Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 (No. 2)

[2014] NSWSC 117

Supreme Court

New South Wales

Medium Neutral Citation:	Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 (No. 2) [2014] NSWSC 117
Hearing dates:	19 February 2014
Decision date:	25 February 2014
Jurisdiction:	Common Law
Before:	Slattery J
Decision:	Order the plaintiffs to pay the defendants' costs of these proceedings on the ordinary basis.
Catchwords:	COSTS - general rule that costs follow the event - whether uncertainty from the making of the legislative scheme in question in the proceedings may be misconduct relating to the litigation or the circumstances leading up to the litigation sufficient to deprive the successful defendants of their costs - whether defendants' Defence lacked sufficient completeness to deprive the defendants the benefit of an award of costs.
Legislation Cited:	Water Act 1912 (NSW) Water Management Act 2000 (NSW) Uniform Civil Procedure Rules 2005, r 42.1
Cases Cited:	Donald Campbell & Co Ltd v Pollak [1927] AC 732 Green v Minister for Climate Change, Environment and Water [2008] NSWLEC 48 Green v Minister for Climate Change, Environment and Water (No. 2) [2008] NSWLEC 133 Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 [2014] NSWSC 46 Oshlack v Richmond River Council (1998) 193 CLR 72
Category:	Costs
Parties:	Plaintiffs: Hutchins Pastoral Co Pty Ltd (First Plaintiff) Danwillach Pty Ltd (Second Plaintiff) Delta Creek Pty Ltd (Third Plaintiff) Defendants: The Minister administering the Water Management Act 2000 (First Defendant) State of New South Wales (Second Defendant)
Representation:	Plaintffs: M. Zammit Defendant: J. Hutton Plaintiff: Leigh Adams, Leigh Adams Lawyers Defendants: I.V. Knight, Crown Solicitor
File Number(s):	2009/298126
Publication restriction:	No

Judgment

1. This is the Court's costs judgment in these proceedings. The Court's principal judgment, given on 3 February 2014, determined the issue whether the first defendant, the Minister administering the Water Management Act 2000 (""the 2000 Act") correctly calculated the plaintiffs' water access licence rights to sources of ground water in the Lower Murrumbidgee River water management area: Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 [2014] NSWSC 46.

1. In the principal judgment the Court found that the Minister had correctly calculated the plaintiffs' entitlements under the 2000 Act: Hutchins Pastoral Co Pty Ltd v The Minister administering the Water Management Act 2000 [2014] NSWSC 46 at [7]. The parties accepted that the appropriate order to give effect to the Court's reasons in the principal judgment was that the plaintiffs' proceedings be dismissed. That order was subsequently made. At the time of giving the principal judgment the Court invited further submissions from the parties as to costs. The parties took advantage of those directions and lodged written submissions as to costs, which were the subject of short oral argument on 19 February 2014, followed by further written submissions.

1. This second judgment does not repeat the Court's findings in the principal judgment. Both judgments should be read together. Events, matters and things are referred to in both judgments the same way.

1. The position taken by the parties on costs may be shortly stated. The defendants contend that they have been successful and should have an order for costs made in their favour on the ordinary basis for the whole proceedings. The usual rule as to costs is that costs follow the event, unless the Court considers some other order ought be made: Uniform Civil Procedure Rules, r 42.1 ("UCPR"). The defendants submit that they were wholly successful in the proceedings and therefore should have their costs on the ordinary basis.

1. The plaintiffs resist that result. The plaintiffs rely upon the Court's UCPR, r 42.1 discretion to make "some other order", acknowledging that they were unsuccessful in the proceedings. They contended that the appropriate order should be that each party bear its own costs, or in the alternative that each party should bear its own costs up until January 2013, shortly before the February 2013 hearing. First, the plaintiffs argued that the 2003 Plan was so uncertain that it was "inevitable that litigation would result". Secondly, the plaintiffs argued that the "majority" of the submissions the defendants made relating to the 2004 Regulation, which submissions the Court accepted, were not pleaded in their Defence and were not apparent to the plaintiffs until the defendants served their submissions in January 2013, so the defendants should not have an order for their costs before that time. These reasons deal with each of these arguments in turn.

1. In the result, the Court is not persuaded by the plaintiffs' arguments and orders that the plaintiffs should pay the defendants' costs of the proceedings on the ordinary basis. No order for indemnity costs was applied for or made.

Uncertainty of the 2003 Plan

1. The plaintiffs first argue on costs that the 2003 Plan did not provide the necessary certainty for determining the plaintiffs' entitlement under the formula in clauses 25C and 25D, particularly in the circumstances that faced the plaintiffs where there were different activation dates for each of their bores.

1. The plaintiffs argued that: (1) although the 2003 Plan, Schedule 4 set out general rules in relation to the calculation of the conversion from entitlements under the 1912 Act to the corresponding share component under the 2000 Act WAL and SWAL, those rules were not sufficiently precise to overcome the uncertainty in the calculations for multiple bores in the 2003 Plan; and, (2) even r 10 in Schedule 4 was insufficient to overcome this imprecision, because the words "amalgamated" and "amalgamation" are nowhere defined in the 2003 Plan.

1. The plaintiffs submit that the 2003 Plan, a document of critical importance in the legislative scheme, and the public document on which the parties should have been expected to rely, lacked the necessary precision to allow the plaintiffs to calculate their entitlement under the cl 25C formula. Relying upon statements of the High Court in Oshlack v Richmond River Council (1998) 193 CLR 72; [1998] HCA 11 ("Oshlack") at [69], the plaintiffs submit that given this lack of precision "it was inevitable that there would be tension between the competing methodology of the plaintiffs, as against [that of] the defendants, which would have the effect of inviting litigation".

1. In Oshlack the High Court explained the traditional exceptions to the usual order for costs in the following way, at [69]:

"The traditional exceptions to the usual order as to costs focus on the conduct of the successful party which disentitles it to the beneficial exercise of the discretion. In Anglo-Cyprian Trade Agencies Ltd v Paphos Wine Industries Ltd [1951] 1 All ER 873 at 874. Devlin J formulated the relevant principle as follows:

'No doubt the ordinary rule is that, where a plaintiff has been successful, he ought not to be deprived of his costs, or, at any rate, made to pay the costs of the other side, unless he has been guilty of some sort of misconduct.'

'Misconduct' in this context means misconduct relating to the litigation (King & Co v Gillard & Co [1905] 2 Ch 7; Donald Campbell & Co Ltd v Pollak [1927] AC 732 at 812), or in the circumstances leading up to the litigation (Bostock v Ramsey Urban District Council [1900] 2 QB 616). Thus, the court may properly depart from the usual order as to costs when the successful party by its lax conduct effectively invites the litigation (Jones v McKie [1964] 1 WLR 960; [1964] 2 All ER 842; Bostock [1900] 2 QB 616 at 622, 625, 627); unnecessarily protracts the proceedings (Forbes v Samuel [1913] 3 KB 706); succeeds on a point not argued before a lower court (Armstrong v Boulton [1990] VR 215 at 223); prosecutes the matter solely for the purpose of increasing the costs recoverable (Hobbs v Marlowe [1978] AC 16); or obtains relief which the unsuccessful party had already offered in settlement of the dispute (Jenkins v Hope [1896] 1 Ch 278). "

1. The plaintiffs contended that although the Court ultimately rejected the plaintiffs' construction of the term "amalgamated" (see the principal judgment at [118]), and preferred the defendants' construction (principal judgment at [120]), the defendants' successful approach to the construction of the provisions was only first expressed in its Defence filed on 12 August 2011, was not expressed to the plaintiffs before the commencement of the proceedings, and was certainly not expressly provided for in the 2003 Plan itself. As the uncertainty in the 2003 Plan was the defendants' responsibility, the plaintiffs submit that the defendants should not have their costs of the proceedings.

1. But the defendants' answers to these arguments are persuasive. First, a successful party should not ordinarily be deprived of costs, unless that party has been guilty of misconduct "relating to the litigation or the circumstances leading up to the litigation": Oshlack at [69]. It is difficult to see how the making of delegated legislation in the form of a the 2003 Plan is "conduct relating to the litigation or the circumstances leading up to the litigation". The drafting and promulgation of delegated legislation which does not define every term used, and which admits more than one interpretation is common place, is not readily to be characterised as "misconduct" within this principle in Oshlack. This was an ordinary contest about the construction of the wording in statute, where both meanings were maintainable. Drafting legislation or contracts with debatable meaning is hardly to "invite" litigation in the sense which would deprive a party of legal costs. Cases concerning misconduct within this Oshlack principle generally concern deliberate or unreasonable behaviour which either protracts or increases the cost of litigation, whatever its outcome: Oshlack at [69]. No foundation for such conduct has been made out against the Minister.

1. Another related difficulty with the plaintiffs' argument is that although the 2003 Plan was a Minister's plan under the 2000 Act, s 50, the consequences of inadequacy of the plan cannot be sheeted home entirely to the Minister. The intensive process of consultation mandated by the 2000 Act, Part 3, and followed in this case, means that responsibility for any imprecision in the 2003 Plan would also be shared with the local Lower Murrumbidgee Water Management Committee. And the result that was achieved in this case is in part dependent upon the operation of the 2004 Regulation, s 29B, which was the responsibility of Parliament, not the Minister. It seems to me that a finding of relevant "misconduct" attracting this Oshlack principle is not maintainable in these circumstances.

1. Secondly, the 2003 Plan was not ultimately uncertain. All that has occurred in this case is that as a result of a routine, although complex, exercise in statutory interpretation, the meaning of the 2003 Plan has been construed. Nor was any uncertainty in the 2003 Plan, such as failing to define the words "amalgamated" and "amalgamation" in rule 10, sufficiently remarkable that it should justify depriving the successful defendants of their costs on the basis that it "invited litigation", as the plaintiffs allege.

1. Thirdly, to the extent that there is any uncertainty in the word "amalgamated" in Schedule 4. Rule 10, the defendants did clearly plead and submit what they meant by "amalgamated" in the 2003 Plan. The Court simply gave a meaning to "amalgamated" which accorded with the defendants' pleading and submissions: principal judgment at [117].

1. Fourthly, even if the meaning of the word "amalgamated" in the 2003 Plan were debatable in 2003, Jagot J had already decided Green v Minister for Climate Change, Environment and Water [2008] NSWLEC 48 ("Green") over a year before the plaintiffs commenced the present proceedings in 2009. Green concerned a plan for different groundwater sources but, nevertheless, a plan which was relevantly indistinguishable from the 2003 Plan. As a result of Green, the scheme and operation of the 2003 Plan and 2004 Regulation was clear, and much of the uncertainty of which the plaintiffs now complain had been removed: as the principal judgment makes clear, at [114] and [149].

1. In the later costs arguments in Green, Jagot J declined to award costs to the Minister, because in making the plan in that case and refusing to correct an acknowledged error in the plan the Minister "effectively invited the proceedings: Green v Minister for Climate Change, Environment and Water (No. 2) [2008] NSWLEC 133 ("Green - No. 2"). But there was no acknowledged and uncorrected error by the Minister in these proceedings, as there had been in Green - No. 2.

Pleading the 2004 Regulation

1. In the alternative the plaintiffs argue that the basis on which the defendants succeeded in relation to the 2004 Regulation, r 29B(2) was not clearly pleaded in the Defence to the Amended Statement of Claim. The plaintiffs concede on this argument that when the defendants served their written submissions in advance of the hearing on 10 January 2013, the material that had not been clearly pleaded in the Defence was finally brought to the fore. So, this alternative argument involves a concession that costs should follow the event after the service of the defendants' submissions on 10 January 2013.

1. The plaintiffs' argument starts with the Court's conclusions, which involved acceptance of the defendants' arguments in relation to the construction and operation of the 2004 Regulation. Those conclusions were the following:

(a) on 1 October 2006 the effect of Schedule 10, clause 17(2)(a) was that a group of licences is "taken to have been replaced" by a "single aquifer access licence held by all the persons or bodies who held the licences for the quantity of water specified by the linking condition" - principal judgment at [136];

(b) even if the methodology in the 2003 Plan was not applied according to its terms, the plaintiffs' share component are as specified in the 2004 Regulation- principal judgment at [140];

(c) even if the 2003 Plan, clauses 25C and 25D were to have been applied incorrectly to the plaintiffs' licences, the figures listed in the 2004 Regulation, Schedule 4A are decisive, because the 2004 Regulation, r 29B(2) provides that the 1912 Act licences are "taken to have been replaced" by 2000 Act licences with share components specified in 2004 Regulation, Schedule 4A - principal judgment at [142];

(d) clause 29B, Schedule 4A of the 2004 Regulation operated as a kind of deeming provision, declaring or deeming that the methodology of the 2003 Plan produced a set of particular share component volumes as set out in the Schedule - principal judgment at [144];

(e) in the event of any inconsistency, the 2004 Regulation, r29B(2) takes precedence over the formula in the 2003 Plan, clause 25C because of the operation of the 2000 Act, Schedule 9, clause 1(4) - principal judgment at [146]; and

(f) even if the Court was minded to grant the relief sought by the plaintiffs, it does not have a power to do so as the plaintiffs do not challenge the validity of the 2004 Regulation - principal judgment at [147].

1. The plaintiffs' Amended Statement of Claim, in paragraph 13, pleaded that the Minster made an error in applying the 2003 Plan, Appendix 4, rule 10 and clause 25C.

1. The plaintiffs now submit that the defendants failed to answer paragraph 13 so as to highlight the argument that the defendants ultimately relied upon. In their Defence of 12 August 2011 and their Defence to the Amended Statement of Claim of 29 November 2011, the defendants denied the allegations in paragraph 13 of the plaintiffs' Amended Statement of Claim and then pleaded:

(a) that the volume of the share component of the plaintiffs' Water Access Licence ("the WAL") and the Supplementary WAL is, in each case, prescribed by cl 29B(2) of the Regulation and Schedule 4A of the Regulations;

(b) that the volumes pleaded in sub-paragraph (a) above and specified in Schedule 4A of the Regulations are calculated in accordance with the methodologies set out in cls 25C(5) (in respect of the WAL) and 25D(2) (in respect of the Supplementary WAL) of the Water Sharing Plan;

(c) that by cl 6(5) of the Plan, Appendix 4 of the Water Sharing Plan does not form part of the Plan; and

(d) that insofar as the Rules in Appendix 4 of the Water Sharing Plan informed the application of the methodology set out in cls 25C(5) and 25D(2) of the Water Sharing Plan, the volumes pleaded in sub-paragraph (a) above and specified in Schedule 4A of the Regulation are consistent with Appendix 4.

1. The plaintiffs' underlying submission is that the Defence to the Amended Statement of Claim did not clearly plead and identify the matters which the defendants were later to put in submission, and which were accepted in the Court's principal judgment. The plaintiffs submit that as a result the defendants should not have an order for costs in their favour until they had put on their submissions which made their arguments clear.

1. The plaintiffs' alternative submission is not persuasive. First, the defendants' contentions with respect to the 2004 Regulation were comparatively well pleaded. Only some aspects of the argument finally put were not set out in the Defence, as Mr Zammit explained: the role of the 2000 Act, Schedule 10, clause 17; the effect of Schedule 4A to the 2004 Regulation; and the effect of the plaintiffs' lack of challenge to the 2004 Regulation. But Schedule 10, clause 17 was not decisive in the argument on its own, and Green had already set out and decided all the other significant arguments based on the 2004 Regulation.

1. Secondly, exposition of a defendants' argument is not necessary in the defendants' pleading before the defendant can recover costs. All the submissions before trial did on 10 January 2013 was to flesh out the material in the pleading. The substance was already there. There was sufficient in the Defence to put the plaintiffs on notice of the defendants' contentions about the 2004 Regulation.

1. Thirdly, apart from the Defence to the Amended Statement of Claim, other documents the defendants served (such as their Statement of Reasons served on 28 March 2012 pursuant to Practice Note SC CL 5 and the Crown Solicitors' letter to the plaintiffs dated 3 April 2012) had well before January 2013 put the plaintiffs on notice of the detail of the ultimately successful argument, in a manner that was fuller than the Defence. It does not matter that these documents were not themselves pleadings: they explained a complete process of reasoning that was quite consistent with the Defence.

Conclusion and Orders

1. In the result therefore the plaintiffs' costs submissions have been unsuccessful. Therefore the orders of the Court will be:

(1) the plaintiffs pay the defendants' costs of these proceedings on the ordinary basis; and

(2) that exhibits (apart from the Court books) and subpoenaed material may be returned forthwith; any exhibits returned must be retained intact by the party or person that produced the material until the expiry of the time to file an appeal, or until any appeal has been determined.

**********

Decision last updated: 25 February 2014