Arnold v Minister Administering the Water Management Act 2000

Land and Environment Court (NSW)|2009-05-06|Before: Biscoe J, Mr P

BACKGROUND 2 The numerous applicants are farmers who held groundwater extraction entitlements in the Lower Murray region under Pt 5 of the Water Act 1912 (NSW). Pursuant to Pt 2 of Ch 3 of the Water Management Act 2000 (NSW), as and from 1 November 2006, such entitlements were replaced by aquifer access licences and supplementary water licences. As a result of these measures, and pursuant to regulations made under the Water Management Act 2000 entitled Water Sharing Plan for the Lower Murray Groundwater Source (2006 Plan), the applicants' entitlements to extract groundwater have been significantly reduced. 3 The applicants commenced proceedings in this Court challenging the validity of the legislative scheme and the 2006 Plan. The respondents to the proceedings are the NSW Minister Administering the Water Management Act 2000, the State of New South Wales and the Commonwealth. The relief sought included declarations that the 2006 Plan is invalid, that the National Water Commission Act 2004 (Cth) and the Natural Resources Management (Financial Assistance) Act 1992 (Cth) are, relevantly, unconstitutional, as well as quashing orders, injunctions and damages. 4 The Commonwealth moved successfully for a stay of the proceedings against it: Arnold v Minister Administering Water Management Act 2000 [2007] NSWLEC 531, (2007) 157 LGERA 379 (Lloyd J). Costs were reserved. An appeal was dismissed with costs: Arnold and Others v Minister Administering Water Management Act 2000 and Others [2008] NSWCA 338, (2008) 163 LGERA 429.

7 Subsequently, I dismissed with costs the applicants' notice of motion charging the Commonwealth with contempt: Arnold v Minister Administering the Water Management Act 2000 (No 3) [2009] NSWLEC 56.

DISCUSSION 8 The applicants submit that I should not deal with the costs of the proceedings but only with the costs of the Commonwealth's notice of motion for a stay of the proceedings determined by Lloyd J, and that either the parties should pay their own costs of that motion or there should be an apportionment of costs. I propose to deal with the costs of the proceedings. Section 98(3) of the Civil Procedure Act 2005 (CPA) provides that: "An order as to costs may be made by the court at any stage of the proceedings or after the conclusion of the proceedings". The proceedings between these parties appear to be concluded except as to costs. All residual costs issues should be disposed of in as timely a way as possible. It is appropriate to dispose of them now.

9 Section 98(1)(a) of the CPA provides that: "(1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court,"

10 Rule 42.1 of the Uniform Civil Procedure Rules 2005 (UCPR) applies to proceedings in class 4 of the Court's jurisdiction and provides: "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".

11 Thus, the starting point in considering the question of costs in class 4 proceedings (as in civil litigation generally in the courts) is that costs follow the event. The Court has flexibility to depart from the starting point because of its power to make some other order. 12 The applicants submit that the sole source of this Court's power to award costs (apart from any inherent power) is the former s 69(2)(a) of the Land and Environment Court Act 1979. Section 69 was repealed with effect from 28 January 2008 when this Court came under the CPA and UCPR regime. Section 69(2)(a) provided that "costs are in the discretion of the court". The applicant says that s 69(2)(a) applies in this case because the Commonwealth's successful notice of motion for summary dismissal was filed in July 2007. There are no savings or transitional provisions in respect of the repeal of s 69. Accordingly, in my opinion, CPA s 98 and UCPR r 42.1 apply. In any case, the point is arid because even prior to the repeal of s 69 a successful party in class 4 proceedings (which are analogous to ordinary civil litigation) would reasonably expect to be awarded costs in the absence of special circumstances to warrant a different: order: Oshlack v Richmond River Council [1998] HCA 11, (1998) 193 CLR 72. 13 The applicants submit that there are factors justifying a costs order other than that proposed by the Commonwealth.

14 The first factor is said to be that the applicants are farmers and that "the Government [including the Commonwealth] has taken from them their water and their means of livelihood" and they have been suffering because of the "worst drought ever recorded" in their area. There is no evidence before the Court of the financial or personal circumstances of the applicants. Further, because the purpose of a costs order is generally compensatory (Latoudis v Casey [1990] HCA 59, (1990) 170 CLR 534) "the claim that, absent special circumstances, the financial stress of a litigant may be a relevant consideration in the exercise of the costs discretion is inconsistent with principle" and the authorities: Board of Examiners v XY [2006] VSCA 190 at [34] per Chernov JA (Nettle and Neave JJA agreeing).

15 The second factor is said to be that the Commonwealth knew of a decision to deprive the applicants of an ex gratia payment and "did nothing to discourage their joint venture partner…or at least did nothing to help the applicants, but rather did everything they could to punish them for daring to sue the Commonwealth". This stops just short of canvassing my decision on the applicants' unsuccessful contempt motion that it had not been established that it was the Commonwealth that made the decision to withhold payments to the applicants. In my view, the evidence before the Court does not establish that the Commonwealth was under an obligation to assist the applicants in relation to the ex gratia payment, nor that it "did everything it could to punish them" for suing the Commonwealth.

16 The third factor is said to be that the Court of Appeal overturned Lloyd J's decision that this Court did not have ancillary jurisdiction pursuant to s 16(1A) of the Land and Environment Court Act 1979. The applicants submit that they have wasted substantial costs on an argument on which they have been proved right and that this should be reflected in an apportionment of costs.

17 The principles and authorities relating to apportionment of costs where an unsuccessful party succeeds on a discrete issue or issues in a multi issue case were reviewed in F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235 by me. Costs may be apportioned where there are multiple issues involved and the successful party fails on a particular issue or group of issues which is clearly dominant or separable: at [15]. Mathematical precision is illusory and the exercise of the discretion will depend upon matters of impression and evaluation: at [8].

18 The Court of appeal did not make any apportionment of costs of the appeal, notwithstanding that the applicants succeeded on appeal in establishing jurisdiction under s 16(1A). On the other hand, no costs apportionment application appears to have been made to the Court of Appeal. The applicants failed on other jurisdictional arguments before Lloyd J and the Court of Appeal. Nevertheless, they succeeded on the contested jurisdictional issue, which was a discrete issue that took up a significant amount of time at trial.

19 I am persuaded that there should be some apportionment of the costs of the proceedings to reflect the applicants' success on the jurisdictional issue. In the absence of evidence, the quantum of apportionment is a matter of impression and evaluation. Doing the best I can in a broad brush way, I think it would reasonably be reflected in an order that the applicants pay 80 percent of the Commonwealth's costs of the proceedings. This does not affect the costs order that I have earlier made against the applicants in relation to their unsuccessful contempt motion against the Commonwealth.

20 The fourth factor is said to be the public interest. 21 Rule 4.2(1) of the Land and Environment Court Rules 2007, which came into force on 28 January 2008, provides: " 4.2 Proceedings brought in the public interest

(1) The Court may decide not to make an order for the payment of costs against an unsuccessful applicant in any proceedings if it is satisfied that the proceedings have been brought in the public interest." 22 I considered and compared this new rule with the general law public interest cost principles in Anderson on behalf of the Numbahjing Clan within the Bundjalung Nation v NSW Minister for Planning (No 2) [2008] NSWLEC 272, (2008) 163 LGERA 132 and Ku-Ring-Gai Council v Minister for Planning (No 2) [2008] NSWLEC 226. In Anderson at [8] - [11] and [13] I held (omitting most citations): "[8] The new r 4.2(1) is not a mere formulation of the pre-existing case law. Previously, in the absence of any costs rule expressly dealing with public interest proceedings, the courts adopted the general principle that the public interest has to be served by the litigation and there has to be an additional factor contributing to a finding of special circumstances which justifies departure from the usual costs order.

[9] The additional factor may be found in the raising of arguable, novel legal issues of general significance. Hence, the costs outcome may depend on whether the applicant had the good fortune to find such a novel legal issue or the misfortune to have to rely on conventional legal arguments. That is a matter of chance and is entirely irrelevant to a public interest litigant's motivation for bringing the proceedings. Departure from the usual costs order is a concession to the public interest litigant.

[10] Yet even the general principle that there has to be something more than the public interest is not rigid; for the nature of the public interest, of itself, may be of such moment or magnitude as to be sufficient to depart from the usual order as to costs. As noted in Oshlack at [42], Liversidge v Anderson [1942] AC 206 at 283 is a celebrated example of 'a matter of very general importance' - the liberty of the subject in time of war - in which it was inappropriate for the successful defendant (the Secretary of State) to seek costs against the incarcerated, unsuccessful plaintiff. There was no suggestion that any additional factor was necessary.

[11] The new LECR r 4.2(1) does not prescribe that, in addition to the public interest, there must be a factor leading to the conclusion that there are special circumstances justifying departure from the usual costs rule. Hence, such special circumstances are not a mandatory prerequisite to the exercise of the discretion to depart from the usual order as to costs in public interest cases. However, in my opinion, the discretion under the new rule is only enlivened if departure from the usual costs order is justified. The public interest consideration alone may be of such moment or magnitude as to ground that justification. An example might be an unsuccessful proceeding, based on a good arguable case, brought to stop or limit the development of one of the last habitats of an endangered species. In most cases, however, I expect it would also be necessary to establish special circumstances additional to the public interest in order to enliven the discretion. In such cases the practical application of the new rule would not be different from the pre-existing position. For example, in F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) the case properly proceeded upon the common ground that special circumstances had to be shown. …

[13] 'The public interest' is a nebulous concept unless given further content of a legally normative nature. Much civil litigation concerns the public interest, including most constitutional and administrative law matters and some ordinary civil actions. If characterisation as public interest litigation were sufficient reason to depart from the usual order as to costs, that order would cease to be usual in large areas of litigation. The expression 'in the public interest' requires a consideration of the subject matter, scope and purpose of the statutory enactment in which it is contained." 23 In Sharples v Minister for Local Government (No 2) [2009] NSWLEC 62 at [5] - [6] I said: "[5] In a case decided before the introduction of the new public interest costs rule, Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434, (2004) 136 LGERA 365 at [15], Lloyd J identified five matters that may be considered in determining whether proceedings can be categorised as having been brought in the public interest: `The public interest served by the litigation. Whether that interest is confined to a relatively small number of members from the group or association in the immediate vicinity of the development, concerned with their own private amenity; or whether the interest is wider, involving a significant number of members of the public and concern for a wider and significant geographic area.

Whether the applicant sought to enforce public law obligations.

Whether the prime motivation of the litigation is to uphold the public interest and the rule of law.

Whether the applicant has no pecuniary interest in the outcome of the proceedings.'

[6] In Minister for Planning v Walker (No 2) [2008] NSWCA 334 Ms Walker succeeded at first instance but failed on appeal. The Court of Appeal held that the litigation brought by Ms Walker was public interest litigation and there were additional special circumstances, and exercised the costs discretion by ordering each party to pay their own costs both at first instance and on appeal. It appears that the new public interest costs rule in this Court and the cases which had considered them were not brought to the Court of Appeal's attention. The Court of Appeal decided the case by approving the five public interest considerations identified in Engadine, and by holding that more was required to displace the ordinary rule as to costs." 24 The applicants submit that the following are public interest considerations: (a) whether the Court has jurisdiction over the Commonwealth when it impairs the environmental and water rights of NSW residents; (b) the litigation was motivated by a concern to examine that water sharing be fair as between farmers and the environment; (c) many farmers in NSW are affected by similar water sharing plans and there was therefore a public interest in the outcome of the litigation especially having regard to the joint program between the Commonwealth and the State; (d) a major question concerns whether the Commonwealth has to go it alone in addressing water conservation issues, or may work with the State, a question which this case addresses.

25 If public interest considerations are a sound reason for making no order as to costs (or for apportioning costs) of the proceedings at first instance, they would seem to be an equally sound reason for making no order as to the costs of the appeal. However, the Court of Appeal ordered the applicants to pay the Commonwealth's costs of the appeal. On the other hand, no public interest costs argument appears to have been put to the Court of Appeal.

26 I accept that, like many administrative and environmental law cases in this Court, this case has public interest elements. I am not satisfied, however, that the prime motivation of the litigation was to uphold the public interest. The applicants have a substantial pecuniary interest in the outcome. Even if the litigation were to be characterised as being in the public interest, I would not be prepared to exercise the costs discretion in the applicants' favour. In the first place, it is an unattractive case for the exercise of discretion in the applicants' favour because their proceedings were summarily dismissed on the grounds that they had no standing and that the proceedings disclosed no reasonable cause of action. Secondly, I can see no special circumstances that would make it appropriate to exercise the discretion in that way.

27 The final factor, according to the applicants, is that they succeeded on specific interlocutory issues on which they should have their costs. First, the applicants refer to a contested application for remittal of the matter to mediation. However, the Commonwealth was ordered to participate in the mediation already ordered between the applicants and the State of New South Wales at a time when the Commonwealth was absent from the proceedings. The costs of proceedings generally include the costs of a court ordered mediation: Newcastle City Council v Weiland [2009] NSWCA 113. Secondly, the applicants refer to contested applications for amendments of the statement of claim. However, it has been held that it disclosed no reasonable cause of action against the Commonwealth. Further, unless the Court orders otherwise, a party that amends a pleading must pay the costs of and occasioned by the amendment: UCPR 42.6. Thirdly, the applicants refer to directions hearings including when orders were made joining the Commonwealth. I do not think it is sensible to give the applicants their costs of directions hearings when consent orders were made, nor their costs of the order for joinder of the Commonwealth made in the absence of the Commonwealth and without notice to it. 28 The costs of any application or other step in the proceedings, unless the Court orders otherwise, are to be dealt with in the same way as the general costs of the proceedings: UCPR 42.7.1. I do not think there should be an "otherwise" order. Overall, in my view, the costs of these interlocutory issues are not clearly separable from the costs of these issues determined in favour of the Commonwealth on the summary dismissal motion. ORDER 29 The order of the Court is that the applicants are to pay 80 percent of the third respondent's costs of the proceedings. I note that this order does not affect the costs order made on 27 April 2009 that the applicants are to pay the third respondent's costs of the applicants' notice of motion for contempt filed on 22 August 2007.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.

CITATION : Arnold v Minister Administering the Water Management Act 2000 (No 4) [2009] NSWLEC 87

Anderson on behalf of the Numbahjing Clan within the Bundjalung Nation v NSW Minister for Planning (No 2) [2008] NSWLEC 272, (2008) 163 LGERA 132 Arnold v Minister Administering Water Management Act 2000 [2007] NSWLEC 531, (2007) 157 LGERA 379 Arnold and Others v Minister Administering Water Management Act 2000 and Others [2008] NSWCA 338, (2008) 163 LGERA 429 Arnold v Minister Administering the Water Management Act 2000 (No 3) [2009] NSWLEC 56. Board of Examiners v XY [2006] VSCA 190 CASES CITED: F & D Bonaccorso Pty Ltd v City of Canada Bay Council (No 5) [2008] NSWLEC 235 Ku-Ring-Gai Council v Minister for Planning (No 2) [2008] NSWLEC 226 Latoudis v Casey [1990] HCA 59, (1990) 170 CLR 534 Newcastle City Council v Weiland [2009] NSWCA 113. Oshlack v Richmond River Council [1998] HCA 11, (1998) 193 CLR 72 Sharples v Minister for Local Government (No 2) [2009] NSWLEC 62

(2008) 163 LGERA 132

(2007) 157 LGERA 379

(2008) 163 LGERA 429

(2004) 136 LGERA 365

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