Stanley Rural Community Inc v Stanley Pastoral Pty Ltd
[2016] VSC 173
•20 April 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION AND PLANNING LIST
S CI 2015 06415
BETWEEN:
| STANLEY RURAL COMMUNITY INC | Applicant |
| v | |
| STANLEY PASTORAL PTY LTD | Respondent |
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JUDGE: | GINNANE J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 1 April 2016 |
DATE OF JUDGMENT: | 20 April 2016 |
CASE MAY BE CITED AS: | Stanley Rural Community Inc v Stanley Pastoral Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 173 |
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PRACTICE AND PROCEDURE – Security for costs – Planning – Permit associated with water extraction in rural areas – VCAT granting permit – Community group objector seeking leave to appeal – Respondent seeking security for costs – Relevant factors in the exercise of the discretion – Security ordered – Amount of security - Victorian Civil and Administrative Tribunal Act 1998 s 148; Supreme Court (General Civil Procedure) Rules 2015 r 62.02(b).
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr D M Robinson | Lander & Rogers |
| For the Respondent | Ms E Peppler | Best Hooper |
HIS HONOUR:
The respondent, Stanley Pastoral Pty Ltd, (‘Stanley Pastoral’), seeks security for its costs of this proceeding in the sum of $76,059.56 under rule 62.02(b) of the Supreme Court (General Civil Procedure) Rules 2015, or under the inherent jurisdiction of the Court. That rule provides:
62.02 When security for costs may be ordered
(1) Where—
…
(b)the plaintiff is a corporation or (not being a plaintiff who sues in a representative capacity) sues, not for the plaintiff's own benefit, but for the benefit of some other person, and there is reason to believe that the plaintiff has insufficient assets in Victoria to pay the costs of the defendant if ordered to do so;
…
the Court may, on the application of a defendant, order that the plaintiff give security for the costs of the defendant of the proceeding and that the proceeding as against that defendant be stayed until the security is given.
Nature of the proceeding
The dispute between the parties arises from the permission given to Stanley Pastoral to extract water from its land near Stanley, which is located in North-East Victoria. The produce of Stanley includes apples and chestnuts. Stanley Rural Community Inc. (‘SRCI’), whose membership includes about a quarter of the area’s population, seeks leave to appeal against an order of the Victorian Civil and Administrative Tribunal (‘VCAT’) on six questions of law.[1] The SRCI was an objector in the VCAT proceedings.
[1]Under s 148(1)(b) of the Victorian Civil and Administrative Tribunal Act 1998.
SRCI is a non-profit incorporated association[2] with aims that include fostering and enhancing Stanley’s cultural, economic, social and environmental interests, and providing it with a single representative voice.
[2]Under the Associations Incorporation Reform Act 2012.
Stanley Pastoral wishes to extract water, including groundwater, from its land near Stanley. It will use an existing bore to extract and store groundwater for transportation to a bottling facility in Albury after which it will be sold as bottled water. SRCI opposed the grant of a planning permit to enable that extraction.
The Shire Council refused to grant Stanley Pastoral a planning permit. The VCAT decision set aside that decision and ordered that:
a permit is granted and directed to be issued to use and develop land at Cue Springs Road, Stanley, being the land more particularly described in PC370674Q, for a utility installation subject to the conditions set out in Appendix A.[3]
[3]Stanley Pastoral Pty Ltd v Indigo Shire Council [2015] VCAT 1822. There were 22 conditions.
Stanley Pastoral’s proposal had been considered by the local water authority, Goulburn-Murray Water (‘GMW’). On 31 October 2013, GMW approved the split of Stanley Pastoral’s existing entitlement to extract surface water into two licences – one to extract 19ML from the ground, and the other to extract 31ML from the surface.
SRCI was an objector to Stanley Pastoral’s planning permit application and was represented by counsel at the VCAT proceeding, where it called two expert witnesses. A unanimous vote of a meeting of its members decided to seek leave to appeal. Its solicitor states[4] that none of its members, nor anyone associated with it, has a direct pecuniary interest in the outcome of this proceeding. Counsel in submissions updated SRCI’s financial position, stating that it held funds of $13,198.60 for its general purposes, some of which has come from fundraising for the legal proceeding. It also holds $5,888.66 for the running of the Stanley Post Office.[5] It owes $2,646.30 to its solicitors, for filing fees in the proceeding, and a further sum of $5,000 for counsel’s fees for the conduct of the VCAT proceeding. Counsel has agreed to suspend payment of his fees so that SRCI can use the $5,000 for this proceeding. SRCI’s lawyers represent it under a conditional costs agreement so that at this point SRCI will only have to pay ordinary disbursements such as filing fees.
[4]Affidavit of Dru Marsh of 29 March 2016.
[5]It has an arrangement with Australia Post to run the Post Office.
SRCI expects that it may be able to raise further sums of approximately $8,000 to $10,000 over the next three months through fundraising events. It receives approximately $1,000 per year in membership fees, but they are paid throughout the year. Its solicitor states that it has no access to other funds and that it cannot provide security for costs above $8,500, being the total amount it has available in funds not tied to the Post Office and any further amount it is able to raise through normal fundraising activities, provided it was given enough time to raise those funds. It has already planned fundraising activities including a raffle for a bespoke dining table, a Community Jazz Night, a vintage car show and a Community Dinner.
SRCI’s lawyers estimate that their legal costs of the application for leave to appeal will be $28,964, being $10,000 for the firm’s legal fees, $16,364 for counsel’s fees and $2,600 disbursements for filing fees.
Stanley Pastoral relies on an affidavit of Paul Linsdell, who is a costs lawyer, estimating its costs calculated on a standard basis on the Supreme Court Scale as $76,059.56.
The parties’ submissions
Both parties made extensive submissions about the merits of the application for leave to appeal and the application for security for costs. Stanley Pastoral described itself as an unwilling, but necessary participant in the appeal as neither the Indigo Shire Council or VCAT[6] was a party. It is a proper contradictor to the applicant’s case and thereby performs both a private and public role. If SRCI succeeded it would seek its costs against Stanley Pastoral and it in turn could seek an appeal’s cost funds certificate, and receive some of its costs. However, if SRCI did not succeed, and VCAT’s decision was affirmed, Stanley Pastoral would have to pay all its costs as SRCI would, in all likelihood, be unable to pay them. The applicant will seek a costs order if it succeeds. Stanley Pastoral, which is a family owned company, is the only party bearing a risk of having to pay the other side’s costs.
[6]Which, of course, does not participate in appeals from its decisions.
Stanley Pastoral submitted that the merits of SRCI’s leave application were unclear and that it would be difficult for it to establish a vitiating error of law in the VCAT decision. VCAT had adopted a ‘cascading’ approach in its written decision. First, it had decided that a planning permit was not required for the extraction of groundwater. It granted a planning permit for utility installation. Secondly, under the heading ‘Alternative Analysis’, it assessed what its conclusion would have been if a planning permit had been required. Thirdly, it considered how it would have exercised the discretion to determine whether to grant a permit and concluded that it would not have ventured into the area of GMW’s authority as it had specialist expertise recognised by the Water Act 1989 (‘the Water Act’) for the purpose of deciding matters concerning the use of water. VCAT decided that the issue of a permit with conditions would protect against any adverse consequences from the proposed extraction of water and its finding was in part based upon the evidence of one of SRCI’s expert witnesses.
No application had been made to VCAT to review GMW’s decision to split Stanley Pastoral’s water licence entitlements.[7]
[7]That review could have been sought under s 64 of the Water Act 1989.
SRCI’s inability to pay costs was a weighty factor supporting an order for security and it was fully aware, when it commenced the appeal proceeding, of the possible costs consequences, but reports in the local newspaper suggested that it chose to ignore them. It had received advice about protecting its assets and had acted on that advice in respect of its primary asset, the operation of the post office.
Stanley Pastoral contended that SRCI had not established that an order that it provide security would stultify the litigation. It had not established that it was unable to raise funds, beyond the limited amounts that it acknowledged. It was unclear whether its members would provide further funds. SRCI bore the onus of demonstrating that those who stood behind it were without means. Some individual objectors to the permit had participated in the VCAT proceedings.
Stanley Pastoral submitted that SRCI had no particular mandate to protect the water resources of the local area. The proceeding did not involve any public interest considerations.
Stanley Pastoral submitted that the ‘proportionality issue’, being the difference between the amount of security sought and the cost of the development, supported the order for security. The costs of the development were $275,000 but the costs of defending the proceedings were $75,000.
On the other hand, SRCI submitted that VCAT had incorrectly characterised the purpose of the permit application and that affected all parts of its decision-making. Nor did VCAT take into account the expert evidence led by SRCI about the effect of the extraction of water. SRCI submitted that VCAT did not properly consider its objections. SRCI contrasted VCAT’s decision with the opinions expressed by Dwyer DP about VCAT’s jurisdiction to consider ‘water issues’ when determining an application by Stanley Pastoral at an earlier stage in the VCAT proceedings.[8]
[8]Stanley Pastoral Pty Ltd v Indigo Shire Council [2015] VCAT 36, [80]-[91].
SRCI contended that a decision by the Supreme Court was required to clarify the interaction in planning decisions between the Water Act and the Planning and Environment Act1987 (‘the Planning Act’). The proceedings involved important questions of law and had a significant public interest element. An order that it provide security for costs would stop the proceeding, that there were no persons standing behind it in the relevant sense. The proceeding was not a usual inter partes civil proceeding and Stanley Pastoral did not have to participate in it.
SRCI disputed any suggestion that it had taken any step to minimize the financial impact of adverse outcome to the litigation on it.
SRCI emphasised that the principal consideration was that any order that it provide a significant sum for security for costs would shut it out from proceeding with the application.[9]
[9]It relied in this respect on the decision in Spiel v Commodity Brokers Australia Pty Ltd (in liq) (1983) 35 SASR 294.
Consideration of submissions
There was no dispute that SRCI is a corporation within the meaning of the Rule and that there is reason to believe that it has insufficient assets in Victoria to pay for Stanley Pastoral’s costs if ordered to do so. The Court therefore has a discretion to order security for costs.
In exercising that discretion the Court must balance Stanley Pastoral’s interest in being adequately and fairly protected from prejudice in recovering its costs arising from the limited liability of SRCI and the risk of unnecessarily shutting SRCI out from seeking relief.
The inability to pay costs is a significant factor supporting an order for security for costs. An assertion that an order for security would impose on a corporation a financial burden that would stop the litigation, must be established by the corporation making that assertion.[10]
[10]Livingspring Pty Ltd v Kliger Partners (2008) 20 VR 377, [22] (‘Livingspring’).
Security for costs applications in appeals or applications for leave to appeal on questions of law from planning decisions are not common. The parties referred to many decisions concerning security for costs, including cases where the plaintiff was a community organisation or an association with a particular interest in the environment. Each case was influenced by its particular context and in most such cases no security was ordered.[11]
[11]But compare No TasWind Farm Group Inc v Hydro-Electric Corporation (No 2) [2014] FCA 348.
I accept that SRCI has an interest in the environment of Stanley and surrounding areas and that includes the use of land for the extraction of water. It is a non-profit organisation and does not sue for the benefit of another person. Whilst its members have an interest in the outcome, it is not a financial interest by which persons standing behind it will benefit.[12] However, the possibility of members providing funding can still be relevant.
[12]Friends of Hinchinbrook Society Inc v Minister for Environment (1996) 69 FCR 1, 21-2; and Fitzroy Football Club Ltd v Brisbane Bears-Fitzroy Football Club Ltd [2010] VSC 180.
On the other hand, the Planning Act recognises the interest of objectors in the planning process.[13] There is a social importance in protecting the environment by the processes of law.[14]
[13]Section 57.
[14]Maritime Services Board of New South Wales v Citizens Airport Environment Association Inc (1992) 83 LGERA 107, 111 (Kirby P).
I take into account that at least some of SRCI’s proposed grounds of appeal are arguable, but it is not possible nor desirable at this stage to say more than that.
SRCI has already exercised its right to object to Stanley Pastoral’s development, in VCAT over five days and during a preliminary hearing of questions of law before Dwyer DP.[15] It did not exercise its earlier opportunity to review GMW’s decision to ‘split’ Stanley Pastoral’s licence. SRCI is not satisfied with VCAT’s consideration of the issues. It has no right of appeal and must seek leave to appeal. The appeal, if leave is granted, is limited to questions of law. The application for leave and any appeal will be heard together.
[15]Stanley Pastoral Pty Ltd v Indigo Shire Council [2015] VCAT 36.
I have taken into account the amount of SRCI’s assets and, so far as it is possible to speculate, the possibility of further fundraising to support its desire to seek leave to appeal. I have taken into account the possibility that a security for costs order may prevent the proceeding being brought. But, I have also taken into account the risk that Stanley Pastoral will be unable to enforce a judgment for costs if the application is unsuccessful.
None of the factors to which I have referred is by itself decisive. But considering the case in its overall context, I consider that it is appropriate to order SRCI to provide some security for Stanley Pastoral’s costs. I do not consider that an outcome in which SRCI can seek leave to appeal and argue its appeal grounds with no risk of having to pay Stanley Pastoral’s legal costs of the proceeding is a just outcome. Unlike at VCAT, in the Supreme Court, the unsuccessful party usually has to pay the costs of the successful party on a standard basis. If such an order were made in this proceeding it is likely that Stanley Pastoral would receive little in payment of its costs.
I have taken into account the difference between the applicant’s solicitors’ estimate of their costs and the estimate of Stanley Pastoral’s costs provided by Mr Linsdell. The latter’s estimates include a 15 per cent loading of and includes the costs of senior counsel. Stanley Pastoral did not retain senior counsel in the VCAT proceeding, but rather junior counsel, who appeared before me on this application and is obviously very familiar with the proceeding. Senior counsel’s fees and the 15 per cent loading appear to account for approximately $25,000 of Stanley Pastoral’s costs.
Where security is ordered it is not always for the full amount of the estimated costs. As French J stated:
Orders requiring the provision of security for costs involve a balancing of the legitimate interests of the applicant, to pursue its claimed entitlement to remedies against wrongs allegedly done to it and the legitimate interests of the respondents that they not be exposed to irrecoverable loss by reason of proceedings which cause them to incur substantial expense but are ultimately unsuccessful against them. It is because the award of security involves a balancing of contending legitimate interests that the amount of the security to be provided is generally not the full amount of estimated costs.[16]
[16]National Institute for Truth Verification v Computer Voice Stress Analyser [2007] FCA 736 [16], quoted in Tasmanian Conservation Trust Inc v Gunns Ltd [2012] TASSC 18 (Holt AsJ); see also Gunns Ltd v Tasmanian Conservation Trust Inc [2012] TASSC 51 (Blow J).
In the exercise of the discretion enlivened under r 62.02, I consider that it is appropriate to order that SRCI provide security for costs in a form acceptable to the Prothonotary of the Court in the sum of $20,000, of which $10,000 is to be provided within one month from today, with the balance of $10,000 to be provided within two months from today.
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