Bathurst Regional Council v Natural Resources Access Regulator (No 2)

[2022] NSWSC 1113

Supreme Court

New South Wales

Medium Neutral Citation:

Bathurst Regional Council v Natural Resources Access Regulator (No 2) [2022] NSWSC 1113

Hearing dates:

On the papers

Date of orders:

23 August 2022

Decision date:

23 August 2022

Jurisdiction:

Common Law

Before:

Basten AJ

Decision:

Dismiss the Regulator’s notice of motion filed on 12 July 2022.

Catchwords:

COSTS – general rule that costs follow the event –discretion to order otherwise – material considerations – proceedings brought by public authorities – issue of public importance – public interest in transparency of regulation – neither party wholly successful – no order as to costs

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Environmental Planning and Assessment Act 1979 (NSW), s 123

Fines Act 1996 (NSW), s 19A

Water Management Act 2000 (NSW), s 107

Uniform Civil Procedure Rules 2005 (NSW), r 42.1

Cases Cited:

Bathurst Regional Council v Natural Resources Access Regulator [2022] NSWSC 846

Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11

Category:

Costs

Parties:

Bathurst Regional Council (Plaintiff)
Natural Resources Access Regulator (Defendant)

Representation:

Counsel:
Mr M Seymour / Mr C Koikas (Plaintiff)
Ms Z Heger / Mr A Brown (Defendant)

Solicitors:
Crennan Legal (Plaintiff)
Department of Planning Industry and Environment (Defendant)

File Number(s):

2020/215879

JUDGMENT

1. BASTEN AJ: The plaintiff, Bathurst Regional Council, commenced proceedings (initially in the Land and Environment Court, but transferred to this Court) in relation to a dispute between it and the Natural Resources Access Regulator (the defendant) as to the proper construction of the conditions governing release of water from Winburndale Dam into the Winburndale Rivulet. The principal judgment of the Court was delivered on 28 June 2022. ^[1] This judgment concerns the costs of those proceedings.

   1. Bathurst Regional Council v Natural Resources Access Regulator [2022] NSWSC 846.

2. Although the Council sought relief by way of an order setting aside a caution issued under s 19A(1) of the Fines Act 1996 (NSW) on the basis that the Council had committed a penalty notice offence, little attention was paid to the factual basis upon which the caution was issued and no relief was granted with respect to that issue. Rather, the focus of the proceeding was to obtain a ruling as to the proper construction of the conditions of the Approval pursuant to which the Council operated the dam. To that end, the Court made a declaration, being order (2) made on 28 June 2022. The amended summons was otherwise dismissed: order (3).

3. The obligation of the Council to discharge water from the dam turned on the combined effect of two variables, namely “inflow” and the outflow capacity of a 300mm discharge pipe. As a matter of practicality, the evidence did not reveal how either factor could be quantified on a continuous basis, as the condition appeared to envisage.

4. The judgment noted that the parties had reserved their positions with respect to costs. I indicated a tentative view that there should be no order as to the costs of the proceeding. That passage in the judgment continued:

“55   … Both litigants are public authorities seeking to resolve a dispute as to the basis of water releases required by a statutory scheme carrying penal consequences for breach. The Council has raised an issue of some public importance, the resolution of which may not be entirely satisfactory to either party. How daily inflows are to be monitored is unclear. How the officer could have been satisfied of a continuing breach of condition DK3944 over a period of some 22 months is equally unclear.”

5. On 12 July 2022, the Regulator filed a notice of motion seeking that the Council pay its costs of the proceedings. Alternatively, it sought that the Council pay its costs thrown away by reason of the filing of the amended summons.

6. As to the alternative order, the costs thrown away, as identified in written submissions, were those incurred because the proceedings were commenced, concededly in error, in the Land and Environment Court. I accept that some costs may have been incurred unnecessarily as a result of the extra step of transferring the matter to this Court. However, it is by no means clear what part of the costs incurred prior to the transfer were “thrown away”, rather than being costs which would necessarily have been incurred in dealing with the proceeding, as continued in this Court.

7. The primary matter for consideration is whether, as the Regulator submitted, costs should “follow the event”, in accordance with the general rule provided in r 42.1 of the Uniform Civil Procedure Rules 2005 (NSW) (“UCPR”). It further submitted that the Council was entirely unsuccessful, the declaration which was made not reflecting the Council’s proposed reading of the conditions of the Approval and the summons being otherwise dismissed. The Council therefore failed and should pay the Regulator’s costs in accordance with the general rule.

8. The Regulator further submitted that there should be no departure from the general rule on the basis that there were alternative avenues to address the dispute, namely for the Council to seek a variation of the conditions of the approval pursuant to s 107 of the Water Management Act 2000 (NSW). The Regulator noted that such an application had been made and a process of assessment was underway when the proceedings were commenced.

9. Finally, the Regulator relied upon an offer to settle the proceedings by withdrawal of the summons filed in the Land and Environment Court, with each party to bear its own costs. At that time, namely 23 September 2021, the Regulator had identified its costs as being in an amount of $18,900. The Regulator did not seek costs on an indemnity basis, but submitted that this offer (which was not accepted by the Council) was a factor which supported an order for costs on the ordinary basis, in its favour.

10. Defensively, the Regulator opposed any departure from the general rule on the basis that the litigation was brought “in the public interest”.

11. The Council submitted, in substance, that (i) neither party had achieved full success in the litigation; (ii) while the Council had sought an alternative approach to resolving the issue as to the operation of the dam, the negotiation had not proceeded satisfactorily because of the disputed issue as to the proper construction of the present condition, and (iii) the litigation was indeed brought in the public interest between two public authorities.

12. Putting to one side the operation of the costs provisions in s 98 of the Civil Procedure Act 2005 (NSW) and r 42.1 of the UCPR, the other issues may be addressed together. So far as the alternative mechanism of seeking an amendment of the condition of the Approval was concerned, it is clear that that course had been initiated, but it is not within the scope of this proceeding for the Court to evaluate why the negotiations have not resolved the issue. It is at least plausible, as the Council submitted, that the litigation was an important factor in setting the basis upon which an amendment might be developed. The Court is not satisfied that the amendment application was truly an alternative to the litigation.

13. If the litigation were otherwise appropriate, little weight should be given to the “walk away” offer made at an early stage and which, if accepted, would simply have prevented what appears to have been a bona fide dispute from being resolved by a court having jurisdiction to do so.

14. The dispute as to whether this is “public interest litigation” is also largely beside the point. For most purposes, that label is entirely appropriate. The parties were two public authorities involved in the management of water resources, the dispute concerned the appropriate allocation of water as between town use and environmental flows. The subject matter was clearly a matter of public interest. The real question is whether these factors have any bearing upon the proper exercise of the discretion to award costs.

15. Turning to the underlying purpose of the power to award costs, it may be accepted that the primary purpose is to indemnify the successful party to litigation for expenses which would not otherwise have been incurred. (It was not necessary, as the submissions for the Regulator did, to rely upon the dissenting judgment of McHugh J in Oshlack v Richmond River Council ^[2] for that proposition.)

    2. (1998) 193 CLR 72; [1998] HCA 11 at [67].

16. Further, it may be accepted that the mere fact that both parties are public authorities does not, of itself, deprive one of its right to costs, or confer immunity on the other against the payment of costs, if such an order is otherwise justified.

17. Rule 42.1 of the UCPR provides that “if the court makes any order as to costs the court is to order that the costs follow the event unless it appears to the court that some other order should be made …”. The rule thus provides a presumption in favour of costs following the event. In this case, the Council did not propose that “some other order” should be made, but rather submitted that the Court should not make any order as to costs. However, that involves a departure from the general rule and should be adopted only in circumstances where the departure may be justified on grounds which are consistent with the purpose underlying the general rule. While the court has a discretion to make no order, it must be exercised for a proper purpose and on relevant grounds.

18. In expressing tentative views in the principal judgment, as set out above, three factors were identified. The first was that the litigants were “public authorities seeking to resolve a dispute as to the basis of water releases required by a statutory scheme carrying penal consequences for breach”. I adhere to the view that this was a material consideration. On one view, disputes between public authorities should, wherever possible, be resolved without resort to litigation. On that view, at best, disputes between public authorities in a court appear unseemly; at worst, they reveal an expenditure of public funds on a purpose which is not part of the core functions of either, namely litigation. On the other hand, where the Parliament has established a regulatory scheme whereby one public authority is responsible for ensuring compliance by another with laws as to the management of public resources, litigation may be inevitable. Indeed, it may be desirable in the sense that it provides a transparent exposure of the different sides to a dispute which can be resolved by an independent court. On the one hand, litigation may demonstrate that the regulating authority has not been captured by another arm of government and, on the other hand, that it is not acting arbitrarily. The institutional nature of the litigation takes it out of the ordinary scheme of civil litigation. That is not to say that it renders the general rules governing orders for costs irrelevant; it is merely a factor to be taken into account and it is appropriate to do so in this case.

19. In Oshlack, the absence of an award of costs was seen as an available option consistent with the open standing rule provided by s 123 of the Environmental Planning and Assessment Act 1979 (NSW). ^[3] That factor is apposite here.

    3. Oshlack at [45], [47]-[48] (Gaudron and Gummow JJ); [134(6)] (Kirby J).

20. The second matter identified in my tentative view was that the issue raised was one of some public importance. I adhere to that view. The allocation of water between environmental flows, benefiting both wildlife and downstream properties, and public and private users in the City of Bathurst is a significant matter.

21. Finally, and perhaps most importantly, I noted that the resolution of the dispute “may not be entirely satisfactory to either party”. As noted above, the problem was a practical one: a condition had been imposed on the Approval to operate the dam which appeared to assume that the operator would be able to monitor the volume and timing of any inflow and measure that against the outflow through the 300mm pipe, during the period of inflow. The evidence did not demonstrate a capacity of the Council to undertake that exercise, nor any concern on the part of the Regulator that such an exercise was required. That conclusion cast doubt on the proposition that the Regulator was a successful party merely because the construction of the condition proposed by the Council was not accepted.

Conclusion

22. For these reasons, in my view there should be no order as to the costs of the proceedings. The Regulator’s notice of motion filed on 12 July 2022 should be dismissed. However, I accept the Regulator’s submission that in that event there should be no order as to the separate costs of the motion. There will be no such order.

23. The Court makes the following order:

1. Dismiss the Regulator’s notice of motion filed on 12 July 2022.

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Endnotes

Decision last updated: 23 August 2022