Delta Electricity v Blue Mountains Conservation Society Inc - [2010] NSWCA 263

No judgment structure available for this case.

Reported Decision: 176 LGERA 424

New South Wales

Court of Appeal

CITATION: Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 263

HEARING DATE(S): 16 March 2010

JUDGMENT DATE:
18 October 2010

JUDGMENT OF: Beazley JA at 1; Basten JA at 169; Macfarlan JA at 222

DECISION: The appeal is dismissed;
The appellant is to pay the respondent's costs of the appeal.

CATCHWORDS: COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – appeal against decision to order maximum costs - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – discretion to order maximum costs - interrelationship with the Civil Procedure Act 2005, ss 56-60 - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – proportionality – whether maximum costs order should be proportionate to the estimated costs of the proceedings - PROCEEDINGS – interlocutory proceedings – determination of whether proceedings are taken in the public interest - PROCEEDINGS – interlocutory proceedings – whether proceeding can be characterised as being in the public interest at an interlocutory stage - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – relevance of public interest nature of proceedings in assessment of maximum costs – impact of Land and Environment Court Rules 2007, r 4.2 on a party’s cost expectations - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – need to balance discretion to order maximum costs with overriding statutory purpose of the Civil Procedure Act 2005 and Uniform Civil Procedure Rules 2005 - WORDS & PHRASES – “the public interest”

LEGISLATION CITED: Civil Procedure Act 2005
Civil Procedure Rules (UK)
Corporations Act 2001 (Cth)
Environmental Planning and Assessment Act 1979
Federal Court Rules
Freedom of Information Act 1989
Land and Environment Court Act 1979
Land and Environment Court Rules 2007
Legal Aid Commission Act 1979
Protection of the Environment Operations Act 1997
Supreme Court Act 1970
Uniform Civil Procedure Rules 2005

CATEGORY: Principal judgment

CASES CITED: Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources [2009] NSWLEC 165; (2009) 170 LGERA 22
Corcoran v Virgin Blue Airlines Proprietary Limited [2008] FCA 864
Dibb v Avco Financial Services Limited [2000] FCA 1785
Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434; (2004) 136 LGERA 365
Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372
Hanisch v Strive Pty Limited (1997) 74 FCR 384
Hammersmith and Fulham London BC, ex parte Council for the protection of rural England London Branch [2000] Env LR 544
House v The King [1936] HCA 40; (1936) 55 CLR 499
Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited [2009] HCA 43
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
Mahar v Rogers Cablesystems Ltd (1995) 25 OR (3d) 690
Maunchest Pty Limited v Bickford (Federal Court of Australia, 7 July 1993, unreported)
McDonald v Horn [1995] 1 All ER 961, [1995] ICR 685
Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32; 54 NSWLR 82
Minister for Planning v Walker (No 2) [2008] NSWCA 334
Muller v Human Rights and Equal Opportunity Commission and Anor (Federal Court of Australia, 17 July 1997, unreported)
Nadia Eweida v British Airways PLC [2009] EWCA Civ 1025
Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72
R (on the application of Corner House Research) v The Secretary of State for Trade and Industry [2005] 4 All ER 1
R v Lord Chancellor, Ex Parte Child Poverty Action Group [1998] 2 All ER 755
Re Gilbert (1946) NSW SR 318
Sacks v Permanent Trustee Australia Limited (1993) 45 FCR 509; (1993) 118 ALR 265
Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor [2005] NSWSC 1003; 65 NSWLR 268
Singer v Berghouse [1994] HCA 40; 181 CLR 201
South Melbourne City Council v Hallam [No 2] (1994) 83 LGERA 307
Woodlands v Permanent Trustee Co Limited; Bass v Permanent Trustee Co Limited; Conca Permanent Trustee Co Limited (1995) 58 FCR 139

PARTIES: Delta Electricity (Appellant)
Blue Mountains Conservation Society Inc (Respondent)

FILE NUMBER(S): CA 2009/298528

COUNSEL: B Coles QC; H Irish (Appellant)
TG Howard (Respondent)

SOLICITORS: Middletons (Appellant)
Environmental Defenders Office (Respondent)

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT FILE NUMBER(S): LEC 40358/2009

LOWER COURT JUDICIAL OFFICER: Pain J

LOWER COURT DATE OF DECISION: 9 September 2009

LOWER COURT MEDIUM NEUTRAL CITATION: Blue Mountains Conservation Society Inc v Delta Electricity [2009] NSWLEC 150

- 1 -

2009/298528

BEAZLEY JA
BASTEN JA
MACFARLAN JA
18 October 2010

Delta Electricity v Blue Mountains Conservation Society Inc

Headnote

The respondent, Blue Mountains Conservation Society, commenced proceedings in the Land and Environment Court seeking, inter alia, a declaration that the appellant, Delta Electricity, had polluted the waters of the Cox’s River, in the Local Government Area of Lithgow in New South Wales, in contravention of the Protection of the Environment Operations Act 1997 (PEO Act), s 120. The respondent contended that the proceedings were brought in the public interest; its standing to bring the proceedings deriving from the PEO Act, s 252.

At an early stage in the proceedings, the respondent filed a notice of motion seeking an order pursuant to Uniform Civil Procedure Rules 2005, r 42.4 limiting the maximum costs recoverable by the parties to the proceedings to $10,000, or an amount specified by the court; the respondent having resolved that was only able to proceed with the litigation if an order limiting costs was made. The application was opposed by the appellant, who adduced evidence that the costs that it would likely incur in defending the substantive proceedings would be between $232,000 and $266,000. The respondent did not contest the reasonableness of the appellant’s cost estimate.

On 9 September 2009 Pain J ordered that the maximum costs that may be recovered by a party to the proceedings was the sum of $20,000. The appellant appealed against her Honour’s interlocutory order, principally contending that:

(i) her Honour erred in making an order to protect the respondent’s assets to the exclusion of other relevant considerations: those other relevant considerations included the usual rule that costs follow the event and are compensatory in nature, and that the underlying purpose of r 42.4 is to ensure the proportionality of costs to the complexity of proceedings; and

(ii) it was not reasonably possible to categorise proceedings as public interest litigation at the outset.

The appeal being from a discretionary decision, the appellant was required to establish error of the type identified in House v The King [1936] HCA 40; (1936) 55 CLR 499.

Held, dismissing the appeal (by majority)
Per Basten JA (Macfarlan JA agreeing):

(i) Where a broad discretion is conferred on a court, it is important that the full range of permissible considerations is identified and that limitations which do not find reflection in the language of the rule not be imposed: [186]

(ii) Notwithstanding the early stage of the proceedings, the litigation may be characterised as being in “the public interest”: [209].

(iii) The public interest nature of the proceedings is directly relevant to the propriety of a maximum costs order: [203]. The proceedings being in the public interest, the Land and Environment Court Rules 2007, r 4.2 would operate to qualify the appellant’s expectation that it would recover its costs if successful: [203].

(iv) The principle that any person may bring proceedings to prevent a breach or threatened breach of environmental protection laws will be seriously undermined if some protection against large costs bills is not available: [218].

(v) The appellant did not establish that there was any error in the approach taken by the primary judge or that the order made was unreasonable in amount. As a result, the appeal should be dismissed with costs: [220]

Per Macfarlan JA:

(vi) The primary judge did not fail to have regard to the relationship between the amount of costs the subject of the order made at first instance and the costs likely to be incurred by the appellant: [223].

Per Beazley JA (in dissent):

(vii) There was no error in the trial judge characterising the substantive proceedings as public interest litigation, notwithstanding that the proceedings were still at an early stage: [120].

(viii) A party utilising the open standing provisions of the Protection of the Environment Operations Act 1997 to bring proceedings in “the public interest” is not thereby entitled to a favourable costs outcome. Whether such a party is entitled will depend upon the facts and circumstances of the case: [125].

(ix) The discretion conferred on a trial judge by r 42.4 is a broad discretionary power to specify the maximum costs that may be recovered by one party from another. The discretion so conferred must be exercised in the context of the overriding statutory purpose of the Civil Procedure Act 2005 and the Uniform Civil Procedure Rules 2005 in facilitating the just, quick and cheap resolution of the real issues in the proceedings: [134].

(x) Australian courts have not been persuaded to make a maximum costs order based simply upon an assertion that an applicant will not continue the proceedings unless an order limiting costs is made. That factor must be considered having regard to all the facts and circumstances: [149].

(xi) In accordance with the dictates of justice, Australian courts should have regard to the proportionality of any proposed maximum costs to the costs likely to be incurred by the parties: [164].

(xii) The trial judge failed to take into account a relevant consideration, namely, the disproportionality between the order made and the reasonable estimate of the appellant’s costs: [166].

(xiii) Given the disproportionality, the order falls outside the reasonable exercise of the discretion conferred by r 42.4: [166].

2009/298528

BEAZLEY JA
BASTEN JA
MACFARLAN JA
18 October 2010

Delta Electricity v Blue Mountains Conservation Society Inc

Judgment

BEAZLEY JA:

Introduction

1 On 9 September 2009 Pain J ordered pursuant to the Uniform Civil Procedure Rules 2005 (UCPR), r 42.4, that the maximum costs that may be recovered by one party from another in proceedings commenced by the respondent against the appellant in the Land and Environment Court was the sum of $20,000. The appellant seeks leave to appeal from her Honour’s order. The summons for leave to appeal and the appeal have been heard concurrently. As the appeal is from a discretionary decision, the appellant must demonstrate error of the type indicated in House v The King [1936] HCA 40; (1936) 55 CLR 499.

2 The matter has significance for both parties. The respondent’s position is that it would not proceed with the substantive proceedings unless an order was made under r 42.4. The appellant, for its part, is required to defend potentially complex proceedings whilst being confined to recovery of a small proportion of its anticipated costs if it is successful in the substantive proceedings. Leave to appeal should be granted. Although the matter is interlocutory, it would not be appropriate to require the appellant to await the outcome of the substantive proceedings before challenging the order. By then it would be too late.

Procedural background

3 The respondent commenced its proceedings by way of summons on 2 June 2009 seeking a declaration that between May 2007 and April 2009 the appellant had polluted the waters of the Cox’s River, in the Local Government Area of Lithgow in New South Wales, in contravention of the Protection of theEnvironment Operations Act 1997 (the PEO Act), s 120.

4 The respondent also sought orders that the appellant cease polluting the waters of the Cox’s River in contravention of the PEO Act and that it take such steps as the Court directs to mitigate the harm caused to the environment of the Cox’s River by reason of the appellant having polluted the said waters in contravention of s 120. The respondent’s standing to bring the proceedings derives from the PEO Act, s 252. The relevant legislative framework is set out below.

5 Points of claim were filed in the matter on 11 June 2009. The essential factual allegations are set out at (10) and (11) of that document in the following terms:

“(10) The Coxs River has its head waters in the area to the north of Lithgow; flows through the Wallerawang Power Station, including via the water body known as Lake Wallace; and continues to flow downstream of the Wallerawang Power Station, discharging its waters into the Warragamba Dam.

6 The breach of the PEO Act was alleged at (13) in the following terms:

“(13) During the period between about May 2007 and about April 2009, Delta polluted the waters of the Coxs river in contravention of section 120 [of the PEO Act] by discharging waste waters containing pollutants from the cooling towers and/or associated plant into the Coxs River at the Discharge Point.”

7 The pollutants alleged to have been discharged into the waters of the Cox’s River are salt, copper, zinc, aluminium, boron, fluoride and arsenic.

8 On the same day it filed its points of claim, the respondent filed a notice of motion in which it sought an order that the maximum costs that may be recovered by one party from another in the proceedings be in the sum of $10,000. Alternatively, the respondent sought an order that the maximum costs that may be recovered be in an amount specified by the Court.

9 The notice of motion was supported by the affidavit of Tara Cameron, affirmed on 12 June 2009.

The legislative framework

10 The objects of the PEO Act are specified in s 3. The objects specified in (a) and (d) provide an overview of the protection to the environment that the legislation is designed to achieve. Those provisions state the objects of the Act as being:

“(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development …

…

11 The PEO Act, Ch 5 deals with environment protection offences. Part 5.3 deals with water pollution. Section 120, upon which the respondent based its substantive application, provides:

“ 120 Prohibition of pollution of waters

(1) A person who pollutes any waters is guilty of an offence.

(2) In this section:

pollute

12 There are specific standing provisions in the PEO Act, which are also reflected in the objects specified in s 3. The relevant provisions are as follows:

“ 3 Objects of Act

…

“ 252 Remedy or restraint of breaches of this Act or regulations

(1) Any person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of this Act or the regulations.

(2) Any such proceedings may be brought whether or not proceedings have been instituted for an offence against this Act or the regulations.

(3) Any such proceedings may be brought whether or not any right of the person has been or may be infringed by or as a consequence of the breach.

(4) Any such proceedings may be brought by a person on the person’s own behalf or on behalf of another person (with their consent), or of a body corporate or unincorporate (with the consent of its committee or other controlling or governing body), having like or common interests in those proceedings.

(5) Any person on whose behalf proceedings are brought is entitled to contribute to or provide for the payment of the legal costs and expenses incurred by the person bringing the proceedings.

13 The respondent also drew the Court’s attention to s 253 which is a complementary standing provision permitting any person to bring an action in respect of breaches or threatened breaches of any other Act.

The Blue Mountains Conservation Society Inc

14 The respondent was formed in 1996 by the merging of the Upper and Lower Blue Mountains Conservation Societies. Ms Cameron, in her affidavit, describes the respondent as the “peak environmental group in the Blue Mountains region”. As at the time of swearing her affidavit, the respondent had approximately 973 members, mostly residents of the Blue Mountains.

15 The main object of the respondent, as stated in its Constitution, is to:

“… disseminate and foster an understanding of the ideals of Conservation among the members of [the respondent] and the public generally, particularly in relation to the unique resources of the Blue Mountains.”

16 In its Mission Statement, the respondent’s stated aim is to:

·

17 The respondent is run by a management committee comprised of volunteers. It operates two plant nurseries, one at Blackheath and the other at Lawson. It has no staff and the various activities that it undertakes, including the operation of the nurseries, are performed by volunteers.

18 The respondent’s income is derived from membership fees, donations, nursery sales, a government grant and interest from investments. For the 12 month period ending 28 February 2009, the respondent had net assets of $180,016. It had suffered an operating loss for the year of almost $54,000 due to a decrease in the value of investments during the period of the global financial crisis.

Reasons for commencing proceedings

19 The respondent has been concerned with the alleged degradation of the quality of the water in the Cox’s River since January 2007, when the problem was brought to its attention by the Lithgow Environment Group, which had carried out water quality testing in the Cox’s River as part of its Streamwatch program.

20 In commencing the proceedings, the respondent considered the case was in the public interest and that the ongoing degradation of water quality in the Cox's River was an important environmental issue that needed to be addressed. Before commencing the proceedings, the respondent brought the matter to the attention of the Department of Environment and Climate Change. A response was received from the then Minister for the Environment, in which he advised that he had brought the matter to the attention of the Sydney Catchment Authority. In her affidavit, Ms Cameron stated that as far as she was aware, the Department had not taken any action to improve water quality in the river and accordingly the respondent felt proceedings needed to be taken in the public interest.

21 At the hearing of the application, the respondent also relied upon the affidavit evidence of Christiaan Jonkers. Mr Jonkers is a volunteer with Streamwatch, a water monitoring program supporting local communities to investigate water quality. Mr Jonkers has undertaken training in water quality testing provided by Streamwatch for the purposes of testing water quality at 35 sites along the Cox’s River. On the basis of the testing he had undertaken, high salinity levels and elevated phosphate levels were detected in those parts of the river alleged to be polluted by the appellant.

22 The expert report of Dr Ian Wright was also in evidence. According to that evidence, there is water quality impairment due to the inflow of the Wallerawang Power Station waste waters into the Cox’s River from the Tortuous Watercourse. Dr Wright said that the contamination was due to elevated levels of salt and heavy metals including aluminium, arsenic, copper, nickel, zinc, boron, and fluoride. He was of the opinion that:

“… the more sensitive species across many biological groups would be damaged or killed by the elevated toxic levels.”

23 Dr Wright also identified a risk to consumers of locally caught fish because of the accumulation of heavy metals such as copper and zinc.

The respondent's reasons for seeking a maximum costs order under r 42.4

24 The respondent, in explaining why it was seeking an order under UCPR, r 42.4, referred to the financial statement annexed to the affidavit of Ms Cameron. That statement revealed that for the year ended 28 February 2009, it had membership fees and nursery trading income each of approximately $14,000, donations of just over $9,000 and a government grant of $4,500. As already indicated, it had total net current and non-current assets of $180,000.

25 Ms Cameron stated that income sources were not guaranteed and that in the following year the respondent would be required to lease new premises, as it had recently lost the use of premises it had occupied at a nominal rent. Ms Cameron further stated that the respondent did not have a reliable income stream that would replace the respondent’s investments if used on a single court case.

26 In deciding to investigate the water quality in the Cox’s River and in pursuing the court proceedings, the respondent’s management committee had resolved to pay to the Environmental Defenders’ Office a sum of $1,500 to engage an expert to undertake water quality monitoring and a further sum of $200 for an application under the Freedom of InformationAct 1989 to the Department of Environment and Climate Change, for information about the Cox’s River. Both those sums have been expended. The respondent, at the time that Ms Cameron affirmed her affidavit, had also committed to pay the following fees to enable the proceedings to be conducted:

27 Through Ms Cameron’s affidavit, the respondent contended that unlimited costs and/or an adverse costs order could threaten its ongoing viability and jeopardise its ability to continue to provide member services and engage in campaigns about local and regional conservation. The respondent also contended that it was possible it could become insolvent if an order limiting its response to costs was not made. Accordingly, it had resolved that it was only able to proceed if an order was made by the Court limiting the costs it would be liable to pay should it be unsuccessful in the proceedings.

The appellant’s response to the application

28 The application for a maximum costs order was opposed and was also met by an application by the appellant for security for costs. In his affidavit sworn 5 August 2009, Timothy Webster, solicitor for the appellant, identified the issues in the case as being:

“(a) whether the defendant polluted the waters in the Coxs River in contravention of section 120 of [the PEO Act];

(b) whether, the Court in its discretion, should make a declaration that the defendant has committed a criminal offence;

(c) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the physical condition of the waters to the river;

(d) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the chemical [composition] of the waters to the river;

(e) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the biological condition of the waters to the river;

(f) whether the change in the condition of the waters of the Coxs River (if any) makes, or is likely to make, the waters unclean, noxious, poisonous, impure or harmful to aquatic life, animals, birds or fish;

29 Mr Webster also referred to the evidence he understood would be adduced in the substantive proceedings by the respondent, including the affidavits of Mr Jonkers and Dr Wright, as well as affidavits from a representative of the Sydney Catchment Authority as to the testing referred to in the affidavit of Dr Wright, and an affidavit from an engineer with expertise in the operations of coal-fired power plants. Mr Webster also referred to documents that the respondent expected to obtain following the issue of subpoenas.

30 Mr Webster then provided an assessment of the costs the appellant anticipated it would incur in defending the substantive proceedings. In his opinion, it was likely the costs of the proceedings assessed on the ordinary basis would be between $232,000 and $266,000. That assessment included the cost of retaining junior and senior counsel for the purposes of advising; preparing the matter for hearing and appearing on the hearing; solicitors’ costs; and the cost of retaining experts to carry out water quality sampling and testing and eco-toxicity testing. Mr Webster provided the following summary of these costs:

31 In addition, the appellant estimated it would expend $37,000 on the r 42.4 application, which was then listed for a half day hearing.

32 Mr Webster's assessment of the costs likely to be incurred by the appellant was supported by an affidavit of Alyson Ashe, expert legal costs consultant. The respondent did not contest the reasonableness of this assessment, but did observe that costs were very much in the control of the party incurring them.

The trial judge's reasons

33 The trial judge commenced her consideration of the application by reference to the Civil Procedure Act 2005, ss 58 and 60 and the UCPR, r 42.4. As s 58 makes internal reference to ss 56 and 57, it is convenient to also refer to those provisions at this point.

“ 56 Overriding purpose

(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings …

57 Objects of case management

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects:

(a) the just determination of the proceedings …

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).

58 Court to follow dictates of justice

(a) whether to make any order or direction for the management of proceedings, including:

…

the court must seek to act in accordance with the dictates of justice.

(i) the degree of difficulty or complexity to which the issues in the proceedings give rise,
(ii) ....

…

60 Proportionality of costs

34 The power exercised in this case was pursuant to UCPR, r 42.4 which provides:

“ 42.4 Power to order maximum costs

(1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.

…

35 The significant argument advanced by the respondent before the trial judge was the public interest nature of the substantive proceedings. The focus of the appellant’s argument was that the power in UCPR, r 42.4 was directed to the need to ensure that costs are proportionate to the issues raised by the parties, so that a court may put a brake on intemperate and/or the disproportionately expensive conduct of proceedings: see the Civil Procedure Act, ss 58 and 60. The appellant submitted that, in particular, UCPR, r 42.4 was not a tool in the armoury of well-intentioned public interest litigants.

36 Pain J rejected the appellant’s argument that the purpose of making an order under UCPR, r 42.4 was related solely to the need to manage cases efficiently, as required by the Civil Procedure Act, s 60. Her Honour observed that the rule itself was broadly drafted and that it did not only refer to matters arising by reference to s 60. Her Honour held that there was no basis in the Civil Procedure Act and the UCPR to restrict the application of the power to make costs orders pursuant to UCPR, r 42.4 in the way for which the appellant contended.

37 Her Honour acknowledged that the question of costs was generally considered at the end of the hearing, at which time a decision could be made as to whether a public interest consideration was to apply to any costs order. However, as her Honour observed, an order under UCPR, r 42.4 could be sought at any time in the proceedings, and held that an order under UCPR, r 42.4 could be made in public interest cases: see R (on the application of Corner House Research) v The Secretary of State for Trade and Industry [2005] 4 All ER 1 (Corner House) at [74]; and Corcoran v Virgin Blue Airlines Proprietary Limited [2008] FCA 864 at [6]. Her Honour considered that the factors referred to in those decisions provided a useful guide as to the relevant criteria that ought to be considered in this case.

38 Her Honour noted that this was the first case under the PEO Act using the open standing provisions of s 252 of that Act seeking, in civil proceedings, a declaration and orders requiring a holder of an environment protection licence to cease polluting waters in contravention of the PEO Act. Her Honour also observed that pollution of waters contrary to s 120 involved the commission of a criminal offence. As the application had been filed early in the proceedings, her Honour observed that in the absence of any knowledge of the appellant’s case, it was difficult to fully understand the complexity of the issues likely to be raised. However, her Honour inferred that the legal matters that might be raised in the proceedings would be complex and novel. Her Honour said that the matter, if it proceeded, would be a test case. Her Honour also observed that the appellant had not put in issue, for the purposes of the hearing of the application, that the respondent had an arguable case.

39 Her Honour concluded that the matter appeared to be one of public interest, given the constitutional objects and activities of the respondent and the environmental protection issues the litigation sought to address. Her Honour was satisfied, in this regard, that the proposed litigation came within the respondent’s constitutional objects and purposes. Her Honour rejected the appellant’s submission that the protection of the public interest resided within the Department responsible for regulating the environmental legislation the subject of the proceedings. Her Honour considered it relevant, however, that the relevant regulatory authorities had not commenced proceedings against the appellant, notwithstanding that the respondent’s solicitors had brought the matter to the attention of those authorities. She also found that the respondent would derive no financial benefit from the proceedings.

40 Her Honour considered the position as to the costs each party would incur should the substantive matter proceed. She noted that the legal representation for the respondent was essentially being undertaken on a pro bono basis and that the respondent would not continue with the proceedings if it was at risk of a costs order in a sum greater than $20,000. Her Honour accepted that the appellant’s assessment of the costs it was likely to incur, namely, in the range of approximately $230,000 to $285,000, appeared to be a reasonable estimate. However, as the appellant had substantial resources and was a large State government corporation, her Honour considered that although it would not recover most of its costs if the respondent’s case failed, it would not suffer financial hardship if the order sought under UCPR, r 42.4 was made.

41 Finally, her Honour rejected the appellant’s argument that the making of an order under UCPR, r 42.4 gave rise to the potential for inefficient litigation, as there would be no incentive for the respondent to run its case efficiently. Her Honour was satisfied that was not a problem, having regard to the terms of UCPR, r 42.4(4), which enables the court, if there are special reasons and it is in the interests of justice to do so, to vary the specification of maximum recoverable costs under UCPR, r 42.4(1).

The issues on the appeal

42 The appellant raised 19 grounds of appeal. These grounds were sometimes overlapping and repetitious. A subsequent attempt to refine these issues was not of much assistance to the Court. In the course of argument, it became apparent that the appellant’s principal challenge was that her Honour had erred in that she had made an order to protect the respondent’s assets to the exclusion of other relevant considerations. Those other relevant considerations included that the usual rule that costs follow the event and are compensatory in nature and that the underlying purpose of r 42.4 is to ensure the proportionality of costs to the complexity of the proceedings. The appellant contended that her Honour erred in her reliance on the English authorities and, in particular, the decision in Corner House, relating to protective costs orders. Related to this argument was the appellant’s submission that it was not reasonably possible to categorise proceedings as public interest litigation at the outset. The appellant also complained that in making an order under r 42.4, her Honour had predetermined the result of the appellant’s security for costs application.

43 The appellant submitted that, given those errors, the Court may infer that there had been a failure to properly exercise the discretion conferred by UCPR, r 42.4 as, upon the facts, the result embodied in the primary judge’s order was unreasonable or plainly unjust.

44 The respondent filed a notice of contention, contending that:

“Section 98(1) and 98(3) of the Civil Procedure Act 2005 conferred on the primary judge the discretionary power to make an order in terms of order No. 1 as set out at paragraph [71] of the primary judges reasons for judgment.”

45 As much of the discussion on the appeal was directed to the purpose underlying r 42.4, it is useful at the outset to consider the cases where a maximum costs order has been made. On the appellant’s approach, it was necessary to understand those authorities in the context of the rules of court and the general principles that govern costs, including costs in public interest matters. Accordingly, this is also a convenient point at which to refer to the relevant provisions of the legislation and rules of court governing costs, which I will refer to as the costs rules.

The costs rules

46 The general rule as to costs is that costs are in the discretion of the court. The Civil Procedure Act, s 98(1) provides that subject to the rules of Court and to the Civil Procedure Act or any other Act, costs are in the discretion of the court. The Civil Procedure Act, s 98(3) provides that an order as to costs may be made at any time of the proceedings. UCPR, r 42.1 provides:

“ 42.1 General rule that costs follow the event

47 Unless the court otherwise orders or the rules otherwise provide, costs are payable on the ordinary basis: UCPR, r 42.2. The provisions of UCPR, r 42.4 , the maximum costs provision, have already been set out above at [35]. Security for costs may be ordered at any stage in the proceedings: UCPR, r 42.21; see also the Corporations Act 2001 (Cth), s 1335.

48 The Land and Environment Court Rules 2007 (the LEC Rules), r 4.2 provides:

“ 4.2 Proceedings brought in the public interest

(1) The Court may decide not to make an order for the payment of costs against an unsuccessful applicant in any proceedings if it is satisfied that the proceedings have been brought in the public interest.

Pursuant to UCPR, r 1.7, local rules, such as r 4.2, prevail over the UCPR.

The case law

49 There are four aspects of the case law relevant for present purposes. The first relates to the appellate function, having regard to the fact that her Honour was exercising a broad based discretion: the second is the case law relating to public interest litigation; the third and fourth aspects are the Australian and English authorities, respectively, where costs orders have been made, either capping the costs that may be recovered, in the case of the Australian authorities; or the English cases, where a protective costs order has been considered.

(a) appeals from discretionary judgments

50 The restraints on appellate interference with discretionary judgments are well recognised. Error in the exercise of the discretion must be established: see House v R at 504. Accordingly, it must be shown that the judge acted on a wrong principle; mistook facts; failed to take into account a relevant consideration; or took into account an irrelevant consideration. However, even if some such error is not discernible from the judge’s reasons, a result that is unreasonable or plainly unjust may give rise to an inference that there was some failure in the proper exercise of the discretion: House v R at 505.

51 In Re Gilbert (1946) NSW SR 318, Jordan CJ observed, at 323, that there was:

“… a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights.”

52 His Honour pointed out that unless a “tight rein” was kept on the interference with orders on matters of practice and procedure, “the result would be disastrous to the proper administration of justice”. As his Honour pointed out, cases could be delayed and costs increased significantly if a litigant “with a long purse or a litigious disposition” could, in effect, transfer the exercise of discretion in interlocutory applications from a trial judge to a court of appeal.

53 However, different considerations apply where what was being appealed was a discretionary decision finally determinative of legal rights. Jordan CJ emphasised that the restraints on appellate interference in respect of this class of case, whilst strict, were less stringent than those adopted in matters of practice or procedure.

54 The present case involves an interlocutory order. However, it is somewhat hybrid in its nature. It is more serious in its effect than what is involved, for example, in the making of directions for the conduct of proceedings. However, it is not final in the sense that pursuant to UCPR, r 42.4(4), the court may vary the order made, subject to there being special reasons and it being in the interests of justice to do so. In any event, it should be observed that the wide discretion given to trial judges in respect of costs generally is respected by the statutory provisions which require the grant of leave to appeal against any costs order, whether made during or at the conclusion of proceedings.

(b) public interest cases

55 Even prior to the introduction of the LEC Rules, r 4.2, it was accepted that in public interest cases an unsuccessful party may not be ordered to pay costs: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. That case concerned the validity of a development consent granted by the respondent Council, for failure to require a fauna impact statement. The applicant’s concern was with an endangered koala population. The applicant failed before the primary judge. Nonetheless, the primary judge, Stein J, determined that there should be no order as to costs.

56 In determining that there be no order as to costs, Stein J took, relevantly, the following matters into account:

(i) that the rule that costs follow the event evolved in an era of private litigation and that there was a need to distinguish applications to enforce public law obligations arising under environmental laws, lest the relaxation of standing conferred by s 123 had little significance;

(ii) the characterisation of proceedings as “ public interest litigation ”, with the prime motivation for bringing the proceedings being the upholding of “ the public interest and the rule of law ”, may be a factor which contributed to a finding of “ special circumstances ”, but was not of itself sufficient to constitute special circumstances warranting departure from the usual rule. Something more was required;

(iii) The appellant had no private interest in the litigation and was only motivated by public interest considerations;

(iv) there was a public interest in the outcome of litigation in this case as a significant number of members of the public shared the appellant’s stance as to the development, the preservation of natural features and flora of the site and the impact on endangered fauna;

(v) the case had been arguable and had raised and resolved significant issues as to the interpretation and future administration of statutory provisions relating to the protection of endangered fauna and the ambit and future administration of the development consent. These issues had implications for the Council, the developer and the public.

57 The relevant cost provision governing the appellant’s case at that time had been the Land and Environment CourtAct 1979, s 69. That section provided, relevantly, that costs were in the discretion of the court and, the court may determine by whom and to what extent costs were to be paid. The discretion conferred by s 69 was unconfined except to the extent that a court could not take into account extraneous considerations having regard to “the subject matter and the scope and purpose of the legislation”: Oshlack at [22]. There was no provision equivalent to UCPR, r 42.1.

58 The High Court upheld the trial judge’s order. Gaudron and Gummow JJ observed, at [30], that “public interest litigation” was a “nebulous concept”, unless given content of a legally normative nature, as the primary judge had done: South Melbourne City Council v Hallam [No 2] (1994) 83 LGERA 307 at 311; cf Mahar v Rogers Cablesystems Ltd (1995) 25 OR (3d) 690 at 702-705. Their Honours stated, at [40], that there is no absolute rule that in the absence of disentitling conduct a successful party was to be compensated in costs by the unsuccessful party. Their Honours also stated that there was no rule excluding the jurisdiction of the court to order a successful party to bear the costs of the unsuccessful party.

59 Their Honours concluded, at [45], that s 69, in its operation upon litigation under the open standing provision of s 123, was not to be narrowly construed. Their Honours further commented that s 69 was applicable to a new species of litigation and the discretion it conferred was “to be exercised so as to allow for the varied interests at stake in such litigation”. Their Honours considered that Stein J did not take into account considerations which could be said to be definitely extraneous to any objects the legislature could have had in view in enacting s 69 and in relation to the operation of s 69 upon proceedings instituted under s 123.

60 Kirby J, in a separate judgment, agreed.

61 In Minister for Planning v Walker (No 2) [2008] NSWCA 334, the Court accepted, at [9], that more than the fact that litigation is characterised as public interest litigation is required to displace the “ordinary rule as to costs”. The costs provisions in play in Walker were the Civil Procedure Act, s 98 and UCPR, r 42.1 (LEC Rules, r 4.2 was not in force at the time of those proceedings). Hodgson JA (Campbell and Bell JJA agreeing) held that there was clearly a public interest in the principles of ecologically sustainable development and in climate change flood risk in relation to properties near the coast, which had been the subject matter of the proceedings in that case. His Honour considered that this interest was not confined to a small number of people in the immediate vicinity of the development. His Honour inferred that the prime motivation of this litigation was to uphold the rule of law in relation to that matter of public interest.

62 Accordingly, his Honour characterised the matter as “plainly public interest litigation”. The factors his Honour took into account in determining that the matter was properly characterised as public interest litigation were based on considerations that Lloyd J had identified in Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434; (2004) 136 LGERA 365. The additional factors the Court considered constituted special circumstances warranting departure from the usual rule that costs follow the event included that the proceedings raised a novel point of law and were reasonably arguable that the appellant had established the Minister had not taken into account one of the objects of the Environmental Planning and Assessment Act 1979 and that the Minister’s failure to do so was contrary to good decision-making.

(c) maximum costs order cases

(i) the Australian cases

63 Maximum costs orders were first introduced in Australia in the Federal Court Rules, O 62A by Statutory Rule 421 of 1992. UCPR, r 42.4(1) effectively mirrors O 62A(1). To the extent there are differences, they are not presently relevant.

64 Prior to the introduction of O 62A, Black CJ wrote to the Law Council of Australia seeking comments about the proposal. His Honour wrote:

“There is concern within the court, reflecting that within the wider community and the legal profession, that the cost of litigation, particularly for persons of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice.

A deterrent to the assertion or defence of rights in civil litigation is a fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected. One suggestion that has been made proposes a change to the rules so as to empower a judge, early in proceedings, to make an order fixing a ceiling on the amount of costs recoverable from the unsuccessful party in the litigation …

Sacks

v Permanent Trustee Australia Limited

65 O 62A has been considered in a variety of factual circumstances, including in the following cases: Dibb v Avco Financial Services Limited [2000] FCA 1785; Muller v Human Rights and Equal Opportunity Commission and Anor (Federal Court of Australia, 17 July 1997, unreported); Woodlands v Permanent Trustee Co Limited; Bass v Permanent Trustee Co Limited; Conca Permanent Trustee Co Limited (1995) 58 FCR 139; Hanisch v Strive Pty Limited (1997) 74 FCR 384; Maunchest Pty Limited v Bickford (Federal Court of Australia, 7 July 1993, unreported); Sacks v Permanent Trustee; and Corcoran v Virgin Blue Airlines.

66 UCPR r 42.4 has been considered in Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor [2005] NSWSC 1003; 65 NSWLR 268 and in Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources [2009] NSWLEC 165; (2009) 170 LGERA 22.

67 The commencing point for any consideration of r 42.4 is that the power to make such an order is discretionary. In the context of an application for a maximum costs order in the Land and Environment Court, the LEC Rules, r 4.2 is also relevant.

68 UCPR, r 42.4 does not apply for the benefit of the applicant only: if an order is made, it extends to both parties. see Sacks; Maunchest; Muller. The existence of a public interest element in a case has been held to be a factor of “some significance”, although not a decisive consideration: Woodlands at [148]. However, it should be noted that Woodlands was not public interest litigation of the kind contended for in this case. Rather, it involved representative actions in which damages were sought by or on behalf of private individuals who had suffered loss under a State government administered HomeFund scheme.

69 In Woodlands two other factors were of significance. First, the applicants, who were elderly and of insubstantial means, would most likely be required to abandon their litigation unless a maximum costs order was made. Secondly, had the proceedings been brought in the New South Wales State court system, the applicants would have had the benefit of the capping provisions contained in the Legal Aid Commission Act 1979, s 47. There was doubt whether that provision applied to proceedings in the Federal Court. Given the public interest element in the case, those two factors were persuasive in the Court making an order limiting the costs to the amount that the applicants would have been required to pay in a State court, having regard to the costs capping provisions of the Legal Aid Commission Act.

70 Another issue which arose in Woodlands was whether persons in the representative group could provide funds to satisfy any adverse costs order. When the Court raised that issue, evidence was adduced that a levy of $200 per member had been struck but the funds raised had been reasonably spent on the applicants’ own legal costs.

71 The complexity of the matter may be a relevant consideration: see Sacks; Hanisch. Overall, the authorities have exercised the discretion in favour of making an order in less complex litigation. However, the fact that a matter is complex does not preclude an order being made: see Woodlands; Muller; Hanisch. Drummond J observed in Hanisch, at 387, that the principal object of O 62A is to:

Woodlands

72 In Hanisch Drummond J (subject to a qualification not presently relevant) fixed the maximum costs order to the costs that the parties would have recovered had the matter been brought in the District Court, being the jurisdiction in which his Honour considered the proceedings ought more appropriately have been brought. His Honour did not set a fixed amount by way of a maximum costs order, but made an order by reference to the scale of fees in the District Court.

73 In Dibb v Avco Financial Services Limited Sackville J refused an application for a maximum costs order in the sum of $10. His Honour said, at [15]:

inter alia,

74 It seems that it was also relevant to Sackville J’s determination that there was nothing to suggest that the applicant was prevented or inhibited from conducting his case by the prospect of an adverse costs order.

75 In Corcoran Bennett J, in summary form, identified from the existing case law the following factors that had been considered relevant in determining whether a maximum costs order should be made; the timing of the application; the complexity of the factual or legal issues raised in the proceedings; the amount of damages than the applicant seeks to recover and the extent of the remedies sought; whether the applicant's claims are arguable and not frivolous or vexatious; the undesirability of forcing the applicant to abandoning the proceedings; and whether there is a public interest element to the case.

76 In Sacks, I referred to the desirability of the Court being informed of the estimate of costs that were likely to be incurred in the litigation:

“… not for the purposes of using it as the benchmark for any order which might be made, but to provide the court with evidence as to what costs are likely to be incurred and why such costs are likely to be incurred. The court would then be informed as to whether the amount which the court was asked to order was reasonable, having regard not only to the amount of the claim, but also the complexity of the issues, the extent of the work involved in the matter up to and including the hearing and the costs otherwise likely to be incurred.”

77 In Sherborne Palmer J made a maximum costs order in a Family Provision Act 1982 matter. His Honour observed, at [33]:

Supreme Court Act

78 Earlier, his Honour said:

“[26] I conclude that UCPR 42.4 is intended as a means whereby the Court may, if the need arises, curb the tendency of one or all parties to engage in disproportionate expenditure on legal costs by making it clear, at an early stage of the proceedings, that beyond a certain limit the parties will have to bear their own costs – win or lose.

…

[29] It seems to me that UCPR 42.4 and its precursor, SCR Pt 52A r.35A, were designed to put into the Court’s hands a brake on intemperate and disproportionately expensive conduct of proceedings. The power conferred by the Rule is not brought into play only if one of the parties invokes it: the Court itself may exercise the power on its own motion whenever it sees the need. This is because the policy of the law, enshrined in CPA s.56(1), is to facilitate the just, quick and cheap resolution of the real issues in proceedings. By s.56(2), the Court not only may, but must, give effect to that policy whenever it exercises any power conferred upon it by the Act or the Rules – indeed, even when the parties themselves do not wish to conduct the proceedings quickly or cheaply.

Lownds v Home Office (Practice Note)

Jvancich v Kennedy (No 2)

Jvancich

79 Subsequent to the decision in this matter, Preston CJ considered an application for an order under r 42.4 in the Caroona Coal Action Group matter. His Honour observed, at [16], that the purpose of a maximum costs order was to facilitate access to justice, which could be impeded where the costs of litigation were high, including where a party feared a costs order where the costs were likely to be high. That is the position in this case.

80 Preston CJ said, at [18], that a maximum costs order was one means of achieving proportionality of costs. This comment was directed at proportionality as between the amount of costs and the complexity of proceedings. In other words, costs were often disproportionately high in non-conflict proceedings, or where the amount involved in the litigation was not high. His Honour instanced Family Provision Act proceedings as a good example: see Sherborne. His Honour considered that a maximum costs order in such situations fulfilled the court’s duty under the Civil Procedure Act, s 56.

81 However, his Honour observed that ensuring proportionality of costs did not always have the effect of achieving access to justice. A party might be deterred from bringing complex proceedings because of costs considerations. His Honour said, at [21]:

“A maximum costs order may alleviate this barrier by protecting the beneficiary of the order from exposure to legal costs beyond the maximum amount specified in the order.”

82 His Honour observed, at [23], that public interest litigation was a category of litigation “where the fear of an adverse costs order may impede access to justice”. Nonetheless, his Honour considered that it was important not to over-generalise. As he noted at [27], not all public interest litigation would be discontinued if the court declined to make a maximum costs order. A public interest litigant may have access to financial resources sufficient to fund the public interest litigation.

83 Preston CJ also observed, at [27], that there was a risk of over-generalising the beneficial effect the making of a maximum costs order may have on facilitating access to justice. In this regard, his Honour noted that commonly, in making a maximum costs order, the Court considered that fairness required that a maximum costs order should be bidirectional, or multi-directional, so that all parties to the proceedings had the benefit of the order. However, his Honour considered that an order could be uni-directional, that is, made in favour of one party only. This view is contrary to the Federal Court decisions of Sacks and Maunchest and to the approval of those decisions in Muller. This issue did not arise on the appeal in this case. I expressed my view in Sacks. However, I accept that this may be a matter that remains open for argument.

84 At [31], his Honour considered the factors relevant to making a maximum costs order. His Honour noted that the factors that will be relevant will vary depending upon the circumstances of the case and of the plaintiff, and what is necessary to facilitate access to justice in the particular case. His Honour referred to the factors that have been formulated as being relevant to public interest litigation, particularly in Corcoran and Corner House. I have already referred to Corcoran. Corner House is discussed below.

85 Preston CJ observed that the factors enumerated in Corcoran and Corner House may, in an appropriate case, provide guidance, but should not be elevated to become fixed criteria governing the exercise of the discretionary power to make a maximum costs order. As his Honour observed, all of the factors will not be relevant in all cases. In addition, some factors may take on different importance depending upon the circumstances. His Honour explained this as follows:

“[36] … For example, the complexity or simplicity of the factual or legal issues may take on different significance depending on the nature and subject matter of the proceedings and the aspect of access to justice that is relevant, such as achieving proportionality of costs or alleviating the deterrent effect of the fear of an adverse costs order. Some of the factors have the potential for misdirecting the court from considering the critical issue of access to justice. Examples are whether there is any private interest in the proceedings or whether the plaintiff’s counsel is acting pro bono. In the end, the critical question for the court is whether or not making a maximum costs order facilitates or impedes access to justice in the particular case.”

86 For myself, I would add the following to his Honour's remark. When reference is made to access to justice in the particular case, I am of the opinion that regard must be had not only to the facilitation of the bringing of proceedings, but also the just disposition of the proceedings as between the parties.

(ii) the English position

87 In England, there are relevantly two distinct types of costs order whereby the court may limit the costs payable. The first is a protective costs order (PCO), which protects a party against liability for the other party’s costs. The second is a costs capping order (CCO). A PCO is only available in public law litigation where the claimant has no (or virtually no) private interest in the matter at issue. The intent of a PCO is to protect a party from exposure to any costs order, although an order may be made which limits the amount of costs that may be ordered against a party. A CCO is made on the basis that the litigant is at risk as to the other side’s costs in the ordinary way but the order limits the amount of costs recoverable by either party and thus prevents the costs liability from being inflated by the incurring of disproportionate costs: see Nadia Eweida v British Airways PLC [2009] EWCA Civ 1025 at [8].

88 PCOs have been a feature of public law litigation in the UK for some time. The history of such orders was reviewed in Corner House. Having regard to the assistance that the trial judge gained from Corner House and given the difference in the English rules as compared to UCPR, r 42.4 and the LEC Rules r 4.2, it is necessary to review that case in some detail.

89 In Corner House, the Court of Appeal traced the rules and the case law underlying the traditional approach to costs in private law litigation and the developments that had occurred relating to costs in such litigation. The Court observed that matters had moved on from Lord Hoffman’s comments in McDonald v Horn [1995] 1 All ER 961, [1995] ICR 685, that it was difficult to envisage a case where a court could properly exercise its discretion in advance of the substantive decision, to the position where, in public law litigation, the Crown on occasions either did not apply for costs, or leave to appeal was granted to a public body on the basis that it would pay both parties’ costs on the appeal. The Court of Appeal noted that there were other examples where the court had declined to make an order for costs against unsuccessful appellants where they were not pursuing proceedings for any motive of private gain and where the judgment in the intermediate appellate court had left an undesirable lack of clarity in an important area of law.

90 The Court of Appeal next referred to the historical setting of PCOs. It observed that there had been a growing concern both in England and in other common law jurisdictions that access to justice was sometimes unjustly impeded if there was a slavish adherence to the private costs regime where costs usually followed the event. Whilst the liberalisation of the standing rules had gone some way in enabling a party or interest group to bring judicial review proceedings so as to vindicate the rule of law and to have unlawful conduct stopped, that had been only partially successful because of the prohibitive effect that exposure to an order for costs was likely to have on persons wishing to engage in such public interest litigation. The Court referred to observations to this effect made by Toohey J, extracurially, in 1989. The Court then noted, at [41], that from a review of cases up until 1998, a trend towards protecting litigants, who reasonably brought public law proceedings in the public interest from liability for costs, was discernible.

91 In 1998, Dyson J in R v Lord Chancellor, Ex Parte Child Poverty Action Group [1998] 2 All ER 755 considered the circumstances in which it was appropriate for a court to make a PCO. It was common ground in that case that following McDonald v Horn a PCO was not available in a private law action. The main question for his Honour, therefore, was whether different public policy considerations applied in cases aptly characterised as public interest challenges. Dyson J said that a PCO should only be made in the most exceptional circumstances. His Honour then listed the factors of which the court would need to be satisfied before making an order. Those factors were adopted with some modification by the Court of Appeal in Corner House and are considered below.

92 In Hammersmith and Fulham London BC, ex parte Council for the protection of rural England London Branch [2000] Env LR 544, Richards J commented, in considering whether to make a PCO, that the court should ensure as far as practicable that the parties were on an equal footing and that the case was dealt with in a way proportionate to the financial position of each party.

93 The Court of Appeal in Corner House next dealt with the rules of court governing costs. The Court noted that the general rule that costs followed the event remained, subject to the discretion in the court to make some different order. In this regard, the Civil Procedure Rules (UK) (CPR), r 1.2 expressly stated that the rules were a new procedural code with the overriding objective of enabling the court to deal with cases justly. CPR, r 1.1 (2) then provided that:

“… dealing with a case justly includes, so far as is practicable --

(a) ensuring that the parties are on an equal footing ...

94 The English rules of court did not confer a specific power to make a PCO under the new rules. Nonetheless, the Court of Appeal held that there was jurisdiction to make such an order. It expressed the view that there were features of public law litigation that distinguished it from private law civil, including family litigation and it accepted that a PCO should only be made in the most exceptional circumstances, adopting the statement to that effect by Dyson J in the Child Poverty Action Group case. However, the court noted that the fact that a PCO should only be made in exceptional circumstance did not of itself assist in identifying the circumstances in which an order should be made.

95 As already mentioned, the Court of Appeal considered there should be some recasting of the guidelines articulated by Dyson J. In the case before it, the Court of Appeal considered that the application for judicial review had a real prospect of success and that it was in the public interest to make the order. It then restated the governing ‘principles’ as to the discretion to make a PCO in these terms:

“(1) A PCO may be made at any stage of the proceedings, on such conditions as the court thinks fit, provided that the court is satisfied that: (i) the issues raised are of general public importance; (ii) the public interest requires that those issues should be resolved; (iii) the applicant has no private interest in the outcome of the case; (iv) having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved it is fair and just to make the order; and (v) if the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing. (2) If those acting for the applicant are doing so pro bono this will be likely to enhance the merits of the application for a PCO. (3) It is for the court, in its discretion, to decide whether it is fair and just to make the order in the light of the considerations set out above.”

96 In specifying these ‘governing principles’, the Court observed that there should be no arterial hardening of guidelines into rules: see also Oshlack at [38], 87.

97 The Court of Appeal, at [76], considered that it was likely that when a court made a PCO, the effect of which was to immunise the applicant against liability for any costs order, it would also make a costs capping order if the applicant made it apparent that it would be seeking its costs if successful on the substantive application. Costs capping orders are provided for in CPR, r 44. That rule is more prescriptive than UCPR, r 42.4. The rule is specifically stated not to apply to protective costs orders: CPR, r 44(3). CPR, rr 44.18(5) and (6) provide relevantly:

“(5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if -

(b) there is a substantial risk that without such an order costs will be disproportionately incurred; and

(c) it is not satisfied that the risk in sub-paragraph (b) can be adequately controlled by -

(i) case management directions or orders made under Part 3; and

(ii) detailed assessment of costs.

(a) whether there is a substantial imbalance between the financial position of the parties;

(b) whether the costs of determining the amount of the cap are likely to be proportionate to the overall costs of the litigation;

(c) the stage which the proceedings have reached; and

(d) the costs which have been incurred to date and the future costs.”

98 In Ewieda v British Airways the Court of Appeal noted that all three conditions set out in r 44.18(5) must be satisfied before a CCO can be made out. In that case, the Court refused a CCO on the basis that even if disproportionate costs would be incurred, there was no reason why that could not be controlled by way of an appropriate assessment of costs. The Court was not satisfied in any event that para (c) of subrule 5 was satisfied and doubted whether para (b) was satisfied.

The principal challenge to the trial judge’s order: the order was made to protect the respondent’s assets to the exclusion of other relevant considerations: ground 10

99 The appellant’s commencing submission was that, subject to the rules, costs are in the discretion of the court: the Civil Procedure Act, s 98(1)(a). In that regard, the appellant submitted that the general rule is that costs follow the event: UCPR, r 42.1 and that a costs order is intended to be compensatory in nature: see Oshlack per McHugh J at [66] 98. The appellant contended, therefore, that it was entitled to engage in the proceedings on the assumption that it would recover its costs if it was successful.

100 The appellant contended that it was apparent that the underlying reason for her Honour’s order was because the sum of $20,000 was all the respondent was prepared to commit to the litigation. The appellant contended that her Honour had allowed that consideration to overwhelm all other factors relevant to the discretionary exercise of the power under UCPR, r 42.4. The appellant submitted that the trial judge had thereby erred in making the maximum costs order as she had failed to properly have regard to the purpose of UCPR, r 42.4 in the context of the provisions of the Civil Procedure Act, especially s 56 and the suite of costs rules contained in UCPR, r 42, including r 42.4, which is the rule specifically under consideration here and r 42.21, which provides for security for costs.

101 The appellant accepted that the respondent’s contention, that it would not continue with the substantive proceedings if it did not obtain a r 42.4 order, was genuinely advanced. However, the appellant contended that the respondent’s position in this regard was not to be equated with the discretionary factors considered relevant in a case such as Woodlands where the Court was satisfied that the applicants reasonably were unable to meet a full costs orders. Rather, the respondent’s position was that it would not continue with the proceedings if it was required to expend more than $20,000. The appellant submitted that it was irrelevant for her Honour to be concerned with the respondent’s assertion.

102 The appellant next submitted that in determining whether to make a r 42.4 order, it was relevant for the court to assess the likely amount of costs that would be incurred. However, it was not a proper exercise of the discretion to impose an amount of costs for the purposes of protecting one party in respect of the costs for which that party might be liable, without having proper regard to other relevant considerations. One such other consideration in this case was the reasonable costs likely to be incurred by the appellant in defending what effectively was a civil prosecution of an alleged criminal offence.

103 Underlying this last submission, as I understand it, was the need for regard to be had to the proportionality of the order made and the likely reasonable costs to be incurred, a submission that the appellant advanced in a number of different ways. In this regard, the appellant submitted that in a case where it could not be said that there was any anticipated waste in the manner in which the appellant proposed to defend the proceedings, it was an error to predetermine the amount of costs that the appellant could recover, at least in an amount that was so disproportionate to the reasonable costs that it estimated it would be required to expend in defending the proceedings.

104 In an allied submission the appellant contended that the purpose of a rule such as r 42.4 was to provide a means whereby the Court could place some control on the parties so there was some proportionality of the costs to the actual amount in issue in the case or to the complexity of the matters in issue: see the Civil Procedure Act, s 60; see also Sacks v Perpetual Trustee. In this case, the trial judge accepted that the case would raise complex issues; have serious consequences for the appellant should the respondent succeed; and that the appellant’s estimated costs of approximately $250,000 were reasonable.

Civil Procedure Act

considerations

105 The appellant also pointed out that as s 56 required the court to facilitate the just, quick and cheap resolution of the real issues in the proceedings, it was necessary for the Court to consider the question of the “just” disposition of proceedings from the viewpoint of both parties. The appellant’s central complaint was therefore reiterated, in terms, that her Honour’s predominant consideration in making the maximum costs order in this case was the protection or insulation of the respondent’s assets, in circumstances where the respondent was not prepared to commit itself to the proceedings unless the costs for which it might become liable could be limited to $20,000. Given that the appellant’s estimated costs were in the order of $250,000, this was not a “just” disposition as between the appellant and the respondent. It followed on the appellant’s submission that there had not been a proper exercise of the judicial discretion invested in her Honour by UCPR, r 42.4.

106 The appellant pointed out that the need for the Court to exercise its powers justly as between both parties was reinforced by the provisions of the Civil Procedure Act, ss 57-58, which provided for the management of proceedings having regard to “the timely disposal of proceedings … at a cost affordable by the respective parties”; and that in making orders for the management of proceedings, the court must act in accordance with the dictates of justice. Matters relevant to determining the dictates of justice in a particular case included the degree of difficulty or complexity to which the issues in the proceedings give rise: the Civil Procedure Act, s 58(2)(b)(i).

167 That leaves the question as to what should be done. This may well be a case where it is appropriate to make a maximum costs order. However, given that I have concluded that her Honour failed to take into account a relevant consideration or, alternatively, the order her Honour made fell outside the wide bounds of the discretion conferred by the section, I propose that the appeal be allowed and that the matter be remitted to the Land and Environment Court for redetermination.

168 Finally, I should note that the respondent filed a notice of contention in which it contended that subs 98(1) and (3) conferred on the trial judge the discretionary power to make the order in the terms she did. There is no doubt that her Honour had the discretion to make such an order. The only question is whether her Honour erred in the exercise of the discretion in accordance with House v R principles. It is not necessary, therefore, to deal specifically with the notice of contention.

169 BASTEN JA: The applicant (“Delta”) is a state-owned corporation which generates electricity from a coal-fired power station at Wallerawang near Lithgow. The respondent (“the Society”) is an incorporated association having objects related to environmental protection in the Blue Mountains region of New South Wales. It has brought proceedings in the Land and Environment Court seeking to prevent pollution (or further pollution) of the Coxs River resulting from alleged discharge of pollutants by the applicant.

170 On 9 September 2009 Pain J granted the Society an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) (“the UCPR”), r 42.4 fixing the maximum costs “that may be recovered by one party from another in these proceedings” at the sum of $20,000. (The order originally sought was in a lesser sum.)

171 The applicant seeks leave to appeal and, if leave be granted, to have the order set aside. I agree with Beazley JA that leave should be granted but the appeal should be dismissed with costs.

Issues

172 As her Honour explains, there was a degree of confusion, or at least lack of precision, in the grounds upon which the applicant sought to challenge the order. In the final analysis, the challenge, so far as it had any substance, can be identified by reference to three matters:

173 How these separate matters should be approached is of some importance in the disposition of the present application. The failure of the applicant to identify with sufficient care the various elements of its challenge tended to obscure the difficulties which it faced in this Court. Those difficulties need to be identified.

174 In addition to that step, I would add some comments in respect of the nature of the litigation and its relevance to the approach taken, both below and in this Court.

175 To the extent that there are matters of principle involved, and because this is apparently the first occasion in Australia involving consideration by an intermediate court of appeal of the proper exercise of the discretionary power to cap costs, it is appropriate that there be a grant of leave to appeal.

Approach in appellate jurisdiction

176 As the draft notice of appeal recorded, the application was brought pursuant to s 58(3)(a) of the LEC Act. That provision requires leave of this Court with respect to a proposed appeal under s 58(1) against an interlocutory order or decision of the Land and Environment Court. The right of appeal accorded by s 58(1) is not restricted to a question of law and is thus governed by s 75A of the Supreme Court Act 1970 (NSW), the appeal being by way of rehearing.

177 There are three reasons for exercising appellate restraint in a case such as the present. First, it is a clear example of an interlocutory judgment involving a procedural order and therefore subject to the well-known principles of restraint conveniently identified by Jordan CJ in In re the Will of FB Gilbert (Deceased) (1946) 46 SR (NSW) 318.

178 Secondly, the power is of a kind which is discretionary, both as to the making of the order and the amount of any sum fixed. The two stages are difficult to separate. The fixing of a sum involves not merely an evaluative judgment, but one which will encompass a range of possibilities, rather than a binary choice. Accordingly, a challenge to the maximum costs order should be subject to the constraints which apply in such cases: see, eg, Singer v Berghouse [1994] HCA 40; 181 CLR 201, at 212 (Mason CJ, Deane and McHugh JJ).

179 Thirdly, the subject matter of the proceedings involves the operation of environmental legislation, and particularly the Protection of the Environment Operations Act 1997 (NSW) (“the PEO Act”), s 120 and Chapter 8, the enforcement of which falls within the exclusive jurisdiction of the Land and Environment Court. Decisions as to the circumstances in which, and the conditions under which, proceedings in that jurisdiction may be maintained are matters as to which an appellate court should accord a measure of deference in granting leave to appeal, and in reviewing on appeal, decisions of a primary judge.

Identifying relevant considerations

180 A consideration of the correct approach to the application in the present case requires reference to the statutory provision under which the order was sought. That was r 42.4 of the UCPR, which provides:

42.4 Power to order maximum costs

181 The structure and context of the UCPR provide no assistance in considering the functions and scope of this provision. Although the UCPR generally (like most rules of court) follow a chronological sequence, which places Pt 42, dealing with costs, after Parts relating to judgments and before a miscellany of Parts appearing at the end of the rules, some provisions in Pt 42 operate at an early stage of proceedings. Rule 42.4 is one which is capable of so operating, as is r 42.21, dealing with security for costs.

182 The precursor to r 42.4 in the UCPR, which was in similar terms to the present rule, was r 35A in Pt 52A (Costs) of the Supreme Court Rules 1970. That rule was introduced in January 2000. Both rules are in similar (though not identical) terms to Order 62A of the Federal Court Rules, which commenced on 1 January 1993.

183 Early decisions as to the operation of the provision in the Federal Court reveal a cautious approach to the circumstances in which it is appropriate to make a costs capping order, in the absence of clear guidance from the rule itself as to the circumstances of its operation. Early decisions in the Federal Court took note of the content of a letter from the Chief Justice of that Court to the President of the Law Council of Australia identifying the concern underlying the proposed rule as the belief that “the cost of litigation, particularly for persons of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice”: see Sacks v Permanent Trustee Australia Ltd [1993] FCA 502; 45 FCR 509 at [6] (Beazley J); Woodland v Permanent Trustee Company Ltd [1995] FCA 1388; 58 FCR 139 at 144 (Wilcox J). The letter further noted that the fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected constituted a “deterrent to the assertion or defence of rights in civil litigation”.

184 The propriety of reliance on such a document in ascertaining the purpose of a court rule was not debated in either proceeding, but the underlying statement of purpose may, in any event, be accepted. However, the rule, in its terms, is not limited to such a purpose and restrictions on its operation must be identified by reference to its language and the context in which it appears and the jurisdiction in which it is invoked, rather than by reference to extraneous materials.

185 The relationship between r 42.4 in the UCPR and ss 56-60 of the Civil Procedure Act 2005 (NSW), which are partly reflected in r 42.4(3), supports the view that a costs capping order may properly be made to “curb the tendency of one or all parties to engage in disproportionate expenditure on legal costs”, and to maintain “[p]roportionality of costs to the value of the result”: see Sherborne Estate (No 2): Vanvalen v Neaves [2005] NSWSC 1003; 65 NSWLR 268 at [26] and [30] (Palmer J). However, it does not follow that those are the only circumstances in which an order can be made; rather they reflect the concerns which arose in that case. (It is not necessary for present purposes to consider whether his Honour was correct in concluding that an order could only be made prophylactically and not at the time of making a final costs order: at [31].)

186 Where a broad discretionary power is conferred on a court, it is important that the full range of permissible considerations is identified and that limitations which do not find reflection in the language of the rule not be imposed. More recent cases have adopted this approach.

187 The Federal Court rule, providing that the Court might specify “the maximum costs that may be recovered on a party and party basis” was originally construed as requiring that any order made bind both (or all) parties to the litigation: Maunchest Pty Ltd v Bickford [1993] FCA 318 at [14] (Drummond J). In Hanisch v Strive Pty Ltd [1997] FCA 303; (1997) 74 FCR 384 at 390 his Honour repeated the view he had expressed in Maunchest. His Honour was of the view that the order made in Woodland was to similar effect, though that conclusion may be doubted. As will be seen below, the language of the UCPR imposes no such constraint.

188 Further, in Hanisch at 387, Drummond J stated:

“The principal object of O 62A is to arm the Court with power to limit the exposure to costs of parties engaged in litigation in the Federal Court which involves less complex issues and is concerned with the recovery of moderate amounts of money, although it may be appropriate for an order to be made under O 62A in other cases ….”

189 In a more recent decision, Corcoran v Virgin Blue Airlines Pty Ltd [2008] FCA 864 at [6]-[13], Bennett J identified a wide variety of factors which might need to be taken into account in appropriate cases under O 62A. A helpful exposition of relevant considerations in a public law context may be found in the judgment of Preston CJ in Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd [2009] NSWLEC 165; 170 LGERA 22. As noted by Preston CJ at [12], under r 42.4, it is a matter for the Court to specify the party which is protected by a maximum costs order: there is no requirement that the order apply equally to all parties.

190 The language of r 42.4 differs from the language used in the Federal Court rules and decisions as to the operation of that rule, have no necessary application in this jurisdiction. As Caroona demonstrates, there is no call to limit the “principal objects” of r 42.4 in the way suggested by Drummond J in Hanisch in relation to the Federal Court rule. Further, as subsequent litigation has demonstrated, public law cases have proved a separate and important area of its operation.

191 After referring to the discussion of proportionality between costs incurred and the subject-matter in dispute in Sherborne Estate (No 2), Preston CJ said in Caroona at [21]:

“Ensuring proportionality of costs does not always have the effect of achieving access to justice. The subject matter of a dispute may be important, complex and of high value. By the criterion of proportionality of costs alone, significant expenditure of legal costs to litigate such a dispute could be justified. Yet the financial resources of one or more of the parties may be insufficient to meet an adverse costs order of such magnitude. The fear of exposure to significant legal costs to which an unsuccessful party may be subjected may deter a party from asserting, or continuing to assert, its rights in litigation.”

192 Against these general principles, it is convenient to consider specific factors of relevance to the present case.

Open standing

193 The PEO Act makes it an offence for a person to pollute any waters. Section 252, in Pt 8.4, provides:

252 Remedy or restraint of breaches of this Act or regulations

breach

194 The importance of open standing provisions in environmental protection legislation is well-understood, particularly in the Land and Environment Court. As the primary judge noted at [44]:

“The history of public interest litigation in this Court through the utilisation of third party standing provisions in virtually all the major environmental and planning legislation in NSW is reasonably extensive and commenced early in the life of the Court. Broad standing provisions enable the legislation to be tested and enforced through proceedings in the Court.”

195 Commentators have noted that the evident purpose of open standing provisions may not be realised unless financial disincentives to their use by public-minded citizens are not removed or at least reduced. Thus, Toohey J, speaking extra-judicially has said:

“There is little point in opening the doors to the courts if litigants cannot afford to come in. The general rule in litigation that ‘costs follow the event’ is in point. The fear, if unsuccessful, of having to pay the costs of the other side (often a government instrumentality or wealthy private corporation), with devastating consequences to the individual or environmental group bringing the action, must inhibit the taking of cases to court. In any event, it will be a factor that looms large in any consideration to initiate litigation.”

Proceedings of the International Conference on Environmental Law. 14-18 June 1989, Sydney, Australia

196 As Preston CJ stated in Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited (No 3) [2010] NSWLEC 59; 173 LGERA 280 at [31]:

Oshlack v Richmond River Shire Council

Oshlack v Richmond River Council

R (On the Application of Corner House Research) v Secretary of State for Trade and Industry

Kent v Cavanagh

197 There are limits to the power of a judge to address such concerns if traditional procedural rules are not varied. However, where, as with the Land and Environment Court, costs rules have been varied to permit such concerns to be taken into account, the Court would fail to promote the statutory purpose underlying the open standing provisions in not seeking to identify inappropriate financial disincentives.

Likely final costs order

198 From the point of view of the party seeking protection, the purpose of a maximum costs order is to limit the potential liability of a party in the event that it fails to obtain the outcome sought. From the perspective of the other party, such an order will limit its ability to recover costs it has expended in successfully pursuing or defending the proceedings. It follows that a matter of primary importance is the identification of the likely final costs order.

199 Many of the cases in which maximum costs orders have been considered have assumed, often without discussion, that absent misconduct on one side or the other, costs will follow the event of the litigation.

200 The relevant power in the present case for the Court to award costs in the proceedings below, was to be found in s 98(1) of the Civil Procedure Act. The unfettered discretion contained in s 98(1) is subject to rules of court. The phrase “rules of court” is taken to include the UCPR, being the rules made under s 9 of the Civil Procedure Act: s 10(1). Pursuant to UCPR r 42.1, which applies to the Land and Environment in its class 4 jurisdiction, unless the Court otherwise orders, costs follow the event. However, the operation of that rule is qualified by the rules specified in Schedule 2, which includes the Land and Environment Court Rules 2007 (“the LEC Rules”): UCPR, r 1.7. Relevantly for present purposes, r 4.2 of the LEC Rules, governing proceedings in class 4 of the Court’s jurisdiction, provides:

4.2 Proceedings brought in the public interest

201 The manner in which this rule might operate in the present case was not the subject of submissions. However, two matters appear to have been accepted by the parties. First, as her Honour stated, the litigation was brought “in the public interest”: at [18]. Secondly, r 4.2 would operate when the question of costs came to be determined. That was a matter her Honour noted and took into account stating at [44]:

“This [rule] reflects the need to make appropriate costs orders and other procedural orders which do not unduly inhibit public interest cases being brought in this Court. It is important to recognise the impact practice and procedure rules and judicial decisions about these can have on access to justice in this Court, as matters are often concerned with issues of importance to the wider community beyond the interests of the immediate parties to the litigation.”

202 A principled approach to the application of r 4.2 may be found in the judgement of Preston CJ in Caroona (No 3) (above at [29]). Before discussing how the various considerations should apply, his Honour noted at [38] and [39]:

Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2)

Anderson v NSW Minister for Planning (No 2)

Minister for Planning v Walker (No 2)

Sharples v Minister for Local Government (No 2)

Sharples v Minister for Local Government

Hastings Point Progress Association Inc v Tweed Shire Council (No 3)

203 For present purposes, rule 4.2 has the following significant aspects. First, it removes any argument that the bringing of proceedings in the public interest might be an extraneous factor which could not influence an order as to costs: cf Latoudis v Casey [1990] HCA 59; 170 CLR 534 and see Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [31] (Gaudron and Gummow JJ). Secondly, satisfaction of the Court that the proceedings have been brought in the public interest provides an affirmative reason for not making an order against an unsuccessful applicant, and thus qualifies the operation of UCPR r 42.1, which would otherwise be applicable. Thirdly, and consequentially, r 4.2 qualifies any expectation that Delta may have that it would receive its costs if successful. Taken in conjunction with the first factor considered (open standing), the diminution in the expectation of the respondent that it will be entitled to receive its costs if successful is a factor which diminishes the extent to which a maximum costs order will undermine that expectation and hence provides support for the making of such an order. It follows that the public interest nature of the proceedings is directly relevant to the propriety of a maximum costs order.

Application of principles

204 What is required is a consideration of the future of the litigation from the point of view of the defendant, if the proposed order is made and from the point of view of the applicant, if it is not made. Each perspective needs to be addressed separately and the likely consequences balanced.

(a) the defendant’s perspective

205 Delta’s primary basis of objection to the making of the order was that it would lose an expectation of recovering 90% of its party and party costs in the event that it should be successful. It submitted that either no order should be made, or a far greater amount should be allowed.

206 This premise underlying the submission can only be accepted subject to a number of significant qualifications. First, the expectation is based upon an assumption that an order will be made in favour of Delta, if the applicant is unsuccessful. That assumption fails to give weight to r 4.2, which permits the Court to decline to order that an unsuccessful applicant pay the respondent’s costs in public interest litigation.

207 Although her Honour did conclude that “it appears this matter is one of public interest” (at [59]), her Honour stated that a protective costs order should not be lightly made at an early stage in proceedings “given that it is occurring before all the issues are known and the result determined”: at [69].

208 First, if there were, at the stage her Honour considered the application, uncertainty as to the issues in dispute, there must also have been a level of uncertainty about the likely costs which might be recoverable on a party and party basis, and hence the extent of the prejudice Delta feared.

209 Secondly, I do not share the concern that litigation cannot readily be characterised as being in the public interest at an early stage in the proceedings. Her Honour accepted that the Society had acted responsibly in bringing the proceedings and that it had a reasonably arguable case. It is apparent that the proceedings were brought to prevent or limit alleged pollution of the Coxs River. The river is an important watercourse, feeding into Sydney’s water supply. The public interest in preventing or limiting pollution in that body of water is readily apparent. The proceedings would not lose their character as public interest litigation because the Court might ultimately not be satisfied that the water was being polluted, nor that there was any imminent threat thereof.

210 Her Honour also thought that the plaintiff could be said to have an interest in the outcome of the proceedings “because the members of the Society are mostly residents of the area where the offence is alleged to have been committed”: also at [40].

211 There was no basis in the evidence to conclude that any member of the Society had an interest sufficient to confer on him or her legal standing to bring proceedings according to the ordinary rules. In any event, the interests of the members were not the same as the interests of the Society. It is not necessary for present purposes to determine whether a party having a sufficient private interest to accord it standing in public law proceedings would deprive litigation which was otherwise pursued in the public interest of the character of public interest litigation. Arguably, one would assess the dominant interests involved.

212 The primary judge was somewhat ambivalent in her finding that this was public interest litigation. She said that the proceedings are “not clearly in the public interest”, because the “whole of the catchment is not affected”: at [40]. However, the degree of confidence the Court has in its characterisation of the proceedings as public interest litigation is important to its assessment of the likelihood that no costs order would be made in favour of Delta even if it were ultimately successful. Her Honour was correct to characterise the proceedings as public interest litigation; the concern as to the area of catchment affected was not shown to be material on the evidence. A significant qualification of Delta’s expectation of a favourable costs order therefore followed.

213 The respondent to the proceedings is a state-owned corporation, whose principal function is to provide electricity for consumers in the Sydney region. The proper exercise of that function and control of waste products produced in exercising that function, is itself a matter of public interest. This is relevant not only to the characterisation of the litigation, but also to the conduct of Delta, which, it should be assumed, will act as a model litigant. It will therefore limit its costs to those strictly necessary, act co-operatively in seeking to identify the real issues in dispute and take appropriate steps to limit or settle the litigation. It should be assumed that, as with all litigants, it will fulfil its duty to assist the Court to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) and (3).

(b) the applicant’s perspective

214 The protective costs order was sought on the basis, accepted as reasonable by the primary judge, that the Society did not wish to set at risk the whole of its financial viability, despite the importance of the issues raised in the proceedings, having regard to its objects. The amount of the order made reflected, in her Honour’s view, the maximum liability the Society was willing to risk by way of an adverse costs order, in its pursuit of the litigation.

215 Delta complained that her Honour had failed to consider the possibility that the Society might be able to raise additional funds from its members. However, that proposition involved a factual element which might have been pursued in cross-examination of the President of the Society, but was not. Further, her Honour did not need to accept at face value the evidence given by the President. It was a matter for her to make an assessment of the point at which she believed the risk of an adverse costs order would lead the Society to terminate the proceedings. That involved an evaluative judgment of a kind with which this Court would not willingly interfere. No error or principle has been demonstrated in the approach her Honour took to that specific matter.

(c) the balancing exercise

216 Her Honour accepted that making an order in the terms proposed would adversely impact on the financial interests of Delta. Because the adverse impact assumed that Delta would be successful and would receive a favourable costs order, her Honour’s assessment of the prejudice to Delta was probably overstated. Her Honour also made an assessment, as she was required to do, of the likelihood of the proceedings not being pursued, if an order were not made. That assessment has not been shown to be unreasonable or otherwise flawed. Given her further conclusions that the case was reasonably arguable, that the applicant had acted reasonably in pursuing it, and that it was public interest litigation, there was a sound basis for making a protective costs order in the amount proposed.

217 The amount itself was not unreasonable. If the Society had obtained legal aid, Delta would have been limited to recovering an amount of $5,000 from the Legal Aid Commission: Legal Aid Commission Act 1979 (NSW), s 47. Why legal aid is not available is not known. Nevertheless, as illustrated by Woodland, the existence of such a scheme and its consequences if engaged, may be a permissible consideration, even in circumstances where the scheme does not operate.

218 The lack of proportionality between the costs permitted to be recovered and the likely final bill does not carry the weight sought to be placed on it by Delta. As noted above, the principle that any person may bring proceedings to prevent a breach or threatened breach of environmental protection laws will be seriously undermined if some protection against large costs bills is not available. Important public interest disputes are often complex and based on expert evidence. Public-minded citizens may well be able to obtain donations of time and expertise from professional witnesses and lawyers, but will find it less easy to raise funds to meet the costs of the other party.

219 In the past, such litigation was sometimes undertaken by people of no means, rendering it unlikely that a successful respondent which obtained an order for its costs would ever be likely to recover those costs. It is preferable that litigation be conducted by responsible entities and that the final arrangements with respect to recovery be transparent.

Conclusion

220 In the circumstances, I can see no error of a kind unfavourable to Delta, in the approach adopted by her Honour. Nor is the order made unreasonable in amount. I would dismiss the appeal and order Delta to pay the Society’s costs in this Court.

221 The orders sought by Delta did not address her Honour’s refusal to grant security for costs.

222 MACFARLAN JA: I agree with the judgment of Basten JA.

223 I add the following comments upon the matter that is treated by Beazley JA in her judgment as of particular significance (see [164] – [167] above). That is the relationship between the amount of costs the subject of the order made at first instance and the costs likely to be incurred by the appellant in the proceedings. First I emphasise my agreement with the comments of Basten JA on that issue (see [218] – [219] above). Secondly, my view is that it is in any event apparent from [67] of the judgment of the primary judge that in considering whether, and determining that, a maximum costs order should be made in a particular amount, the estimate in evidence of the costs likely to be incurred by the appellant was at the forefront of her Honour’s mind. In those circumstances it cannot be said that her Honour failed to have regard to the relevant matter.

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Citations

Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 263

Most Recent Citation

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CITATION:	Delta Electricity v Blue Mountains Conservation Society Inc [2010] NSWCA 263
HEARING DATE(S):	16 March 2010
JUDGMENT DATE:	18 October 2010
JUDGMENT OF:	Beazley JA at 1; Basten JA at 169; Macfarlan JA at 222
DECISION:	The appeal is dismissed; The appellant is to pay the respondent's costs of the appeal.
CATCHWORDS:	COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – appeal against decision to order maximum costs - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – discretion to order maximum costs - interrelationship with the Civil Procedure Act 2005, ss 56-60 - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – proportionality – whether maximum costs order should be proportionate to the estimated costs of the proceedings - PROCEEDINGS – interlocutory proceedings – determination of whether proceedings are taken in the public interest - PROCEEDINGS – interlocutory proceedings – whether proceeding can be characterised as being in the public interest at an interlocutory stage - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – relevance of public interest nature of proceedings in assessment of maximum costs – impact of Land and Environment Court Rules 2007, r 4.2 on a party’s cost expectations - COSTS – appeal – Uniform Civil Procedure Rules 2005, r 42.4 – maximum costs order – need to balance discretion to order maximum costs with overriding statutory purpose of the Civil Procedure Act 2005 and Uniform Civil Procedure Rules 2005 - WORDS & PHRASES – “the public interest”
LEGISLATION CITED:	Civil Procedure Act 2005 Civil Procedure Rules (UK) Corporations Act 2001 (Cth) Environmental Planning and Assessment Act 1979 Federal Court Rules Freedom of Information Act 1989 Land and Environment Court Act 1979 Land and Environment Court Rules 2007 Legal Aid Commission Act 1979 Protection of the Environment Operations Act 1997 Supreme Court Act 1970 Uniform Civil Procedure Rules 2005
CATEGORY:	Principal judgment
CASES CITED:	Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources [2009] NSWLEC 165; (2009) 170 LGERA 22 Corcoran v Virgin Blue Airlines Proprietary Limited [2008] FCA 864 Dibb v Avco Financial Services Limited [2000] FCA 1785 Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434; (2004) 136 LGERA 365 Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372 Hanisch v Strive Pty Limited (1997) 74 FCR 384 Hammersmith and Fulham London BC, ex parte Council for the protection of rural England London Branch [2000] Env LR 544 House v The King [1936] HCA 40; (1936) 55 CLR 499 Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited [2009] HCA 43 Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534 Mahar v Rogers Cablesystems Ltd (1995) 25 OR (3d) 690 Maunchest Pty Limited v Bickford (Federal Court of Australia, 7 July 1993, unreported) McDonald v Horn [1995] 1 All ER 961, [1995] ICR 685 Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32; 54 NSWLR 82 Minister for Planning v Walker (No 2) [2008] NSWCA 334 Muller v Human Rights and Equal Opportunity Commission and Anor (Federal Court of Australia, 17 July 1997, unreported) Nadia Eweida v British Airways PLC [2009] EWCA Civ 1025 Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 R (on the application of Corner House Research) v The Secretary of State for Trade and Industry [2005] 4 All ER 1 R v Lord Chancellor, Ex Parte Child Poverty Action Group [1998] 2 All ER 755 Re Gilbert (1946) NSW SR 318 Sacks v Permanent Trustee Australia Limited (1993) 45 FCR 509; (1993) 118 ALR 265 Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor [2005] NSWSC 1003; 65 NSWLR 268 Singer v Berghouse [1994] HCA 40; 181 CLR 201 South Melbourne City Council v Hallam [No 2] (1994) 83 LGERA 307 Woodlands v Permanent Trustee Co Limited; Bass v Permanent Trustee Co Limited; Conca Permanent Trustee Co Limited (1995) 58 FCR 139
PARTIES:	Delta Electricity (Appellant) Blue Mountains Conservation Society Inc (Respondent)
FILE NUMBER(S):	CA 2009/298528
COUNSEL:	B Coles QC; H Irish (Appellant) TG Howard (Respondent)
SOLICITORS:	Middletons (Appellant) Environmental Defenders Office (Respondent)
LOWER COURT JURISDICTION:	Land & Environment Court
LOWER COURT FILE NUMBER(S):	LEC 40358/2009
LOWER COURT JUDICIAL OFFICER:	Pain J
LOWER COURT DATE OF DECISION:	9 September 2009
LOWER COURT MEDIUM NEUTRAL CITATION:	Blue Mountains Conservation Society Inc v Delta Electricity [2009] NSWLEC 150