Delta Electricity v Blue Mountains Conservation Society Inc

Procedural background 3 The respondent commenced its proceedings by way of summons on 2 June 2009 seeking a declaration that between May 2007 and April 2009 the appellant had polluted the waters of the Cox's River, in the Local Government Area of Lithgow in New South Wales, in contravention of the Protection of the Environment Operations Act 1997 (the PEO Act), s 120. 4 The respondent also sought orders that the appellant cease polluting the waters of the Cox's River in contravention of the PEO Act and that it take such steps as the Court directs to mitigate the harm caused to the environment of the Cox's River by reason of the appellant having polluted the said waters in contravention of s 120. The respondent's standing to bring the proceedings derives from the PEO Act, s 252. The relevant legislative framework is set out below. 5 Points of claim were filed in the matter on 11 June 2009. The essential factual allegations are set out at (10) and (11) of that document in the following terms: "(10) The Coxs River has its head waters in the area to the north of Lithgow; flows through the Wallerawang Power Station, including via the water body known as Lake Wallace; and continues to flow downstream of the Wallerawang Power Station, discharging its waters into the Warragamba Dam.

(11) Waste waters from the cooling towers and/or associated plant at the Wallerawang Power Station are discharged by Delta into the Coxs River at a point approximately 200 metres to the south south east of the point where the Coxs River exits Lake Wallace (the 'Discharge Point') via an artificial watercourse known as the Tortuous Watercourse." 6 The breach of the PEO Act was alleged at (13) in the following terms: "(13) During the period between about May 2007 and about April 2009, Delta polluted the waters of the Coxs river in contravention of section 120 [of the PEO Act] by discharging waste waters containing pollutants from the cooling towers and/or associated plant into the Coxs River at the Discharge Point." 7 The pollutants alleged to have been discharged into the waters of the Cox's River are salt, copper, zinc, aluminium, boron, fluoride and arsenic. 8 On the same day it filed its points of claim, the respondent filed a notice of motion in which it sought an order that the maximum costs that may be recovered by one party from another in the proceedings be in the sum of $10,000. Alternatively, the respondent sought an order that the maximum costs that may be recovered be in an amount specified by the Court. 9 The notice of motion was supported by the affidavit of Tara Cameron, affirmed on 12 June 2009.

The legislative framework 10 The objects of the PEO Act are specified in s 3. The objects specified in (a) and (d) provide an overview of the protection to the environment that the legislation is designed to achieve. Those provisions state the objects of the Act as being:

"(a) to protect, restore and enhance the quality of the environment in New South Wales, having regard to the need to maintain ecologically sustainable development …

(d) to reduce risks to human health and prevent the degradation of the environment by the use of mechanisms that promote the following: (i) pollution prevention and cleaner production, (ii) the reduction to harmless levels of the discharge of substances likely to cause harm to the environment, (iia) the elimination of harmful wastes, (iii) the reduction in the use of materials and the re-use, recovery or recycling of materials, (iv) the making of progressive environmental improvements, including the reduction of pollution at source, (v) the monitoring and reporting of environmental quality on a regular basis …" 11 The PEO Act, Ch 5 deals with environment protection offences. Part 5.3 deals with water pollution. Section 120, upon which the respondent based its substantive application, provides: " 120 Prohibition of pollution of waters

(1) A person who pollutes any waters is guilty of an offence.

pollute waters includes cause or permit any waters to be polluted." 12 There are specific standing provisions in the PEO Act, which are also reflected in the objects specified in s 3. The relevant provisions are as follows: " 3 Objects of Act

(b) to provide increased opportunities for public involvement and participation in environment protection …" " 252 Remedy or restraint of breaches of this Act or regulations

(1) Any person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of this Act or the regulations.

(2) Any such proceedings may be brought whether or not proceedings have been instituted for an offence against this Act or the regulations.

(3) Any such proceedings may be brought whether or not any right of the person has been or may be infringed by or as a consequence of the breach.

(4) Any such proceedings may be brought by a person on the person's own behalf or on behalf of another person (with their consent), or of a body corporate or unincorporate (with the consent of its committee or other controlling or governing body), having like or common interests in those proceedings.

(5) Any person on whose behalf proceedings are brought is entitled to contribute to or provide for the payment of the legal costs and expenses incurred by the person bringing the proceedings.

(6) If the Court is satisfied that a breach has been committed or that a breach will, unless restrained by order of the Court, be committed, it may make such orders as it thinks fit to remedy or restrain the breach." 13 The respondent also drew the Court's attention to s 253 which is a complementary standing provision permitting any person to bring an action in respect of breaches or threatened breaches of any other Act.

The Blue Mountains Conservation Society Inc 14 The respondent was formed in 1996 by the merging of the Upper and Lower Blue Mountains Conservation Societies. Ms Cameron, in her affidavit, describes the respondent as the "peak environmental group in the Blue Mountains region". As at the time of swearing her affidavit, the respondent had approximately 973 members, mostly residents of the Blue Mountains. 15 The main object of the respondent, as stated in its Constitution, is to: "… disseminate and foster an understanding of the ideals of Conservation among the members of [the respondent] and the public generally, particularly in relation to the unique resources of the Blue Mountains." 16 In its Mission Statement, the respondent's stated aim is to: " · Promote ecological sustainability as the basis for all human activities · Preserve the natural environment: flora, fauna, habitat, water, land and air · Actively oppose those human activities which degrade or destroy the natural environment …" 17 The respondent is run by a management committee comprised of volunteers. It operates two plant nurseries, one at Blackheath and the other at Lawson. It has no staff and the various activities that it undertakes, including the operation of the nurseries, are performed by volunteers. 18 The respondent's income is derived from membership fees, donations, nursery sales, a government grant and interest from investments. For the 12 month period ending 28 February 2009, the respondent had net assets of $180,016. It had suffered an operating loss for the year of almost $54,000 due to a decrease in the value of investments during the period of the global financial crisis.

Reasons for commencing proceedings 19 The respondent has been concerned with the alleged degradation of the quality of the water in the Cox's River since January 2007, when the problem was brought to its attention by the Lithgow Environment Group, which had carried out water quality testing in the Cox's River as part of its Streamwatch program. 20 In commencing the proceedings, the respondent considered the case was in the public interest and that the ongoing degradation of water quality in the Cox's River was an important environmental issue that needed to be addressed. Before commencing the proceedings, the respondent brought the matter to the attention of the Department of Environment and Climate Change. A response was received from the then Minister for the Environment, in which he advised that he had brought the matter to the attention of the Sydney Catchment Authority. In her affidavit, Ms Cameron stated that as far as she was aware, the Department had not taken any action to improve water quality in the river and accordingly the respondent felt proceedings needed to be taken in the public interest. 21 At the hearing of the application, the respondent also relied upon the affidavit evidence of Christiaan Jonkers. Mr Jonkers is a volunteer with Streamwatch, a water monitoring program supporting local communities to investigate water quality. Mr Jonkers has undertaken training in water quality testing provided by Streamwatch for the purposes of testing water quality at 35 sites along the Cox's River. On the basis of the testing he had undertaken, high salinity levels and elevated phosphate levels were detected in those parts of the river alleged to be polluted by the appellant. 22 The expert report of Dr Ian Wright was also in evidence. According to that evidence, there is water quality impairment due to the inflow of the Wallerawang Power Station waste waters into the Cox's River from the Tortuous Watercourse. Dr Wright said that the contamination was due to elevated levels of salt and heavy metals including aluminium, arsenic, copper, nickel, zinc, boron, and fluoride. He was of the opinion that: "… the more sensitive species across many biological groups would be damaged or killed by the elevated toxic levels." 23 Dr Wright also identified a risk to consumers of locally caught fish because of the accumulation of heavy metals such as copper and zinc.

The respondent's reasons for seeking a maximum costs order under r 42.4 24 The respondent, in explaining why it was seeking an order under UCPR, r 42.4, referred to the financial statement annexed to the affidavit of Ms Cameron. That statement revealed that for the year ended 28 February 2009, it had membership fees and nursery trading income each of approximately $14,000, donations of just over $9,000 and a government grant of $4,500. As already indicated, it had total net current and non-current assets of $180,000. 25 Ms Cameron stated that income sources were not guaranteed and that in the following year the respondent would be required to lease new premises, as it had recently lost the use of premises it had occupied at a nominal rent. Ms Cameron further stated that the respondent did not have a reliable income stream that would replace the respondent's investments if used on a single court case. 26 In deciding to investigate the water quality in the Cox's River and in pursuing the court proceedings, the respondent's management committee had resolved to pay to the Environmental Defenders' Office a sum of $1,500 to engage an expert to undertake water quality monitoring and a further sum of $200 for an application under the Freedom of Information Act 1989 to the Department of Environment and Climate Change, for information about the Cox's River. Both those sums have been expended. The respondent, at the time that Ms Cameron affirmed her affidavit, had also committed to pay the following fees to enable the proceedings to be conducted:

fees for water quality expert: capped at $3,000 fees for the Environmental Defenders' Office: capped at $1,500 (and already expended) fees for junior counsel: capped at $5,000 cost of court fees and other disbursements: estimated at approximately $2,000 27 Through Ms Cameron's affidavit, the respondent contended that unlimited costs and/or an adverse costs order could threaten its ongoing viability and jeopardise its ability to continue to provide member services and engage in campaigns about local and regional conservation. The respondent also contended that it was possible it could become insolvent if an order limiting its response to costs was not made. Accordingly, it had resolved that it was only able to proceed if an order was made by the Court limiting the costs it would be liable to pay should it be unsuccessful in the proceedings.

The appellant's response to the application 28 The application for a maximum costs order was opposed and was also met by an application by the appellant for security for costs. In his affidavit sworn 5 August 2009, Timothy Webster, solicitor for the appellant, identified the issues in the case as being: "(a) whether the defendant polluted the waters in the Coxs River in contravention of section 120 of [the PEO Act];

(b) whether, the Court in its discretion, should make a declaration that the defendant has committed a criminal offence;

(c) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the physical condition of the waters to the river;

(d) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the chemical [composition] of the waters to the river;

(e) whether, and how, the matter alleged to have been introduced into the waters of the Coxs River has changed the biological condition of the waters to the river;

(f) whether the change in the condition of the waters of the Coxs River (if any) makes, or is likely to make, the waters unclean, noxious, poisonous, impure or harmful to aquatic life, animals, birds or fish;

(g) what steps, if any, the defendant must take to mitigate any harm (if any) caused to the environment of the Coxs River." 29 Mr Webster also referred to the evidence he understood would be adduced in the substantive proceedings by the respondent, including the affidavits of Mr Jonkers and Dr Wright, as well as affidavits from a representative of the Sydney Catchment Authority as to the testing referred to in the affidavit of Dr Wright, and an affidavit from an engineer with expertise in the operations of coal-fired power plants. Mr Webster also referred to documents that the respondent expected to obtain following the issue of subpoenas. 30 Mr Webster then provided an assessment of the costs the appellant anticipated it would incur in defending the substantive proceedings. In his opinion, it was likely the costs of the proceedings assessed on the ordinary basis would be between $232,000 and $266,000. That assessment included the cost of retaining junior and senior counsel for the purposes of advising; preparing the matter for hearing and appearing on the hearing; solicitors' costs; and the cost of retaining experts to carry out water quality sampling and testing and eco-toxicity testing. Mr Webster provided the following summary of these costs:

solicitor's fees of $154,203; junior counsel's fees of $25,900; senior counsel's fees of $51,550; expert's fees of $12,500; sampling, testing and disbursements of $88,428. 31 In addition, the appellant estimated it would expend $37,000 on the r 42.4 application, which was then listed for a half day hearing. 32 Mr Webster's assessment of the costs likely to be incurred by the appellant was supported by an affidavit of Alyson Ashe, expert legal costs consultant. The respondent did not contest the reasonableness of this assessment, but did observe that costs were very much in the control of the party incurring them.

The trial judge's reasons 33 The trial judge commenced her consideration of the application by reference to the Civil Procedure Act 2005, ss 58 and 60 and the UCPR, r 42.4. As s 58 makes internal reference to ss 56 and 57, it is convenient to also refer to those provisions at this point. " 56 Overriding purpose

(1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings …

(1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects:

(2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1).

(1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: …

(iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice.

(2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) ....

(vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case.

In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute." 34 The power exercised in this case was pursuant to UCPR, r 42.4 which provides: " 42.4 Power to order maximum costs

(1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another.

(3) An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap: (a) progress of the proceedings to trial or hearing, or (b) trial or hearing of the proceedings.

(4) If, in the court's opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1)." 35 The significant argument advanced by the respondent before the trial judge was the public interest nature of the substantive proceedings. The focus of the appellant's argument was that the power in UCPR, r 42.4 was directed to the need to ensure that costs are proportionate to the issues raised by the parties, so that a court may put a brake on intemperate and/or the disproportionately expensive conduct of proceedings: see the Civil Procedure Act, ss 58 and 60. The appellant submitted that, in particular, UCPR, r 42.4 was not a tool in the armoury of well-intentioned public interest litigants. 36 Pain J rejected the appellant's argument that the purpose of making an order under UCPR, r 42.4 was related solely to the need to manage cases efficiently, as required by the Civil Procedure Act, s 60. Her Honour observed that the rule itself was broadly drafted and that it did not only refer to matters arising by reference to s 60. Her Honour held that there was no basis in the Civil Procedure Act and the UCPR to restrict the application of the power to make costs orders pursuant to UCPR, r 42.4 in the way for which the appellant contended. 37 Her Honour acknowledged that the question of costs was generally considered at the end of the hearing, at which time a decision could be made as to whether a public interest consideration was to apply to any costs order. However, as her Honour observed, an order under UCPR, r 42.4 could be sought at any time in the proceedings, and held that an order under UCPR, r 42.4 could be made in public interest cases: see R (on the application of Corner House Research) v The Secretary of State for Trade and Industry [2005] 4 All ER 1 (Corner House) at [74]; and Corcoran v Virgin Blue Airlines Proprietary Limited [2008] FCA 864 at [6]. Her Honour considered that the factors referred to in those decisions provided a useful guide as to the relevant criteria that ought to be considered in this case. 38 Her Honour noted that this was the first case under the PEO Act using the open standing provisions of s 252 of that Act seeking, in civil proceedings, a declaration and orders requiring a holder of an environment protection licence to cease polluting waters in contravention of the PEO Act. Her Honour also observed that pollution of waters contrary to s 120 involved the commission of a criminal offence. As the application had been filed early in the proceedings, her Honour observed that in the absence of any knowledge of the appellant's case, it was difficult to fully understand the complexity of the issues likely to be raised. However, her Honour inferred that the legal matters that might be raised in the proceedings would be complex and novel. Her Honour said that the matter, if it proceeded, would be a test case. Her Honour also observed that the appellant had not put in issue, for the purposes of the hearing of the application, that the respondent had an arguable case. 39 Her Honour concluded that the matter appeared to be one of public interest, given the constitutional objects and activities of the respondent and the environmental protection issues the litigation sought to address. Her Honour was satisfied, in this regard, that the proposed litigation came within the respondent's constitutional objects and purposes. Her Honour rejected the appellant's submission that the protection of the public interest resided within the Department responsible for regulating the environmental legislation the subject of the proceedings. Her Honour considered it relevant, however, that the relevant regulatory authorities had not commenced proceedings against the appellant, notwithstanding that the respondent's solicitors had brought the matter to the attention of those authorities. She also found that the respondent would derive no financial benefit from the proceedings. 40 Her Honour considered the position as to the costs each party would incur should the substantive matter proceed. She noted that the legal representation for the respondent was essentially being undertaken on a pro bono basis and that the respondent would not continue with the proceedings if it was at risk of a costs order in a sum greater than $20,000. Her Honour accepted that the appellant's assessment of the costs it was likely to incur, namely, in the range of approximately $230,000 to $285,000, appeared to be a reasonable estimate. However, as the appellant had substantial resources and was a large State government corporation, her Honour considered that although it would not recover most of its costs if the respondent's case failed, it would not suffer financial hardship if the order sought under UCPR, r 42.4 was made. 41 Finally, her Honour rejected the appellant's argument that the making of an order under UCPR, r 42.4 gave rise to the potential for inefficient litigation, as there would be no incentive for the respondent to run its case efficiently. Her Honour was satisfied that was not a problem, having regard to the terms of UCPR, r 42.4(4), which enables the court, if there are special reasons and it is in the interests of justice to do so, to vary the specification of maximum recoverable costs under UCPR, r 42.4(1).

The issues on the appeal 42 The appellant raised 19 grounds of appeal. These grounds were sometimes overlapping and repetitious. A subsequent attempt to refine these issues was not of much assistance to the Court. In the course of argument, it became apparent that the appellant's principal challenge was that her Honour had erred in that she had made an order to protect the respondent's assets to the exclusion of other relevant considerations. Those other relevant considerations included that the usual rule that costs follow the event and are compensatory in nature and that the underlying purpose of r 42.4 is to ensure the proportionality of costs to the complexity of the proceedings. The appellant contended that her Honour erred in her reliance on the English authorities and, in particular, the decision in Corner House, relating to protective costs orders. Related to this argument was the appellant's submission that it was not reasonably possible to categorise proceedings as public interest litigation at the outset. The appellant also complained that in making an order under r 42.4, her Honour had predetermined the result of the appellant's security for costs application. 43 The appellant submitted that, given those errors, the Court may infer that there had been a failure to properly exercise the discretion conferred by UCPR, r 42.4 as, upon the facts, the result embodied in the primary judge's order was unreasonable or plainly unjust. 44 The respondent filed a notice of contention, contending that: "Section 98(1) and 98(3) of the Civil Procedure Act 2005 conferred on the primary judge the discretionary power to make an order in terms of order No. 1 as set out at paragraph [71] of the primary judges reasons for judgment."

The respondent relied on its written submission in respect of the notice of contention. 45 As much of the discussion on the appeal was directed to the purpose underlying r 42.4, it is useful at the outset to consider the cases where a maximum costs order has been made. On the appellant's approach, it was necessary to understand those authorities in the context of the rules of court and the general principles that govern costs, including costs in public interest matters. Accordingly, this is also a convenient point at which to refer to the relevant provisions of the legislation and rules of court governing costs, which I will refer to as the costs rules.

The costs rules 46 The general rule as to costs is that costs are in the discretion of the court. The Civil Procedure Act, s 98(1) provides that subject to the rules of Court and to the Civil Procedure Act or any other Act, costs are in the discretion of the court. The Civil Procedure Act, s 98(3) provides that an order as to costs may be made at any time of the proceedings. UCPR, r 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." 47 Unless the court otherwise orders or the rules otherwise provide, costs are payable on the ordinary basis: UCPR, r 42.2. The provisions of UCPR, r 42.4 , the maximum costs provision, have already been set out above at [35]. Security for costs may be ordered at any stage in the proceedings: UCPR, r 42.21; see also the Corporations Act 2001 (Cth), s 1335. 48 The Land and Environment Court Rules 2007 (the LEC Rules), r 4.2 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.

(2) The Court may decide not to make an order requiring an applicant in any proceedings to give security for the respondent's costs if it is satisfied that the proceedings have been brought in the public interest."

Pursuant to UCPR, r 1.7, local rules, such as r 4.2, prevail over the UCPR.

The case law 49 There are four aspects of the case law relevant for present purposes. The first relates to the appellate function, having regard to the fact that her Honour was exercising a broad based discretion: the second is the case law relating to public interest litigation; the third and fourth aspects are the Australian and English authorities, respectively, where costs orders have been made, either capping the costs that may be recovered, in the case of the Australian authorities; or the English cases, where a protective costs order has been considered.

(a) appeals from discretionary judgments 50 The restraints on appellate interference with discretionary judgments are well recognised. Error in the exercise of the discretion must be established: see House v R at 504. Accordingly, it must be shown that the judge acted on a wrong principle; mistook facts; failed to take into account a relevant consideration; or took into account an irrelevant consideration. However, even if some such error is not discernible from the judge's reasons, a result that is unreasonable or plainly unjust may give rise to an inference that there was some failure in the proper exercise of the discretion: House v R at 505. 51 In Re Gilbert (1946) NSW SR 318, Jordan CJ observed, at 323, that there was: "… a material difference between an exercise of discretion on a point of practice or procedure and an exercise of discretion which determines substantive rights." 52 His Honour pointed out that unless a "tight rein" was kept on the interference with orders on matters of practice and procedure, "the result would be disastrous to the proper administration of justice". As his Honour pointed out, cases could be delayed and costs increased significantly if a litigant "with a long purse or a litigious disposition" could, in effect, transfer the exercise of discretion in interlocutory applications from a trial judge to a court of appeal. 53 However, different considerations apply where what was being appealed was a discretionary decision finally determinative of legal rights. Jordan CJ emphasised that the restraints on appellate interference in respect of this class of case, whilst strict, were less stringent than those adopted in matters of practice or procedure. 54 The present case involves an interlocutory order. However, it is somewhat hybrid in its nature. It is more serious in its effect than what is involved, for example, in the making of directions for the conduct of proceedings. However, it is not final in the sense that pursuant to UCPR, r 42.4(4), the court may vary the order made, subject to there being special reasons and it being in the interests of justice to do so. In any event, it should be observed that the wide discretion given to trial judges in respect of costs generally is respected by the statutory provisions which require the grant of leave to appeal against any costs order, whether made during or at the conclusion of proceedings.

(b) public interest cases 55 Even prior to the introduction of the LEC Rules, r 4.2, it was accepted that in public interest cases an unsuccessful party may not be ordered to pay costs: see Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72. That case concerned the validity of a development consent granted by the respondent Council, for failure to require a fauna impact statement. The applicant's concern was with an endangered koala population. The applicant failed before the primary judge. Nonetheless, the primary judge, Stein J, determined that there should be no order as to costs. 56 In determining that there be no order as to costs, Stein J took, relevantly, the following matters into account:

(i) that the rule that costs follow the event evolved in an era of private litigation and that there was a need to distinguish applications to enforce public law obligations arising under environmental laws, lest the relaxation of standing conferred by s 123 had little significance;

(ii) the characterisation of proceedings as " public interest litigation ", with the prime motivation for bringing the proceedings being the upholding of " the public interest and the rule of law ", may be a factor which contributed to a finding of " special circumstances ", but was not of itself sufficient to constitute special circumstances warranting departure from the usual rule. Something more was required;

(iii) The appellant had no private interest in the litigation and was only motivated by public interest considerations;

(iv) there was a public interest in the outcome of litigation in this case as a significant number of members of the public shared the appellant's stance as to the development, the preservation of natural features and flora of the site and the impact on endangered fauna;

(v) the case had been arguable and had raised and resolved significant issues as to the interpretation and future administration of statutory provisions relating to the protection of endangered fauna and the ambit and future administration of the development consent. These issues had implications for the Council, the developer and the public.

His Honour considered, therefore, that there were sufficient special circumstances to justify a departure from the ordinary rules as to costs. 57 The relevant cost provision governing the appellant's case at that time had been the Land and Environment Court Act 1979, s 69. That section provided, relevantly, that costs were in the discretion of the court and, the court may determine by whom and to what extent costs were to be paid. The discretion conferred by s 69 was unconfined except to the extent that a court could not take into account extraneous considerations having regard to "the subject matter and the scope and purpose of the legislation": Oshlack at [22]. There was no provision equivalent to UCPR, r 42.1. 58 The High Court upheld the trial judge's order. Gaudron and Gummow JJ observed, at [30], that "public interest litigation" was a "nebulous concept", unless given content of a legally normative nature, as the primary judge had done: South Melbourne City Council v Hallam [No 2] (1994) 83 LGERA 307 at 311; cf Mahar v Rogers Cablesystems Ltd (1995) 25 OR (3d) 690 at 702-705. Their Honours stated, at [40], that there is no absolute rule that in the absence of disentitling conduct a successful party was to be compensated in costs by the unsuccessful party. Their Honours also stated that there was no rule excluding the jurisdiction of the court to order a successful party to bear the costs of the unsuccessful party. 59 Their Honours concluded, at [45], that s 69, in its operation upon litigation under the open standing provision of s 123, was not to be narrowly construed. Their Honours further commented that s 69 was applicable to a new species of litigation and the discretion it conferred was "to be exercised so as to allow for the varied interests at stake in such litigation". Their Honours considered that Stein J did not take into account considerations which could be said to be definitely extraneous to any objects the legislature could have had in view in enacting s 69 and in relation to the operation of s 69 upon proceedings instituted under s 123. 60 Kirby J, in a separate judgment, agreed. 61 In Minister for Planning v Walker (No 2) [2008] NSWCA 334, the Court accepted, at [9], that more than the fact that litigation is characterised as public interest litigation is required to displace the "ordinary rule as to costs". The costs provisions in play in Walker were the Civil Procedure Act, s 98 and UCPR, r 42.1 (LEC Rules, r 4.2 was not in force at the time of those proceedings). Hodgson JA (Campbell and Bell JJA agreeing) held that there was clearly a public interest in the principles of ecologically sustainable development and in climate change flood risk in relation to properties near the coast, which had been the subject matter of the proceedings in that case. His Honour considered that this interest was not confined to a small number of people in the immediate vicinity of the development. His Honour inferred that the prime motivation of this litigation was to uphold the rule of law in relation to that matter of public interest. 62 Accordingly, his Honour characterised the matter as "plainly public interest litigation". The factors his Honour took into account in determining that the matter was properly characterised as public interest litigation were based on considerations that Lloyd J had identified in Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434; (2004) 136 LGERA 365. The additional factors the Court considered constituted special circumstances warranting departure from the usual rule that costs follow the event included that the proceedings raised a novel point of law and were reasonably arguable that the appellant had established the Minister had not taken into account one of the objects of the Environmental Planning and Assessment Act 1979 and that the Minister's failure to do so was contrary to good decision-making.

(i) the Australian cases 63 Maximum costs orders were first introduced in Australia in the Federal Court Rules, O 62A by Statutory Rule 421 of 1992. UCPR, r 42.4(1) effectively mirrors O 62A(1). To the extent there are differences, they are not presently relevant. 64 Prior to the introduction of O 62A, Black CJ wrote to the Law Council of Australia seeking comments about the proposal. His Honour wrote: "There is concern within the court, reflecting that within the wider community and the legal profession, that the cost of litigation, particularly for persons of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice.

A deterrent to the assertion or defence of rights in civil litigation is a fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected. One suggestion that has been made proposes a change to the rules so as to empower a judge, early in proceedings, to make an order fixing a ceiling on the amount of costs recoverable from the unsuccessful party in the litigation …

The fixing of any such a maximum would not preclude recovery over and above that limit where a party had, by its own conduct, caused the successful party to incur additional and unnecessary costs. There would, of course, be a general provision to allow for the variation of a maximum figure so fixed, but the object of such a rule would be to define a budget so that the management of the case might be tailored according to its economic limits. It is anticipated that such a rule, if introduced, would be applied principally to commercial litigation at the lower end of the scale in terms of complexity and the amount in dispute, although it could be applied in other cases as appropriate." ( Sacks v Permanent Trustee Australia Limited (1993) 45 FCR 509; (1993) 118 ALR 265 at 269) 65 O 62A has been considered in a variety of factual circumstances, including in the following cases: Dibb v Avco Financial Services Limited [2000] FCA 1785; Muller v Human Rights and Equal Opportunity Commission and Anor (Federal Court of Australia, 17 July 1997, unreported); Woodlands v Permanent Trustee Co Limited; Bass v Permanent Trustee Co Limited; Conca Permanent Trustee Co Limited (1995) 58 FCR 139; Hanisch v Strive Pty Limited (1997) 74 FCR 384; Maunchest Pty Limited v Bickford (Federal Court of Australia, 7 July 1993, unreported); Sacks v Permanent Trustee; and Corcoran v Virgin Blue Airlines. 66 UCPR r 42.4 has been considered in Sherborne Estate (No 2): Vanvalen & Anor v Neaves & Anor; Gilroy v Neaves & Anor [2005] NSWSC 1003; 65 NSWLR 268 and in Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited and Minister for Mineral Resources [2009] NSWLEC 165; (2009) 170 LGERA 22. 67 The commencing point for any consideration of r 42.4 is that the power to make such an order is discretionary. In the context of an application for a maximum costs order in the Land and Environment Court, the LEC Rules, r 4.2 is also relevant. 68 UCPR, r 42.4 does not apply for the benefit of the applicant only: if an order is made, it extends to both parties. see Sacks; Maunchest; Muller. The existence of a public interest element in a case has been held to be a factor of "some significance", although not a decisive consideration: Woodlands at [148]. However, it should be noted that Woodlands was not public interest litigation of the kind contended for in this case. Rather, it involved representative actions in which damages were sought by or on behalf of private individuals who had suffered loss under a State government administered HomeFund scheme. 69 In Woodlands two other factors were of significance. First, the applicants, who were elderly and of insubstantial means, would most likely be required to abandon their litigation unless a maximum costs order was made. Secondly, had the proceedings been brought in the New South Wales State court system, the applicants would have had the benefit of the capping provisions contained in the Legal Aid Commission Act 1979, s 47. There was doubt whether that provision applied to proceedings in the Federal Court. Given the public interest element in the case, those two factors were persuasive in the Court making an order limiting the costs to the amount that the applicants would have been required to pay in a State court, having regard to the costs capping provisions of the Legal Aid Commission Act. 70 Another issue which arose in Woodlands was whether persons in the representative group could provide funds to satisfy any adverse costs order. When the Court raised that issue, evidence was adduced that a levy of $200 per member had been struck but the funds raised had been reasonably spent on the applicants' own legal costs. 71 The complexity of the matter may be a relevant consideration: see Sacks; Hanisch. Overall, the authorities have exercised the discretion in favour of making an order in less complex litigation. However, the fact that a matter is complex does not preclude an order being made: see Woodlands; Muller; Hanisch. Drummond J observed in Hanisch, at 387, that the principal object of O 62A is to: "… arm the Court with power to limit the exposure to costs of parties … which involves less complex issues and is concerned with the recovery of modest amounts of money, although it may be appropriate for an order to be made under O 62A in other cases, of which Woodlands is an example." 72 In Hanisch Drummond J (subject to a qualification not presently relevant) fixed the maximum costs order to the costs that the parties would have recovered had the matter been brought in the District Court, being the jurisdiction in which his Honour considered the proceedings ought more appropriately have been brought. His Honour did not set a fixed amount by way of a maximum costs order, but made an order by reference to the scale of fees in the District Court. 73 In Dibb v Avco Financial Services Limited Sackville J refused an application for a maximum costs order in the sum of $10. His Honour said, at [15]: "There does not seem to me to be any feature of the present case that warrants an order being made under O 62A. The proceedings cannot be described as simple commercial litigation which should be subject to a 'budget costs regime'. Indeed, Mr Dibb has framed his case in such a way that a large number of factual and legal issues are likely to arise. Should it turn out that his case fails, there is a risk of injustice to the respondents if they are denied what otherwise would be their entitlement to apply for orders that Mr Dibb pay their costs. I bear in mind that they have already been required, inter alia, to undertake discovery of substantial numbers of documents and, for this purpose, to undertake extensive, time-consuming and doubtless expensive inquiries." 74 It seems that it was also relevant to Sackville J's determination that there was nothing to suggest that the applicant was prevented or inhibited from conducting his case by the prospect of an adverse costs order. 75 In Corcoran Bennett J, in summary form, identified from the existing case law the following factors that had been considered relevant in determining whether a maximum costs order should be made; the timing of the application; the complexity of the factual or legal issues raised in the proceedings; the amount of damages than the applicant seeks to recover and the extent of the remedies sought; whether the applicant's claims are arguable and not frivolous or vexatious; the undesirability of forcing the applicant to abandoning the proceedings; and whether there is a public interest element to the case. 76 In Sacks, I referred to the desirability of the Court being informed of the estimate of costs that were likely to be incurred in the litigation: "… not for the purposes of using it as the benchmark for any order which might be made, but to provide the court with evidence as to what costs are likely to be incurred and why such costs are likely to be incurred. The court would then be informed as to whether the amount which the court was asked to order was reasonable, having regard not only to the amount of the claim, but also the complexity of the issues, the extent of the work involved in the matter up to and including the hearing and the costs otherwise likely to be incurred." 77 In Sherborne Palmer J made a maximum costs order in a Family Provision Act 1982 matter. His Honour observed, at [33]: "Section 98 gathers together powers formerly given in s.76 Supreme Court Act and SCR Pt 52A r.6, r.7 and r.8. The terms of SCR Pt 52A r.6(2) - now CPA s.98(4) - indicate that the Court is empowered to do a number of different things. As the opening words of s.98(4) indicate, the Court acts under this section at the time of pronouncing a costs order, whether at the conclusion of the whole of the proceedings or at the conclusion of some interlocutory stage. In this regard, the power of the Court is exercised at a different time and for a different purpose from the power conferred by UCPR 42.4: it is exercised as part of the giving or refusal of substantive relief whereas the power in UCPR 42.4 is exercised as part of case management to ensure that disputes are resolved justly and cheaply." 78 Earlier, his Honour said: "[26] I conclude that UCPR 42.4 is intended as a means whereby the Court may, if the need arises, curb the tendency of one or all parties to engage in disproportionate expenditure on legal costs by making it clear, at an early stage of the proceedings, that beyond a certain limit the parties will have to bear their own costs - win or lose.

[29] It seems to me that UCPR 42.4 and its precursor, SCR Pt 52A r.35A, were designed to put into the Court's hands a brake on intemperate and disproportionately expensive conduct of proceedings. The power conferred by the Rule is not brought into play only if one of the parties invokes it: the Court itself may exercise the power on its own motion whenever it sees the need. This is because the policy of the law, enshrined in CPA s.56(1), is to facilitate the just, quick and cheap resolution of the real issues in proceedings. By s.56(2), the Court not only may, but must, give effect to that policy whenever it exercises any power conferred upon it by the Act or the Rules - indeed, even when the parties themselves do not wish to conduct the proceedings quickly or cheaply.

30 Proportionality of costs to the value of the result is central to the just and efficient conduct of civil proceedings: see e.g. Lownds v Home Office (Practice Note) [2002] 1 WLR 2450 per Lord Wolfe CJ. It is a pity that the precursor of UCPR 42.4 seems never to have been used to this end. In Jvancich v Kennedy (No 2) [2004] NSWCA 397 at para [6], the Court of Appeal pointed out that it has not been the practice in Australia for the Court to fix the amount of costs. However, the Court in that case was concerned with a costs order made at the conclusion of proceedings and was not giving consideration to the making of a capping order in the course of case management under SCR Pt 52A r.35A (UCPR 42.4). I do not read Jvancich as inhibiting the use to which I have suggested UCPR 42.4 may be put. In my opinion the Court should not be reluctant to use UCPR 42.4 to prevent extravagant expenditure of legal costs in FPA cases, such as has occurred here. The time for its use is early in case management, whenever it appears that the parties' litigious fervour may be leading them to excessive expenditure of costs." 79 Subsequent to the decision in this matter, Preston CJ considered an application for an order under r 42.4 in the Caroona Coal Action Group matter. His Honour observed, at [16], that the purpose of a maximum costs order was to facilitate access to justice, which could be impeded where the costs of litigation were high, including where a party feared a costs order where the costs were likely to be high. That is the position in this case. 80 Preston CJ said, at [18], that a maximum costs order was one means of achieving proportionality of costs. This comment was directed at proportionality as between the amount of costs and the complexity of proceedings. In other words, costs were often disproportionately high in non-conflict proceedings, or where the amount involved in the litigation was not high. His Honour instanced Family Provision Act proceedings as a good example: see Sherborne. His Honour considered that a maximum costs order in such situations fulfilled the court's duty under the Civil Procedure Act, s 56. 81 However, his Honour observed that ensuring proportionality of costs did not always have the effect of achieving access to justice. A party might be deterred from bringing complex proceedings because of costs considerations. His Honour said, at [21]: "A maximum costs order may alleviate this barrier by protecting the beneficiary of the order from exposure to legal costs beyond the maximum amount specified in the order." 82 His Honour observed, at [23], that public interest litigation was a category of litigation "where the fear of an adverse costs order may impede access to justice". Nonetheless, his Honour considered that it was important not to over-generalise. As he noted at [27], not all public interest litigation would be discontinued if the court declined to make a maximum costs order. A public interest litigant may have access to financial resources sufficient to fund the public interest litigation. 83 Preston CJ also observed, at [27], that there was a risk of over-generalising the beneficial effect the making of a maximum costs order may have on facilitating access to justice. In this regard, his Honour noted that commonly, in making a maximum costs order, the Court considered that fairness required that a maximum costs order should be bidirectional, or multi-directional, so that all parties to the proceedings had the benefit of the order. However, his Honour considered that an order could be uni-directional, that is, made in favour of one party only. This view is contrary to the Federal Court decisions of Sacks and Maunchest and to the approval of those decisions in Muller. This issue did not arise on the appeal in this case. I expressed my view in Sacks. However, I accept that this may be a matter that remains open for argument. 84 At [31], his Honour considered the factors relevant to making a maximum costs order. His Honour noted that the factors that will be relevant will vary depending upon the circumstances of the case and of the plaintiff, and what is necessary to facilitate access to justice in the particular case. His Honour referred to the factors that have been formulated as being relevant to public interest litigation, particularly in Corcoran and Corner House. I have already referred to Corcoran. Corner House is discussed below. 85 Preston CJ observed that the factors enumerated in Corcoran and Corner House may, in an appropriate case, provide guidance, but should not be elevated to become fixed criteria governing the exercise of the discretionary power to make a maximum costs order. As his Honour observed, all of the factors will not be relevant in all cases. In addition, some factors may take on different importance depending upon the circumstances. His Honour explained this as follows: "[36] … For example, the complexity or simplicity of the factual or legal issues may take on different significance depending on the nature and subject matter of the proceedings and the aspect of access to justice that is relevant, such as achieving proportionality of costs or alleviating the deterrent effect of the fear of an adverse costs order. Some of the factors have the potential for misdirecting the court from considering the critical issue of access to justice. Examples are whether there is any private interest in the proceedings or whether the plaintiff's counsel is acting pro bono. In the end, the critical question for the court is whether or not making a maximum costs order facilitates or impedes access to justice in the particular case." 86 For myself, I would add the following to his Honour's remark. When reference is made to access to justice in the particular case, I am of the opinion that regard must be had not only to the facilitation of the bringing of proceedings, but also the just disposition of the proceedings as between the parties.

(ii) the English position 87 In England, there are relevantly two distinct types of costs order whereby the court may limit the costs payable. The first is a protective costs order (PCO), which protects a party against liability for the other party's costs. The second is a costs capping order (CCO). A PCO is only available in public law litigation where the claimant has no (or virtually no) private interest in the matter at issue. The intent of a PCO is to protect a party from exposure to any costs order, although an order may be made which limits the amount of costs that may be ordered against a party. A CCO is made on the basis that the litigant is at risk as to the other side's costs in the ordinary way but the order limits the amount of costs recoverable by either party and thus prevents the costs liability from being inflated by the incurring of disproportionate costs: see Nadia Eweida v British Airways PLC [2009] EWCA Civ 1025 at [8]. 88 PCOs have been a feature of public law litigation in the UK for some time. The history of such orders was reviewed in Corner House. Having regard to the assistance that the trial judge gained from Corner House and given the difference in the English rules as compared to UCPR, r 42.4 and the LEC Rules r 4.2, it is necessary to review that case in some detail. 89 In Corner House, the Court of Appeal traced the rules and the case law underlying the traditional approach to costs in private law litigation and the developments that had occurred relating to costs in such litigation. The Court observed that matters had moved on from Lord Hoffman's comments in McDonald v Horn [1995] 1 All ER 961, [1995] ICR 685, that it was difficult to envisage a case where a court could properly exercise its discretion in advance of the substantive decision, to the position where, in public law litigation, the Crown on occasions either did not apply for costs, or leave to appeal was granted to a public body on the basis that it would pay both parties' costs on the appeal. The Court of Appeal noted that there were other examples where the court had declined to make an order for costs against unsuccessful appellants where they were not pursuing proceedings for any motive of private gain and where the judgment in the intermediate appellate court had left an undesirable lack of clarity in an important area of law. 90 The Court of Appeal next referred to the historical setting of PCOs. It observed that there had been a growing concern both in England and in other common law jurisdictions that access to justice was sometimes unjustly impeded if there was a slavish adherence to the private costs regime where costs usually followed the event. Whilst the liberalisation of the standing rules had gone some way in enabling a party or interest group to bring judicial review proceedings so as to vindicate the rule of law and to have unlawful conduct stopped, that had been only partially successful because of the prohibitive effect that exposure to an order for costs was likely to have on persons wishing to engage in such public interest litigation. The Court referred to observations to this effect made by Toohey J, extracurially, in 1989. The Court then noted, at [41], that from a review of cases up until 1998, a trend towards protecting litigants, who reasonably brought public law proceedings in the public interest from liability for costs, was discernible. 91 In 1998, Dyson J in R v Lord Chancellor, Ex Parte Child Poverty Action Group [1998] 2 All ER 755 considered the circumstances in which it was appropriate for a court to make a PCO. It was common ground in that case that following McDonald v Horn a PCO was not available in a private law action. The main question for his Honour, therefore, was whether different public policy considerations applied in cases aptly characterised as public interest challenges. Dyson J said that a PCO should only be made in the most exceptional circumstances. His Honour then listed the factors of which the court would need to be satisfied before making an order. Those factors were adopted with some modification by the Court of Appeal in Corner House and are considered below. 92 In Hammersmith and Fulham London BC, ex parte Council for the protection of rural England London Branch [2000] Env LR 544, Richards J commented, in considering whether to make a PCO, that the court should ensure as far as practicable that the parties were on an equal footing and that the case was dealt with in a way proportionate to the financial position of each party. 93 The Court of Appeal in Corner House next dealt with the rules of court governing costs. The Court noted that the general rule that costs followed the event remained, subject to the discretion in the court to make some different order. In this regard, the Civil Procedure Rules (UK) (CPR), r 1.2 expressly stated that the rules were a new procedural code with the overriding objective of enabling the court to deal with cases justly. CPR, r 1.1 (2) then provided that: "… dealing with a case justly includes, so far as is practicable --

(a) ensuring that the parties are on an equal footing ...

(d) ensuring that [the case] is dealt with … fairly".

I pause at this point to note that the consideration in CPR, r 1.1(2)(a) does not appear in ss 56 or 60 or in the costs provisions of the UCPR. However, the NSW legislation has provisions to similar effect as CPR, r 1.1(2)(d), that is, that the overriding purpose of the Act and rules is to facilitate the just, quick and cheap resolution of matters: s 56; that proceedings are to be managed having regard to the just determination of matters: s 57; and the court, for the purposes of case management, must act in accordance with the dictates of justice: s 58. 94 The English rules of court did not confer a specific power to make a PCO under the new rules. Nonetheless, the Court of Appeal held that there was jurisdiction to make such an order. It expressed the view that there were features of public law litigation that distinguished it from private law civil, including family litigation and it accepted that a PCO should only be made in the most exceptional circumstances, adopting the statement to that effect by Dyson J in the Child Poverty Action Group case. However, the court noted that the fact that a PCO should only be made in exceptional circumstance did not of itself assist in identifying the circumstances in which an order should be made. 95 As already mentioned, the Court of Appeal considered there should be some recasting of the guidelines articulated by Dyson J. In the case before it, the Court of Appeal considered that the application for judicial review had a real prospect of success and that it was in the public interest to make the order. It then restated the governing 'principles' as to the discretion to make a PCO in these terms: "(1) A PCO may be made at any stage of the proceedings, on such conditions as the court thinks fit, provided that the court is satisfied that: (i) the issues raised are of general public importance; (ii) the public interest requires that those issues should be resolved; (iii) the applicant has no private interest in the outcome of the case; (iv) having regard to the financial resources of the applicant and the respondent(s) and to the amount of costs that are likely to be involved it is fair and just to make the order; and (v) if the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing. (2) If those acting for the applicant are doing so pro bono this will be likely to enhance the merits of the application for a PCO. (3) It is for the court, in its discretion, to decide whether it is fair and just to make the order in the light of the considerations set out above." 96 In specifying these 'governing principles', the Court observed that there should be no arterial hardening of guidelines into rules: see also Oshlack at [38], 87. 97 The Court of Appeal, at [76], considered that it was likely that when a court made a PCO, the effect of which was to immunise the applicant against liability for any costs order, it would also make a costs capping order if the applicant made it apparent that it would be seeking its costs if successful on the substantive application. Costs capping orders are provided for in CPR, r 44. That rule is more prescriptive than UCPR, r 42.4. The rule is specifically stated not to apply to protective costs orders: CPR, r 44(3). CPR, rr 44.18(5) and (6) provide relevantly: "(5) The court may at any stage of proceedings make a costs capping order against all or any of the parties, if -

(a) it is in the interests of justice to do so; (b) there is a substantial risk that without such an order costs will be disproportionately incurred; and (c) it is not satisfied that the risk in sub-paragraph (b) can be adequately controlled by - (i) case management directions or orders made under Part 3; and

(6) In considering whether to exercise its discretion under this rule, the court will consider all the circumstances of the case, including - (a) whether there is a substantial imbalance between the financial position of the parties; (b) whether the costs of determining the amount of the cap are likely to be proportionate to the overall costs of the litigation; (c) the stage which the proceedings have reached; and (d) the costs which have been incurred to date and the future costs." 98 In Ewieda v British Airways the Court of Appeal noted that all three conditions set out in r 44.18(5) must be satisfied before a CCO can be made out. In that case, the Court refused a CCO on the basis that even if disproportionate costs would be incurred, there was no reason why that could not be controlled by way of an appropriate assessment of costs. The Court was not satisfied in any event that para (c) of subrule 5 was satisfied and doubted whether para (b) was satisfied.

The principal challenge to the trial judge's order: the order was made to protect the respondent's assets to the exclusion of other relevant considerations: ground 10 99 The appellant's commencing submission was that, subject to the rules, costs are in the discretion of the court: the Civil Procedure Act, s 98(1)(a). In that regard, the appellant submitted that the general rule is that costs follow the event: UCPR, r 42.1 and that a costs order is intended to be compensatory in nature: see Oshlack per McHugh J at [66] 98. The appellant contended, therefore, that it was entitled to engage in the proceedings on the assumption that it would recover its costs if it was successful. 100 The appellant contended that it was apparent that the underlying reason for her Honour's order was because the sum of $20,000 was all the respondent was prepared to commit to the litigation. The appellant contended that her Honour had allowed that consideration to overwhelm all other factors relevant to the discretionary exercise of the power under UCPR, r 42.4. The appellant submitted that the trial judge had thereby erred in making the maximum costs order as she had failed to properly have regard to the purpose of UCPR, r 42.4 in the context of the provisions of the Civil Procedure Act, especially s 56 and the suite of costs rules contained in UCPR, r 42, including r 42.4, which is the rule specifically under consideration here and r 42.21, which provides for security for costs. 101 The appellant accepted that the respondent's contention, that it would not continue with the substantive proceedings if it did not obtain a r 42.4 order, was genuinely advanced. However, the appellant contended that the respondent's position in this regard was not to be equated with the discretionary factors considered relevant in a case such as Woodlands where the Court was satisfied that the applicants reasonably were unable to meet a full costs orders. Rather, the respondent's position was that it would not continue with the proceedings if it was required to expend more than $20,000. The appellant submitted that it was irrelevant for her Honour to be concerned with the respondent's assertion. 102 The appellant next submitted that in determining whether to make a r 42.4 order, it was relevant for the court to assess the likely amount of costs that would be incurred. However, it was not a proper exercise of the discretion to impose an amount of costs for the purposes of protecting one party in respect of the costs for which that party might be liable, without having proper regard to other relevant considerations. One such other consideration in this case was the reasonable costs likely to be incurred by the appellant in defending what effectively was a civil prosecution of an alleged criminal offence. 103 Underlying this last submission, as I understand it, was the need for regard to be had to the proportionality of the order made and the likely reasonable costs to be incurred, a submission that the appellant advanced in a number of different ways. In this regard, the appellant submitted that in a case where it could not be said that there was any anticipated waste in the manner in which the appellant proposed to defend the proceedings, it was an error to predetermine the amount of costs that the appellant could recover, at least in an amount that was so disproportionate to the reasonable costs that it estimated it would be required to expend in defending the proceedings. 104 In an allied submission the appellant contended that the purpose of a rule such as r 42.4 was to provide a means whereby the Court could place some control on the parties so there was some proportionality of the costs to the actual amount in issue in the case or to the complexity of the matters in issue: see the Civil Procedure Act, s 60; see also Sacks v Perpetual Trustee. In this case, the trial judge accepted that the case would raise complex issues; have serious consequences for the appellant should the respondent succeed; and that the appellant's estimated costs of approximately $250,000 were reasonable.

Civil Procedure Act considerations 105 The appellant also pointed out that as s 56 required the court to facilitate the just, quick and cheap resolution of the real issues in the proceedings, it was necessary for the Court to consider the question of the "just" disposition of proceedings from the viewpoint of both parties. The appellant's central complaint was therefore reiterated, in terms, that her Honour's predominant consideration in making the maximum costs order in this case was the protection or insulation of the respondent's assets, in circumstances where the respondent was not prepared to commit itself to the proceedings unless the costs for which it might become liable could be limited to $20,000. Given that the appellant's estimated costs were in the order of $250,000, this was not a "just" disposition as between the appellant and the respondent. It followed on the appellant's submission that there had not been a proper exercise of the judicial discretion invested in her Honour by UCPR, r 42.4. 106 The appellant pointed out that the need for the Court to exercise its powers justly as between both parties was reinforced by the provisions of the Civil Procedure Act, ss 57-58, which provided for the management of proceedings having regard to "the timely disposal of proceedings … at a cost affordable by the respective parties"; and that in making orders for the management of proceedings, the court must act in accordance with the dictates of justice. Matters relevant to determining the dictates of justice in a particular case included the degree of difficulty or complexity to which the issues in the proceedings give rise: the Civil Procedure Act, s 58(2)(b)(i). 107 The appellant submitted, therefore, that r 42.4 should not be used as a device to displace or usurp the instruction in the Civil Procedure Act, s 60 as to the proportionality of costs, having regard to the importance and complexity of the proceedings. Otherwise, r 42.4 would be allowed to operate as a benign mechanism for providing insurance to a party who informed the court it was only prepared to commit a certain amount of money to the proceedings. 108 The appellant further submitted that given the nature of the proceedings, that is, a civil prosecution of an alleged criminal offence, the appellant would expect to be entitled to a costs order if the proceedings against it failed, in accordance with the principles stated in Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534. In that case, it was held that a defendant in an unsuccessful prosecution was entitled to costs, costs being compensatory and not punitive in nature. 109 The appellant submitted that her Honour erred in making the order under r 42.4 because by doing so, she effectively extinguished the appellant's prospective entitlement to costs. The order made here, on the appellant's submission, did not pay regard to that fundamental notion. Rather, in selecting the sum of $20,000, the order was arbitrary and capricious and had no better basis than being the amount the respondent was prepared to "put up as the price of the insurance against the hazards of litigation".

Predetermination of the security for costs application 110 The appellant next contended that not only had her Honour predetermined the appellant's reasonable expectation of a favourable costs order at the conclusion of the proceedings if the applicant was unsuccessful, her Honour had also predetermined its application for an order for security for costs. 111 The appellant acknowledged that a relevant consideration in the determination of an application for security for costs was whether the ordering of security would stifle the proceedings, that being a factor pointing to the exercise of the discretion not to order security for costs. The appellant contended that there were other factors that were relevant to the making of an order for security for costs. The appellant referred in particular, to the fact that the respondent had no private interest in the litigation in the sense that the respondent will derive no financial benefit from the proceedings. However, her Honour had taken that factor as favourably pointing to a maximum costs order, whereas the appellant would have sought to rely on the same factor as pointing to the exercise of the discretion to order security for costs. 112 The appellant also submitted that in determining whether to order security for costs, it was relevant for the Court to have regard to the position of those who stand behind the corporation. In this case, the respondent had 970 members but had not circularised its membership to determine whether they would assist in funding the litigation. The appellant submitted that the effect of the maximum costs order precluded any consideration being given to this factor on the security for costs application because the trial judge had foreclosed the result of the security for costs application in first making the maximum costs order. 113 The appellant submitted that her Honour had thereby erred in determining the application for a maximum costs order before determining the application for security for costs. In my opinion, her Honour was not in error in determining the applications in the order that she did. Indeed, it was the only sensible approach to the two applications. Further, it is not unusual for the same factual considerations to pull in different directions depending upon the nature of the particular discretionary exercise being undertaken. 114 Except to the limited extent that I have sought to resolve the various arguments advanced by the appellant to underpin its central challenge to her Honour's decision, it is convenient to next deal with the following further challenges to her Honour's decision, before reaching my conclusion on the matter.

Public interest litigation 115 The appellant in essence made three submissions in respect of her Honour's finding that the proceedings were public interest litigation. First, it submitted that the finding was wrong. Secondly, the appellant contended that even if the proceedings were correctly characterised as public interest litigation in the Oshlack sense, that was an extraneous consideration to the exercise of her discretion pursuant to r 42.4. Thirdly, the appellant submitted that public interest was not a sufficient factor of itself for the Court to make a costs order favourable to the public interest litigant. The submissions in support of these three contentions overlapped to a significant extent. 116 The appellant submitted that the mere identification of proceedings as public interest litigation could not compel a particular outcome as to costs. Rather, there were a variety of matters to be taken into account in determining whether or not proceedings were public interest litigation in a way that was relevant to the costs order that ought to be made in a particular case. Those matters included the cogency of the applicant's evidence: the manner in which the applicant conducted the proceedings; and the tenability of its contentions. 117 In addition, the appellant contended that a range of factors identified in Oshlack as relevant to the costs determination, were missing in this case. Those factors included whether the case was one which would provide significant guidance to public authorities in the future; and whether the case was a true test case with implications for other decisions. In this last regard, the appellant contended (ground 9) that the trial judge erred in characterising these proceedings as a test case. This error was characterised as taking into account an extraneous consideration. 118 Much of the emphasis in the appellant's submission under this rubric was that it was not possible at such an early stage of proceedings to know whether the present proceedings were public interest proceedings and that a mere assertion to that effect by the respondent was not determinative of the question. It followed on the appellant's submission that the assertions made in the points of claim were not sufficient for the matter to be characterised as public interest litigation. 119 The appellant submitted that even if the proceedings could, at this early stage, be identified as public interest litigation, that of itself would not be sufficient for the making of a costs order, the effect of which was to essentially deprive a successful defendant of its costs. In accordance with the principles in Oshlack, something else was required. In this regard, the appellant contended that her Honour's identification, in this case, of the considerations upon which Stein J had based his order in Oshlack, was on an insecure footing. In particular, the appellant submitted that this case had no importance beyond the obvious interest of members of the public in the enforcement of the law, and environmental laws in particular. The appellant submitted, as Stein J had found in Oshlack, that such considerations might contribute to a finding of special circumstances, but were not sufficient of themselves to warrant a departure from the general rule that costs follow the event. 120 In my opinion, there was no error in her Honour characterising the substantive proceedings as public interest litigation, notwithstanding the early stage at which these proceedings presently stand. The respondent's allegation in the substantive proceedings is that the waste waters from the appellant's power station which discharge into the Cox's River is polluting the river. Pollution of rivers is unlawful behaviour which constitutes an offence under the PEO Act, s 120. The appellant is seeking that the alleged offending conduct be stopped. 121 The Cox's River runs through the Blue Mountains and eventually finds its way into Warragamba Dam, which is the source of Sydney's water supply. There was evidence, but in any event, it goes without saying, that water quality in a drinking water catchment area is a matter of critical importance. Another important consideration raised by the respondent was the manner in which major infrastructure is managed, such as the power station, having regard to its location in the water catchment area. In addition, the quality of the water in the river affects other users, such as persons who fish the river and is also relevant to the features of this particular environment, much of which is National Park. The public interest nature of the litigation is reinforced by the fact that the respondent sought to have the regulatory authorities take action before commencing the proceedings. The regulatory authorities did not do so. Accordingly, the appellant's interest can also be seen as seeking to support the rule of law. 122 I should also indicate that I do not consider that the appellant gains much leverage from its third submission relating to costs in public interest litigation. Pursuant to LEC Rules, r 4.2 the court may decide not to make an order against an unsuccessful applicant in public interest litigation. The appellant's submission proceeded on the assumption that 'special circumstances' in the Oshlack sense need to be established. Assuming that is correct, the considerations relevant to the discretionary exercise of the power under LEC Rules, r 4.2 are not necessarily the same as the considerations that are likely to be relevant in the determination of an application for a maximum costs orders under UCPR, r 42.4. In particular, on the assumption that Oshlack continues to apply, the Court is not concerned to find 'special circumstances' on an application for a maximum costs order in a case that involves public interest litigation. To the extent that there is any commonality of factors in the two applications, the relevance of and weight to be given to such factors is determined by the nature of the particular application that the court is considering. 123 I would only add that the case law relating to 'special circumstances' in public interest litigation was developed prior to the introduction of the LEC Rules, r 4.2. As I have indicated, the appellant's submissions were based on the premise that 'special circumstances' must still be found. One reason why the requirement for special circumstances may remain a requirement is that the costs order in Oshlack was made pursuant to s 69 of the Land and Environment Court Act. There was then no equivalent of UCPR, r 42.4 governing costs in the Land and Environment Court. However, that question does not arise for consideration on this application and it is not necessary to express a conclusion either way on this question.

Consideration of extraneous factors and failure to take into account relevant factors 124 The appellant accepted that the obvious purpose of standing provisions such as s 252 was to broaden the range of persons entitled to take proceedings and correspondingly to remove the impediments that had previously applied when persons sought to take proceedings in which they had no personal interest. The appellant submitted, however, that no special cost consequences flowed from such standing provisions. In other words, a standing provision such as s 252 facilitated access to justice but not at the expense of any entitlement to costs that the other party might have (Tr 31). It was open, of course, to such a party to satisfy the court that: Oshlack considerations applied (if still relevant); or, I would add, that an order under LEC Rules, r 42 be made; or that there were other factors such that the court would make an order other than that costs follow the event in accordance with UCPR, r 42.1. 125 I agree with the appellant's submission to the extent that it contains a proposition to the effect that a party who utilises s 252 to bring proceedings is not thereby entitled to a favourable costs outcome, even it the litigation fails. Whether such a party is so entitled will depend on a variety of factors, depending upon the facts and circumstances of the case. However, I do not accept that her Honour made any error of the type which is at least implicitly asserted by the appellant in these submissions. Rather, her Honour considered a range of factors relevant to making a maximum costs order. 126 The appellant next submitted that her Honour erred, by failing to consider the financial resources of the parties who stood behind the respondent, namely its membership. A similar submission was advanced by the appellant in support of its contention that her Honour had erred in the order in which she had considered the competing applications for security for costs and for a maximum costs order and has been dealt with earlier in these reasons. The appellant contended that the same consideration was relevant to a determination as to whether a maximum costs order should be made in the matter and if so, in what amount. However, her Honour had failed to take this matter into account. 127 In this regard, the appellant relied upon the comments of Heydon J in Melville v Craig Nowlan & Associates Pty Ltd & Anor [2002] NSWCA 32; 54 NSWLR 82 and Jeffery & Katauskas Pty Limited v SST Consulting Pty Ltd; Jeffery & Katauskas Pty Limited v Rickard Constructions Pty Limited [2009] HCA 43. 128 Melville v Craig Nolan involved an application for security for costs against an applicant who had brought proceedings in the Land and Environment Court under the standing provision in the Land and Environment Court Act, s 123. Heydon JA (as his Honour then was), with whom Young CJ in Eq (as his Honour then was) agreed, observed that an order for security for costs against an impecunious natural person bringing proceedings under s 123(1) does not deprive such a person of any fundamental right and that there were many others who might prosecute the case by reason of the open standing provisions of the legislation. In Jeffrey and Katauskas Heydon J again commented, at [91], that the concept that poverty was no bar to litigation was a "severely qualified" concept, as was the notion of "open access to justice". 129 The appellant next submitted that her Honour erred in finding the appellant would not suffer financial hardship if a maximum costs order was made and in taking that into account. The appellant submitted that by focusing upon that consideration by reference to whether the appellant would suffer financial hardship as it was a large State Corporation, her Honour failed to consider that it was likely such costs as the appellant would be required to bear out of its own resources would be passed on to consumers. In any event, the appellant submitted there was a financial hardship in the inevitable commitment of resources to the defence of the proceedings which it would not recoup, other than, potentially, for the sum of $20,000, if the order remained. This submission is also dealt with below.

The respondent's submissions 130 Without seeking to do any disservice to any of the respondent's submissions, it is correct to say that it refuted each of the above arguments. However, the respondent made three principal submissions to which particular reference should be made. 131 First, the respondent submitted it was relevant to take into account the correspondence between the standing provisions and the need to provide effective access to justice. The respondent submitted that when consideration is given to the broad costs discretion invested in the Court, it was appropriate to have regard to the open standing provisions in the exercising that discretion. The respondent submitted that the open standing provisions provided a means whereby individuals or private entities could seek to enforce provisions of statutes enacted for the public benefit. The respondent contended, therefore, that the UCPR ought not be construed in a way that was antipathetic to the purpose evinced by the legislature in providing open standing provisions. In this regard, counsel for the respondent relied upon the comments of Preston CJ in Caroona Coal at [23], to which reference is made at [82] above. 132 Secondly, the respondent addressed the appellant's submission that her Honour had failed to take into account the guiding principles in the Civil Procedure Act, Part 6, Division 1, ss 56-60. Principally, this responded to what the respondent saw as the appellant's principal argument on the appeal and at trial; that the need for proportionality (as provided in the Civil Procedure Act, s 60) confined the discretion available under r 42.4. In this regard, the respondent contended that her Honour had regard to the question of proportionality, notwithstanding that she did not, nor was required to, delve into any particular detail in respect of Part 6. The respondent submitted that without engaging in a "nitpicking analysis of the primary judge's judgment", there were two major considerations that her Honour took into account in her determination to make a maximum costs order: the potential injustice caused by a lack of proportionality in costs; balanced against the need for the parties to obtain access to justice, and that having taken these guiding principles into account, her Honour did not act in excess of the discretion conferred under r 42.4. The respondent submitted that it was erroneous to construe UCPR, r 42.4 as not being available in complex cases where substantial costs would undoubtedly be incurred. Accordingly, the respondent contended that the statutory requirement of proportionality found in s 60 should not be used to preclude a maximum costs order in a case involving the public interest. 133 Thirdly, the respondent contended that it was open for her Honour to conclude, as she did, that the proceedings are in the public interest, notwithstanding that the proceedings are only at an interlocutory stage: see Land and Environment Court Rules, r 4.2(2) which enables a judge to determine, in a security for costs application, that a proceeding is in the public interest.

Did her Honour err in the exercise of her discretion? 134 The discretion conferred on the trial judge by r 42.4 is a broad discretionary power to specify the maximum costs that may be recovered by one party from another. The discretion so conferred must be exercised in the context of the overriding statutory purpose of the Civil Procedure Act and the UCPR in facilitating the just, quick and cheap resolution of the real issues in the proceedings: the Civil Procedure Act, s 56; the prescribed objects of case management: s 57; the requirement for the court to follow the dictates of justice: s 58; and the object of resolving disputes in a way that the costs are proportionate to the importance and complexity of the subject matter in dispute: s 60. 135 In Halpin & Ors v Lumley General Insurance Ltd [2009] NSWCA 372 Basten JA, at [20]-[29], observed that the application of the various criteria in those sections is not without difficulty. There is some tension between the provisions. However, as Sackville AJA observed, at [95] (Tobias JA agreeing), whatever difficulties there are in reconciling those objectives, the court has wide powers to make directions for the conduct of proceedings. 136 Halpin was concerned with whether the court had power to make a direction that an affidavit intended to be used in proceedings not be served. This case, of course, is quite different. There is an undoubted power for the Court to make a maximum costs order and the discretion conferred by r 42.4 is in general terms. Nonetheless, the power must be exercised judicially and ss 56-60 are mandatory considerations to which the court must have regard. The manner in which those considerations operate will depend upon the facts of the particular case. 137 In this regard, sight cannot be lost of the fact that the criteria of the "just, quick and cheap resolution of disputes" and the "dictates of justice" apply to both parties. It may not be just to limit the amount of costs recoverable if the amount specified is disproportionate to the reasonable costs likely to be incurred by the opposing party. That is a factor to which the court must have regard. As Palmer J identified in Sherborne, the proportionality of costs to the value of the result is central to the just and efficient conduct of proceedings. His Honour made this comment in the context of disproportionately high costs to the value of the proceedings. However, it holds good as a general proposition. The outcome in a particular case will depend upon the total mix of factors relevant to the exercise of the discretion and the importance that the court gives to any particular factor or factors. I consider that in the mix of factors it may be relevant that the party has brought proceedings under a standing provision such as s 252. However, I do not consider that that factor will compel any particular conclusion. 138 The courts have thus far identified the central purpose of r 42.4 as providing a means to curb the tendency of parties to engage in disproportionate expenditure, especially in cases where the quantum involved is relatively low or the proceedings are not complex. I agree that may undoubtedly be a purpose in an appropriate case. However, the general terms of the discretion are such that it is not confined by or to that purpose. The preferable approach to the discretion conferred is to determine whether, having regard to the particular circumstances of the case, an order should be made. The caselaw to date has provided an inventory of circumstances that have been considered relevant in those cases. Such factors may usefully assist in the determination of a particular case. However, the discretion under r 42.4 is not confined by such considerations and the court is not compelled to apply them in the same way. 139 In this case, a significant feature of the appellant's argument was that there was a general rule that costs follow the event and that the discretion to make an order under r 42.4 had to be exercised, first, in the context that if successful in the litigation, it had at least a prima facie entitlement to costs, and secondly, that in the just disposition of the case, regard ought to have been had to the proportionality of any order that the trial judge proposed to make and the reasonable estimated costs of the litigation. 140 The submission that there is a 'general rule that costs follow the event' is an oft-stated proposition presumably based on the heading to UCPR, r 42.1. Stated in those broad terms, the proposition is not very helpful in the resolution of the question whether her Honour erred in the exercise of her discretion in this case. In the first place UCPR, r 42.1 is subject to the court making any other order. Further, UCPR, r 42.4, operates sympathetically with UCPR, r 42.1, in the sense that if a maximum costs order is made, costs may follow the event pursuant to UCPR, r 42.1; however, the amount of the costs payable will have been determined by the Court at an earlier stage of the proceedings. It must also be borne in mind that the LEC Rules, r 4.2, which have precedence over the UCPR, empowers the court to make a costs order against an unsuccessful litigant in public interest litigation. Such an order can be made in any event under UCPR, r 42.1. 141 In making the order in this case, her Honour stated that the factors referred to in Corner House in a generally similar statutory context and the factors referred to in Corcoran to which I have referred above provided a useful guide to the relevant criteria to be considered in this case. Her Honour then considered the following factors: the timing of the application; whether the claim appeared arguable; whether the claim was properly characterised as public interest litigation; whether the plaintiff had a private interest in the proceedings; whether the proceedings would continue if the order was not made; whether counsel was acting pro bono; the parties' financial means; and whether in making the order the Court was rewarding inefficient litigation. 142 I have already dealt with her Honour's finding that this was public interest litigation. I have something more to say about the relevance of the public interest as considered in Corner House. Leaving that aside for the moment, however, I accept that her Honour's finding that this was public interest litigation was open to her and that was a relevant consideration for her Honour to take into account in determining whether to make a maximum costs orders. 143 Her Honour dealt with the other factors in the following manner. Her Honour found that the application had been brought in a timely manner; the substantive proceedings were arguable, as had been conceded; and her Honour surmised that the matter would be complex and would involve novel issues. In this regard, her Honour identified the proceedings as in the nature of a test case; and that the respondent would derive no financial benefit from the proceedings. Her Honour found that the respondent's counsel was acting pro bono and that there was evidence that the respondent would not proceed if an order limiting costs to $20,000 was not made. Her Honour considered that notwithstanding the costs the appellant estimated it would incur, it would not suffer financial hardship if the order was made. Her Honour considered that if, in the course of the proceedings, it appeared that the respondent was running the proceedings inefficiently, a further order could be made under r 42.2(4), which enabled a court to later vary any order made under the rule. I have difficulty with this latter consideration in this case, given the respondent's stated position that it had committed $20,000 to the litigation, but no point was expressly taken by the appellant in respect of her Honour's consideration of that matter. 144 Subject to the relevance her Honour attached to the respondent's position that it would not proceed unless a maximum costs order were made and the manner in which her Honour considered the appellant's financial means, the only challenge the appellant made to these findings was the finding that the proceedings were in the nature of a test case. I do not consider that there was any error in that finding. It might be contestable whether that pointed in favour of the making of a maximum costs order, however, that was a matter for her Honour's determination. No error has been demonstrated in this regard. 145 That leaves for consideration the manner in which her Honour dealt with the appellant's financial means and the respondent's evidence that it would not continue with the proceedings if an order limiting costs was not made. That issue is closely associated with the proposition raised by the appellant, namely, that her Honour failed to have regard to the financial resources of those who stood behind the respondent. There is also the fundamental issue in the appellant's argument of a need for some proportionality between a maximum costs order and the costs reasonably likely to be incurred in the litigation. 146 As I have indicated, her Honour derived a series of factors that she considered relevant in this case from the factors enumerated in Corner House and Corcoran. Insofar as she dealt with the appellant's position in relation to the litigation, her Honour said, at [64], under the heading "Continuation of proceedings": "The evidence of [the respondent's] President is that the proceedings will not continue if a PCO is not made in the amount of $20,000". 147 It is apparent from her Honour's judgment that she took that matter into account favourably to the respondent. It is also apparent that her Honour recognised this would result in requiring the respondent to commit a greater sum to the proceedings than it had resolved to do, as her Honour commented that, contrary to the respondent's submission, it appeared likely that the respondent would be able to raise that money. 148 The question whether the proceedings would continue if an order was not made has been considered a relevant consideration, both in the United Kingdom (Corner House) and in Australia. In Corner House, in respect of a PCO, this was put in terms: "… if the order is not made the applicant will probably discontinue the proceedings and will be acting reasonably in so doing." 149 In the Australian decisions, it is apparent that the courts have not been persuaded to make a maximum costs order based simply upon an assertion that an applicant will not continue the proceedings unless an order is made. Rather, that factor has been considered having regard to all the surrounding circumstances and there is an underlying consideration in the authorities as to whether the applicant's withdrawal from the proceedings would be reasonable. 150 In Corcoran Bennett J referred to the statement in Corner House to which I have referred in the previous paragraphs. Bennett J also referred to the Canadian authorities where the ability of the party to continue with the litigation has been accepted as a relevant consideration, as is whether the litigant could show that he or she genuinely cannot afford to pay for the litigation and that no other realistic option exists for bringing the issues to trial. The courts in Canada have also referred to the need to be satisfied that there is a prima facie case of sufficient merit. Bennett J commented, at [13], that: "If present, there are, therefore, a variety of factors that may be taken into account in exercising the Court's discretion." 151 It will be recalled that in Woodlands, the Court was concerned to know whether there had been a call on the membership of the relevant group to contribute to the costs of the litigation. Then, in making the order, the Court fashioned it such that the respondent would be in no worse position than if the proceedings had been brought in the State Court. In other words, the court balanced the position between the applicants who were faced with the uncertainty of an unexpected argument that they would not have the costs protection contained within the State legal aid legislation and the respondents, who, if the proceedings had been brought in the State Courts, would have been confined by that legislation to the recovery of limited costs. It was also apparent in Woodlands that the Court considered the applicants would reasonably be required to abandon the proceedings if an order was not made, given their impecunious circumstances. 152 In making these observations, I have not overlooked that Woodlands involved private litigation which had a public interest element. However, the point to be made is that the relevant consideration in that case was not merely whether the applicants would not continue with the proceedings. That factor was considered in the context of other matters to which I have referred. A similar observation can be made in respect of the approach taken in Hanisch where the court had regard to the fact that the proceedings could have been brought in a lower costs jurisdiction. 153 Her Honour's finding, at [64], needs to be considered against this background. Her Honour accepted that the respondent had committed $20,000 to the undertaking of the proceedings. The evidence established that the respondent has certain of its own costs to bear, which are somewhat, but not substantially in excess of $10,000. That sum and the order initially sought of a maximum costs order in the sum of $10,000 presumably represented the intended extent of that commitment. The respondent at that stage was thus committed to spending about $20,000, or 11 per cent of its then net assets on the litigation. The effect of the Court's order is that it is committed to spending approximately $30,000, or 17 per cent of its net assets on the litigation. 154 The respondent's net assets include managed fund investments of approximately of $134,000 and current assets, including bank or financial accounts, of approximately $25,000. Its asset position had been depleted by about $50,000 from the 2008 financial year, mainly due to the global financial crisis. 155 One of the appellant's challenges to her Honour's order was that her Honour failed to have regard to the financial resources of the respondent's membership, which numbered approximately 970 persons. An examination of the respondent's 2008/2009 accounts revealed that its membership fees were $14,194: that is, a yearly membership fee in the order of $15.00. The appellant relied upon the absence of evidence of any levy on the membership to support the litigation. 156 The question whether there are and the extent of financial resources available to an applicant for a maximum costs orders is, in my opinion, a relevant consideration. Preston CJ adverted to this in Caroona Coal Action Group when his Honour observed that a public interest litigant may have access to financial resources sufficient to fund the litigation. However, much depends upon the manner in which the parties conduct the proceedings; in this case, the respondent's application for a maximum costs order. 157 In this case, the appellant cross-examined Ms Cameron, the President of the respondent society, to ascertain whether the membership of had been asked to "make a donation or to contribute to a fighting fund will or something of that kind" to support the litigation. However, Ms Cameron was not cross-examined to suggest that that was a course that reasonably ought to have been taken. Nor was it suggested to Ms Cameron in cross-examination that the reasons she gave in respect of the respondent's proposed withdrawal from the proceedings if a maximum costs order was not made, were unreasonable. Ms Cameron also gave evidence that the respondent had many priorities, including these proceedings. However, her evidence was that the respondent's funds were limited and in part had been built up historically by the nursery receiving income and that was not likely to be replicated. There was no cross-examination to suggest that even given these matters, the respondent's decision not to proceed if a maximum costs order in excess of $20,000 was not made, was in any way unreasonable. 158 The appellant, having chosen to conduct the proceedings in that way, cannot now complain that the trial judge failed to take into account a relevant consideration. The failure of the respondent to approach the membership for funding may have been relevant to the exercise of the discretion if, for example, it pointed in some way to the unreasonableness of the respondent's stated position that it would not proceed with the litigation unless a maximum costs order in the stated sum was made. 159 However, it was never suggested to Ms Cameron that the respondent had acted unreasonably in not approaching the membership. Merely ascertaining as a fact in cross-examination that the members had not been approached to make a specific contribution to the litigation by way of donation or the establishment of a fighting fund, is not a sufficient basis to assert error in the exercise of her Honour's discretion. If the appellant intended to assert that the financial status of those behind the respondent was relevant to the exercise of the discretion, it was incumbent upon the appellant to give the respondent an opportunity to deal with the basis upon which it proposed to make such an assertion and to demonstrate to the trial judge why it was a relevant factor. However, the appellant's case in this regard did not rise any higher than the factual assertion identified above. 160 I have indicated that I wish to say something further in relation to Corner House. The English Court of Appeal, although eschewing the development and application of rigid rules in the exercise of the discretion, stated that a PCO may be made, provided the Court is satisfied of the matters it specified (which are set out above at [95]). It is apparent, however, from the manner in which the Court of Appeal expressed itself that the factors to which it referred are not merely a 'tick list', but are the minimum requirements of which the Court needs to be satisfied if it is to make an order, although they do not mandate the making of an order. 161 Those considerations are also intended to have an internal synergy. The court must be satisfied that the identified public interest requires the issues to be resolved. It must be fair and just to make the order having regard to the financial resources of the parties and the amount of costs likely to be incurred. However, it will not be fair and just to make an order merely because one party does not have the resources to fund the litigation. Rather, whether it is fair and just to make the order depends not only on whether the applicant can fund the litigation. As I have said, the public interest must require that the issues, which must be of public importance, be resolved. 162 Having regard to her Honour's reliance on the factors referred to in Corner House, it is relevant to again observe that the English rules under which the PCOs have been developed are not precisely mirrored in the NSW legislation. In particular, there is no requirement in the NSW Acts and Rules that the court ensure, so far as possible that parties be put on an equal footing. That provision would appear to powerfully underwrite the development of the discretionary considerations relevant to the making of a PCO in England in circumstances where it has been said that the court must be satisfied that the public interest requires the issues of general public importance be resolved. It is understandable that the courts would have identified as an underlying purpose of such orders the facilitation of litigation by a person or entity with little or no assets against a State entity, with significant assets and financial resources. 163 It is also relevant in my opinion that the purpose of a PCO is to protect the assets of a party bringing public interest litigation. That is not the purpose underlying r 42.4. Although one of the purposes of r 42.4 is to facilitate access to the courts, an order under r 42.4 is not directed to protecting the assets of the applicant in the same way as a PCO made by the English courts. Accordingly, the relevance of proportionality as between the amount of costs ordered under r 42.4 and the reasonable estimated costs of the other party is likely to have more significance than is the case with a PCO. 164 Her Honour did not give express consideration to the question of the proportionality of any proposed maximum costs to the costs likely to be incurred by the appellant. She may have considered this to be irrelevant, having regard to her focus on the financial position of the parties, a factor derived from Corner House. Her Honour's reasoning in this regard was that the appellant, as a large government entity, would not suffer financial hardship as a result of a maximum costs order being made. 165 However, in my opinion, that consideration should have taken its hue from other considerations, including the proportionality of the order sought as compared to the reasonable costs likely to be incurred. As I have said, that factor does not appear to feature in the matters relevant to the exercise of the discretion in respect of a PCO. However, the dictates of justice must be seen to operate in both directions and I consider that was a relevant consideration in this case and was a matter that was raised in the conduct of the case before the trial judge. 166 An alternative approach to this same issue is that the disproportionality between the order made and the reasonable estimate of the appellant's costs is such that the order falls outside a reasonable exercise of the discretion. For that reason also, I consider that her Honour erred in the exercise of her discretion. 167 That leaves the question as to what should be done. This may well be a case where it is appropriate to make a maximum costs order. However, given that I have concluded that her Honour failed to take into account a relevant consideration or, alternatively, the order her Honour made fell outside the wide bounds of the discretion conferred by the section, I propose that the appeal be allowed and that the matter be remitted to the Land and Environment Court for redetermination. 168 Finally, I should note that the respondent filed a notice of contention in which it contended that subs 98(1) and (3) conferred on the trial judge the discretionary power to make the order in the terms she did. There is no doubt that her Honour had the discretion to make such an order. The only question is whether her Honour erred in the exercise of the discretion in accordance with House v R principles. It is not necessary, therefore, to deal specifically with the notice of contention. 169 BASTEN JA: The applicant ("Delta") is a state-owned corporation which generates electricity from a coal-fired power station at Wallerawang near Lithgow. The respondent ("the Society") is an incorporated association having objects related to environmental protection in the Blue Mountains region of New South Wales. It has brought proceedings in the Land and Environment Court seeking to prevent pollution (or further pollution) of the Coxs River resulting from alleged discharge of pollutants by the applicant. 170 On 9 September 2009 Pain J granted the Society an order pursuant to Uniform Civil Procedure Rules 2005 (NSW) ("the UCPR"), r 42.4 fixing the maximum costs "that may be recovered by one party from another in these proceedings" at the sum of $20,000. (The order originally sought was in a lesser sum.) 171 The applicant seeks leave to appeal and, if leave be granted, to have the order set aside. I agree with Beazley JA that leave should be granted but the appeal should be dismissed with costs.

Issues 172 As her Honour explains, there was a degree of confusion, or at least lack of precision, in the grounds upon which the applicant sought to challenge the order. In the final analysis, the challenge, so far as it had any substance, can be identified by reference to three matters:

(a) failure to identify the correct principles to be applied in making a costs-capping order; (b) erroneous fact-finding, and (c) erroneous assessment of an appropriate amount, should an order be made. 173 How these separate matters should be approached is of some importance in the disposition of the present application. The failure of the applicant to identify with sufficient care the various elements of its challenge tended to obscure the difficulties which it faced in this Court. Those difficulties need to be identified. 174 In addition to that step, I would add some comments in respect of the nature of the litigation and its relevance to the approach taken, both below and in this Court. 175 To the extent that there are matters of principle involved, and because this is apparently the first occasion in Australia involving consideration by an intermediate court of appeal of the proper exercise of the discretionary power to cap costs, it is appropriate that there be a grant of leave to appeal.

Approach in appellate jurisdiction 176 As the draft notice of appeal recorded, the application was brought pursuant to s 58(3)(a) of the LEC Act. That provision requires leave of this Court with respect to a proposed appeal under s 58(1) against an interlocutory order or decision of the Land and Environment Court. The right of appeal accorded by s 58(1) is not restricted to a question of law and is thus governed by s 75A of the Supreme Court Act 1970 (NSW), the appeal being by way of rehearing. 177 There are three reasons for exercising appellate restraint in a case such as the present. First, it is a clear example of an interlocutory judgment involving a procedural order and therefore subject to the well-known principles of restraint conveniently identified by Jordan CJ in In re the Will of FB Gilbert (Deceased) (1946) 46 SR (NSW) 318. 178 Secondly, the power is of a kind which is discretionary, both as to the making of the order and the amount of any sum fixed. The two stages are difficult to separate. The fixing of a sum involves not merely an evaluative judgment, but one which will encompass a range of possibilities, rather than a binary choice. Accordingly, a challenge to the maximum costs order should be subject to the constraints which apply in such cases: see, eg, Singer v Berghouse [1994] HCA 40; 181 CLR 201, at 212 (Mason CJ, Deane and McHugh JJ). 179 Thirdly, the subject matter of the proceedings involves the operation of environmental legislation, and particularly the Protection of the Environment Operations Act 1997 (NSW) ("the PEO Act"), s 120 and Chapter 8, the enforcement of which falls within the exclusive jurisdiction of the Land and Environment Court. Decisions as to the circumstances in which, and the conditions under which, proceedings in that jurisdiction may be maintained are matters as to which an appellate court should accord a measure of deference in granting leave to appeal, and in reviewing on appeal, decisions of a primary judge.

Identifying relevant considerations 180 A consideration of the correct approach to the application in the present case requires reference to the statutory provision under which the order was sought. That was r 42.4 of the UCPR, which provides: " 42.4 Power to order maximum costs (1) The court may by order, of its own motion or on the application of a party, specify the maximum costs that may be recovered by one party from another. (2) A maximum amount specified in an order under subrule (1) may not include an amount that a party is ordered to pay because the party: (a) has failed to comply with an order or with any of these rules, or (b) has sought leave to amend its pleadings or particulars, or (c) has sought an extension of time for complying with an order or with any of these rules, or (d) has otherwise caused another party to incur costs that were not necessary for the just, quick and cheap: (i) progress of the proceedings to trial or hearing, or (ii) trial or hearing of the proceedings. (3) An order under subrule (1) may include such directions as the court considers necessary to effect the just, quick and cheap: (a) progress of the proceedings to trial or hearing, or (b) trial or hearing of the proceedings. (4) If, in the court's opinion, there are special reasons, and it is in the interests of justice to do so, the court may vary the specification of maximum recoverable costs ordered under subrule (1)." 181 The structure and context of the UCPR provide no assistance in considering the functions and scope of this provision. Although the UCPR generally (like most rules of court) follow a chronological sequence, which places Pt 42, dealing with costs, after Parts relating to judgments and before a miscellany of Parts appearing at the end of the rules, some provisions in Pt 42 operate at an early stage of proceedings. Rule 42.4 is one which is capable of so operating, as is r 42.21, dealing with security for costs. 182 The precursor to r 42.4 in the UCPR, which was in similar terms to the present rule, was r 35A in Pt 52A (Costs) of the Supreme Court Rules 1970. That rule was introduced in January 2000. Both rules are in similar (though not identical) terms to Order 62A of the Federal Court Rules, which commenced on 1 January 1993. 183 Early decisions as to the operation of the provision in the Federal Court reveal a cautious approach to the circumstances in which it is appropriate to make a costs capping order, in the absence of clear guidance from the rule itself as to the circumstances of its operation. Early decisions in the Federal Court took note of the content of a letter from the Chief Justice of that Court to the President of the Law Council of Australia identifying the concern underlying the proposed rule as the belief that "the cost of litigation, particularly for persons of ordinary means, places access to the civil courts beyond their reach and thus effectively denies them justice": see Sacks v Permanent Trustee Australia Ltd [1993] FCA 502; 45 FCR 509 at [6] (Beazley J); Woodland v Permanent Trustee Company Ltd [1995] FCA 1388; 58 FCR 139 at 144 (Wilcox J). The letter further noted that the fear of the ultimate exposure in terms of the legal costs to which an unsuccessful party may be subjected constituted a "deterrent to the assertion or defence of rights in civil litigation". 184 The propriety of reliance on such a document in ascertaining the purpose of a court rule was not debated in either proceeding, but the underlying statement of purpose may, in any event, be accepted. However, the rule, in its terms, is not limited to such a purpose and restrictions on its operation must be identified by reference to its language and the context in which it appears and the jurisdiction in which it is invoked, rather than by reference to extraneous materials. 185 The relationship between r 42.4 in the UCPR and ss 56-60 of the Civil Procedure Act 2005 (NSW), which are partly reflected in r 42.4(3), supports the view that a costs capping order may properly be made to "curb the tendency of one or all parties to engage in disproportionate expenditure on legal costs", and to maintain "[p]roportionality of costs to the value of the result": see Sherborne Estate (No 2): Vanvalen v Neaves [2005] NSWSC 1003; 65 NSWLR 268 at [26] and [30] (Palmer J). However, it does not follow that those are the only circumstances in which an order can be made; rather they reflect the concerns which arose in that case. (It is not necessary for present purposes to consider whether his Honour was correct in concluding that an order could only be made prophylactically and not at the time of making a final costs order: at [31].) 186 Where a broad discretionary power is conferred on a court, it is important that the full range of permissible considerations is identified and that limitations which do not find reflection in the language of the rule not be imposed. More recent cases have adopted this approach. 187 The Federal Court rule, providing that the Court might specify "the maximum costs that may be recovered on a party and party basis" was originally construed as requiring that any order made bind both (or all) parties to the litigation: Maunchest Pty Ltd v Bickford [1993] FCA 318 at [14] (Drummond J). In Hanisch v Strive Pty Ltd [1997] FCA 303; (1997) 74 FCR 384 at 390 his Honour repeated the view he had expressed in Maunchest. His Honour was of the view that the order made in Woodland was to similar effect, though that conclusion may be doubted. As will be seen below, the language of the UCPR imposes no such constraint. 188 Further, in Hanisch at 387, Drummond J stated: "The principal object of O 62A is to arm the Court with power to limit the exposure to costs of parties engaged in litigation in the Federal Court which involves less complex issues and is concerned with the recovery of moderate amounts of money, although it may be appropriate for an order to be made under O 62A in other cases …." 189 In a more recent decision, Corcoran v Virgin Blue Airlines Pty Ltd [2008] FCA 864 at [6]-[13], Bennett J identified a wide variety of factors which might need to be taken into account in appropriate cases under O 62A. A helpful exposition of relevant considerations in a public law context may be found in the judgment of Preston CJ in Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd [2009] NSWLEC 165; 170 LGERA 22. As noted by Preston CJ at [12], under r 42.4, it is a matter for the Court to specify the party which is protected by a maximum costs order: there is no requirement that the order apply equally to all parties. 190 The language of r 42.4 differs from the language used in the Federal Court rules and decisions as to the operation of that rule, have no necessary application in this jurisdiction. As Caroona demonstrates, there is no call to limit the "principal objects" of r 42.4 in the way suggested by Drummond J in Hanisch in relation to the Federal Court rule. Further, as subsequent litigation has demonstrated, public law cases have proved a separate and important area of its operation. 191 After referring to the discussion of proportionality between costs incurred and the subject-matter in dispute in Sherborne Estate (No 2), Preston CJ said in Caroona at [21]: "Ensuring proportionality of costs does not always have the effect of achieving access to justice. The subject matter of a dispute may be important, complex and of high value. By the criterion of proportionality of costs alone, significant expenditure of legal costs to litigate such a dispute could be justified. Yet the financial resources of one or more of the parties may be insufficient to meet an adverse costs order of such magnitude. The fear of exposure to significant legal costs to which an unsuccessful party may be subjected may deter a party from asserting, or continuing to assert, its rights in litigation." 192 Against these general principles, it is convenient to consider specific factors of relevance to the present case.

Open standing 193 The PEO Act makes it an offence for a person to pollute any waters. Section 252, in Pt 8.4, provides: " 252 Remedy or restraint of breaches of this Act or regulations (1) Any person may bring proceedings in the Land and Environment Court for an order to remedy or restrain a breach of this Act or the regulations. … (3) Any such proceedings may be brought whether or not any right of the person has been or may be infringed by or as a consequence of the breach. … (6) If the Court is satisfied that a breach has been committed or that a breach will, unless restrained by order of the Court, be committed, it may make such orders as it thinks fit to remedy or restrain the breach. … (8) In this section: breach includes a threatened or apprehended breach. 194 The importance of open standing provisions in environmental protection legislation is well-understood, particularly in the Land and Environment Court. As the primary judge noted at [44]: "The history of public interest litigation in this Court through the utilisation of third party standing provisions in virtually all the major environmental and planning legislation in NSW is reasonably extensive and commenced early in the life of the Court. Broad standing provisions enable the legislation to be tested and enforced through proceedings in the Court." 195 Commentators have noted that the evident purpose of open standing provisions may not be realised unless financial disincentives to their use by public-minded citizens are not removed or at least reduced. Thus, Toohey J, speaking extra-judicially has said: "There is little point in opening the doors to the courts if litigants cannot afford to come in. The general rule in litigation that 'costs follow the event' is in point. The fear, if unsuccessful, of having to pay the costs of the other side (often a government instrumentality or wealthy private corporation), with devastating consequences to the individual or environmental group bringing the action, must inhibit the taking of cases to court. In any event, it will be a factor that looms large in any consideration to initiate litigation." J Toohey and A D'Arcy, "Environmental Law - Its Place in the System" in R J Fowler (ed), Proceedings of the International Conference on Environmental Law. 14-18 June 1989, Sydney, Australia ( National Environmental Law Association of Australia and Law Association for Asia and the Pacific). 196 As Preston CJ stated in Caroona Coal Action Group Inc v Coal Mines Australia Pty Limited (No 3) [2010] NSWLEC 59; 173 LGERA 280 at [31]: "[Toohey J's] observation has been cited with approval by courts in Australia and overseas: see Oshlack v Richmond River Shire Council at 238 per Stein J; Oshlack v Richmond River Council at [114] per Kirby J; R (On the Application of Corner House Research) v Secretary of State for Trade and Industry [2005] EWCA Civ 192; [2005] 1 WLR 2600; … at [31]. It has also been cited by judges in their extra-curial writings: see for example Justice P Salmon, 'Access to Environmental Justice' (1998) 2 NZ J Env L 1 at 13 and Lord Justice Brooke, 'Environmental Justice: The Costs Barrier' (2006) 18 J Env L 341 at 346. Others have made like comments: P Sands, 'Access to Environmental Justice in the European Community: Principles, Practice and Proposals' (1994) 3(4) RECIEL 206 at 212-213; Sir Robert Carnwarth, 'Environmental Litigation - A Way through the Maze?' (1999) 11 J Env L 1 at 9 and Kent v Cavanagh (1973) 1 ACTR 43 at 55 per Fox J." 197 There are limits to the power of a judge to address such concerns if traditional procedural rules are not varied. However, where, as with the Land and Environment Court, costs rules have been varied to permit such concerns to be taken into account, the Court would fail to promote the statutory purpose underlying the open standing provisions in not seeking to identify inappropriate financial disincentives.

Likely final costs order 198 From the point of view of the party seeking protection, the purpose of a maximum costs order is to limit the potential liability of a party in the event that it fails to obtain the outcome sought. From the perspective of the other party, such an order will limit its ability to recover costs it has expended in successfully pursuing or defending the proceedings. It follows that a matter of primary importance is the identification of the likely final costs order. 199 Many of the cases in which maximum costs orders have been considered have assumed, often without discussion, that absent misconduct on one side or the other, costs will follow the event of the litigation. 200 The relevant power in the present case for the Court to award costs in the proceedings below, was to be found in s 98(1) of the Civil Procedure Act. The unfettered discretion contained in s 98(1) is subject to rules of court. The phrase "rules of court" is taken to include the UCPR, being the rules made under s 9 of the Civil Procedure Act: s 10(1). Pursuant to UCPR r 42.1, which applies to the Land and Environment in its class 4 jurisdiction, unless the Court otherwise orders, costs follow the event. However, the operation of that rule is qualified by the rules specified in Schedule 2, which includes the Land and Environment Court Rules 2007 ("the LEC Rules"): UCPR, r 1.7. Relevantly for present purposes, r 4.2 of the LEC Rules, governing proceedings in class 4 of the Court's jurisdiction, 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. (2) The Court may decide not to make an order requiring an applicant in any proceedings to give security for the respondent's costs if it is satisfied that the proceedings have been brought in the public interest." 201 The manner in which this rule might operate in the present case was not the subject of submissions. However, two matters appear to have been accepted by the parties. First, as her Honour stated, the litigation was brought "in the public interest": at [18]. Secondly, r 4.2 would operate when the question of costs came to be determined. That was a matter her Honour noted and took into account stating at [44]: "This [rule] reflects the need to make appropriate costs orders and other procedural orders which do not unduly inhibit public interest cases being brought in this Court. It is important to recognise the impact practice and procedure rules and judicial decisions about these can have on access to justice in this Court, as matters are often concerned with issues of importance to the wider community beyond the interests of the immediate parties to the litigation." 202 A principled approach to the application of r 4.2 may be found in the judgement of Preston CJ in Caroona (No 3) (above at [29]). Before discussing how the various considerations should apply, his Honour noted at [38] and [39]: "A review of the costs decisions reveals that courts have referred to a variety of considerations to determine whether litigation can properly be characterised as having been brought in the public interest. Lloyd J in Engadine Area Traffic Action Group Inc v Sutherland Shire Council (No 2) [2004] NSWLEC 434; (2004) 136 LGERA 365 at [15] summarised five considerations: '(a) The public interest served by the litigation…; (b) 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…; (c) Whether the applicant sought to enforce public law obligations…; (d) Whether the prime motivation of the litigation is to uphold the public interest and the rule of law…; (e) Whether the applicant has no pecuniary interest in the outcome of the proceedings….' These five considerations have been used to characterise the litigation in Anderson v NSW Minister for Planning (No 2) [[2008] NSWLEC 272; 163 LGERA 132] at [15]; Minister for Planning v Walker (No 2) [2008] NSWCA 334 at [6]-[9]; Sharples v Minister for Local Government (No 2) [2009] NSWLEC 62 at [5], [11]-[19]; affirmed in Sharples v Minister for Local Government [2010] NSWCA 36 at [115], [116] and [123]; and Hastings Point Progress Association Inc v Tweed Shire Council (No 3) at [25], [42] and implicitly at [11]." 203 For present purposes, rule 4.2 has the following significant aspects. First, it removes any argument that the bringing of proceedings in the public interest might be an extraneous factor which could not influence an order as to costs: cf Latoudis v Casey [1990] HCA 59; 170 CLR 534 and see Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [31] (Gaudron and Gummow JJ). Secondly, satisfaction of the Court that the proceedings have been brought in the public interest provides an affirmative reason for not making an order against an unsuccessful applicant, and thus qualifies the operation of UCPR r 42.1, which would otherwise be applicable. Thirdly, and consequentially, r 4.2 qualifies any expectation that Delta may have that it would receive its costs if successful. Taken in conjunction with the first factor considered (open standing), the diminution in the expectation of the respondent that it will be entitled to receive its costs if successful is a factor which diminishes the extent to which a maximum costs order will undermine that expectation and hence provides support for the making of such an order. It follows that the public interest nature of the proceedings is directly relevant to the propriety of a maximum costs order.

Application of principles 204 What is required is a consideration of the future of the litigation from the point of view of the defendant, if the proposed order is made and from the point of view of the applicant, if it is not made. Each perspective needs to be addressed separately and the likely consequences balanced.

(a) the defendant's perspective 205 Delta's primary basis of objection to the making of the order was that it would lose an expectation of recovering 90% of its party and party costs in the event that it should be successful. It submitted that either no order should be made, or a far greater amount should be allowed. 206 This premise underlying the submission can only be accepted subject to a number of significant qualifications. First, the expectation is based upon an assumption that an order will be made in favour of Delta, if the applicant is unsuccessful. That assumption fails to give weight to r 4.2, which permits the Court to decline to order that an unsuccessful applicant pay the respondent's costs in public interest litigation. 207 Although her Honour did conclude that "it appears this matter is one of public interest" (at [59]), her Honour stated that a protective costs order should not be lightly made at an early stage in proceedings "given that it is occurring before all the issues are known and the result determined": at [69]. 208 First, if there were, at the stage her Honour considered the application, uncertainty as to the issues in dispute, there must also have been a level of uncertainty about the likely costs which might be recoverable on a party and party basis, and hence the extent of the prejudice Delta feared. 209 Secondly, I do not share the concern that litigation cannot readily be characterised as being in the public interest at an early stage in the proceedings. Her Honour accepted that the Society had acted responsibly in bringing the proceedings and that it had a reasonably arguable case. It is apparent that the proceedings were brought to prevent or limit alleged pollution of the Coxs River. The river is an important watercourse, feeding into Sydney's water supply. The public interest in preventing or limiting pollution in that body of water is readily apparent. The proceedings would not lose their character as public interest litigation because the Court might ultimately not be satisfied that the water was being polluted, nor that there was any imminent threat thereof. 210 Her Honour also thought that the plaintiff could be said to have an interest in the outcome of the proceedings "because the members of the Society are mostly residents of the area where the offence is alleged to have been committed": also at [40]. 211 There was no basis in the evidence to conclude that any member of the Society had an interest sufficient to confer on him or her legal standing to bring proceedings according to the ordinary rules. In any event, the interests of the members were not the same as the interests of the Society. It is not necessary for present purposes to determine whether a party having a sufficient private interest to accord it standing in public law proceedings would deprive litigation which was otherwise pursued in the public interest of the character of public interest litigation. Arguably, one would assess the dominant interests involved. 212 The primary judge was somewhat ambivalent in her finding that this was public interest litigation. She said that the proceedings are "not clearly in the public interest", because the "whole of the catchment is not affected": at [40]. However, the degree of confidence the Court has in its characterisation of the proceedings as public interest litigation is important to its assessment of the likelihood that no costs order would be made in favour of Delta even if it were ultimately successful. Her Honour was correct to characterise the proceedings as public interest litigation; the concern as to the area of catchment affected was not shown to be material on the evidence. A significant qualification of Delta's expectation of a favourable costs order therefore followed. 213 The respondent to the proceedings is a state-owned corporation, whose principal function is to provide electricity for consumers in the Sydney region. The proper exercise of that function and control of waste products produced in exercising that function, is itself a matter of public interest. This is relevant not only to the characterisation of the litigation, but also to the conduct of Delta, which, it should be assumed, will act as a model litigant. It will therefore limit its costs to those strictly necessary, act co-operatively in seeking to identify the real issues in dispute and take appropriate steps to limit or settle the litigation. It should be assumed that, as with all litigants, it will fulfil its duty to assist the Court to facilitate the just, quick and cheap resolution of the real issues in the proceedings: s 56(1) and (3).

(b) the applicant's perspective 214 The protective costs order was sought on the basis, accepted as reasonable by the primary judge, that the Society did not wish to set at risk the whole of its financial viability, despite the importance of the issues raised in the proceedings, having regard to its objects. The amount of the order made reflected, in her Honour's view, the maximum liability the Society was willing to risk by way of an adverse costs order, in its pursuit of the litigation. 215 Delta complained that her Honour had failed to consider the possibility that the Society might be able to raise additional funds from its members. However, that proposition involved a factual element which might have been pursued in cross-examination of the President of the Society, but was not. Further, her Honour did not need to accept at face value the evidence given by the President. It was a matter for her to make an assessment of the point at which she believed the risk of an adverse costs order would lead the Society to terminate the proceedings. That involved an evaluative judgment of a kind with which this Court would not willingly interfere. No error or principle has been demonstrated in the approach her Honour took to that specific matter.

(c) the balancing exercise 216 Her Honour accepted that making an order in the terms proposed would adversely impact on the financial interests of Delta. Because the adverse impact assumed that Delta would be successful and would receive a favourable costs order, her Honour's assessment of the prejudice to Delta was probably overstated. Her Honour also made an assessment, as she was required to do, of the likelihood of the proceedings not being pursued, if an order were not made. That assessment has not been shown to be unreasonable or otherwise flawed. Given her further conclusions that the case was reasonably arguable, that the applicant had acted reasonably in pursuing it, and that it was public interest litigation, there was a sound basis for making a protective costs order in the amount proposed. 217 The amount itself was not unreasonable. If the Society had obtained legal aid, Delta would have been limited to recovering an amount of $5,000 from the Legal Aid Commission: Legal Aid Commission Act 1979 (NSW), s 47. Why legal aid is not available is not known. Nevertheless, as illustrated by Woodland, the existence of such a scheme and its consequences if engaged, may be a permissible consideration, even in circumstances where the scheme does not operate. 218 The lack of proportionality between the costs permitted to be recovered and the likely final bill does not carry the weight sought to be placed on it by Delta. As noted above, the principle that any person may bring proceedings to prevent a breach or threatened breach of environmental protection laws will be seriously undermined if some protection against large costs bills is not available. Important public interest disputes are often complex and based on expert evidence. Public-minded citizens may well be able to obtain donations of time and expertise from professional witnesses and lawyers, but will find it less easy to raise funds to meet the costs of the other party. 219 In the past, such litigation was sometimes undertaken by people of no means, rendering it unlikely that a successful respondent which obtained an order for its costs would ever be likely to recover those costs. It is preferable that litigation be conducted by responsible entities and that the final arrangements with respect to recovery be transparent.

Conclusion 220 In the circumstances, I can see no error of a kind unfavourable to Delta, in the approach adopted by her Honour. Nor is the order made unreasonable in amount. I would dismiss the appeal and order Delta to pay the Society's costs in this Court. 221 The orders sought by Delta did not address her Honour's refusal to grant security for costs. 222 MACFARLAN JA: I agree with the judgment of Basten JA. 223 I add the following comments upon the matter that is treated by Beazley JA in her judgment as of particular significance (see [164] - [167] above). That is the relationship between the amount of costs the subject of the order made at first instance and the costs likely to be incurred by the appellant in the proceedings. First I emphasise my agreement with the comments of Basten JA on that issue (see [218] - [219] above). Secondly, my view is that it is in any event apparent from [67] of the judgment of the primary judge that in considering whether, and determining that, a maximum costs order should be made in a particular amount, the estimate in evidence of the costs likely to be incurred by the appellant was at the forefront of her Honour's mind. In those circumstances it cannot be said that her Honour failed to have regard to the relevant matter. **********

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