O'Keefe v Water Administration Ministerial Corporation (No 2)

[2010] NSWLEC 89

Land and Environment Court

of New South Wales

CITATION:

O'Keefe v Water Administration Ministerial Corporation (No 2) [2010] NSWLEC 89

PARTIES:

FIRST APPLICANT
David Daniel O'Keefe

SECOND APPLICANT
Kathryn Michelle O'Keefe

FIRST RESPONDENT
Water Administration Ministerial Corporation

SECOND RESPONDENT
Peter Bryan Eccleston

THIRD RESPONDENT
Lucy Finette Taylor Eccleston

FILE NUMBER(S):

30531 of 2009

CORAM:

Pepper J

KEY ISSUES:

PRACTICE AND PROCEDURE :- costs in class 3 proceedings - whether fair and reasonable for unsuccessful party to pay costs - whether appeal was an appeal on merits or concerned questions of law - whether unsuccessful party acted unreasonably in conduct of litigation - presumptive rule in r 3.7 not displaced

LEGISLATION CITED:

Civil Procedure Act 2005 ss 11 and 98
Land and Environment Court Act 1979 s 69
Land and Environment Court Rules 1996 Pt 16 r 4(2)
Land and Environment Court Rules 2007 r 3.7(2) and (3)
Uniform Civil Procedure Rules 2005 rr 1.7 and 42.1

CASES CITED:

Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224
Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources (No 3) [2010] NSWLEC 59
Eccleston v O’Keefe [2007] NSWSC 159
Grant v Kiama Municipal Council [2006] NSWLEC 70
Hastings Point Progress Association Inc v Tweed Shire Council (No 3) [2010] NSWCA 39
Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534
Morrison Design v North Sydney Council [2007] NSWLEC 802; (2007) 159 LGERA 361
O’Keefe v Water Administration Ministerial Corporation [2010] NSWLEC 9
Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125

DATES OF HEARING:

3 June 2010

EX TEMPORE JUDGMENT DATE:

3 June 2010

LEGAL REPRESENTATIVES:

APPLICANTS
Ms K Burke
SOLICITORS
McIntosh McPhillamy & Co

FIRST RESPONDENT
N/A

SECOND & THIRD RESPONDENTS
Ms J Needham SC
SOLICITORS
Rickards Whiteley Lawyers

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

PEPPER J

3 June 2010

30531 of 2009 O’Keefe & Anor -v- Water Administration Ministerial Corporation & Ors (No 2)

EX TEMPORE JUDGMENT

Introduction

1 HER HONOUR: This notice of motion concerns whether or not the appellants in Class 3 proceedings, Mr David O’Keefe and Ms Kathryn O’Keefe (together, “the O’Keefes”), should pay the costs of the second and third respondents, Mr Peter Eccleston and Ms Lucy Eccleston (together, “the Ecclestons”). The O’Keefes were unsuccessful in proceedings before Lloyd J (O’Keefe v Water Administration Ministerial Corporation [2010] NSWLEC 9). The first respondent, the Water Administration Ministerial Corporation (“the Corporation”), although an active party in the proceeding before Lloyd J, is not a party to the motion seeking costs.

2 In my view, the appropriate order is that the notice of motion should be dismissed with costs. That is to say, there is to be no order for costs in respect of the proceedings before Lloyd J.

The Power of the Court to Order Costs in Class 3 Proceedings and Applicable Legal Principles in the Exercise of that Power

3 The power of the Court to order costs is contained in s 98 of the Civil Procedure Act 2005. Section 98(1) provides:

98 Courts powers as to costs

(1) Subject to rules of court and to this or any other Act:
(a) costs are in the discretion of the court, and
(b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and
(c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis.

4 The relevant rules of the Court are contained in r 42 of the Uniform Civil Procedure Rules 2005 (“UCPR”). Rule 42.1 provides:

42.1 General rule that costs follow the event

Subject to this Part, if the court makes any order as to costs, the court is to order that the costs follow the event unless it appears to the court that some other order should be made as to the whole or any part of the costs.

5 The Land and Environment Court has adopted specific rules with respect to costs of proceedings in certain classes of its jurisdiction which prevail over r 42.1 of the UCPR to the extent of any inconsistency between them (s 11 of the Civil Procedure Act and r 1.7 and Sch 2 of the UCPR).

6 Rule 3.7(2) and (3) of the Land and Environment Court Rules 2007 (“the Rules”) relevantly provides in respect of proceedings in Class 3 of the Court’s jurisdiction:

3.7 Costs in certain proceedings

(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.

(3) Circumstances in which the Court might consider the making of a costs order to be fair and reasonable include (without limitation) the following:

(a) that the proceedings involve, as a central issue, a question of law, a question of fact or a question of mixed fact and law, and the determination of such question:
(i) in one way was, or was potentially, determinative of the proceedings, and
(ii) was preliminary to, or otherwise has not involved, an evaluation of the merits of any application the subject of the proceedings,
(b) that a party has failed to provide, or has unreasonably delayed in providing, information or documents:
(i) that are required by law to be provided in relation to any application the subject of the proceedings, or
(ii) that are necessary to enable a consent authority to gain a proper understanding of, and give proper consideration to, the application,
(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.

7 The effect of this rule is to create a presumption that there will be no order for costs (Port Stephens Council v Sansom (2007) 156 LGERA 125 at [48] and Morrison Design v North Sydney Council (2007) 159 LGERA 361 at [64]). This presumptive rule is not displaced unless the Court considers that the making of a costs order is fair and reasonable in the circumstances. The onus is on the party seeking to displace the presumptive rule (Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources (No 3) [2010] NSWLEC 59 at [102]).

8 The rationale of the presumptive rule was addressed by Biscoe J in Arden Anglican School v Hornsby Shire Council (2008) 158 LGERA 224, where his Honour said that (at [9]-[10]):

9 In the context of the presumptive rule that there will be no order as to costs in planning appeals, the power to make a costs order is in the broadest of terms, that is, what is “fair and reasonable in the circumstances”. All rational considerations are relevant to the formulation of that judgment. In the end, the question is whether, in the opinion of the Court, they are of sufficient weight to overcome the presumptive rule. Indicative guidelines for the exercise of the discretion are useful in promoting consistent decisions, but are not entitled to presumptive, let alone determinative, weight. These principles were identified in the context of the former Part 16 r 4 by the Court of Appeal in Port Stephens Council v Sansom at [48], [53] and [54] and Thaina Town (On Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150 at [33] and [35]. Those judgments were delivered on the same day by an identically constituted Bench of five judges. Spigelman CJ delivered the leading judgment in each case. The presence of the words “in the particular circumstances of the case” in the old rule influenced his Honour to hold that a general characterisation of proceedings such as “merits review” or “capacity”, cannot be determinative or, indeed, entitled to presumptive weight: Sansom at [60]. In the present case, there was no suggestion that the absence of these words from the new rule bears on the outcome.
10 One of the purposes of the costs follow the event rule in ordinary civil litigation is to encourage the parties to settle their disputes: Sansom at [26]; Thaina at [65]. In contrast, a no discouragement principle underlies the no costs rule in planning appeals, that is, that persons generally should not be discouraged from exercising their rights of appeal via the prospect of an adverse costs order: Sansom at [22]-[23]. This may be rationalised on the bases that a significant purpose of planning appeals is to improve the decision-making process and that those involved are not adversaries in the same sense as adversaries in conventional civil litigation. Spigelman CJ explained this in Sansom at [71]-[74].

9 In Grant v Kiama Municipal Council [2006] NSWLEC 70 Preston J examined the cases concerning what constitutes fair and reasonable in the context of now repealed Pt 16 r 4(2) of the Land and Environment Court Rules 1996 (“the 1996 Rules”). While care must be taken when considering past costs authorities to distinguish between cases decided under the former s 69 of the Land and Environment Court Act 1979 and Pt 16 r 4(2) of the 1996 Rules, and those decided under the Civil Procedure Act (Hastings Point Progress Association Inc v Tweed Shire Council (No 3) [2010] NSWCA 39 at [22]), in my view, Pt 16 r 4(2) of the 1996 Rules is sufficiently similar in wording to r 3.7(2) that Grant continues to remain instructive. I therefore adopt Preston J’s observations in Grant (at [15]) concerning the non-exhaustive variety of circumstances where the Court has considered that it would be fair and reasonable to make an order for costs.

Factual Background

10 The factual background giving rise to this application is set out in Lloyd J’s decision and is not repeated here (at [1]-[4]).

11 In summary, the Ecclestons own a property which has the benefit of a registered easement for water and electricity supply over part of an adjoining property owned by the O’Keefes. The easement allows the Ecclestons to draw and pump water from a specified dam located on the O’Keefes’ property and to use the water “for stock and domestic supply only”.

12 In earlier and related proceedings before Windeyer J (Eccleston v O’Keefe [2007] NSWSC 159) it was held that, first, a registered easement entitling the Ecclestons to draw water from the dam existed, but second, the easement was unenforceable unless the Ecclestons had a water licence under the Water Act 1912 or some other Act.

13 After leave to appeal was dismissed, the Ecclestons applied to the Corporation, for a licence under s 10 of the Water Act to pump water within the easement from the “dam or unnamed watercourse” on the O’Keefes’ property. After a three day hearing by the Local Land Board in Orange (“the Board”), the Board found in favour of granting the application for a licence for a period of five years.

14 The O’Keefes appealed the findings of the Board to this Court. This involved an examination of the operation of both the Water Act and the Water Management Act 2000.

The Proceedings Before and Decision of Lloyd J on 27 January 2010

15 Lloyd J identified the issues for determination before him as follows (at [11]) (emphasis added):

11 Originally a large number of issues were raised for determination, but during the hearing the issues were refined to the following:


(a) The “work” intended by the Ecclestons is not connected with a river or lake as the definition of a “river” does not include the watercourse that the dam is located on.

(b) The Ecclestons are not “occupiers” within the meaning in s 10 of the WA.

(c) An easement is not a criterion referred to in the legislation as a basis upon which to grant an application.

(d) The Ecclestons have a number of Strahler type streams running through their own property and accordingly they are not landlocked and any criterion associated with a decision to grant an application ought to consider whether the Ecclestons have or are using their basic landholder and/or own harvestable rights under the WMA.

(e) The granting of the application equates to the Eccelstons encroaching upon the O’Keefes’ basic landholder rights and as such offends the paramount basic landholder rights afforded to rural landholders under the WMA.

(f) The O’Keefes remain to be prohibited under s 53(3) of the WMA to supply water notwithstanding the grant of the application.

(g) The granting of the application will cause the O’Keefes to breach the provisions of s 53(3) of the WMA.

(h) The allowance of 4 megalitres per annum as allowed under the terms and conditions of the grant of the application misrepresents the easement terms relating to the 4 megalitres level and is excessive in the circumstances.

Issues (d), (e) and (h) are questions of merit . Issues (b), (c), (f) and (g) are questions of law. Issue (a) is a mixed question of law and fact. This appeal is a full appeal involving a hearing de novo of questions of both merits and law.

16 Ultimately Lloyd J held that none of the O’Keefes’ challenges were successful, and therefore, his Honour “found the application should otherwise be granted on the merits” (at [109], emphasis added). As a consequence, his Honour ordered:

(a) that the appeal against the decision of the Board be dismissed; and

(b) that the decision of the Board be confirmed.

Evidence of the Parties

17 The Ecclestons relied on an affidavit of Ms Camilla Davidson, affirmed 8 February 2010. Ms Davidson is the solicitor for the Ecclestons. In her affidavit Ms Davidson set out the background to the proceedings before Lloyd J and gave a description of what had occurred at the hearing before his Honour. Most importantly, she stated that in her opinion less than 10 per cent of the hearing time was devoted to evidence relating to the merits review, as opposed to evidence and arguments on points of law raised by the O’Keefes seeking to show that the decision of the Board was ultra vires.

18 The O’Keefes relied on the affidavit of Mr Christopher Nichols, sworn 24 February 2010. Mr Nichols is the solicitor for the O’Keefes. Mr Nichols deposed that in support of a determination of the merit issues raised in the appeal before Lloyd J, the O’Keefes filed and served affidavit evidence from Mr David Craig, a registered surveyor and tendered various written material.

19 Mr Nichols deposed that the reason why affidavits of Mr Peter Eccleston and an affidavit of Mr Hedley Taylor, read on behalf of the Ecclestons, were not the subject of cross examination (a matter about which the Ecclestons were critical) was because after discussion between counsel, substantial parts of each affidavit were not read, and therefore, cross examination was not required. Mr Nichols further stated that it was anticipated that Mr Mark Campbell from the Department of Water and Energy was to give evidence on behalf of the Corporation and that his evidence would have gone to the merit issues identified at [11](d), (e) and (h) of Lloyd J’s decision, however, at the hearing Mr Campbell was not called by the Corporation.

20 Finally, Mr Nichols disputed Ms Davidson’s estimate that less than 10 per cent of the hearing time was devoted to the merits as opposed to questions of law. Rather, Mr Nichols asserted that merit issues were dealt with throughout the course of the hearing. As an illustration, Mr Nichols referred to Mr Craig’s evidence.

21 In response, the Ecclestons relied on an affidavit in reply of Ms Davidson, affirmed 18 March 2010. In that affidavit Ms Davidson stated that, in effect, the expectation of the O’Keefes that Mr Campbell would be called as a witness in the appeal was misplaced, there having been no notice given by the Corporation that this would occur.

Submissions of the Ecclestons

22 The Ecclestons contend that in all the circumstances it is fair and reasonable that the O’Keefes pay their costs because:

(a) first, relying on Grant , the proceedings before Lloyd J had the character of ordinary civil litigation, and therefore, the Court should consider applying the ordinary principles articulated in Latoudis v Casey (1990) 170 CLR 534, namely, that costs follow the event;

(b) second, again relying on Grant , that the proceedings ceased to have the character of a merits review because the critical issue was whether there was power to grant the water licence;

(c) third, the subject matter of the appeal before his Honour was essentially the same as that ventilated in the earlier three day hearing before the Board, at which all parties were legally represented and for which the Ecclestons had to bear their own costs;

(d) fourth, given that the compass of the subject matter of the dispute, namely, whether water could be drawn from a pump for stock and domestic purposes, was relatively confined, the principle of proportionality in litigation ought to apply. This was particularly so in light of the fact that the O’Keefes had had the benefit of the earlier judgment of Windeyer J in the Supreme Court upholding the validity of the registered easement, a decision which stood at the time of the Board hearing and which still stands;

(e) fifth, the O’Keefes acted unreasonably in the conduct of the proceedings before Lloyd J by initially indicating that there was no discrete issue to be dealt with in advance of the hearing, but less than two weeks before the hearing was due to commence seeking to agitate a preliminary point of law to be heard and determined separately; and

(f) sixth, the appeal had no reasonable prospect of success because:

(i) Lloyd J found that (at [109]) “none of the O’Keefes’ challenges in which they allege an absence of power to grant a licence have been successful, and I have found that the application should otherwise be granted on the merits”;

(ii) a large part of the hearing was taken up with the expert evidence of Dr David Goldney, called on behalf of the O’Keefes, which was ultimately not determinative of the legal questions raised by the O’Keefes; and

(iii) more generally in light of his Honour’s findings which were adverse to the O’Keefes (at [99]-[101]).

Submissions of the O’Keefes

23 Counsel for the O’Keefes was content, save for one aspect, to rely on their filed written submissions.

24 That one aspect was in relation to the Ecclestons’ contentions on the preliminary point of law. Counsel for the O’Keefes asserted that initially the question was raised before Sheahan J who transferred the question for determination by the trial judge, namely Lloyd J. There was nothing unreasonable in this course of conduct.

25 That Lloyd J declined to hear and determine separately the point of law, the O’Keefes argued, was strongly suggestive of the fact that the appeal did not involve, as the central issue, a question of law which was potentially determinative of the proceedings and which was preliminary to an evaluation of the merits of the appeal (r 3.7(3)(a)).

26 Furthermore, to the extent that the Ecclestons submitted that the preliminary point of law was raised unreasonably late, the O’Keefes argued that it was brought before the Court at the earliest opportunity. It was not until the expert evidence of the Corporation (Dr Outhet) was served, late, that the issue was able to be identified. Thus the O’Keefes were not dilatory in agitating the preliminary point of law.

Consideration

27 In my view the application for costs by the Ecclestons ought to be refused for the reasons below.

28 First, while it is true that legal issues played a significant part in the appeal before Lloyd J, I do not accept that consideration of the merits was such a “small part” of the proceedings before his Honour that a departure from the presumptive rule contained in r 3.7 is, without more, warranted.

29 As the judgment of Lloyd J itself demonstrates, three of the issues concern questions of merit, one of the issues was a mixed question of law and fact and four of the issues raised for determination concern questions of law. A proper reading of his Honour’s judgment reveals that having identified the issues in this way, this is how they were determined by his Honour. Accordingly, his Honour was required to determine both the lawfulness and the merits of whether or not a water licence ought to be issued.

30 Further, to characterise the appeal as a mere “dispute between neighbours” as the Ecclestons did, is to misstate the nature of the appeal. The decision of Lloyd J confirms that the appeal was one going to both the merits of the application and the power of the Board to issue the licence, and in so doing, paid considerable regard to the issues between the experts engaged by the Corporation and the O’Keefes (see [14]-[63], [84], [102] and [109] of the judgment). Thus, his Honour found that “on the merits the application for the licence should be granted” and that he was “satisfied that, on the merits, the application for licence should be granted” (see [102] and [109] of the judgment and also [84] emphasis added).

31 Second, to the extent that the Ecclestons are critical of the O’Keefes for bringing the appeal given the earlier decision of Windeyer J, it was because of the finding by Windeyer J that the easement was unenforceable absent a water licence that the O’Keefes made the application to the Board. Having been unsuccessful before the Board, there was nothing inappropriate about the O’Keefes seeking to appeal the Board’s decision to this Court. They were entitled to do so in the Class 3 jurisdiction of the Court.

32 The appeal was, by its very nature, a merits appeal from a decision made with respect to the granting of a water licence. While undoubtedly containing questions of law, it is incorrect to describe the appeal as an “adversarial argument” enlivening the general rule that costs follow the event. This is not the case.

33 Third, in relation to the submission that the principle of proportionality in litigation ought to apply, no authority was put before the Court to illustrate the practical operation of this principle or indeed the ambit of its application in the context of r 3.7. For the reasons already explained, the O’Keefes did not have, as was submitted by the Ecclestons, the entire benefit of Windeyer J’s judgment in the Supreme Court given his Honour’s findings. They were compelled to make an application for a water licence in order to take the benefit of the easement and were entitled to appeal the decision of the Board which effectively refused them the licence. They did not, in my view, act unreasonably in doing so. To find otherwise, through the vehicle of costs sanctions, would be to displace the no discouragement principle which underpins the basis of r 3.7 (see Arden at [10] and the authorities cited thereat).

34 Fourth, criticism was made by the Ecclestons of the attempt by the O’Keefes to raise a preliminary question of law approximately two weeks before the hearing was due to commence. Yet it is this very question of law which the Ecclestons now complain “engulfed the hearing” before Lloyd J.

35 Again, I see nothing about the behaviour of the O’Keefes in this regard that would warrant displacement of the presumptive rule. It was not submitted by the Ecclestons that the preliminary point of law could have been identified earlier by the O’Keefes. That said, the O’Keefes acted promptly to raise the issue before the Court. There is some force in the submission of the O’Keefes that Lloyd J’s refusal may be inferred as indicative of the trial judge’s view that the proceedings did not involve as a central issue only a question of law (or even a question of mixed fact and law) that would be determinative of the proceedings (see r 3.7(3)(a)).

36 Finally, I reject the submission that that O’Keefes acted unreasonably in the conduct of the appeal. Merely because the O’Keefes did not succeed does not make the appeal unreasonable. Nor does it mean that they did not have reasonable prospects of success. A fair reading of his Honour’s judgment is not suggestive of an appeal with limited prospects of success as was submitted by the Ecclestons.

37 Moreover, to the extent that a large part of the hearing was taken up with the expert evidence of Dr Goldney which, it was argued, was ultimately not relevant, is not correct. Dr Goldney gave concurrent evidence, having prepared a joint report at the request of the Corporation’s expert. The report was tendered. Counsel for the Ecclestons cross examined Dr Goldney, as did counsel for the Corporation. His Honour’s judgment considered in detail the evidence given by both Dr Goldney and Dr Outhet (see [14], [23], [33], [44], [48] and [61] of the judgment). I accept the submission of the O’Keefes that read as a whole, Lloyd J’s judgment demonstrates the relevance of the expert evidence, which includes Dr Goldney’s evidence, to a number of significant issues for determination (see the judgment at [14]-[63]).

Conclusion and Orders

38 In all the circumstances I do not find that it would be fair and reasonable to displace the statutory rule that the Court is not to make an order for costs. It follows that the notice of motion is dismissed with costs.

**********