(Reflecting Oral Reasons Given At The Hearing And Subsequently Revised)

1 This matter is an application for costs by the first respondent, the Department of Primary Industries (DPI) against the applicant, Ballarto Pastoral Pty Ltd, following the applicant request to withdraw its application for review in these proceedings.

2 The application for review was made to the tribunal under section 48(4) Extractive Industries Development Act 1995 against a notice No. 0033 dated 30 June 2005 issued by DPI to the applicant.

3 The other parties, Mrs Pinchen, the Frankston City Council and others did not make any application for costs on the withdrawal.

4 The tribunal's file reveals that the application for review was lodged on 16 September 2005, there was a directions hearing before the President, His Honour Mr Justice Morris on 7 October 2005, the matter was mediated before a member of the tribunal on 5 and 6 December and certain procedural consent orders were issued. However the matter was not resolved and it was set down for hearing for 10 days.

5 Subsequently the applicant applied to withdraw the application but DPI applied for costs as a consequence.

6 The applications for withdrawal and costs were heard on 9 March 2006 and an order was made giving leave to the applicant to withdraw the application. Also it was ordered that the application for costs by DPI against the applicant was refused and that each party shall bear their own costs.

7 Oral reasons for the decision were given at the hearing. The parties were advised that written reasons were being prepared. These revised and amplified reasons are based on the oral reasons given at the hearing.

8 The hearing was scheduled for 2 hours. It lasted 4 hours concluding after 6.00pm when the digital recording system was turned off, resulting in part of the oral reasons not being recorded. The respondent's solicitors had requested a half day hearing, but in hindsight the parties should have requested a full day given the amount of the claim and the volume and complexity of the material.

9 The only evidence before the tribunal was the affidavit of Ms French of the Victorian Government Solicitors' Office which was relied on. No cross examination of this witness was required and the affidavit was taken as read. Otherwise the parties' counsel made written and oral submissions and many plans, maps, photos and documents were produced.

10 I had prior knowledge of the site, the area and the applicant's sand mining operation, having sat in the matter of Skye Environmental Services Pty Ltd v Frankston CC[1]. The parties were aware of this. No inspection of the site for the purposes of this hearing was required.

11 The respondent sought costs under s.74(2)(b) Victorian Civil and Administrative Tribunal Act 1998 (VCAT Act) on, inter alia, the following grounds:

•

the applicant's claim had no tenable basis in fact or law;

•

the application for review was in the nature of a challenge to an enforcement action brought by the respondent;

•

the application for review was at all times misconceived, in that a successful outcome for the applicant could not have finally resolved the water management issues faced by the applicant with respect to its commercial quarry operations;

•

the applicant sought to withdraw the application for review at a time when the respondent has incurred considerable costs which are, as a result of the application to withdraw, wasted.

12 The total amount of costs claimed is $82,456.88. Ms French's affidavit gave a breakdown between solicitor/client fees ($55,500.06), counsel's fees ($12,837.27), experts' fees ($13,430.00) and other disbursements ($689.55), but no detailed bill of costs in taxable form was produced, presumably on the basis that if the tribunal had made an order for costs, the order would have directed the costs be assessed by the Registrar in accordance with an appropriate scale.

13 Ms Schoff first raised the issue of whether the power to award costs under s.74(2)(b) VCAT Act on the withdrawal of an application was a head of power independent of s.109 VCAT Act and she referred to a number of decisions which she submitted showed a divided opinion within the tribunal[2].

14 Leave to withdraw a proceeding in the tribunal is given under s 74(1). S 74(2)(b) empowers the tribunal to make an order that the applicant pay all, or any part of, the costs of the other parties to the proceeding.

15 S 109 deals with the power to award costs and provides at ss 109(1) that subject to this division, each party is to bear their own costs in the proceeding. Both ss 74 and 109 fall within Part 4 of the VCAT Act which deals with the general procedures of the tribunal but in separate divisions, s 74 in Division 4 (preliminary procedure) and s 109 in Division 8 (costs). Batt JA observed in Transport Accident Commission v Coyle[3] that s 74(2)(b) is an empowering provision that authorises the tribunal to award costs against an applicant after an application has been withdrawn. A similar view was adopted by Deputy President Coghlan in Rhonda Hurwood v Emergency Services Superannuation Scheme,[4] where she also observed that ss 109(3) applies in the exercise of the discretion.

16 Whilst s 74(2)(b) provides a wide discretion in ordering costs, the underlying principle of costs in the VCAT Act is that set out in s 109(1) that each party bear their own costs. It is considered that the exercise of the discretion under s 74(2)(b) should commence with the underlying view that if the proceeding had not been withdrawn and the matter had proceeded to a hearing, no underlying principle applies in the tribunal as in the courts that costs will follow the event. Rather, the underlying principle is that there will be no award of costs unless as stated in s 109 it is fair in the circumstances to award costs having regard to the matters set out in s 109(3). The matters set out in s 109(3) are considered to be the matters that one would generally consider when exercising discretion on the issue of costs and includes the wider discretion referred to in s 109(3)(e) that the tribunal can have regard to any other matter the Tribunal considers relevant.

17 This view is supported by Mr Smale's submission that s 109 is unlimited in its application, except by its opening words in s 109(1) subject to this division..., and s 74 is in different division.

18 In any case there is no dispute that the tribunal's discretion is unfettered, and even if I am wrong in my view that s 109 applies, there is authority that in exercising discretion the tribunal should have regard to all the circumstances of the case which may include the matters referred to in section 109[5], and it is noted the respondent does rely on those matters.

19 The respondent submitted that the applicant's claim had no tenable basis in fact or law, thus relying on s 109(3)(c). In her submission Ms Schoff asserted that material filed by the applicant made concessions to that effect.

20 Apart from the obvious observation that there has been no full hearing of the application and no findings as to the merits by the tribunal, I heard detailed submissions from both counsel as to whether the applicant had conceded the merits. A large number of documents were produced and discussed, and indeed as the heated debate continued late into the day, the production of documents accelerated, even in the respondent's reply.

21 Mr Smale's contention was that at no time had his client conceded or admitted this ground, and he referred to a letter from the applicant's solicitors, Cornwall Stodart dated 25 July 2005 which set out the grounds on which his client contested the Notice subject to review, and he submitted his client maintained the facts asserted in the letter.

22 I find that the respondent has not established that the application for review had no tenable basis in fact or law, but rather that there was a genuine dispute as to matters of fact and law which would need a full hearing to determine. By way of example:

•

The respondent relied on an assertion that the applicant had made changes to drainage within the Works Authority area which resulted in flooding outside the site, in breach of a condition of the work authority. I was given a description of these changes, which Ms Schoff did not dispute, and I find merit in with Mr Smale's submission that this was merely maintenance to existing works and not changes.

•

It was not disputed that the water discharged into the central drain came from a sump in the sand extraction area. This is groundwater with a stormwater component. However the respondent relied on condition 6.1 of the Work Authority which regulated the discharge of processed solutions or quarry waste. As the sand washing is carried out in a different area of the site than the pit where the sump is located, there is a triable issue as to whether the ground water discharged from the sump is a processed solution or quarry waste.

•

It is asserted that the central drain has not been approved in a formal Water Management Plan. However the minutes of the meetings of all the relevant authorities held over a number of years acknowledged its existence and it had been shown on an earlier Water Management Plan filed with the respondent by the applicant, the status of which as approved is disputed. In any case it is clear form the minutes of the periodic meetings of representatives of the applicant, the respondent and the other authorities that its existence was well known.

23 These examples go to the heart of the merits of this matter and I find the issues raised by them are not conceded by the admissions asserted.

24 The respondent's next ground was that the application for review was in the nature of a challenge to an enforcement action brought by the respondent and Ms Schoff relied on the tribunal decisions that draw a distinction between applications for review on the one hand and applications in the tribunal's original jurisdiction such as enforcement order applications, applications to amend or cancel permits or declaration proceedings on the other, and that in the latter, the tribunal will more readily depart from the principle that each party should bear its own costs[6].

25 Ms Schoff submitted this proceeding was more in the nature of an enforcement proceeding having been brought by reason of the breach by the applicant of its Work Authority and the need to prevent flooding on neighbouring properties, forcing the respondent to defend its notice and to incur costs.

26 The applicant has acknowledged in Cornwall Stodart's letter of 16 January 2006 filed with the tribunal that the notice will stand and will be complied with and other actions will be taken to prepare a Water Management Plan for approval and seek a variation to its Work Plan to deal with a number of issues raised as to drainage and water management.

27 However I do not agree that this application for review falls into the category of enforcement proceedings in the tribunal. Those decisions relate to applications to the tribunal in its original jurisdiction, which a party is forced to defend to avoid, for instance, demolishing or altering building works, discontinuing a use of land or refraining from acting on a permit which it has obtained through due process. The respondent is not in this position, and presumably could have brought proceedings in the appropriate court or tribunal for licence breaches seeking penalties or compliance. It has not done so. It has not been forced to act on the notice, it has merely chosen to do so. Such notices are often dealt with by negotiation, and further notices can be issued if defects are found in an earlier one. All that has occurred is that a private party has sought a review of a government action contained in a handwritten three paragraph notice. I consider this should be treated in the tribunal as an ordinary application for review where each party should bear its own costs.

28 Also I have regard to the comments referred to by Mr Smale of the President, His Honour Mr Justice Morris in Stonnington CC v Blue Emporium Pty Ltd[7] in relation to enforcement proceedings in the tribunal.

MISCONCEIVED - S 109(3)(E) & NATURE AND COMPLEXITY - S 109(3)(D)

29 The respondent submitted that it should be awarded costs as the application was misconceived, in that a successful outcome for the applicant could not have finally resolved the water management issues faced by the applicant in its commercial quarry operations

30 It also sought costs on the basis of the nature and complexity of the proceedings. Ms Schoff submitted that whilst the Notice concerned the discharge of water from the central drain, the applicant sought to bring into the proceedings broader issues, by service of its draft Water Management Plan which addressed the wider issues as to water management at the quarry, giving the respondent no choice but to meet those issues, She stated for that reason the tribunal invited the involvement of the other regulatory authorities at mediation. This, she said, resulted in costs being incurred not only in defending the Notice but in dealing with the broader issues, preparing expert reports and engaging experts.

31 These issues are related.

32 The issue of misconceived proceedings is not an issue mentioned in s 109(3) but it would be a relevant matter under paragraphs (c) and (e). The VCAT Act specifically mentions it in s 75(1)(a) where the tribunal has power to summarily dismiss unjustified proceedings. Misconceived in this context means obviously untenable or groundless, which has been dealt with above, or means that the applicant has brought an incorrect type of application.

33 This application for review is not misconceived in that latter sense as it is the appropriate proceeding to seek a review of the Notice. There is no want of jurisdiction or incorrect selection of the type of proceeding.

34 Rather Ms Schoff put the issue as one where the application could never produce a satisfactory outcome for the applicant because, as it eventuated, a number of other authorities were involved in the regulation of the site and there were compliance issues arising with those authorities. This was the very ground for the application for withdrawal as the applicant came to this view and had to reconsider its approach following the mediation.

35 There was a dispute as to which party involved the other authorities. Ms Schoff's submissions were that the applicant had caused the involvement of the other authorities, but it is clear from Ms French's affidavit [cls 20- 25] that the respondent advised the tribunal of the other authorities, and Mr Smale denied his client had taken that step to complicate the proceedings. Ms Schoff's submission is not supported by the evidence she brought, rather the contrary, and it appears the the respondent caused the complexity of the proceedings to be increased by informing the tribunal of the interested parties.

36 It is quite appropriate, indeed desirable, for a government agency to liaise with other agencies in a situation like this, and that due diligence be conducted of overall compliance with all relevant licences and permits. But non compliance with the other permits or licences is not strictly relevant to the particular application for review, and the applicant should not be responsible for those costs which are not strictly relevant to the proceedings. Such due diligence is an ordinary supervisory task and cost of government unless there is an identified statute throwing that cost onto the person regulated.

37 The further aspect of Ms Schoff's submission is that the proceedings were misconceived because they would not have produced a successful outcome for the applicant, in the sense that it would not have solved the issues arising with the other authorities. What this means in a practical sense is that an applicant should pay costs if the respondent brings to bear pressure from other sources which make it impracticable for the applicant to proceed. In the commercial world these pressures could be financial or market driven. In this case the pressures are governmental. Pressure of this nature is often the way of the world by which litigation is resolved, but it is not a ground for an order for costs under section 109(3).

38 Further it has not been established that the proceedings have been futile. At the hearing I gained the impression that the mediation, whilst not resolving the matter, made progress, identified issues and shown the applicant a path forward. The applicant has taken the sensible course of stepping back to address the issues as a whole, saving the parties the costs of further litigation, which in a no costs jurisdiction is to be encouraged rather than penalised.

[1] [2004] VCAT 682 (6 April 2004)

[2] Asghari v SBS Radio [2001] VCAT 1744 (9 August 2001);

Bourke v Peters [2002] VCAT] 734 (13 December 2001);

Taylor v Third Szable Holdings Pty Ltd [2001] VCAT 2219 (13 December 2001);

Hurwood v Emergency Services Superannuation Scheme [2002] VCAT 1052 (5 September 2002);

[3] [2001] VSCA 236; (2001) 3 VR 589 at 600

[4] [2002] VCAT 1052

[5] Fernandez v Amatek Pty Ltd [2001] VCAT 1979 (

[6] Hobsons Bay CC v Haouli [2001] 7 VPR 249

[7] [2004] VCAT 1441 (23 July 2004) at paras 11-13.