Environment Victoria v AGL Loy Yang (No 2)
[2023] VSC 86
•28 February 2023
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
JUDICIAL REVIEW AND APPEALS LIST
S ECI 2021 03415
| ENVIRONMENT VICTORIA INC | Plaintiff |
| v | |
| AGL LOY YANG PTY LTD & ORS (according to the attached schedule) | Defendants |
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JUDGE: | Gorton J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | On the papers |
DATE OF RULING: | 28 February 2023 |
CASE MAY BE CITED AS: | Environment Victoria v AGL Loy Yang (No 2) |
MEDIUM NEUTRAL CITATION: | [2023] VSC 86 |
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PRACTICE AND PROCEDURE – Costs – Whether public interest considerations justify departure from usual costs order – Whether litigation is in the public interest – Where the successful litigant is a private company rather than a governmental body – Whether three defendants each entitled to costs – Separate representation by defendants – Duplication – Order for plaintiff to pay defendants one-third of counsel’s costs of trial – Oshlack v Richmond River Council (1998) 193 CLR 72 – Bob BrownFoundation Inc v Commonwealth (No 2) (2021) 286 FCR 160.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr R Merkel KC, Mr R Watters, Mr M Albert and Mr C Lum of counsel | Environmental Justice Australia |
| For the First Defendant | Mr B Lim of counsel | Herbert Smith Freehills |
| For the Second Defendant | Mr M Collins KC and Ms E Latif of counsel | Clayton Utz |
| For the Third Defendant | Mr J Gobbo KC and Ms C van Proctor of counsel | Allens |
| For the Fourth Defendant | Mr J Pizer KC and Ms E Smith of counsel | Victorian Government Solicitor’s Office |
HIS HONOUR:
A.Background
On 21 December 2022, I published reasons for my decision that a proceeding brought by Environment Victoria Inc, the plaintiff, for judicial review of a decision made by the Environment Protection Authority, the fourth defendant, should be dismissed.[1] These reasons deal with the costs of that proceeding.
[1][2022] VSC 814.
The originating motion filed by Environment Victoria Inc named AGL Loy Yang Pty Ltd, Energy Australia Yallourn Pty Ltd, LYB Operations & Maintenance Pty Ltd (the first to third defendants respectively and together, ‘the power companies’) and the Environment Protection Authority as defendants. The Environment Protection Authority filed an affidavit that produced various documents and filed a written submission on the legal issues that arose. It appeared at the hearing and spoke to its written submission. It otherwise adopted the Hardiman position.[2] Pursuant to an arrangement reached between it and Environment Victoria Inc, the Environment Protection Authority does not seek its costs.
[2]R v Australian Broadcasting Tribunal; Ex parte Hardiman (1980) 144 CLR 13.
On 11 February 2022, that is, well prior to the hearing, Environment Victoria Inc applied pursuant to s 65C(2)(d) of the Civil Procedure Act 2010 for a ‘protective costs order’. It filed an affidavit in support of that application in which its solicitor deposed that it had ‘raised and secured in support’ of its proceeding the sum of $555,773 with a view to that sum being used to cover its costs of the proceeding and any costs orders made against it. Some of that was in unenforceable pledges. The affidavit also disclosed that, as at 30 June 2021, Environment Victoria Inc held $2.87M ‘in financial reserves’ that it sought to use for ongoing campaigns rather than on this litigation. On 3 May 2022, an Order was made by consent that:[3]
(a) the maximum costs as between Environment Victoria Inc and the power companies collectively that may be recovered in this proceeding is $441,000; and
(b) the maximum costs as between Environment Victoria Inc and any one of the power companies individually that may be recovered in this proceeding is $147,000.
[3]There were some exceptions that are not relevant.
There is no suggestion that Environment Victoria Inc had agreed not to seek its costs from the power companies if its claim were to succeed either before me or on appeal. I assume that it would have sought its costs if it had succeeded, and will do so if it were to succeed in an appeal. The effect of this Order, though, would be to limit the costs it could recover for the proceeding to $441,000.
Each power company seeks its costs (subject to the limits referred to) on the simple basis that it succeeded in the litigation and that costs should follow the event.
B. Should Environment Victoria Inc be ordered to pay costs at all?
Environment Victoria Inc submitted, by reference to the principles in Oshlack v Richmond River Council[4] (‘Oshlack’) and Bob Brown Foundation Inc v Commonwealth (No 2)[5] (‘Bob Brown’), that it should not be ordered to pay any of the power companies’ costs.
[4](1998) 193 CLR 72.
[5](2021) 286 FCR 160.
In Oshlack, Mr Oshlack brought proceedings in the Land and Environment Court of New South Wales against a local council and a land developer in which he sought to impugn the consent granted by the council for a development. Mr Oshlack did not have a financial interest in the outcome but was motivated by a desire to preserve the habitat of endangered fauna (koalas) on and around the development site. The proceeding failed in part because Mr Oshlack failed to persuade the Court that the council’s conclusion that the development was unlikely significantly to affect the environment of the endangered fauna was not open. The trial judge ordered that there be no order as to costs. The council appealed, but the developer did not. The Court of Appeal of the Supreme Court of New South Wales allowed the appeal and ordered that Mr Oshlack pay the council’s costs. The High Court (in a split decision) reinstated the trial judge’s order. The High Court emphasised that the discretion as to costs is unconfined save that it must be exercised judicially and not arbitrarily or capriciously or contrary to any legislative intent.[6] It rejected the argument put by the council that the public interest nature of the litigation was an irrelevant consideration, and so concluded that it could not be said that trial judge’s discretion miscarried.[7]
[6](1998) 193 CLR 72, 81 [22] (Gaudron and Gummow JJ), 112-113 [110]-[111], 121-122 [134(4)] (Kirby J).
[7]Ibid 81-82 [23], 84 [31], 88 [40].
In Bob Brown, Bob Brown Foundation Inc sought orders directed at protecting the habitat of the Swift Parrot. Bob Brown Foundation Inc contended that Forestry Tasmania, a body associated with the Tasmanian government, had contravened the Environment Protection and Biodiversity Conservation Act 1999 (Cth). The proceeding raised issues about the interconnected workings of the Tasmanian and Federal governments. A question was reserved for the Full Court of the Federal Court. The Court rejected Bob Brown Foundation Inc’s submissions and dismissed the proceeding. The Court nonetheless made no order as to costs. It treated the matter as ‘public interest litigation’, and accepted that Bob Brown Foundation Inc’s intention was to ensure compliance with relevant provisions of the legislation and that it was not motivated by ‘personal gain or advantage’.
There are differences between the situation that confronted the Courts in Oshlack and Bob Brown and this case:
(a) First, the majority’s reasoning in Oshlack was directed at the situation as it concerned the council, not the developer. The council was not the natural contradictor. Gaudron and Gummow JJ observed that ‘it might have been expected that the Council would submit to such order as the Court might make and that it would not become a protagonist’[8]. Kirby J also noted and treated as relevant that the council could have simply agreed to submit to the orders of the Court.[9] In that way, the council could have avoided incurring the costs that it later sought from Mr Oshlack. By contrast, this case does not concern the costs of a public entity that might have taken the Hardiman position, such as the Environment Protection Authority. In this case, private businesses were the natural contradictors.
(b) Second, and relatedly, the principal contradictors in Bob Brown were the Tasmanian and Federal governments. It can make sense to require a party to bear their own costs of ‘public interest litigation’ when that party is a governmental body, because the costs are then directly borne by the ‘public’ or, in the case of a local council, a section of it. To require a private company to bear its costs of ‘public interest litigation’ brought against it would be to impose an immediate burden on private persons that by the underlying theory should be borne by the public.
(c) Third, in both Oshlack and Bob Brown the claimants were proceeding under specific statutory standing regimes that could be seen as legislative invitations for such persons to bring such proceedings, and this fact was significant in the reasoning process that led to the costs orders that were made. The proceeding brought by Mr Oshlack was brought pursuant to a specific power in the Environment Planning and Assessment Act 1979 (NSW) that invited proceedings by ‘any person’ regardless of whether or not they met the common law test for standing. In that way, the legislation invited ‘a new species of litigation’[10] to be brought in the public interest. Gaudron and Gummow JJ rejected the council’s argument that this extension did not indicate any legislative intention to vary the ordinary rule that a losing party will be ordered to pay the costs of a successful party.[11] They likened the claim brought by Mr Oshlack to an unsuccessful claim brought by an Attorney-General, the costs of which would be borne by the public, in support of a conclusion that the costs might be borne by the public in the form of the council.[12] Kirby J suggested that the particular statute revealed a ‘parliamentary conclusion’ that it was in the public interest that environmental activists be able to bring proceedings under that legislation and that this would be an ‘empty gesture’ if the public character of such proceedings could not be relevant on the issue of costs.[13] He concluded that the ‘special, and in some ways peculiar’ legislation meant that the Court was in some way ‘administering social justice’ and altered to some extent the ‘assumptions’ upon which litigation took place.[14] Similarly, in Bob Brown, Bob Brown Foundation Inc proceeded as an ‘interested person’ under a ‘broad standing provision’ in the Environment Protection and Biodiversity Conservation Act 1999 (Cth).The Court noted that the ‘significance’ that the proceeding was brought under such a provision was ‘emphasised’ in Oshlack.[15] By way of contrast, this proceeding was brought, in the ordinary way, under Order 56 of the Supreme Court (General Civil Procedure) Rules 2015.
[8]Ibid 77-78 [12]. See also 90 [46].
[9]Ibid 126 [141].
[10]Ibid 89 [45].
[11]Ibid 90-91 [47]-[48].
[12]Ibid 90-91 [48].
[13]Ibid 113-114 [114].
[14]Ibid 114-115 [117]-[118].
[15](2021) 286 FCR 160, 162 [9] (Griffiths, Moshinsky and SC Derrington JJ).
These cases establish that the public nature of any litigation is a factor to which the Court may have regard when exercising its discretion as to costs and that there will be cases where the public benefit arising from, or anticipated by the bringing of, the proceeding justifies a losing claimant not being ordered to pay the costs of a successful defendant. This conclusion will be more readily drawn if the claimant has no immediate stake in the outcome, which will often be the case if it is a not-for-profit charitable organisation. But they do not establish that the fact that a proceeding concerns matters of public interest, of itself, alters the general rule that costs should follow the event. As the Court said in Bob Brown, quoting Kirby J in Oshlack:
While the legitimate pursuit of a public interest is a legitimate matter to take into account, “litigants espousing the public interest are not thereby granted an immunity from costs or a ‘free kick’ in litigation”.[16]
[16]Ibid 165 [16(d)], quoting from Oshlack v Richmond River Council (1998) 193 CLR 72, 123 (Kirby J).
It is, obviously, relevant that the power companies did not make the decision that was the subject of the application for review.[17]
[17]Cf, in another context, Transport Accident Commission v O’Reilly [1999] 2 VR 436, where the Court held that costs ought not to follow the event where a claimant under a statutory regime operated by the Transport Accident Commission unsuccessfully sought a review of a decision made by it.
Moreover, determining whether litigation is in the ‘public interest’ is not always straightforward. In one sense, any litigation that results in a clarification of legal principle benefits the public. The more ‘public’ the application of legal principle, the more the ‘public interest’ is involved. The proper interpretation of a far-reaching statute is an obvious example. But it is the nature of issues that fall for determination in the litigation that must govern whether the litigation is in the ‘public interest’, rather than the policy objectives pursued by a particular claimant. The emission of greenhouse gases, or other pollutants, associated with the generation of electricity is a matter of some controversy in the community. Many people in the community feel strongly that there should be a significant reduction in the emission of greenhouse gases by the power companies. This was demonstrated by the number of persons who participated in the review process seeking to have greenhouse gases emissions restricted. Others may feel that any reduction in the emissions from these power companies may not sufficiently alter the risks of climate change globally to warrant any associated increase in the cost of electricity and the impact that increased power prices (at least in the short term) might have on the community. It would not be appropriate, save perhaps for exceptional circumstances, for the Court to exercise its discretion as to costs on the basis that one side or the other was pursuing a policy objective that the Court felt would, if achieved, advance the Court’s view of the public interest. The dangers of the Court allowing extra-judicial views on contested issues of policy to govern costs are obvious, and the administration of justice would fall into disrepute were that to happen.[18] For this reason, it would not be appropriate for me to exercise the discretion as to costs on the basis that Environment Victoria Inc’s objectives of having the Environment Protection Authority impose restrictions on the emission of greenhouse gases by the power companies or the proposed constructions put forward by them were ‘in the public interest’ and that the power companies’ contentions to the contrary were not ‘in the public interest’, or vice versa.
[18]The recent case of Australian Brumby Alliance Inc v Parks Victoria [2023] VSC 46 is a good example. In that case, Australian Brumby Alliance Inc unsuccessfully sought to prevent the culling of wild horses in the Alpine National Park by Parks Victoria. Australian Brumby Alliance Inc sought to avoid a costs order against it by arguing that the proceeding was not brought to vindicate any private interests and that it was public interest litigation. As O’Meara J noted, although Australian Brumby Alliance Inc believed that acting in defence of the brumbies was in the public interest, there was a ‘contrary perspective’ that could ‘sponsor an equally passionate counterclaim’ (at [13]).
That said, determining what the Environment Protection Authority is required to have regard to when deciding what conditions to impose on a licence to operate is a matter of broad public interest, and this is a matter to which I should, and do, have regard. Similarly, I accept, and have regard to, the fact that Environment Victoria Inc had nothing personally to gain from the litigation save for the promotion of its motive of ‘seeking to uphold environmental law’, and that the proceeding concerned the interpretation of statutes that were designed to further the public interest. I also accept that the issues litigated were not straightforward.
Notwithstanding these matters, I have decided that the ordinary rule that costs should follow the event should still apply in the circumstances of this case, for the following reasons:
(a) Environment Victoria Inc commenced this proceeding, thereby causing the power companies to incur legal costs, and then failed to obtain the relief it sought. Costs do not operate by way of punishment. Rather, the reality is that costs have been incurred, and they have to be borne by one side or the other. There is no principle that the costs should be borne by the party who can most afford them. Instead, the ordinary position is that they should be borne by the party who failed in the proceeding[19], which is, in this case, Environment Victoria Inc;
[19]See, eg, Latoudis v Casey (1990) 170 CLR 534, 543 (Mason CJ), 566-7 (McHugh J).
(b) The power companies are private organisations and, unlike in Oshlack or Bob Brown Foundation Inc, are not governmental organisations who might be expected to shoulder costs associated with litigation that involved public interests. As noted above, the Environment Protection Authority, which presumably incurred significant costs, is not seeking an order that its costs be paid by Environment Victoria Inc. Similarly, this proceeding, unlike with Oshlack or Bob Brown Foundation, was not brought pursuant to a particular statutory process designed to encourage such litigation;
(c) Environment Victoria Inc raised funds for the purpose of this litigation including for the purpose of being in a position to pay costs if it were to fail. These funds were raised from persons who wanted this litigation to be commenced and prosecuted. It then obtained a protective costs order limiting its potential liability to the amount that it had raised, so there is no prospect that a costs order will impose a costs liability on it that exceeds the sums that it has raised to meet that eventuality. I appreciate that some of the funds were raised by pledges and may not be enforceable. I also appreciate that if the funds provided are used to pay costs then they will not be available to be used by Environment Victoria Inc in other ways, and that Environment Victoria Inc’s ability to raise funds in the future may be affected. But there is nothing inherently unjust in making a costs order that results in the application of funds donated or pledged by interested persons for the purpose of paying costs being applied for that purpose; and
(d) A significant part of the case concerned the interpretation of the Environment Protection Act 1970, which has already been repealed and replaced by the Environment Protection Act 2017. Accordingly, many of the issues decided in the case were not of ongoing general public interest.
Environment Victoria Inc submitted that imposing a costs liability on an unsuccessful claimant in cases such as this should be avoided because doing so would have a ‘chilling effect’ on public law litigation. The prospect of having to pay costs if unsuccessful has that effect in any form of litigation. It could equally be said that there is a danger in permitting litigation free of a risk of paying costs if unsuccessful, as it would be giving claimants a ‘free kick’ at the expense of respondents: if the complainants succeed the respondents have to pay the claimant’s costs as well as their own costs, and if the claimants fail the respondents still have to bear all their own costs. The unfairness of this from the respondent’s perspective is apparent, and is only justified if it is assumed that there is sufficient public benefit in the litigation having been commenced to justify the usual costs order not applying. On analysis, the assertion that a ‘chilling effect’ should be avoided adds little to the argument that costs should not be paid because of the public interest nature of the litigation, and is insufficient reason not to apply the ordinary rule that costs should follow the event at least in the circumstances of this case where Environment Victoria Inc was able to raise the funds to bring the litigation including to pay costs if required.
Accordingly, I will order costs in favour of the power companies.
C. The separate representation by the power companies
Each power company opposed the application for judicial review. Each power company engaged its own solicitors and barristers and filed a separate written submission. Each power company was represented in court at trial by its own solicitors and barristers. Each power company, in substance if not explicitly, adopted at trial the submissions of each other power company on the issues that fell for determination. No power company presented an argument at trial that was contrary to the interests of any of the other power companies.
In these circumstances, I accept Environment Victoria Inc’s submission that there was some duplication of work, and that it would not be just to order Environment Victoria Inc to pay three lots of costs without taking account of the fact that some of the work done was duplicated. I consider it appropriate that I incorporate this concept into the costs order I make, rather than leaving the issue of duplication to a taxing officer. However, an allowance should only apply to the extent that the power companies were not acting reasonably ‘in remaining at arm’s length during the general course of litigation’.[20]
[20]Statham v Shephard (No 2) (1974) 23 FLR 244, 246 (Woodward J); Local Democracy Matters Inc v Infrastructure NSW (No 2) [2019] NSWCA 118, [20].
In my assessment, it was reasonable for each of the power companies to have retained their own lawyers and to have obtained their own advice in the course of and conduct of the litigation generally. The relevant duplication was, in my view, limited to the preparation of submissions for and appearances at the trial. That work could have been performed by one set of barristers acting for all of them (as has occurred with the submissions in relation to costs with which I am presently concerned), with each power company otherwise being represented at trial by a separate solicitor. I am not being critical of the power companies for retaining their own barristers to draw submissions and to appear at trial, but I consider that to the extent that by doing so they added to the costs that would have been incurred had this been done by one set of lawyers, the additional costs should be treated as ‘solicitor-client costs’ rather than ‘party-party costs’ or costs ‘on the standard basis’, and should not passed on to Environment Victoria Inc.
One of the power companies engaged a senior junior, rather than two counsel. But to some extent, precision must give way to a broad brush in the ordering of costs.[21] It would be complex, time-consuming and overly expensive for there to be a detailed analysis of each power company’s costs and the extent to which they could have been saved by avoiding duplication by counsel in the preparation of submissions and the presentation of argument at trial. For this reason, I propose simply to order that costs recoverable by each power company be limited to one-third of their counsel’s costs of preparing submissions and appearing at the hearing of the trial of this application.
[21]Major Engineering Pty Ltd v Helios Electroheat Pty Ltd (No 2) [2006] VSCA 114, [5]; David Weiping Chen v Kim Man Chan (No 2) [2009] VSCA 233, [10] (Maxwell P, Redlich JA and Forrest AJA). See also Trailer Trash Franchine Systems v GM Fascia & Gutter [2017] VSCA 293, [64] (Tate and Kyrou JJA).
I do not accept the power companies’ submission that Environment Victoria Inc should have commenced proceedings against only one of them, and that its decision to include each of them as parties means that it should pay all of the costs incurred by each of them. In my view, it was clearly appropriate for Environment Victoria Inc to have added each of the power companies to the proceeding, as each of them had a clear interest in the issues to be determined.
E. Disposition
I propose to make the following orders:
(a) There be judgment for the defendants.
(b) The plaintiff pay the costs of the first to third defendants to be taxed in default of agreement on the standard basis, save that each defendant shall be entitled on any taxation only to one-third of their counsel’s costs of preparing submissions for and appearing at the trial of this proceeding.
(c) There be no order as to the costs of the fourth defendant.
I will record in ‘other matters’ that the costs order is subject to the limits imposed by the Order made by Ierodiaconou AsJ on 3 May 2022.
The costs of the application for costs will be costs in the cause, and, given that there was a submission filed jointly by the power companies, should not be subject to any reduction.
SCHEDULE OF PARTIES
S ECI 2021 03415
| ENVIRONMENT VICTORIA INC | Plaintiff |
| - and - | |
| AGL LOY YANG PTY LTD | First Defendant |
| ENERGYAUSTRALIA YALLOURN PTY LTD | Second Defendant |
| LYB OPERATIONS & MAINTENANCE PTY LTD | Third Defendant |
| ENVIRONMENT PROTECTION AUTHORITY | Fourth Defendant |
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