal

Supreme Court

New South Wales

Summary available
Amendment notes

Medium Neutral Citation: Bailey v Director-General, Department of Natural Resources NSW [2015] NSWCA 318
Hearing dates: 15-16 July 2015
Decision date: 14 October 2015
Before: Basten JA at [1];
Gleeson JA at [121];
Leeming JA at [122]
Decision:
(1)   Dismiss the appeal with respect to the dismissal of the first appellant’s claim for damages for malicious prosecution.
(2)   Order that the first appellant pay the respondents’ costs of the appeal on liability.
(3)   Dismiss the appellants’ appeal from the orders made by the trial judge as to the costs of the trial.
(4)   Order that the appellants pay the respondents’ costs of the appeal with respect to the costs of the trial.

Catchwords:
TORT – malicious prosecution – elements of tort – whether prosecution instituted and maintained without reasonable and probable cause – whether proceedings commenced for improper purpose – whether prosecutor lacked reasonable belief in the guilt of the appellant

PLANNING AND ENVIRONMENT – interrelation between the Native Vegetation Conservation Act 1997 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Environmental Planning and Assessment Regulation 1994 (NSW) and State Environmental Planning Policy 46, Sch 3 – appellant prosecuted for clearing native vegetation without consent – whether the exemption under s 12(f) of Native Vegetation Conservation Act 1997 (NSW) only applied to otherwise lawful developments – whether exemption for “rural structures … (such as farm dams)” included a 90 ha reservoir

COSTS – respondents awarded costs to be assessed on indemnity basis – whether offer of compromise compliant with Uniform Civil Procedure Rules 2005 (NSW) – whether a compromise – whether costs of undetermined issues should be refused
WORDS AND PHRASES – “rural structures” – “farm dam” – State Environmental Planning Policy 46, Sch 3
Legislation Cited: Criminal Appeal Act 1912 (NSW), ss 5AE
Environmental Planning and Assessment Act 1979 (NSW), ss 78A, 79, 110, 111. 112; Pt 4, Pt 5
Environmental Planning and Assessment Regulation 1994 (NSW), cl 53C; Sch 3
Evidence Act 1995 (Cth), s 9
Evidence Act 1995 (NSW), ss 9, 118, 119
Interpretation Act 1987 (NSW), s 33
Native Vegetation Conservation Act 1997 (NSW), ss 12, 15, 16, 17, 21, 23, 70; Pt 2 Div 3; Sch 4
State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation, Sch 3
Water Act 1912 (NSW), Pt 8
Uniform Civil Procedure Rules 2005 (NSW), rr 15A; 20.26, 36.11, 36.16,
Cases Cited: A v New South Wales (2007) 230 CLR 500; [2007] HCA 10
Australian Conservation Foundation v Forestry Commission (1988) 76 LGRA 381
Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504
Bailey v Department of Land and Water Conservation (2009) 74 NSWLR 333; [2009] NSWCA 100
Bailey v Director-General, Department of Natural Resources (No 2) [2014] NSWSC 1227
Blatch v Archer (1774) 1 Cowp, 63; 98 ER 969
Booth v Bosworth (2001) 114 FCR 39; [2001] FCA 1453
Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297
Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141
Director-General of the Department of Land and Water Conservation v Bailey [2003] NSWLEC 160
Director General Department of Land and Water Conservation v Bailey [2003] NSWCCA 361; 136 LGERA 242
Director-General Department of Land and Water Conservation v Jackson [2003] NSWLEC 81; 125 LGERA 304
D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12
Hicks v Faulkner (1878) 8 QBD 167
Jones v Dunkel (1959) 101 CLR 298
Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11
Leichhardt Municipal Council v Green [2004] NSWCA 341
Mitchell v John Heine and Son Ltd (1938) 38 SR (NSW) 466
Miwa Pty Ltd v Siantan Properties Pte (No 2) [2011] NSWCA 344
Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29
Sharp v Biggs (1932) 48 CLR 81
Texts Cited:
R P Balkin, J L R Davis, Law of Torts (LexisNexis, 4th ed, 2009)

C Sappideen and P Vines (eds), Fleming’s The Law of Torts (Lawbook Co, 10th ed, 2011)
John G Fleming, The Law of Torts (9th ed, 1998)
Category: Principal judgment
Parties: Bruce Clyde Bailey (First Appellant)
Janet Beatrice Shafik-Bailey (Second Appellant)
Director-General, Department of Natural Resources (First Respondent)
Water Administration Ministerial Corporation (Second Respondent)
State of New South Wales (Third Respondent)
Representation:
Counsel:
Mr B W Rayment QC/Ms V McWilliam (Appellants)
Mr N J Williams SC/Mr I Harvey (Respondents)
Solicitors:
Hicksons Lawyers (Appellants)
Crown Solicitor’s Office (Respondents)

File Number(s): 2014/275047
Decision under appeal

Court or tribunal:

Supreme Court

Citation:

Bailey v Director General, Department of Natural Resources [2014] NSWSC 1012

Date of Decision:

25 July 2014

Before:

Fullerton J

File Number(s):

2006/267230

HEADNOTE

[This headnote is not to be read as part of the judgment]

Mr Bruce Clyde Bailey co-owned with his sister (“the appellants”) a rural property near Boomi in Northern New South Wales. In 2000 and 2002, Mr Bailey cleared some 84 hectares of land on the property (“the clearing”). In July 2002 the Director-General, Department of Land and Water Conservation (now the Director-General, Department of Natural Resources) issued a summons in the Land and Environment Court alleging that the clearing was done in breach of s 21(2) of the Native Vegetation Conservation Act 1997 (NSW) (“the Native Vegetation Act”), since repealed. Mr Bailey defended the proceedings, arguing that the clearing was exempted from the operation of the Native Vegetation Act: (i) under s 12(f) of the Act as a designated development (ie, an “artificial waterbody” pursuant to the Environmental Planning and Assessment Act 1979 (NSW) and Environmental Planning And Assessment Regulation 1994 (“EP&A Regulation”)); and (ii) as a “farm structure” under the State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation (‘SEPP 46’). In July 2003, the trial judge, Talbot J, found that both exemptions applied and dismissed the charges. On the request of the Director-General, the judge stated the questions as to the interpretation of the relevant statutory provisions to the Court of Criminal Appeal, which upheld the trial judge’s approach.

In October 2006 the appellants commenced proceedings in the Common Law Division against the Director-General and the State of New South Wales (the respondents) seeking damages for (relevantly) malicious prosecution. On 25 July 2014, Fullerton J dismissed the proceedings. In a subsequent judgment, her Honour awarded (in favour of the respondents) costs to be assessed on the indemnity basis from the date of an offer of compromise.

The appellants appealed the trial judge’s findings with respect to malicious prosecution and, in the event the substantive challenge failed, the costs order.

The Court had to determine whether:

(i) it was reasonably open to the Director-General to take the view that the exemptions in s 12(f) of the Native Vegetation Act applied only to developments which were otherwise lawful;

(ii) it was reasonably open to the Director-General to take the view that the proposed SEPP 46, Sch 3 did not apply to the proposed reservoir; and

(iii) the Director-General lacked a belief in the guilt of Mr Bailey as evidenced by: (a) in the light of legal advice provided to him by the appellants, his failure to obtain a legal advice, and (b) his failure to give evidence.

Further with respect to the costs judgment the Court had to decide whether:

(iv) the offer of compromise made by the respondents complied with the Uniform Civil Procedure Rule 2005, r 20.26; and

(v) where the case was decided on the basis of no liability the respondents were entitled to costs related to the question of damages.

The Court (per Basten JA, Gleeson and Leeming JJA agreeing) held, dismissing the appeal.

In relation to (i)

1. Arguably the purpose of s 12 of the Native Vegetation Act was to disapply the Act in situations where clearing of the native vegetation was authorised under other relevant legislation. Thus, upon the reading of the legislative scheme as a whole, it was reasonably open for the Director-General to treat the exemption in s 12(f) of the Native Vegetation Act as applying only to designated developments which were otherwise lawful. Such an approach was warranted by the broader legislative planning context within which the Native Vegetation Act operated: [36]-[38].

In relation to (ii)

2. It was reasonably open for the Director-General to treat the exemption provided in SEPP 46, Sch 3 as not applying to the clearing of native vegetation because: (a) Sch 3 exempted “minimal clearing” of native vegetation for construction of “farm structures” (including “farm dams”), which on its ordinary meaning, excluded large scale structures, and consequently would not encompass a large water storage unit covering approximately 90 ha proposed by the appellant; (b) as was the case of s 12(f), this exemption could reasonably be read as referring to developments for lawful purposes and not to developments otherwise requiring approval but not approved; and (c) the EP&A Regulation defining designated development having been enacted only a year before the SEPP, it was most unlikely that such an exemption would include designated development and, if it did, that such activity would be allowed without the need to obtain the appropriate environmental assessment: [41]-[43].

In relation to (iii):

3. It was clear from the departmental memorandum recommending the prosecution that the Director-General considered Allens’ advice and found it unpersuasive. Such course was open considering that the advice (obtained prior to the clearing and not addressing the question of the charges laid) was not conclusive against the reasonableness of the prosecution: [75], [77].

4. Whether or not the Director-General obtained legal advice prior to instituting the proceedings was speculative and in any case it is doubtful how it could assist the appellant where the Director-General did not claim to have relied on any legal advice before laying the charges: [83], [84].

5. The appellant’s failure to establish that there was an absence of reasonable and probable cause for the prosecution could not be cured by an inference drawn from the fact that the Director-General did not give evidence: [90]. Consequently, the trial judge correctly found that the rule in Jones v Dunkel had no basis upon which to operate: [91], [95].

Jones v Dunkel (1959) 101 CLR 298; Kuhl v Zurich Financial Services Australia Ltd (2011) 243 CLR 361; [2011] HCA 11 referred to.

In relation to (iv):

6. The respondents’ offer of compromise reflected UCPR, r 20.26(2) (as applicable at the relevant time); the appellants’ submission to the contrary was untenable as it relied on the reading of authority taken out of context: [110]-[112].

Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 referred to.

7. The term “genuine offer” is apt to mislead. What the statutory language requires is an “offer of compromise”: an offer by a defendant to forgo costs when significant costs had already been incurred involved an element of compromise: [116].

8. The fact that the trial decided there was no liability did not disentitle the respondents from recovering costs of the undetermined issues: [118]

Australian Conservation Foundation v Forestry Commission (1988) 76 LGRA 381 applied.

Judgment

BASTEN JA: The appellants are the owners of a rural property, “Hazeldene”, situated near Boomi in northern New South Wales. Between February and July 2000, the first appellant, Bruce Clyde Bailey, arranged for contractors to clear 64 hectares of native vegetation on part of the land known as “the Strip”. That activity left an area of 20.4 hectares as an island in the middle of the cleared expanse. In April 2002 Mr Bailey arranged for the clearing of the remaining island.
On 18 July 2002 the Director-General, Department of Land and Water Conservation, issued a summons in the Land and Environment Court in respect of each action involving the clearing of native vegetation, alleging a breach of s 21(2)(a) of the Native Vegetation Conservation Act 1997 (NSW) (“the Native Vegetation Act”), since repealed. The sole defendant was Mr Bailey. The charges were heard by Talbot J exercising the criminal jurisdiction of the Land and Environment Court. Mr Bailey defended the proceedings on the basis that the clearing was undertaken for the purpose of constructing a “farm dam” on the land, a purpose permitting the clearing of native vegetation without development consent.
On 17 December 2003, the charges were dismissed.
In October 2006 the appellants commenced proceedings in the Common Law Division against the respondents, seeking damages for four causes of action, namely (a) malicious prosecution, (b) negligent misrepresentation, (c) breach of duty and (d) misfeasance in public office. The trial was conducted over 21 days before Fullerton J in the second half of 2013. By a judgment delivered on 25 July 2014, the trial judge dismissed the proceedings. [1] A subsequent judgment awarded costs in favour of the defendants, to be assessed on an indemnity basis from the date of an offer of compromise. [2]
1. Bailey v Director-General, Department of Natural Resources [2014] NSWSC 1012 (“principal judgment”).
2. Bailey v Director-General, Department of Natural Resources (No 2) [2014] NSWSC 1227 (“costs judgment”).
The civil proceedings originally asserted four causes of action, but the only one pursued on appeal was that for malicious prosecution. (Indeed, it constituted the bulk of the judgment below.) As only Mr Bailey was prosecuted, he appeared to be the only person with a real interest in the appeal. Although his sister and co-owner is an appellant, it is doubtful that she has any interest in the proceeding, except in relation to the costs order. Hereafter it will be sufficient to refer to “the appellant”, meaning Mr Bailey, except when dealing with the challenge to the costs order.
To succeed at trial with respect to malicious prosecution the appellant needed to establish three fundamental propositions, namely that:

(a) the prosecutor did not honestly and reasonably believe that –

(i) clearing native vegetation for a purpose requiring consent, but for which no consent had been given, was unlawful; and

(ii) the purpose, being the construction of levees 1.4 kms and 1.8 kms long to create a water storage unit did not constitute a “farm dam” for which no approval was required, and

(b) the prosecutions were instituted and maintained for a purpose other than that of enforcing the law with respect to clearing native vegetation.

At trial, the appellant failed to establish all of these elements. On appeal, for reasons explained below, he failed to establish error on the part of the trial judge in relation to any of these matters.
The challenge to the order for the costs of the trial was an independent issue, which only arose if the appeal against the substantive orders failed. No question was raised as to whether the appellants needed leave. Assuming that they did not, there was no basis established for interfering with the judgment of the trial judge in that respect. Accordingly the appeal must be dismissed with costs.

Malicious prosecution – elements of tort

The tort of malicious prosecution is a common law cause of action relevantly unaffected by statute. The elements are succinctly stated by Balkin and Davis, Law of Torts, in the following terms: [3]

“In order to succeed in an action for malicious prosecution, the plaintiff must prove: (1) that the defendant had instigated the proceedings; (2) that those proceedings terminated in the plaintiff’s favour …; (3) that the defendant’s conduct was without reasonable and probable cause; (4) that the defendant was also actuated by malice; and (5) that the plaintiff has suffered one of three relevant kinds of damage.”
3. RP Balkin, JLR Davis, Law of Torts (LexisNexis, 4th ed, 2009) at [25.2].

The first element was uncontroversial, the Director-General (being the first defendant in the proceedings below) was the State’s officer in whose name the criminal proceedings were commenced. To the extent other government officers may also have been responsible, the State was properly joined. The second element was also uncontroversial, Mr Bailey having been acquitted. It is not necessary to consider the fifth element, relating to damage.
With respect to the third and fourth requirements, the appellant accepted the statement in Fleming [4] in the following terms:

“Malicious prosecution postulates two fault requirements: the proceedings complained of must have been instituted without reasonable and probable cause and for an improper purpose. Both must be satisfied because the prosecution of persons reasonably and honestly suspected of crime is considered of greater social importance than disapproval of unworthy motives.”
4. C Sappideen and P Vines (eds), Fleming’s The Law of Torts (Lawbook Co, 10th ed, 2011) (“Fleming”) at [27.50] repeating the statements by Professor Fleming in John G Fleming, The Law of Torts (9th ed, 1998) at p 680.

The absence of reasonable and probable cause includes both objective and subjective elements; the latter being the absence of a belief by the prosecutor that the person charged “was probably guilty of the crime imputed.”[5] The canonical statement, from the judgment of Hawkins J in Hicks v Faulkner, [6] defined reasonable and probable cause to be “an honest belief in the guilt of the accused based upon a full conviction, founded upon reasonable grounds, of the existence of a state of circumstances, which, assuming them to be true, would reasonably lead an ordinarily prudent and cautious man, placed in the position of the accuser, to the conclusion that the person charged was probably guilty of the crime imputed.”
5. Hicks v Faulkner (1878) 8 QBD 167 at 171 (Hawkins J).
6. Hicks at 171.
In short, the prosecutor must have an honest belief that the defendant was probably guilty and that belief must be based upon grounds which a reasonable person would accept as supporting the belief. However, as explained by the High Court in A v New South Wales,[7] it is sufficient to demonstrate that the prosecutor did not believe the accused was probably guilty of the offence. That is, reference to “honest” belief adds nothing to that which must be disproved.
7. (2007) 230 CLR 500; [2007] HCA 10.
As was revealed by the extensive examination of authorities in A v New South Wales, the manner in which the elements of the tort are expressed will often depend upon forensic elements of a particular case. [8] Thus, a different analysis will apply where the prosecutor is a public officer with no personal knowledge of the facts, as compared with a prosecutor who is a private individual with actual knowledge of the conduct the subject of the charge.
8. A v NSW at [62] and at [64]-[69], discussing the different formulations of Jordan CJ in Mitchell v John Heine and Son Ltd (1938) 38 SR (NSW) 466 at 469 and of Dixon J in Sharp v Biggs (1932) 48 CLR 81 at 106.
The proper formulation of the principle may also depend upon institutional circumstances, due to the anomalous rule [9] that where proceedings are brought before a judge and jury the existence of reasonable and probable cause is for the judge and not the jury. This circumstance may lead to legitimate differences between principles developed in jurisdictions where juries are (or were) available in civil trials, [10] in contrast to those where trials are by judge alone, as now in New South Wales.
9. Fleming at [27.70].
10. Fleming suggested that was, at the time he wrote, primarily Victoria: p 703, fn 103.

This caution is particularly apposite in the present case where the prosecution was based upon agreed facts and the only issue in dispute was the availability of a statutory exemption. One way to approach the present matter is to ask whether the prosecutor in fact believed that the construction of the statute upon which he relied was probably correct and then ask whether a reasonably competent lawyer would have reached a similar conclusion. However, there is no legal requirement that the matter be approached in this way: it need not be a question asked in two sequential stages. Rather, the approach to one limb of the requirement may affect the answer to the other. For example, if the court were satisfied that the construction adopted by the prosecutor was, as a matter of law, reasonably open, it might be difficult for the plaintiff to establish on the balance of probability that the prosecutor did not believe in the probability of success, absent direct evidence supportive of that conclusion. On the other hand, if the plaintiff could establish that a reasonable lawyer would not adopt that view, the plaintiff might more readily establish that the prosecutor did not have such a belief, although that might still be a difficult forensic task.
Similar practical considerations may affect the order in which the court approaches the elements of the tort. Where malice is a question for the jury, it is usual to deal with reasonable and probable cause first, lest an adverse conclusion about malice “could, in effect, swamp the other issues.”[11] Such a concern is less valid with a trial by judge alone, but it remains conventional to approach the issues in this order.
11. A v NSW at [43].
It has also been noted, as a practical forensic issue, that it may be easier to prove that a private prosecutor has acted for a purpose other than carrying the law into effect, than in the case of a public prosecutor whose decision is subject to layers of scrutiny and to potential review and who is more likely to act with professional detachment. [12]
12. A v NSW at [42].
The fourth element is that of malice. The term is somewhat archaic and, as the High Court noted in A v New South Wales, quoting Fleming, it “has proved a slippery word in the law of torts”. [13] The Court adopted the language of Fleming in the following passage: [14]

“At the root of it is the notion that the only proper purpose for the institution of criminal proceedings is to bring an offender to justice and thereby aid in the enforcement of the law, and that a prosecutor who is primarily animated by a different aim steps outside the pale, if the proceedings also happen to be destitute of reasonable cause.”
13. A v NSW at [89].
14. Fleming, The Law of Torts (9th ed, 1998) at 685, now appearing in the 10th edition at [27.80] and referring to A v NSW.

As the High Court further noted, the elements of malice and honest belief in the guilt of the defendant may overlap but are not coterminous. A prosecutor who has an honest and reasonable belief in the guilt of the accused may nevertheless seek to pursue a prosecution out of spite or ill-will. That circumstance alone would not base an action for malicious prosecution. Prosecution of criminal charges motivated by disgust at the conduct of a person believed to have indulged in criminal activity, with the intention that he or she should be punished, might be thought to constitute malice in a colloquial sense, but it would not constitute an extraneous purpose for the tort of malicious prosecution. On the other hand, if it can be shown that the prosecutor had no actual belief in the guilt of the accused, it might more readily be inferred that he or she acted for an improper motive. Nevertheless, the two subjective elements must remain separate and be addressed separately.

Relevant planning controls

(a) the issue before this court

It is convenient to deal first with the objective element of reasonable and probable cause for laying the charges. In order to explain the basis on which charges were laid against the appellant, it is necessary to identify the statutory controls in place with respect to clearing native vegetation, as they operated between February 2000 and July 2002. The appellant was acquitted on both charges, on the basis of findings as to the meaning of several statutory provisions dealt with in the judgment of the Land and Environment Court. The critical findings were the subject of a case stated on two questions of law to the Court of Criminal Appeal, pursuant to s 5AE of the Criminal Appeal Act 1912 (NSW). The judgments of those courts are not subject to review in these proceedings. The issue with respect to malicious prosecution is whether the prosecutor had reasonable and probable cause to adopt, before those judgments, a construction which differed from those adopted in those judgments.
The approach to statutory construction adopted in the following reasons appears not to have been that presented to the Land and Environment Court or to the Court of Criminal Appeal. Nor are the legal materials referred to here identical with those considered by those courts. These factors may explain a difference in approach and in the outcome of the analysis.
Claims for malicious prosecution are by no means common and can arise in a variety of circumstances. A case in which the prosecution ultimately turned solely on beliefs of the prosecutor as to the proper construction of statutory provisions is rare: indeed, this Court was not referred to any case where that had arisen. When a court, whose job it is to determine the law, is required to consider whether a particular view of the law was reasonably open at the time the prosecution was commenced, the fact that a court considering the criminal charges took a particular view of the law should be disregarded. The issue in this Court, somewhat unusually, is not to state the law governing a particular set of facts, but to decide whether a particular view of the law was reasonably open at the time charges were laid, so as to provide reasonable and probable cause for pursuing a prosecution. To go further would be to undermine the basis of the acquittals.
A similar difficulty can arise with respect to the more usual case of alleged malicious prosecution, which turns on issues of fact. However, in that situation there is a different standard of proof to be applied. Thus, so far as the objective circumstances are relevant, the plaintiff (being the accused in the criminal proceeding) bears the burden of establishing that there was no reasonable basis for the prosecutor to conclude that a prosecution would probably result in a guilty verdict. The differing burdens and standards of proof can readily accommodate the rejection of a claim of malicious prosecution without undermining the acquittal on the criminal charge. However, a similar reconciliation is not so easy with respect to questions of law. Indeed, the potential to undermine an acquittal which depends purely on an understanding of the law is sufficient to raise a doubt as to whether the tort of malicious prosecution, based purely on a wrong view of the law can properly coexist (except in extreme cases) with the strong principle of finality embraced in D'Orta-Ekenaike v Victoria Legal Aid. [15] However, as that was not an issue raised in the present proceedings, it must be put to one side.
15. (2005) 223 CLR 1; [2005] HCA 12.
The conclusion reached below is that a construction of the law sufficient to support a conviction was reasonably available to the prosecutor. The finding of the Court need go no further and should not be understood as going further. Nevertheless, the reasons for reaching that conclusion cannot all be stated with such express reservations. For example, to explain what the Court considers to be the proper approach to statutory construction as a view which is merely “reasonably open” would be more than awkward and artificial; it would be positively misleading. All that can be said is that the analysis which follows must be understood in the context of the limited issue to be determined by this Court.

(b) protection of native vegetation

The two charges laid against the appellant alleged breaches of s 21(2) of the Native Vegetation Act. Section 21 provided at the time of the offences:

21   Clearing native vegetation on land not subject to plan
(1)   This section does not apply to:
(a)   any land to which a regional vegetation management plan applies, or
(b)   State protected land.
(2)   A person must not clear native vegetation on any land except in accordance with:
(a)   a development consent that is in force, or
(b)   a native vegetation code of practice.
Note. See also clauses 3 and 5 of Schedule 4 which provide that certain exemptions under SEPP 46 and the Western Lands Act 1901 that existed before the commencement of this Act will be continued on a transitional basis. [16]
16. The term “SEPP 46” referred to the State Environmental Planning Policy No 46—Protection and Management of Native Vegetation; it will be referred to below as “SEPP 46”.

Unsurprisingly given the agreed facts, the Land and Environment Court (Talbot J) was satisfied beyond reasonable doubt that the clearing the subject of each charge had occurred within the periods particularised. [17] There was no dispute that s 21 applied to the land, that there was no development consent in force and that the clearing was not undertaken in accordance with a native vegetation code of practice. There were, nevertheless, two exemptions relied upon, one being that referred to in the note to s 21(2) and the other arising under s 12 of the Native Vegetation Act. It was these exemptions which determined whether or not the prosecution could succeed.
17. Director-General of the Department of Land and Water Conservation v Bailey [2003] NSWLEC 160 at [33] (“Bailey (LEC)”).

(c) designated development

Section 12 of the Native Vegetation Act stated that the Act did not apply to certain types of clearing, specified in paragraphs (a)-(p). Each paragraph dealt with a form of statutory authority, six referring to clearing “authorised under” a specified statute or statutes (or in one case a licence granted under a specified statute), while a further six referred to clearing “carried out in accordance with” a permission granted under a statute. There were two exceptions to this linguistic scheme. One referred to clearing “that involves the removal or lopping of any tree or other vegetation in accordance with” a provision of the Roads Act, [18] being in effect a combination of the language used in the other paragraphs. The other exception was that relied upon in the present case, namely par (f), which was in the following terms:

12 Clearing excluded from operation of Act
This Act does not apply to the following types of clearing:
…
(f) any clearing that is, or that is part of, designated development within the meaning of the EPA Act….
18. Native Vegetation Act, s 12(m).

The term “designated development” is defined in the Environmental Planning and Assessment Act 1979 (NSW) (the “EP&A Act”) as development declared to be designated development by an environmental planning instrument or the regulations. Relevantly for present purposes, cl 53C of the Environmental Planning and Assessment Regulation 1994 (NSW) (“EP&A Regulation”), as then in force, declared development described in Sch 3 to be designated development for the purposes of the EP&A Act. Sch 3 included “artificial waterbodies”, a term which included a dam, pond or lake “with a maximum aggregate surface area of water of more than 20 hectares or a maximum total water volume of more than 800 megalitres”. [19] It was common ground that the proposed water retention area for which the clearing was carried out was well in excess of these criteria, having a proposed capacity of 3,500-4,000 megalitres, and an area of some 90 hectares (being the figures used by the appellant in his application for a licence under Pt 8 of the Water Act 1912 (NSW)).
19. EP&A Regulation, Sch 3, Artificial waterbodies.
The exemption in s 12(f) thus raised a question as to the inter-relationship of the Native Vegetation Act and the EP&A Act. The relationship was addressed by a number of provisions of the Native Vegetation Act:

15   Granting of development consent
(1) If development consent is, because of this Part, required to clear native vegetation or any protected land, that development consent may be obtained by the Minister making a determination, in accordance with Part 4 of the EPA Act, to grant development consent.
(2) For the avoidance of doubt, Part 4 of the EPA Act applies to and in respect of that development consent in the same way as it applies to and in respect of development consent that may be required by an environmental planning instrument.
…
16 Relationship with Part 5 of EPA Act
Part 5 of the EPA Act does not apply to any clearing carried out in accordance with this Part, and any such clearing is not an activity for the purposes of Part 5 of the EPA Act.
17   Offence of contravening this Part
(1)   A person who contravenes this Part is guilty of an offence under this Act.
(2)   Section 126(1) of the EPA Act (Penalties) applies to any such offence in the same way as it applies to an offence against that Act.

Further, the provisions in Pt 2 Div 3 of the Native Vegetation Act, which applied to land not subject to regional vegetation management plans, also contained the following provision:

23   Clearing not affected by other instruments or Acts
(1)   If native vegetation or State protected land is, or is about to be, cleared in accordance with development consent as required by this Division, that clearing cannot be prohibited, restricted or otherwise affected by an environmental planning instrument or by the provisions of any Act (other than this Act or the EPA Act) to the extent to which that instrument, or those provisions, prohibit, restrict or otherwise affect that clearing.
(2)   However, subjection (1) does not operate to exclude any requirement for:
(a) consent under section 90 of the National Parks and Wildlife Act 1974, or
(b)   a licence under the Protection of the Environment Operations Act 1997,
that might arise in relation to any such clearing.
(3)   Subsection (1) does not apply to any clearing that is lawfully carried out under this Act otherwise than in accordance with development consent as required by this Division.
Note. For example, in any case where clearing is carried out in accordance with a native vegetation code of practice, the clearing may still require development consent because of an environmental planning instrument.

It is apparent that the role of the Native Vegetation Act within the scheme of State planning legislation was given express consideration in drafting the Act. The effect of a development consent under the Native Vegetation Act, permitting clearing of native vegetation, where such consent was required, was to override any prohibition or constraint imposed by an environmental planning instrument or another Act, other than the Native Vegetation Act itself or the EP&A Act. This reflected an expectation that there should be a coherent scheme created for the inter-relationship of the Native Vegetation Act and the EP&A Act.
Mr Bailey did not have a consent under the EP&A Act for carrying out designated development. If such a consent were required and if the clearing of the native vegetation constituted part of that designated development, there would have been a contravention of the EP&A Act. (Section 23(1) would not have been engaged because he did not have a consent under the Native Vegetation Act.) Of course, if Mr Bailey had been prosecuted under the wrong legislation, he would have been entitled to an acquittal. There was, however, a large question in the proceedings as to whether the disapplication of the Native Vegetation Act, pursuant to s 12(f), was engaged. At his criminal trial Mr Bailey asserted that s 12(f) was engaged because the clearing was part of the construction of the proposed artificial water body which was designated development; the fact that he did not have consent to carry out such activity was irrelevant for the purposes of s 12(f). That was because the language of par (f), in contrast to the other paragraphs in the section did not refer to clearing “carried out in accordance with” a consent granted under the EP&A Act.
The significance of designated development under the EP&A Act is that a development application (if permitted and required) in respect of such activity must be accompanied by an environmental impact statement. [20] The application must be placed on public exhibition and notification given in accordance with s 79. That process was presumably deemed to be sufficient to ensure that issues which would otherwise arise on an application under the Native Vegetation Act would be properly addressed.
20. EP&A Act, s 78A(8).
Designated development may be “prohibited development” for the purposes of the EP&A Act; alternatively, carrying out such development may be unlawful because consent has been sought and refused. If the activity, although designated development, did not require consent under Pt 4 of the EP&A Act, Pt 5 of the EP&A Act would be engaged. [21] Under Pt 5, an environmental assessment would have been required, which may involve an environmental impact statement. [22] On the basis that the Native Vegetation Act is disapplied by s 12(f), the clearing would not be carried out in accordance with Pt 2 of that Act and, accordingly, Pt 5 of the EP&A Act would apply to such an activity. [23]
21. EP&A Act, s 110(1)(g).
22. EP&A Act, ss 111, 112.
23. Native Vegetation Act, s 16.
It would, on one view, be perverse to read s 12(f) as if it disapplied the Native Vegetation Act in circumstances where the activity, which included clearing native vegetation, was in fact unlawful under the EP&A Act. Indeed, s 23(1) acknowledged the possibility that clearing for which consent had been given under the Native Vegetation Act might be affected or prohibited under the EP&A Act, in which case the consent would not override the statutory affectation or prohibition by the EP&A Act. Arguably, the purpose and structure of s 12 was to disapply the Native Vegetation Act in circumstances where clearing of native vegetation was authorised under other legislation. On that basis, it was self-evidently not intended that development as significant as “designated development” could allow the destruction of native vegetation even if it were prohibited development or carried out without consent.
In the course of argument, it was suggested that this was not a reasonably available construction of s 12(f) because it required the reading in of words which were not there and, significantly, did appear in every other paragraph of the provision. However, the exercise of statutory interpretation often involves the explication of general or succinct statements in other terms. Where the words in question are ordinary English words, that may not be an appropriate course; in the present case, the scheme of regulation involved legal concepts in respect of which some explication may be necessary and appropriate. Just as the argument relied on by the appellant sought, appropriately, to read par (f) in the context of s 12, taken as a whole, so it was arguably necessary to read s 12 in the context of related statutory provisions. At the very least, that conclusion, however reasoned and articulated, could not be said to be unreasonable. Indeed, it appears to have been the approach accepted by the appellant’s legal advisers prior to the commencement of the proceedings.
There is a further basis upon which it might reasonably be accepted that s 12 disapplied the Native Vegetation Act only in respect of lawful activities. The accepted purpose of the clearing, namely the creation of a water storage unit, required the construction of levees on a floodplain. Because that was the core activity which would result in a designated development for the purposes of s 12(f), it was open to the prosecutor to conclude that the activity could not be lawfully carried out absent an approval under Pt 8 of the Water Act. Section 12(p) of the Native Vegetation Act disapplied its provisions in circumstances where the clearing was carried out in accordance with an approval under the Water Act. That provision was not relied upon in defence of the prosecution, because no such approval had been obtained. Nevertheless, it was open to the prosecutor to conclude that the purpose by which the activity became designated development rendered the activity unlawful and unauthorised, either by reason of the operation of the EP&A Act, or by reason of the absence of authority required under the Water Act. It was reasonable to conclude that the exemption only applied to activity which was otherwise lawful.

(d) exemption for farm structures

The second exemption relied upon by the appellant was to be found in Sch 3 of SEPP 46. SEPP 46 was repealed by the Native Vegetation Act, s 70. However, a savings provision, contained in Sch 4 was in the following terms:

3 Existing development consents and exemptions under SEPP 46
…
(2) Subject to the regulations, the clearing of native vegetation for a purpose or extent described in Schedule 3 to SEPP 46 continues, after the repeal of SEPP 46 by this Act, to be clearing that is exempt from any requirement under Part 2 of this Act for the development consent.

The relevant exemption thus preserved was in the following terms:

Clearing of native vegetation for the purpose of the following:
…
(e) Rural Structures. The clearing to a minimum extent of native vegetation if it is necessary for the construction, operation and maintenance of farm structures (such as farm dams, tracks, bores, windmills, fences, fence lines, stockyards, loading ramps, sheds and the like).

The issue of construction concerned the significance of the examples given in parentheses and the extent to which they might constrain an understanding of the term “farm structures”. One approach to understanding the concept of a farm structure by reference to the examples, was to exclude large scale structures bearing no reasonable relationship to the examples given in the exemption. In its ordinary meaning, a farm dam would be understood to refer to the multitude of small dams which dot the countryside in much of New South Wales. It is most unlikely that a person seeing a water storage unit approximately 90 ha would identify it as a farm dam. On its ordinary meaning, a “farm dam” would arguably not include the water storage unit constructed with levees 1.4 kms and 1.8 kms proposed by the appellant. Accordingly, a “farm structure” for the purposes of the exemption, could reasonably be read as not including such a large water storage facility. Consistently with that approach, in a short letter seeking advice from Ms Wild at Allen, Allen and Hemsley, solicitors, [24] the appellant referred on three occasions to his intention to construct a “reservoir”.
24. The advice is dealt with below at [50]ff.
A second approach, in keeping with the approach proposed above with respect to s 12, would limit the exemption to lawful activities. The reference to “purpose” in the chapeau to SEPP 46, Sch 3 could reasonably have been read as referring to lawful purposes, and not to purposes which were unauthorised or prohibited. Thus, even if a large water storage facility could fall within the concept of a “farm structure”, clearing was neither necessary nor permissible while construction, which required approval, remained unauthorised.
A third approach would require that SEPP 46 be considered in its statutory context. For that purpose, despite its repeal, Sch 3 could not be properly construed without reference to the text of the SEPP as a whole. That text included numerous references to other legislation, including the EP&A Act. Schedule 3 itself made reference to clearing authorised under the Rural Fires Act 1997 (NSW). [25] More broadly, Sch 3 was intended to permit the clearing of native vegetation for quite limited purposes, including “minimal clearing” of up to 2 hectares per annum; minimal tree cutting, of no more than seven trees per hectare in a period of one year for on-farm uses, the lopping of vegetation for stock fodder, but only in a period of declared drought and where the continued health of the vegetation would not be affected. Given the nature of these specific exemptions, and given the assumption that the drafter would have been conscious of the provisions with respect to designated development contained in the EP&A Regulation, promulgated the year before the SEPP, it is most unlikely that the exemptions were intended to include activity which might be designated development. If they did include such activity, it is most unlikely that they included such activity in the absence of an appropriate environmental assessment.
25. SEPP 46, Sch 3(f).
The appellant submitted that the prosecutor’s understanding of the exemption was that it was restricted to “small dams”. That approach was castigated as “absurd”. Where the ordinary meaning of a statutory provision leads to a result which, having regard to the intended purpose of the instrument read as a whole and in its context, is “absurd”, it may be appropriate to prefer a different meaning. [26] However, that is not the exercise proposed. The complaint is that a term (farm dams) cannot rationally be read down by reference to its context to exclude large reservoirs. To describe that exercise as “absurd” is mere rhetoric. Though perhaps necessary to establish a relevant element of the tort of malicious prosecution, such language is unhelpful in identifying reasonably available interpretations. The approach articulated above was at least reasonably available to the prosecutor: the only answer provided was a semantic assertion that the word “small” did not appear before the phrase “farm dams”. So much may be conceded; however, it manifestly fails to demonstrate that the approach articulated above was not reasonable.
26. Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 at 320-321 (Mason and Wilson JJ); see also Interpretation Act 1987 (NSW), s 33.

Consequences of available interpretations of exemptions

The only two bases relied upon as demonstrating a lack of reasonable and probable cause for the prosecutions were the availability of the exemptions discussed above. If the prosecutor adopted a reasonably available belief as to the operation of these exemptions, as a matter of law, the claim for malicious prosecution must have failed. The construction of each provision set out above may not have been the only one reasonably available, but it was necessary for the appellant to demonstrate that either those views were not reasonably available, or, failing that, they were not held by the prosecutor, or those responsible for the prosecution.
Both before the trial judge and in this Court, reference was made to judgments given in the Land and Environment Court, dealing with the present case and a similar case decided some four months earlier (although nine months after the charges had been laid), namely Director-General Department of Land and Water Conservation v Jackson. [27] Reference was also made to the analysis undertaken by the Court of Criminal Appeal, to which Talbot J had stated a case following the trial of the appellant. [28]
27. [2003] NSWLEC 81; 125 LGERA 304 (Bignold J), a judgment delivered on 31 March 2003.
28. Director General Department of Land and Water Conservation v Bailey [2003] NSWCCA 361; 136 LGERA 242 (a judgment of Shaw J, with whom Mason P and Hidden J agreed).
It was noted that the Court of Criminal Appeal took a different view from that set out above with respect to the construction of both s 12(f) of the Native Vegetation Act and the farm structures exemption in SEPP 46, Sch 3(e). Factually, that was so. However, those facts did not advance the appellant’s case significantly. It is a separate and necessary element of the tort of malicious prosecution that a criminal prosecution has failed; in other words, that a court has held that the prosecutor’s assessment of the fact or law involved was erroneous. That does not mean that another view was not reasonably open when the charge was laid or the prosecution maintained.
This case was unusual, perhaps unique, because there was no factual issue in dispute. Assuming, as indicated above, that a construction of each exemption consistent with the guilt of the appellant was reasonably open, the appellant’s case must depend upon demonstration that such an opinion was not in fact held by the prosecutor.

Belief of prosecutor

The appellant’s case in this respect focused on a particular feature of the pre-prosecution circumstances, namely that the appellant had obtained legal advice from Allen, Allen and Hemsley, solicitors, (“Allens’ advice”) a copy of which had been provided to officers in the Director-General’s Department. According to the appellant, this document not merely provided a reasonable basis for him to clear the land, but demonstrated that there was no reasonable basis upon which to prosecute him for so doing. With due respect to the strenuous submissions in support of these propositions, neither conclusion was warranted. To understand why that is so, it is necessary to start with the text of Allens’ advice, which must be understood in the context of the appellant’s instructions and the question to which attention was directed.

(a) Allens’ advice

The letter, dated 20 April 2000 and signed by Ms Wild, was in the following terms:

“Advice on Clearing Native Vegetation
You have asked us to advise as to whether you are required to obtain a development consent under the Native Vegetation Conservation Act 1997 (NSW) (the NVC Act) for the clearing of native vegetation from your land for the construction of a dam.
For the purposes of this advice we have made the following assumptions:-
●   that a Regional Vegetation Management Plan (RVMP) does not apply to the land that you propose to clear. Your consultant, Mr Rob McCosker, has informed us that a RVMP covering your land is being drafted, but is not yet finalised;
● that the vegetation you propose to clear from the land is in fact native vegetation within the meaning of the NVC Act.
Clearing of Land under the Native Vegetation Conservation Act 1997 (NSW)
The NVCA provides that a development consent is required to clear native vegetation from land to which no RVMP applies. However, there are certain exemptions under the NVCA from the requirement to obtain a development consent. A development consent is not required for the clearing of native vegetation in the following circumstances:
(a)   the clearing of up to 2 hectares per annum for any contiguous land holding in the same ownership; and
(b)   the clearing, to a minimum extent, of native vegetation if it is necessary for the construction, operation and maintenance of farm structures (such as farm dams, tracks, bores, windmills, fences, fence lines, stockyards, load ramps, shed and the like).
Therefore, you will not require development consent to clear native vegetation from your land if:
●   no more than 2 hectares of native vegetation needs to be cleared to construct the proposed dam; or
●   you clear only enough native vegetation to enable the construction of the dam to occur.
Any clearing of native vegetation in excess of the minimum amount required to construct the dam would be in breach of the NVCA.
Water Act 1912 (NSW)
Mr McCosker has informed us that you are required under Part 8 of the Water Act 1912 (NSW) to obtain the approval of the Water Administration Ministerial Corporation (the WAMC) to construct any levies [sic] for the proposed dam. Therefore, despite the fact that clearing of native vegetation can take place in the circumstances described above, an application must still be lodged with the WAMC for approval to construct any levies [sic] for the proposed dam.
Conclusion
You will not be required to obtain development consent to clear native vegetation from your land for the purpose of constructing a dam in the circumstances outlined above.
However, you will need to make an application to the WAMC for an approval to construct the levies [sic] for the proposed dam.”

A number of points may be made about this advice. First, it was given before any clearing had taken place; it did not advise in relation to the charges later laid.
Secondly, the advice was that the appellant would “not be required to obtain development consent to clear native vegetation … for the purpose of constructing a dam in the circumstances outlined above.” The advice was directed specifically to the operation of Sch 3(e) of SEPP 46. There was no reference to a possible exemption under s 12 of the Native Vegetation Act. However, it need not be inferred that the solicitor was not aware of other possible exemptions. Shortly after the charges were laid, on 5 September 2002, the State Crown Solicitor’s Officer, acting for the prosecutor, wrote to Ms Wild, who was still acting for the appellant, but was then employed by PricewaterhouseCoopers Legal, seeking admission of numerous matters which might have given rise to a defence. Admissions were sought in respect of each paragraph in s 12 of the Native Vegetation Act, including s 12(f), in the following terms:

“(f) The subject clearing was not clearing that was, or that was part of, designated development within the meaning of the [EP&A Act], as provided in s 12(f) of the [Native Vegetation Act].”

The response from PricewaterhouseCoopers, dated 23 September 2002, was as follows:

“(f) We are instructed that the clearing was not the subject of an application for designated development under the [EP&A Act].”

When the appellant’s lawyers decided to rely upon the exemption under s 12(f) is not clear. The charges were heard in the Land and Environment Court on three days in mid-June 2003. The judgment, delivered on 1 July 2003, noted that senior counsel appearing for the appellant in that proceeding had relied upon s 12(f). [29] The evidence indicated that, even after explicit reference had been made to s 12(f) in the letter from the Crown Solicitor, after the charges were laid, neither party considered there was a defence available under that provision. It may be inferred that reliance on s 12(f) resulted from advice given by counsel in preparing the matter in 2003. So far as appears from the evidence, the appellant gave notice of intended reliance on s 12(f) only on the Friday afternoon before the Monday on which the trial was to proceed. The appellant must now demonstrate that what had been a common approach up until that time was not reasonably available.
29. Bailey (LEC) at [5].
Thirdly, Allens’ advice assumed that the purpose was “the construction of a dam”. The advice was provided in the circumstances outlined, namely that a consent would not be required if the clearing was to be no more than 2 hectares, or to a minimum extent necessary to construct the dam. The possibility that the 2 hectare exemption might apply indicated that the author of the letter either had no information as to the size of the proposed dam, or did not address her mind to that issue.
Fourthly, the letter noted advice given by Mr McCosker, a consultant to the appellant, that approval would be required under Pt 8 of the Water Act to construct the levees for the proposed dam. The letter continued, noting that, despite the lack of a requirement for consent for clearing, if the circumstances identified were met, there was still a need to lodge an application for approval under the Water Act to construct the levees. In other words, the advice expressly contemplated that the purpose of the clearing, namely to construct a dam, was itself a purpose for which authorisation was required. Although the connection between the two issues was not identified with precision, the available inference was that approval to construct the levees was a necessary element of the lawful construction of the dam and therefore a precondition to the exemption for clearing native vegetation for that purpose.
At the very least, there was no suggestion as to when the obtaining of consent and the clearing could take place; the temporal issue was not addressed. That was understandable given the subject matter of the advice, namely whether a separate development consent was required in order to clear vegetation.
Thus, there was nothing inconsistent with Allens’ advice in the analysis of the legislative scheme set out above. The advice did not consider the question (which had not arisen) as to whether the clearing of native vegetation, absent a consent to construct a dam, would be a lawful activity. It was, however, inherently implausible that the SEPP permitted the clearing of native vegetation for a purpose which was not, at the time of the clearing, lawful. The inference that the advice contemplated such a result should be rejected.
If the foregoing reading of the letter were accepted, it provided no support for the application of the exemption with respect to a farm dam in circumstances where the necessary consent under the Water Act had not been obtained. Nor did it envisage an available exemption under s 12(f).
The opening words of SEPP 46, Sch 3, “Clearing of native vegetation for the purpose of the following”, might be seen to be ambiguous. On one construction, they exempted from any requirement under Pt 2 of the Native Vegetation Act clearing for a specified purpose, permitted by law. The alternative construction, which is arguably incoherent in terms of the policy of the Act, permitted clearing of native vegetation if the landowner had a purpose in mind (a subjective intention), even though the purpose was unlawful or prohibited. A reasonable reading of the terms of the exemption, in the context of the Native Vegetation Act, should require the adoption of the former construction. That was consistent with the views presented, perhaps imprecisely, in Allens’ advice. The clearing which later took place did not satisfy that condition (no authorisation having been obtained) and, therefore, as advised by Allens, was unlawful.
There were, accordingly, reasonable grounds for a belief in the appellant’s guilt.

Lack of belief in merit of prosecution: basis of challenge

(a) general approach

Both parties (on the appeal) accepted that the prosecutor was the Director- General of the Department. His was the relevant state of mind; it could only be inferred from the available documentary material as he did not give evidence.
Little can be gleaned from the authorities in relation to a case where the facts are all agreed and the guilt or innocence of the defendant turned on questions of law and points of statutory construction. In that circumstance, the applicant placed weight on three propositions, namely:

(a) having received a copy of Allens’ advice, the Director-General could not have established the necessary belief as to probable guilt on objectively established grounds;

(b) in the alternative, the Director-General could not have held such a belief without obtaining his or her own legal advice which contradicted Allens’ advice; and

The first limb of this approach cannot be accepted. Allens’ advice was given prior to the clearing taking place; it envisaged that consent would not be necessary under the Native Vegetation Act, for the purpose of clearing native vegetation in order to construct a dam, but that consent would be necessary to construct the levees for the dam. Even if the reading of the advice set out above were not to be accepted, the advice failed to address the two critical questions of law relevant to the outcome of the prosecutions.
So far as the second and third limbs of the argument were concerned, the amended statement of claim made no such allegations. As particulars of malice, it identified various alleged improper purposes, including spite and/or pique and a lack of “any genuine belief in the guilt of the [appellant]”. [30] As particulars of absence of reasonable or probable cause, sub-par (a) merely repeated the heading. Sub-paragraph (b) alleged a lack of “evidence … to support essential elements of the offence”, a point which was without substance in the circumstances of the trial, the outcome of which did not turn on lack of evidence. Sub-paragraph (c) stated that the prosecution “ignored established precedent in favour of the [appellant’s] innocence and the agreed facts of the case”, although no “established precedent” was identified in this Court. Sub-paragraph (d) merely described the maintenance of the prosecutions and “the appeal” as “manifestly risky” in circumstances where there were “no sufficient grounds to convict”.
30. Amended statement of claim, filed 27 April 2007, par 18(h).

The amended defence did not assert reliance on legal advice in response to paragraph 18 of the amended statement of claim. The amended reply, filed by the appellant on 4 July 2013, did not take the matter any further.
In these circumstances, it is necessary to consider the evidence proffered in support of the proposition that the Director-General lacked the necessary belief in the probable guilt of the appellant.
A critical document discovered by the respondents, which was tendered by the appellant at the trial, was a memorandum prepared by Ms Paget-Cooke in the Legal and Compliance branch of the Department of Land and Water Conservation (referred to by the parties as “the prosecution memorandum”), recommending that the appellant be prosecuted for the clearing of native vegetation. After setting out the background, section 3 of the document, headed “Comment”, included the following propositions:

“2.9   Full details of the offences and relevant considerations are included in the Recommendation received from the Region, which is in the form of a Memo addressed to Legal and Compliance dated 28 May 2002. (Attachment 1)
…
3.1   No development consent has been issued in respect of the clearing. The clearing is not excluded from the operation of the [Native Vegetation] Act under sections 9, 10 or 12 of the [Native Vegetation] Act.
3.2 No approval has been issued under Part 8 of the Water Act.
3.3   A total of 4 hectares of the clearing would be permitted under the Minimal Clearing exemption.
3.4   Mr Bailey claims that the clearing was permitted under the Rural Structures exemption. The Department’s position is that this exemption was intended to permit the construction and maintenance of every day farm structures, which would include small scale farm dams, but that it does not permit the construction of a large reservoir intended to facilitate the establishment of a new agricultural enterprise.
3.5   Mr Bailey says that he based his decision to undertake the clearing on independent legal advice. The Department has seen this advice and does not find it persuasive.
…
3.7   The Barwon Region has requested that Mr Bailey be prosecuted as the person who authorised the clearing.
3.8   An assessment of the offences according to the DPP Prosecution Policy and Guidelines confirms that the circumstances warrant prosecution.
…
3.10   In view of the large area cleared and the legal question relating to the interpretation of the Rural Structures exemption, it would be appropriate for this prosecution to be brought in the Land and Environment Court rather than in the Local Court.”

The attachment to the prosecution memorandum (referred to at 2.9), was not produced but probably requested prosecution, as indicated at 3.7. The recommendation to commence a prosecution was approved by the General Manager, Legal and Compliance, on 26 June 2002. The matter then went to the Director-General, who sought a discussion with the General Manager, Legal and Compliance. The Director-General then wrote and signed the following direction dated 1 July 2002:

“Following discussion on 1/7/02 agreement to proceed with prosecution as recommended.”

The prosecution memorandum also went to the Deputy Director-General. A comment over the initials of the Deputy Director-General was redacted. There was a dispute with respect to that redaction (and others), for which client legal privilege was claimed under ss 118 and 119 of the Evidence Act 1995 (NSW). A challenge to the claim for privilege was taken on an interlocutory basis to the Supreme Court. The judge hearing the application, James J, identified five classes of documents for which client legal privilege was claimed, namely:

“1.   File notes by legal officers of the Department;
2.   Communications between a Departmental legal officer and a solicitor in the Crown Solicitor’s Office;
3.   Communications between a Departmental legal officer and a Departmental regional officer for the purpose of acquiring evidence;
4.   Communications between the barrister briefed by the Crown Solicitor and either a solicitor in the Crown Solicitor’s Office or a Departmental legal officer; and
5.   Communications between a Departmental legal officer and a witness or potential witness or a person who might provide information for the purpose of the proceedings.”[31]
31. See principal judgment at [310].

The judgment of James J, upholding the claim for privilege, was appealed by the present appellant to this Court. The appeal was dismissed, but towards the end of a lengthy judgment, Tobias JA noted that “as the proceedings at present stand, the Director-General does not seek to make a case in defence to the appellants’ malicious prosecution claim that he acted upon legal advice.”[32] Tobias JA continued:

“If at any time he does, then it would be open to the appellants to seek access to that legal advice and a real question as to waiver would then arise that could have particular repercussions with respect to the costs of the proceedings before the primary judge and this Court with respect to the respondents’ present claim for client legal privilege.”
32. Bailey v Department of Land and Water Conservation (2009) 74 NSWLR 333; [2009] NSWCA 100 at [137] (Tobias JA, Allsop P and Hodgson JA agreeing).

The issue of waiver was raised again at trial and in this Court, reliance being placed on certain answers given to interrogatories with respect to the document which had been attachment 1 to the prosecution memorandum and had itself been the subject of a claim for privilege. On the interlocutory appeal, this Court upheld the respondents’ submission that there had been no waiver at that time. The argument was revisited before the trial judge, on the supposedly different basis that the answers to interrogatories did not constitute “an implied waiver”, but a concession that the respondents “did rely on legal advice before approving the prosecution.”[33] The submission appears to have been an impermissible attempt to reagitate precisely the issue which had been raised unsuccessfully on the interlocutory appeal. In any event, the trial judge rejected it.
33. Principal judgment at [316].
In this Court, the appellant changed tack, accepting that the Director-General had not relied upon legal advice in pursuing the prosecution. However, noting that the facts were not contentious, the submission continued: [34]

“Thus what stood between the guilt or innocence of the appellant was understood to be a question of law and the question for the first respondent was how that question would be likely to be decided by the Court.”
34. Appellant’s amended written submissions, par 10.

In his written submissions, the appellant contended for a finding that the Director-General did obtain legal advice and treated it as authoritative. [35] Next, he submitted that competent advice would have been “adverse to the bringing of a prosecution” and hence the Court should be satisfied that there was a lack of reasonable and probable cause, which the Director-General, having available such advice, must have understood.
35. Appellant’s amended written submissions, par 13.
The basis for this last conclusion appeared to lie in the earlier propositions that (a) there was “no reason to doubt the correctness of the Allens’ advice”; (b) the view that a rural structure such as a “farm dam” should be read down as limited to “little dams” was “absurd” and (c) the exclusion from the category of “farm structures” of a water storage unit of the kind proposed by the appellant was also “absurd”.
For reasons already explained, this line of argument fails at the first step. That is, Allens’ advice was not conclusive against the reasonableness of a prosecution, indeed rather the contrary. Further, to read it as conclusive against the reasonableness of a prosecution did not render any alternative view absurd. The view that a prosecution was based on a reasonable and self-evidently arguable construction of the legislative instruments should be accepted, for the reasons set out above. Accordingly, even accepting that the Director-General had available to him legal advice and took it into account, it did not follow he did not believe there was reasonable and probable cause for a finding of guilt. The appellant’s reasoning in this regard should be rejected.
In oral argument, senior counsel for the appellant was more guarded about the significance of Allens’ advice, submitting that he could “most certainly” succeed even if Allens’ advice had never been provided to the Department. [36] However, the prosecution memorandum accepted by the Director-General described having seen the advice and found it not persuasive. [37]
36. CA Tcpt, 15/07/15, pp 49-50.
37. Prosecution memorandum at 3.5: see [68] above.

(b) evidence of Ms Paget-Cooke

Although the Director-General did not give evidence, Ms Paget-Cooke did. Indeed, her evidence covered some 169 pages of the transcript. In the course of cross-examination, counsel for the appellant elicited the following evidence: [38]
38. Tcpt, 29/07/13, p 511.

“Q. But you acknowledge, don’t you, that you were instrumental in bringing the prosecution against Mr Bailey?
A. Yes.
Q. You had an active role, not only in collecting the information to which I have referred but also preparing the evidence and being involved in the administration of the actual case in court?
A. Yes, up to the point when I stopped being involved in the matter.
HER HONOUR:
Q. Did you instruct counsel?
A. No, we instructed Crown Solicitors who instructed counsel.
KING [counsel for the appellant]:
Q. You acknowledge that you also prepared the decision memorandum that went to the Director General?
A. Yes.
Q. Recommending the commencement of a prosecution?
A. Yes.”

In this Court, senior counsel for the appellant described the “state of mind of Ms Paget-Cooke” as a “false issue at the trial”. [39] As counsel later acknowledged, that was quite inconsistent with the case run for the appellant at trial. The trial judge had noted that it was not in dispute that the Director-General was properly named as a prosecutor in Mr Bailey’s claim. [40] The trial judge said:

“In closing submissions Mr King sought to persuade me that it was also open on the evidence for me to find that each of Mr O'Brien, Mr Gardner, Mr Dines, Mr Cameron and Ms Paget-Cooke were also prosecutors, thereby exposing the third defendant to liability because of what was said to be the active role they each played in setting the prosecution of Mr Bailey in motion maliciously and without reasonable and probable cause.”
39. CA Tcpt, p 1(40).
40. Principal judgment at [272].

The judge continued:[41]

“Mr King submitted that a finding that each of the named individuals was liable as a prosecutor was crucial to Mr Bailey's claim for damages for malicious prosecution. This, it was said, would avoid the consequence of it being successfully put against him that because the first defendant relied upon information from others (and from Ms Paget-Cooke in particular) without having any personal knowledge of Mr Bailey or the circumstances in which he was alleged to have illegally cleared native vegetation, it could not be shown that he acted without reasonable and probable cause, in the sense that it could not be shown that he did not honestly believe in Mr Bailey's guilt.”
41. Principal judgment at [274].

Ultimately the trial judge accepted that Mr Bailey could make out a case based on Ms Paget-Cooke’s role in supporting the recommendation to prosecute, if he could establish that she acted maliciously and without reasonable and probable cause. [42] However, she rejected that approach with respect to the other named individuals, a finding not challenged on appeal. [43]
42. Principal judgment at [288].
43. Principal judgment at [290] and [291].
In oral argument, senior counsel for the appellant submitted that the trial judge “fastens on the position of Ms Paget-Cooke in a way that really doesn’t answer any question involving the [Director-General].” [44] Adopting that approach (but ignoring the implicit criticism of the trial judge which is unsustainable given the way the trial was run), all that follows is that the appellant has abandoned a possible basis for inferring a lack of belief in the merit of the prosecution (and malice) on the part of the prosecutor. However, the fact is that the trial judge rejected the allegation of malice against Ms Paget-Cooke: nor was her finding shown on appeal to have been wrong. It follows that a finding of lack of belief in the probability of guilt must be established on a different basis.
44. CA Tcpt, 15/07/15, p 46(15).

(c) prosecutor’s failure to obtain legal advice

Whether or not the Director-General obtained his own legal advice prior to commencing the prosecution is a matter of speculation. If he did, there is no reason to suppose that it would have been along the same lines as Allens’ advice: it is possible and even probable, that it would have addressed the two key questions not addressed by Allens. That inference would not assist the appellant. In that circumstance, if the Director-General did obtain legal advice, the appellant can be no better (nor worse) off than on the case accepted by the respondents, namely that the Director-General did not rely upon legal advice in deciding to commence the prosecution.
The alternative hypothesis is that the Director-General did not obtain legal advice before reaching his decision to charge the appellant. How far that can assist the appellant is doubtful. That is so for a number of reasons. First, it was not pleaded as a reason for supposing that the Director-General did not have an actual belief in the probability of the charges being upheld. Secondly, it was not argued that if the Director-General had the relevant belief and there were in fact reasonable grounds to support it, the absence of legal advice providing such grounds satisfied this element of the tort. Thirdly, despite the appellant asserting that he could succeed even if the Allens’ advice had not been provided to the Director-General, this element of the appellant’s case was squarely founded on the dual propositions that the Allens’ advice was inconsistent with the guilt of the appellant and that the Director-General, knowing of that advice, could not have held a belief in the probable guilt of the appellant, if he did not obtain and rely upon his own advice to the contrary. Once the premise based on the Allens’ advice is rejected, the rest of the reasoning falls away.
The respondent had an additional objection to this submission, namely that it depended not upon inference but on conjecture and speculation. Adopting the reasoning of Spigelman CJ in Seltsam Pty Ltd v McGuiness, [45] the respondent noted that the party bearing the burden of proof may only rely upon an inference where the inferred fact is reasonably probable, based on other facts which have also been established as reasonably probable. As the Chief Justice noted, “inference must be carefully distinguished from conjecture or speculation”, the latter being that which is within the range from “the barely possible to the quite possible.” The negative inference required in the present case was that the Director-General did not have a belief when directing that charges be laid in the probable guilt of the appellant. As the respondent correctly submitted, there was no basis in the facts established to draw such an inference.
45. (2000) 49 NSWLR 262; [2000] NSWCA 29 at [84]-[88].

(d) failure of Director-General to give evidence

There remains a question as to what inference can be drawn from the failure of the Director-General to give evidence. The complaint raised by the appellant was that the trial judge declined to draw from his absence from the witness box an inference that he lacked an honest belief in the propriety of the prosecution. In substance the challenge depended upon a rejection of the judge’s conclusion that, objectively viewed, the material placed before him was not insufficient to support an honest belief in the appellant’s guilt.
The submission was put with slightly different emphasis at different times. On occasion, it appeared to reflect the principle in Blatch v Archer [46] that “evidence is to be weighed according to the proof which it was in the power of one side to have produced, and in the power of the other to have contradicted.” At points, the emphasis reflected the rule in Jones v Dunkel,[47] which, like the present case, was one where the defendant failed to give evidence in his defence. Where two vehicles had collided, the plaintiff had established that the vehicle driven by her deceased husband had probably been on the correct side of the road and the defendant’s vehicle had probably crossed the centre line. The principle (which ought to have been explained to the jury but was not) was, succinctly, that the absence of the defendant from the witness box “cannot be used to make up any deficiency of evidence”, but that the inference available from the plaintiff’s evidence “can be accepted the more readily if the defendant fails to give evidence”. [48]
46. (1774) 1 Cowp, 63 at 65; 98 ER 969 at 970 (Lord Mansfield).
47. (1959) 101 CLR 298 at 308 (Kitto J), 312 (Menzies J) and 320-321 (Windeyer J).
48. Jones v Dunkel at 312 (Menzies J).
The inference which can be drawn from the failure by a party to give evidence is a matter which must be addressed with some care. The availability of such an inference was recently explained in Kuhl v Zurich Financial Services Australia Ltd: [49]

“[63] The rule in Jones v Dunkel is that the unexplained failure by a party to call a witness may in appropriate circumstances support an inference that the uncalled evidence would not have assisted the party's case. That is particularly so where it is the party which is the uncalled witness. The failure to call a witness may also permit the court to draw, with greater confidence, any inference unfavourable to the party that failed to call the witness, if that uncalled witness appears to be in a position to cast light on whether the inference should be drawn. …
[64] The rule in Jones v Dunkel permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party.”
49. (2011) 243 CLR 361; [2011] HCA 11 (Heydon, Crennan and Bell JJ) (citations omitted).

Section 9(1) of the Evidence Act states that the Act “does not affect the operation of a principle or rule of common law or equity in relation to evidence … except so far as this Act provides otherwise expressly or by necessary intendment.” There is nothing in the Evidence Act inconsistent with the principles expressed in Blatch v Archer and Jones v Dunkel. (A similar view has been taken in relation to the somewhat different wording in s 9 of the Evidence Act 1995 (Cth). [50] )
50. Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 at 516A (Finn J); Booth v Bosworth (2001) 114 FCR 39; [2001] FCA 1453 at [41] (Branson J).
On the basis of the case described above, the appellant failed to establish that there was an absence of reasonable and probable cause for the prosecution. He also failed to establish any relevant motive on the part of the Director-General for commencing the prosecution, other than an intention, in good faith, to enforce the relevant laws protective of native vegetation. The only “fact” on which the appellant could rely to establish a lack of belief in the probability of the appellant’s guilt was the dependence of the case on questions of law and the conceded absence of reliance by the Director-General on legal advice.
There are three reasons why the principles relied upon do not assist the appellant. First, while there are often circumstances in which the line between an available inference and mere speculation (as described by Spigelman CJ) is not readily drawn, this was a relatively clear case of a deficiency in the evidence presented by the plaintiff at trial. In short, he had not established a reasonably available inference which called for a response.

Secondly, the nature of the inference sought to be drawn will depend upon the circumstances of the particular case. Where the inference concerns the state of mind of a state minister, or the head of a government department, as the relevant decision-maker, the inference may be quite weak, on the basis that he or she can be expected to have little recollection of the mental processes which accompanied a decision made some years earlier. Where a decision is made on the basis of a memorandum prepared by a departmental officer, it is common for the memorandum to be provided as a record of the reasons for the decision, which was made by accepting a positive recommendation. In the present case, the recommendation had been tendered by the appellant as part of his case at trial.
That is not to say that the inference may not be available that his evidence would not have assisted his case, but rather that more was required for the appellant to make good his claim. The failure to call the Director-General did not demonstrate a belief that his evidence would harm his case. As explained in Kuhl, [51] the rule in Jones v Dunkel “permits an inference, not that evidence not called by a party would have been adverse to the party, but that it would not have assisted the party.” It was not suggested that the failure to give evidence in the present case constituted an admission against interest; nor would such a finding have been open. [52]
51. Kuhl at [64] (Heydon, Crennan and Bell JJ).
52. Kuhl at [67].
Thirdly, the inference sought to be drawn by the appellant failed to recognise the circumstances in which the particular decision was made. When the charges were laid, the sole issue was not an issue of statutory interpretation. The prosecution depended upon establishing particular facts, the relevance and full extent of which was not to be agreed for some months. Further, although the appellant contended that definitive legal advice in favour of his innocence had been provided to the prosecution team, the officer responsible for the recommendation to lay charges considered the advice unpersuasive and, for reasons explained above, it did not address the critical legal issues. Thus, given the matters in play at the time the decision to prosecute was taken, the Director-General’s concession that he did not, in a relevant sense, rely upon legal advice was understandable and the failure to give oral evidence carried with it little (if any) weight in relation to the present assertion, namely that the prosecution was malicious because his understanding of the law necessary for a successful prosecution was unsustainable.
The trial judge concluded that the material considered by the Director-General “does not provide a factual basis from which to infer he had no honest belief in Mr Bailey’s guilt,” with the result, when taken together with the absence of a reasonable basis for concluding, objectively, that the grounds were probably insufficient, that it left “nothing upon which the principle in Jones v Dunkel can operate.”[53] No error has been established in reaching this conclusion.
53. Principal judgment at [515].

Maintenance of proceedings after failure in LEC

There was said to be a second stage, temporally, in the appellant’s case. That is, the circumstances were said to have changed following the judgment in the Land and Environment Court.
A reading of the amended statement of claim suggests that the request to state a case to the Court of Criminal Appeal (inaccurately referred to as “the appeal”) was simply a further step in the prosecution of the original charges. The change in circumstances from the date on which the charges were laid, relied on by the appellant, was that a judge in the Land and Environment Court had rejected the prosecution case on two questions of law.
If the appellant failed to establish malice with respect to the laying of the charges, how the statement of a case to the Court of Criminal Appeal was said to involve the malicious maintenance of the prosecution was unclear. One factor that had changed since the charges were laid was that the conduct of the proceedings had been taken over by the Crown Solicitor’s Office, which had briefed counsel to appear for the Director-General. Having commenced the prosecution, and lost in the Land and Environment Court, it was entirely consistent with proper purposes of law enforcement for the Director-General to request the judge to state a case for the Court of Criminal Appeal under s 5AE of the Criminal Appeal Act.
Further, by the time the matter involving the appellant was heard by Talbot J in the Land and Environment Court, judgment had been given by Bignold J in the related matter of Jackson. With respect to the farm structure exemption under SEPP 46, Talbot J largely adopted the reasoning of Bignold J in Jackson. With respect to the s 12(f) argument based on there being a designated development, Bignold J had come to a different conclusion, namely that it did not provide a basis for exemption where no consent to carry out the designated development had been obtained.
As argued in this Court, the new element of malicious prosecution arose from the fact that the Director-General proceeded with the stated case in relation to the appellant, but abandoned a similar case in Jackson which, it was said, involved “an acceptance in the much larger clearing case of Jackson, of innocence of the matter, by reason of the SEPP 46 provisions.” [54]
54. CA Tcpt, 15/07/15, at 37-38.
On the basis that the two matters each involved testing the legal controls over the clearing of native vegetation, why a decision to proceed with one case, but not the other, demonstrated an improper purpose is quite obscure. What is known, however, is that on 23 May 2002, albeit before the decision in Jackson, officers within the Department had noted:

“A major issue in [the Jackson case] is whether the Part 8 approval ‘authorised’ the clearing, or whether NVC Act consent was also necessary.”

When Jackson came before the Land and Environment Court, the statement of agreed facts, specific to that matter, noted that the proposed water storage facility required approval under Pt 8 of the Water Act and that “[t]he parties disagree whether such an approval has been given.” It is true that that issue was not reached in Jackson. Indeed the bulk of the reasoning of Bignold J (namely [36]-[106]) addressed the question of law concerning the availability of an exception with respect to designated development under s 12(f). On that point, the prosecution was successful. The question of exemption under SEPP 46 was addressed in eleven short paragraphs, the prosecution construction being rejected.
The decision to proceed with the appellant’s matter to the Court of Criminal Appeal was readily explicable on rational grounds. At the very least, it provided no evidence to support a view that the prosecution was being maintained without reasonable and probable cause, or for an improper purpose.

Conclusions as to liability

For the foregoing reasons, the appeal against the judgment of Fullerton J with respect to the tort of malicious prosecution must be dismissed. The first appellant, Mr Bailey, being the only party interested in the claim based on malicious prosecution, must pay the respondents’ costs of the liability appeal.

Costs

Following dismissal of the claims by the appellants, the respondents sought an order for indemnity costs based on an offer of compromise, stated to be in accordance with r 20.26 of the Uniform Civil Procedure Rules 2005 (NSW) and dated 13 May 2011. The judge ordered that the plaintiffs pay the defendants’ costs on the ordinary basis from the commencement of the proceedings on 10 November 2006 up to 13 May 2011 and thereafter as assessed on the indemnity basis. The order was stated to include “all reserved costs and costs ordered to be costs in the cause” but noted that the “costs orders made on 21 April 2011, 1 August 2011 and 17 May 2013 be undisturbed.”[55]
55. Costs judgment at [21].
At trial, the defendants relied on an affidavit of Ms Graham, a solicitor employed in the Crown Solicitor’s Office, who averred (without contradiction) that the defendants had, as at 13 May 2011, accrued costs of approximately $500,000. The trial commenced on 15 July 2013 and ran for 21 days. It is inevitable that the costs of preparation in the two years from May 2011 to the commencement of the trial, and the costs of the trial itself, will be a substantial sum. It may also be accepted that the difference between costs assessed on a party and party basis and on an indemnity basis for that period will also be a substantial sum. Given that a costs order favourable to the defendants was in issue in any event on the appeal, leave, if required, would have been granted.
The trial judge noted that the application for costs on an indemnity basis was resisted on three grounds, namely that:

the offer referred to costs and therefore did not comply with the requirements of r 20.26;

the offer was a “token offer” and not a “genuine” offer of compromise; and

the costs concerning the issue of damages should be excluded because the defendants raised a defence of illegality on 4 May 2011, which was not determined in the course of the trial. [56]
56. Costs judgment at [5] and [11].

Each of these matters was reagitated on appeal and may be dealt with in order.

(a) non-compliant offer

The submissions on appeal did not condescend to read the relevant rule, but rather extracted a sentence from a judgment of this Court, taken out of context. The sentence was: [57]

“On a natural reading, the requirement that an offer for compromise be exclusive of costs means that it may not involve costs at all.”
57. Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 at [26].

When construing a statute or other instrument, it is helpful to start with the statutory language. Rule 20.26, as in force in May 2011, relevantly stated:

(2) An offer must be exclusive of costs, except where it states that it is a verdict for the defendant and that the parties are to bear their own costs.
…
(12) A notice of offer that purports to exclude, modify or restrict the operation of rule 42.14 or 42.15 is of no effect for the purposes of this Division.

The form of the offer by the defendants reflected the terms of subr (2). A submission to the contrary was untenable. The underlying principle, reflected in subr (2), was articulated in subr (12).

The decision in Dean v Stockland Property did not qualify the operation of the rule with respect to the exception. Rather, it was concerned with an offer by an appellant who had been the unsuccessful plaintiff at trial. The Court stated:[58]

“The governing reasoning is inconsistency between an offer of compromise and the provisions of the rules with respect to costs. An offer of compromise involving costs will not necessarily be of no effect by force of r 20.26(12), because the costs will not necessarily be inconsistent with a plaintiff’s (or defendant’s) entitlement to an order for costs. But even in cases not involving payment of a money sum, such as the present case, there will be the inconsistency. And the language of the rule does not confine exclusivity to only some kinds of offers of compromise. The phrase ‘exclusive of’ means ‘excluding, not compromising of’; ‘that excludes’; or ‘so as to exclude’ …. On a natural reading, the requirement that an offer of compromise be exclusive of costs means that it may not involve costs at all.”
58. Dean at [26].

Once it is appreciated that Dean had nothing to say about a defendant’s offer, within the exception in subr (2), the primary argument for the appellant must be rejected.
The appellants raised a secondary argument which depended on the terms of the covering letter which accompanied the offer of compromise. It stated:

“For avoidance of doubt the offer does not affect costs orders expressed in unqualified terms, that is under which costs have been awarded to any of the parties in respect of any interlocutory application or other step in the proceedings to date.”

No doubt there are circumstances in which a covering letter may be expressed in a manner which is intended to qualify the terms of an offer. The language set out above is not in those terms. The challenge could only succeed if the exception under subr (2) referred to an offer which had the effect of undoing a costs order already made (and perhaps paid). No basis was articulated for reading the subrule in this way. The purpose of an offer of compromise is to resolve matters in dispute without litigation; it would be inconsistent with that purpose if the offer were required to be in a form which reopened matters already resolved. The rule (which is no longer in force) should not be read in that way.
As the respondents submitted, the construction proposed by the appellants would effectively undermine the principle of finality reflected in r 36.11, providing for the effect of entry of a court order, taken together with the limited circumstances in which an entered order may be set aside or varied. [59]
59. That is possible with interlocutory orders: r 36.16(3).

(b) whether genuine offer of compromise

The appellants’ submissions characterised the offer as “not a genuine offer of compromise but rather a demand for capitulation.” While there is authority in this Court which uses the language of “genuine offer of compromise,”[60] such language, which appears to introduce a test as to the subjective motivation of the offeror, is apt to mislead. [61] The rule contains no such test: what it requires is the characterisation of the offer, in the circumstances in which it was made, as constituting an “offer of compromise”. To adopt the appellants’ rhetoric, if the offer required the other party to capitulate (that is abandon its claim entirely) with no benefit foregone by the offeror, it might not constitute an offer within the terms of the rule. However, as rejection of a claim would normally involve payment of the defendant’s costs, an offer to forego substantial costs in circumstances where it may reasonably be expected by the offeror that costs would follow the event, will generally involve an element of compromise: it did so in the present context, as the trial judge correctly held.
60. See, eg, Leichhardt Municipal Council v Green [2004] NSWCA 341 at [22].
61. See, eg, Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 at [9].
This reasoning, which has been articulated by the Court on prior occasions not referred to by the appellants, requires that their arguments be rejected.

(c) costs of assessing damages

The appellants repeated their complaint at trial that the indemnity costs should not extend to the costs of assessing damages. If it mattered, they asserted that some 35% of their costs related to damages. It was presumably to be inferred that a similar percentage of costs of the defendants related to damages. Ultimately, having dismissed the plaintiffs’ claims at the liability stage, it was not necessary for the trial judge to address the question of damages. However, neither that fact, nor the fact that certain aspects of the assessment were agreed (thus reducing the potential costs), affect the entitlement to recover costs. Nor is there anything in the rules to suggest that an order for indemnity costs under Pt 42, r 15A should properly be refused in relation to the costs of undetermined issues. Again, such an approach would be disruptive of the underlying purpose of the rule. As explained by Burchett J in Australian Conservation Foundation v Forestry Commission, [62] a defendant is entitled to raise its earthworks at more than one point and if successful at the first point, is not to be deprived of its costs with respect to other defences which turned out not to be required. (No doubt the defences must each be reasonable in their own terms, but there was no suggestion to the contrary in this case.)
62. (1988) 76 LGRA 381 at 384; 81 ALR 166 at 169.
It follows that the challenge to the costs order must be rejected. Both appellants must bear the costs of that aspect of the appeal in this Court.

Orders

The Court should make the following orders:

(1) Dismiss the appeal with respect to the dismissal of the first appellant’s claim for damages for malicious prosecution.

(2) Order that the first appellant pay the respondents’ costs of the appeal on liability.

(3) Dismiss the appellants’ appeal from the orders made by the trial judge as to the costs of the trial.

(4) Order that the appellants pay the respondents’ costs of the appeal with respect to the costs of the trial.

GLEESON JA: I agree with Basten JA.
LEEMING JA: I agree with Basten JA.

*********

Endnotes

Amendments

14 October 2015 - Coversheet, fn 46 (1974) amended to read (1774).

[23] - Amended "are rare" to read "is rare".

Decision last updated: 14 October 2015

Medium Neutral Citation:	Bailey v Director-General, Department of Natural Resources NSW [2015] NSWCA 318
Hearing dates:	15-16 July 2015
Decision date:	14 October 2015
Before:	Basten JA at [1]; Gleeson JA at [121]; Leeming JA at [122]
Decision:	(1) Dismiss the appeal with respect to the dismissal of the first appellant’s claim for damages for malicious prosecution. (2) Order that the first appellant pay the respondents’ costs of the appeal on liability. (3) Dismiss the appellants’ appeal from the orders made by the trial judge as to the costs of the trial. (4) Order that the appellants pay the respondents’ costs of the appeal with respect to the costs of the trial.
Catchwords:	TORT – malicious prosecution – elements of tort – whether prosecution instituted and maintained without reasonable and probable cause – whether proceedings commenced for improper purpose – whether prosecutor lacked reasonable belief in the guilt of the appellant PLANNING AND ENVIRONMENT – interrelation between the Native Vegetation Conservation Act 1997 (NSW); Environmental Planning and Assessment Act 1979 (NSW); Environmental Planning and Assessment Regulation 1994 (NSW) and State Environmental Planning Policy 46, Sch 3 – appellant prosecuted for clearing native vegetation without consent – whether the exemption under s 12(f) of Native Vegetation Conservation Act 1997 (NSW) only applied to otherwise lawful developments – whether exemption for “rural structures … (such as farm dams)” included a 90 ha reservoir COSTS – respondents awarded costs to be assessed on indemnity basis – whether offer of compromise compliant with Uniform Civil Procedure Rules 2005 (NSW) – whether a compromise – whether costs of undetermined issues should be refused WORDS AND PHRASES – “rural structures” – “farm dam” – State Environmental Planning Policy 46, Sch 3
Legislation Cited:	Criminal Appeal Act 1912 (NSW), ss 5AE Environmental Planning and Assessment Act 1979 (NSW), ss 78A, 79, 110, 111. 112; Pt 4, Pt 5 Environmental Planning and Assessment Regulation 1994 (NSW), cl 53C; Sch 3 Evidence Act 1995 (Cth), s 9 Evidence Act 1995 (NSW), ss 9, 118, 119 Interpretation Act 1987 (NSW), s 33 Native Vegetation Conservation Act 1997 (NSW), ss 12, 15, 16, 17, 21, 23, 70; Pt 2 Div 3; Sch 4 State Environmental Planning Policy No 46 – Protection and Management of Native Vegetation, Sch 3 Water Act 1912 (NSW), Pt 8 Uniform Civil Procedure Rules 2005 (NSW), rr 15A; 20.26, 36.11, 36.16,
Cases Cited:	A v New South Wales (2007) 230 CLR 500; [2007] HCA 10 Australian Conservation Foundation v Forestry Commission (1988) 76 LGRA 381 Australian Securities Commission v AS Nominees Ltd (1995) 62 FCR 504 Bailey v Department of Land and Water Conservation (2009) 74 NSWLR 333; [2009] NSWCA 100 Bailey v Director-General, Department of Natural Resources (No 2) [2014] NSWSC 1227 Blatch v Archer (1774) 1 Cowp, 63; 98 ER 969 Booth v Bosworth (2001) 114 FCR 39; [2001] FCA 1453 Cooper Brookes (Wollongong) Pty Ltd v Federal Commissioner of Taxation (1981) 147 CLR 297 Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 Director-General of the Department of Land and Water Conservation v Bailey [2003] NSWLEC 160 Director General Department of Land and Water Conservation v Bailey [2003] NSWCCA 361; 136 LGERA 242 Director-General Department of Land and Water Conservation v Jackson [2003] NSWLEC 81; 125 LGERA 304 D'Orta-Ekenaike v Victoria Legal Aid (2005) 223 CLR 1; [2005] HCA 12 Hicks v Faulkner (1878) 8 QBD 167 Jones v Dunkel (1959) 101 CLR 298 Kuhl v Zurich Financial Services (2011) 243 CLR 361; [2011] HCA 11 Leichhardt Municipal Council v Green [2004] NSWCA 341 Mitchell v John Heine and Son Ltd (1938) 38 SR (NSW) 466 Miwa Pty Ltd v Siantan Properties Pte (No 2) [2011] NSWCA 344 Seltsam Pty Ltd v McGuiness (2000) 49 NSWLR 262; [2000] NSWCA 29 Sharp v Biggs (1932) 48 CLR 81
Texts Cited:	R P Balkin, J L R Davis, Law of Torts (LexisNexis, 4th ed, 2009) C Sappideen and P Vines (eds), Fleming’s The Law of Torts (Lawbook Co, 10th ed, 2011) John G Fleming, The Law of Torts (9th ed, 1998)
Category:	Principal judgment
Parties:	Bruce Clyde Bailey (First Appellant) Janet Beatrice Shafik-Bailey (Second Appellant) Director-General, Department of Natural Resources (First Respondent) Water Administration Ministerial Corporation (Second Respondent) State of New South Wales (Third Respondent)
Representation:	Counsel: Mr B W Rayment QC/Ms V McWilliam (Appellants) Mr N J Williams SC/Mr I Harvey (Respondents) Solicitors: Hicksons Lawyers (Appellants) Crown Solicitor’s Office (Respondents)
File Number(s):	2014/275047
Decision under appeal	Court or tribunal: Supreme Court Citation: Bailey v Director General, Department of Natural Resources [2014] NSWSC 1012 Date of Decision: 25 July 2014 Before: Fullerton J File Number(s): 2006/267230