Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd v Environment Protection Authority of NSW, Sydney Water Corporation and Douglas and Hilary Hutchinson (No 2)

[2011] NSWLEC 205

Land and Environment Court

New South Wales

Medium Neutral Citation:

Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd v Environment Protection Authority of NSW, Sydney Water Corporation and Douglas and Hilary Hutchinson (No 2) [2011] NSWLEC 205

Hearing dates:

25 October 2011

Decision date:

16 November 2011

Jurisdiction:

Class 1

Before:

Preston CJ

Decision:

1. The applications of the first applicant and of the second respondent for an order for costs of the proceedings are each dismissed.

2. Each of the first applicant and the second respondent is to pay their own costs of the respective applications for costs.

3. The exhibits may be returned.

Catchwords:

COSTS: appeal by polluters against management order to remediate contaminated land - joinder of neighbouring, affected landowners - management order made by court in different terms - both polluters and neighbouring landowners partially successful - a polluter and a neighbouring landowner apply for costs of proceedings - no order for costs unless fair and reasonable - neither polluter nor neighbouring landowner established circumstances making costs order fair and reasonable - no unreasonable conduct leading up to commencement or in conduct of the proceedings - proceedings not brought for improper purpose - no order for costs made

Legislation Cited:

Contaminated Land Management Act 1997 s 14
Protection of the Environment Operations Act 1997
Land and Environment Court Rules 2007
Pt 3 r 3.7(2)
Uniform Civil Procedure Rules 2005 Pt 1 r 1.5(2) and Sch 1, Pt 42 r 42.1

Cases Cited:

Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd v Environment Protection Authority of NSW, Sydney Water Corporation and Douglas and Hilary Hutchinson [2010] NSWLEC 89

Category:

Costs

Parties:

Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd (Applicants)
Environment Protection Authority of NSW (First Respondent)
Sydney Water Corporation (Second Respondent)
Douglas and Hilary Hutchinson (Third and Fourth Respondents)

Representation:

Mr D M Wilson (barrister)
(First Applicant)
Mr C H Withers (barrister)
(Second Respondent)
Henry Davis York (First Applicant)
Clayton Utz (Second Respondent)

File Number(s):

10446 of 2010

Judgment

1. Two of the parties in a merits review appeal in Class 1 of the Court's jurisdiction each seek an order for costs against the other.

1. The appeal was by the owner (Jeffman Pty Ltd) and the occupier (Lawrence Dry Cleaners Pty Ltd) of an industrial site at Waterloo on which a dry cleaning business had been and was still being conducted. Chemical solvents used in the dry cleaning business escaped and contaminated the soil and groundwater beneath the dry cleaning site (the Source Site) and had migrated and are continuing to migrate on to adjoining lands.

1. The Environment Protection Authority ("EPA") issued a management order under s 14 of the Contaminated Land Management Act 1997 to the owner and occupier to take specified action, including to prevent migration of contaminated groundwater to adjoining land and to reduce contamination in the groundwater, other than at the Source Site.

1. Jeffman and Lawrence Dry Cleaners were dissatisfied with the terms of the management order and appealed to this Court under s 61 of the Contaminated Land Management Act. Adjoining owners whose land has been contaminated by migrating contaminated groundwater, including Sydney Water Corporation applied to be and were joined by the Court as respondents to the appeal.

1. I determined that, in light of the evidence adduced at the hearing, the EPA's management order should be replaced by a management order in significantly different terms to that originally issued by the EPA. Accordingly, I upheld the appeal, revoked the EPA's management order and made a new management order. I reserved the question of costs at the request of the parties: Jeffman Pty Ltd and Lawrence Dry Cleaners Pty Ltd v Environment Protection Authority of NSW, Sydney Water Corporation and Douglas and Hilary Hutchinson [2010] NSWLEC 89.

1. One of the applicants, Jeffman, and one of the respondents, Sydney Water, have each applied for an order for costs in their favour. The other applicant, Lawrence Dry Cleaners, is in liquidation and the liquidator wrote to the Court explaining its decision not to appear on the respective applications for costs. The first respondent, the EPA, did not seek an order for costs and no order for costs was sought against it. The third and fourth respondents did not seek an order for costs and no order for costs was sought against them.

1. The proceedings are in Class 1 of the Court's jurisdiction. The Land and Environment Court Rules 2007 have made special provision for orders for costs in Class 1 proceedings (Pt 3 r 3.7). These rules displace the rules dealing with costs of proceedings in the Uniform Civil Procedure Rules 2005 (see Pt 1 r 1.5(2) and Sch 1 making not applicable the usual order that costs follow the event in Pt 42 r 42.1). The special costs rule for proceedings in Class 1 of the Court's jurisdiction is that:

"(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances."

1. Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include those set out in rule 3.7(3). Jeffman relied on the circumstances in paras (c), (d), (e) and (f), while Sydney Water relied on the circumstance in (c). These circumstances are:

"(c) that a party has acted unreasonably in circumstances leading up to the commencement of the proceedings,

(d) that a party has acted unreasonably in the conduct of the proceedings,

(e) that a party has commenced or defended the proceedings for an improper purpose,

(f) that a party has commenced or continued a claim in the proceedings, or maintained a defence to the proceedings, where:

(i) the claim or defence (as appropriate) did not have reasonable prospects of success, or

(ii) to commence or continue the claim, or to maintain the defence, was otherwise unreasonable."

1. Both parties relied on affidavit and documentary evidence of correspondence and communications between the parties and of the cost of legal and expert fees. Both parties helpfully prepared written submissions, both in chief and in reply. I have considered the evidence and submissions.

1. Jeffman's arguments in support of a costs order were basically fivefold:

• the result (or event) of the proceedings was in favour of Jeffman and against Sydney Water (paras 3.17, 5.2 - 5.4 of the first applicant's outline of submission on the question of costs ("FAS") and para 1.4(c) of the first applicant's outline of submissions in reply ("FARS"));
• Sydney Water was an intervener in the proceedings of its own volition (para 4.1(a) of FAS and para 1.4(a) of FARS) and in circumstances where it was unnecessary to intervene because the EPA would have adequately represented all affected persons' interests and the public interest (para 4.1(b) - (d) of FAS and para 1.4(e) of FARS));
• Sydney Water's intervention and conduct in the proceedings increased the time, complexity, evidence and costs of the hearing (paras 4.1(g) - (j), 4.3 and 4.5 of FAS and para 1.4(d) - (g) of FARS);
• Sydney Water's intervention increased the time and complexity in costs of discovery and inspection (para 4.1(k) of FAS); and
• Sydney Water's intervention and conduct in the proceedings was for an extraneous purpose, being to improve its position in ancillary proceedings for nuisance and for breach of the Protection of the Environment Operations Act 1997 (paras 3.7 - 3.10 and 4.2 of FAS and para 1.4(f) and (h) of FARS).

1. Sydney Water's main argument in support of a costs order in its favour was that Jeffman and Lawrence Dry Cleaners had acted unreasonably in the circumstances leading up to the commencement of the proceedings, in that they:

• effectively invited the litigation (paras 14 and 15 of the second respondent's outline of submissions in support of costs orders ("SRS"));
• delayed taking effective steps to remediate the Source Site and Sydney Water's land for 7 years prior to the proceedings being commenced (para 16 of SRS); and
• sought, through the appeal against the EPA's management order, to extend the "open-ended" and "best endeavours" approach that had already resulted in the 7 year delay (para 16 of SRS).

1. Sydney Water submitted that its participation in the hearing: exposed the history in delay and the deficiencies in the testing of Enhanced In Situ Bioremediation ("EISB"); exposed the unsatisfactory situation that had developed between the applicants and the site auditor; and enabled the Court to make an informed decision based on a complete evidentiary record, as to the appropriate terms of the management order (paras 17 - 20 as well as paras 2 - 5, 6 - 7 of SRS).

1. Sydney Water responded to Jeffman's argument that the result of the proceedings was in favour of Jeffman and to the criticisms of the conduct of Sydney Water. Sydney Water submitted:

• its endeavours, prior to the proceedings being commenced, to encourage remediation action and to participate in discussions between the EPA and Jeffman and Lawrence Dry Cleaners, including as to the EPA's management order, were rebuffed and to little or no avail (para 2 of the second respondent's outline of reply submissions ("SRRS");
• Jeffman and Lawrence Dry Cleaners sought for Sydney Water's proceedings for nuisance and breach of the Protection of the Environment Operations Act to be stayed pending determination of their appeal against the EPA's management order on the basis that the orders made by the Court in their appeal would determine the means and the manner by which the Source Site and Sydney Water site would be remediated, thereby rebutting Jeffman's extraneous purpose allegation (paras 4 - 7 of SRRS);
• the Court's management order was substantially different to the EPA's management order and the management order originally contended for by the applicants when they commenced their appeal, the terms of the Court's management order were substantially influenced by the evidence and arguments of Sydney Water, and hence Jeffman's attempt to portray itself as the winner of the proceedings is unavailing (paras 8 - 14 of SRRS); and
• Sydney Water's intervention and conduct in the proceedings was justifiable and reasonable, and beneficially influenced the findings and conclusions of the Court and the terms of the Court's management order (para 15 of SRRS).

1. I have determined that neither party has established a case that it would be fair and reasonable to make an order for the payment of costs in the circumstances.

1. Jeffman's reliance on the result of the proceedings is not persuasive. Rule 3.7(2) of the Land and Environment Court Rules departs from the usual order in r 42.1 of the Uniform Civil Procedure Rules that costs follow the event. Hence, the fact that the event favoured Jeffman, in the sense that Jeffman's appeal was upheld and the terms of the Court's management order permitted the use of EISB as the applicants had argued, does not in itself make it fair and reasonable to order costs. Furthermore, as Sydney Water rightly points out and as the principal judgment explains, the terms of the Court's management order were substantially different to the terms sought by Jeffman and Lawrence Dry Cleaners and were substantially influenced by the evidence and arguments of Sydney Water. The event was not wholly or substantially in favour of Jeffman.

1. Sydney Water's intervention in the proceedings was justifiable. As I found in the judgment (see for example para 91), Jeffman and Lawrence Dry Cleaners had delayed in taking real and effective action to remediate the contaminated Source Site and groundwater plume for 7 years. The EPA had allowed this unacceptable situation to persist, only forcing action in the end by issuing a management order. The terms of the EPA's management order I found, on the basis of the evidence and arguments at the hearing, to be unsatisfactory and unsuitable. By their appeal, Jeffman and Lawrence Dry Cleaners sought to introduce even more flexibility to the EPA's management order, to remove mandatory terms and to lengthen timeframes. After Sydney Water's intervention, the applicants' and the EPA's positions were refined. But for Sydney Water's intervention, the Court would not have had the benefit of the evidence and arguments, and would not have been in a position to make the management order in the terms that it did.

1. Indeed, as Jeffman pointed out in their submissions on costs (see, for example, para 4.1(h) of FAS), at one point prior to the hearing, the applicants and the EPA had reached agreement as to the terms of a revised management order and, but for Sydney Water having been joined as a respondent and not agreeing, the appeal would have been settled. The agreed terms were substantially different to those of the Court's management order. Hence, the result in the proceedings were substantially due to Sydney Water's intervention and conduct, in terms of its evidence and arguments, in the proceedings.

1. I do not agree with Jeffman's submission that the EPA would have adequately represented the interests of affected landowners, including Sydney Water, in the proceedings. The permitting of a 7 year delay in taking real and effective action to remediate the contaminated groundwater plume; the non inclusion and non involvement of affected landowners in settling the appropriate remediation action; the terms of the EPA's management order and the terms of the revised management order on which the EPA was prepared to settle with the applicants, both of which the Court found to be unsatisfactory and unsuitable; the limited evidence called by the EPA and the lack of challenge to the applicants' evidence, all indicate that the EPA would not have adequately represented the affected landowners' interests in the proceedings.

1. Sydney Water's intervention did increase the time, complexity, evidence and costs of the proceedings, but these were consequences of Sydney Water's justifiable intervention in the proceedings. Sydney Water's original case was, put simply: that the polluters had already had sufficient time and should be required to remediate the contaminated Source Site and adjoining lands within a reasonable period of time; that the remediation technology of EISB had not been proven by the applicants' pilot testing to be effective; and that alternative proven remediation techniques should now be used. This was neither an unreasonable case nor did it have little prospects of success, as submitted by Jeffman.

1. Indeed, until the applicants decided to call Dr Konzuk on EISB, and Dr Konzuk put forward for the first time a proposal on how EISB would be implemented to remediate the contaminated Source Site and groundwater plume and a timetable for doing so, Sydney Water's case may well have been successful. Even with Dr Konzuk's evidence, however, the Court only allowed the applicants one final opportunity to demonstrate that EISB can achieve acceptable remediation standards in a reasonable time frame subject to significant checks and safeguards, including if EISB does not meet an interim standard by a specified time, changing to alternative remediation techniques suggested by Sydney Water. This result was substantially different to that which was originally required by the EPA's management order or for which the applicants originally contended in their appeal. Sydney Water's case, including its evidence and arguments was therefore causative of the applicants changing their case, including to call Dr Konzuk, and of the terms of the Court's management order.

1. Jeffman's argument that it incurred time and costs in inspecting documents produced by Sydney Water in response to the applicants' notice to produce and subpoena to Sydney Water does not establish circumstances justifying an order for costs. The volume of documents produced was a consequence of the wide terms in which the applicants framed the notice to produce and the subpoena. The applicants sought all documents relating to any contamination or historical use or activity on Sydney Water's land, initially, over an unlimited period, but subsequently, over a 50 year period. The width of the inquiry resulted in the production of the voluminous documents. It can hardly be unreasonable conduct for a party to whom a notice to produce or subpoena is served to produce all documents in full compliance.

1. I reject Jeffman's argument that Sydney Water's intervention and conduct in the proceedings was for an extraneous purpose. As the applicants recognised when they commenced their appeal, in suggesting that Sydney Water's other proceedings be stayed, the resolution of the appeal would determine the means and manner of remediation of the contaminated Source Site and adjoining lands. It was, therefore, entirely appropriate for Sydney Water to intervene in the applicants' appeal in order to have an opportunity to be heard as to the means and manner of remediation of the contaminated Source Site and adjoining lands, including Sydney Water's land.

1. Accordingly, I do not consider that Jeffman has established that any of the circumstances in r 3.7(3) apply in this case, or that any other circumstances make it fair and reasonable to order Sydney Water to pay Jeffman's costs of the proceedings.

1. Equally, however, I do not consider Sydney Water has established that any of the circumstances in r 3.7(3), including in (c), apply in this case, or that any other circumstances make it fair and reasonable to order the applicants to pay Sydney Water's costs of the proceedings.

1. First, I do not find that the conduct of the applicants prior to the commencement of the applicants' appeal, which Sydney Water says is unreasonable, is directly causally linked to the costs of Sydney Water in participating in the appeal. It is true that I found, in the principal judgment, that there had been an unacceptable, 7 year delay in the applicants taking real and effective action to remediate the contaminated Source Site and groundwater plume. However, Sydney Water's costs of participating in the proceedings are not a direct result of that delay.

1. The proceedings are an appeal against the EPA's management order requiring, among other things, that the applicants take action to remediate the groundwater plume. That management order was issued late in the 7 year period of delay. Unless and until the EPA issued the management order, the applicants could not commence an appeal against the management order. The applicants did not delay in bringing the appeal - they lodged the appeal within the time period for appeal and diligently prosecuted the appeal. Sydney Water had no entitlement to issue or require the EPA to issue a management order and also had no entitlement to appeal against the EPA's management order. All that Sydney Water could do was await the applicants' election to appeal against the EPA's management order and then apply to be joined to such appeal. Sydney Water's opportunity to participate in the proceedings, and hence any costs it incurred in doing so, was wholly dependent on the applicant's electing to appeal against the management order. Sydney Water availed itself of this opportunity and incurred costs in participating in the proceedings as a result. The election of the applicants to appeal against the EPA's management order was not directly causally linked to the applicant's delay in remediating the contaminated groundwater plume.

1. Hence, the appeal and the costs Sydney Water incurred in intervening in the appeal, are not directly causally related to the applicants' delay in remediating the contaminated groundwater plume.

1. Secondly, the applicants' election to appeal the EPA's management order was not unreasonable and did not invite Sydney Water's intervention in the proceedings. The applicants had concerns as to the terms of the EPA's management order and, in particular, that the terms may have precluded the applicants using EISB as their preferred remediation technique. The amendments to the terms of the EPA's management order the applicants originally proposed were intended to give the applicants the opportunity of using EISB. Ultimately, they were successful in this goal as the Court's management order did allow one final opportunity to prove the efficacy of EISB in remediating the contaminated Source Site and groundwater plume, albeit subject to checks and safeguards.

1. As I have indicated, the applicants' appeal against the EPA's management order provided the opportunity for Sydney Water to apply to intervene in the proceedings. But it is a mischaracterisation to say that the applicants, by lodging their appeal against the EPA's management order, invited Sydney Water's intervention in the proceedings. Sydney Water made its own election to intervene: it was not compelled to do so. It did so to protect and further its own interests. As I have noted earlier, this was justifiable but it cannot be attributed to the applicants' conduct of lodging the appeal. The costs Sydney Water incurred were a result of its election to intervene in the proceedings to protect and further its interest.

1. Thirdly, the fact that the applicants sought through their appeal of the EPA's management order to further extend the "open-ended" and "best endeavours" approach that resulted in the 7 year delay, is not unreasonable conduct in the circumstances leading up to the litigation; it is conduct in the litigation.

1. Furthermore, no doubt Sydney Water's concerns that the applicants might be successful with the concomitant adverse consequences for the timing and effectiveness of remediation of Sydney Water's land, prompted Sydney Water's application to intervene in the proceedings. But this does not make the applicants' appeal or their case put forward in the appeal, unreasonable. In fact, after Sydney Water's invention, the applicants changed their case and accepted the need for greater specificity, certainty and timeliness of remediation. Sydney Water's intervention was partly successful in these respects. But again this does not make the applicants' conduct in putting forward its original case or amending its case, unreasonable.

1. Accordingly, I do not consider it fair and reasonable in the circumstances to order the applicants to pay Sydney Water's costs of the proceedings.

1. The parties agreed that if the Court determines not to uphold either of the parties' applications for costs and instead determines not to make an order for costs, it would also be appropriate not to make an order for costs of the applications for costs.

1. The Court orders:

1.   The applications of the first applicant and of the second respondent for an order for costs of the proceedings are each dismissed.

2.   Each of the first applicant and the second respondent is to pay their own costs of the respective applications for costs.

3.   The exhibits may be returned.

**********

Decision last updated: 16 November 2011