ECLIPSE RESOURCES PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [2015] WASC 13 (15 January 2015)

(a) discontinue the four causes of action set out in paragraphs 23 to 37 (inclusive) of the Further ReAmended Second Substituted Statement of Claim dated 9 May 2014 in ClV 1364/09; and

(b) withdraw the four defences set out in paragraphs 30 to 44 (inclusive) of the ReAmended Defence dated 4 June 2014 in ClV 2385/13,

(together 'the Matters'), subject to and conditional upon Eclipse Resources filing an undertaking that it will not in the future bring any action in this Court, or in any other court, against the Government Parties in respect of the above-mentioned causes of action and defences.

1. The Government Parties pay the costs of Eclipse Resources of and incidental to the Matters to be taxed if not agreed.
2. The issue of whether the costs referred to in order 3 above be awarded on an indemnity basis or made pursuant to a special costs order under s. 280(2) of the Legal Profession Act 2008 be determined on the papers by the Court.

4 The Matters involved the following arguments that the 2008 Levy Regulations were invalid:

(a) the 2008 Levy Regulations are invalid because the Waste Authority recommended, or purported to recommend, the making of the regulations to the Governor before s 8 of the Waste Avoidance and Resource Recovery Act 2007 (WA) commenced on 1 July 2008 (Matter 1);

(b) the 2008 Levy Regulations are ultra vires the regulation making power in the Waste Avoidance and Resource Recovery Levy Act 2007 (WA) (the 2007 Levy Act) because they purport to impose a liability to pay levy in respect of waste received at premises which are used for the purpose of receiving waste and in respect of which a licence is held, irrespective of whether or not the occupier is required to hold a licence for the premises (Matter 2);

(c) regulations 10 to 12 of the 2008 Levy Regulations are invalid because they do not exclude from the calculation of the value of material upon which levy is imposed, material disposed of to landfill not being waste (Matter 3); and

(d) the 2008 Levy Regulations are invalid because only four of the five people appointed to be members of the Waste Authority assented by email to a resolution without meeting recommending the making of the regulations (Matter 4).

5 On 3 September 2014, orders were also made for the filing of affidavits and submissions in relation to the remaining costs questions, namely whether the costs referred to in par 3 of the orders should be made on an indemnity basis or with a special costs order under s 280(2) of the Legal Profession Act 2008 (WA).

6 In the course of the preparation of affidavits and submissions in relation to those issues, an issue emerged between the parties as to the ambit of what was captured by the order that the Government Parties pay Eclipse's costs 'of and incidental to the Matters'. The Eclipse Parties assert, and the Government Parties deny, that Eclipse's costs of the issues pleaded in par 49 of the further reamended second substituted statement of claim dated 9 May 2014 in CIV 1364 of 2009 (the Statement of Claim) and in pars 8 and 15 of the reamended defence dated 4 June 2014 in CIV 2385 of 2013 (the Defence) (the No Emissions Issue) are within the ambit of the costs orders made in par 3 of the orders of 3 September 2014.

7 In par 49 of the Statement of Claim, the Eclipse Parties plead that:

At none of the Sites does, or at any material time did, Eclipse or any other occupier thereof cause or increase or permit to be caused or increased an emission or alter or permit to be altered the nature of any Waste, noise, odour or electromagnetic radiation emitted from the Sites within the meaning of section 56 of the Environmental Protection Act 1986 (WA).

8 Section 56 of the Environmental Protection Act 1986 (WA) (the EP Act) provides that the occupier of any 'prescribed premises' who 'causes or increases, or permits to be caused or increased, an emission or alters or permits to be altered the nature of the waste, noise, odour or electromagnetic radiation emitted, from the prescribed premises commits an offence unless he is the holder of a licence issued in respect of the prescribed premises and so causes, increases, permits or alters in accordance with any conditions to which that licence is subject'.

9 In effect, therefore, in par 49 of the Statement of Claim Eclipse asserted that it did not engage in conduct which, without a licence, would have led to a contravention of s 56 of the EP Act and, in that sense, that it was not required to hold a licence. Eclipse makes similar assertions, in effect, in paragraphs 8 and 15 of the Defence.

10 In light of the dispute over costs, Eclipse now seeks the following further orders:

Eclipse's costs to be paid by the Government Parties pursuant to Order 3 of the Orders made by the Honourable Justice Beech on 3 September 2014 include:

(a) the costs of the discontinued cause of action set out in paragraph 49 of the Further ReAmended Second Substituted Statement of Claim dated 9 May 2014 in CIV 1364/09; and

(b) the costs of the withdrawn defence to counterclaim set out in paragraphs 40, 43 and 46 of the Reply to ReAmended Second Substituted Defence and Defence to ReAmended Second Substituted Counterclaim dated 30 May 2014 in CIV 1364/09; and

(c) the costs of the withdrawn defence set out in paragraphs 8 and [15] of the ReAmended Defence dated 4 June 2014 in CIV 2385/13.

11 Eclipse's submissions are founded on an asserted interconnection between the invalidity issues raised by the Matters and the No Emissions Issue. Eclipse asserts that the No Emissions Issue was made redundant by the Validation Act.[1]

12 Matter 2 involved Eclipse's contention that the 2008 Levy Regulations were invalid as being beyond the regulation making power in the 2007 Levy Act because:

(a) the 2007 Levy Act empowered the imposition of a levy for disposal premises being premises which, among other things, were premises in respect of which the occupier was required to hold a licence, whether or not such a licence was in force; whereas

(b) the 2008 Levy Regulations purported to impose liability to pay levy in respect of waste received at premises in respect of which a licence was held, irrespective of whether or not the occupier was required to hold a licence.[2]

13 Eclipse contends that the No Emissions Issue was relevant to whether Eclipse was required to hold a licence, and that that issue falls away in light of the Validation Act because, under the validated regulations, the criterion of liability for the levy is whether a licence is held, not whether a licence was required to be held.

(1) the No Emissions Issue was not one of the discontinued Matters;

(2) the No Emissions Issue is not incidental to any of the Matters;

(3) Eclipse's argument on the No Emissions Issue (the No Emissions Argument) was always redundant in that:

(a) if Eclipse established its contention in Matter 2, then the 2008 Levy Regulations were invalid on the ground that they were beyond power, and there would be no need for or purpose in establishing the No Emissions Argument;

(b) conversely, if Eclipse failed to establish its contentions in Matter 2, the 2008 Levy Regulations were valid, and were to be applied according to their terms under which the criterion of liability was whether the premises were actually licensed;

(4) the No Emissions Issue was not always a live issue between the parties - in particular it was not live between 23 February 2011 and 28 March 2013;

(5) the amendments made by the Eclipse Parties to delete their No Emissions Argument in pleadings filed in September and October 2014 were amendments not the subject of the orders of 3 September 2014. In substance, those amendments should be regarded as amendments to pleadings made without leave pursuant to O 21 r 3, engaging O 66 r 3(1);

(6) the effect of O 66 r 3(1) is that the Government Parties are entitled to their costs thrown away in respect of Eclipse's No Emissions Argument unless the court otherwise orders; and

(7) the circumstances do not justify any contrary order by the court.

15 The parties agree that the general principles regarding costs when proceedings are discontinued are applicable, either directly or by analogy. The legal principles relating to claims that are discontinued or abandoned are not in doubt. Those principles were conveniently summarised by the Court of Appeal in Re Western Australian Planning Commission; Ex parte Solomon[3] as follows:

The power to order costs is a discretionary power. Ordinarily, the power is exercised after a hearing on the merits and, as a general rule, the successful party is entitled to his or her costs. Success in the action or on the particular issues is the fact that usually controls the exercise of the discretion. A successful party is prima facie entitled to a costs order: Latoudis v Casey [1990] HCA 59; (1990) 170 CLR 534, 566 - 568 (McHugh J). However, when there has been no hearing on the merits, a court is necessarily deprived of the factor that usually determines whether or how it will make a costs order: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin [1997] HCA 6; (1997) 186 CLR 622, 624 (McHugh J). The issue about costs cannot be resolved by the court trying a hypothetical action between the parties because this would burden the parties with the cost of a litigated action which, by the abandonment of the action, they have avoided: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (624). If it appears that both parties have acted reasonably in commencing and defending the proceedings and the conduct of the parties continued to be reasonable until the litigation was settled, or its further prosecution became futile, the proper exercise of the costs discretion will usually mean the court will make no order as to costs of the proceedings: Re Minister for Immigration and Ethnic Affairs; Ex parte Lai Qin (625). However, if after litigating for some time, one party effectively surrenders to the other, then the court may make a costs order against that party: One.Tel Ltd v Commissioner of Taxation [2000] FCA 270; (2000) 101 FCR 548, 552 - 553 (Burchett J); Edwards Madigan Torzillo Briggs Pty Ltd v Stack [2003] NSWCA 302. This might be justified where it was clear that the strength of the other side's case led to the surrender thereby allowing the inference to be drawn that the abandoning party had acted unreasonably in suing or defending in the first place [9].

16 I would not make any costs order in favour of Eclipse in relation to costs incurred before 25 June 2013. Eclipse pleaded the No Emissions Issue from the outset of the action in CIV 1364 of 2009. It was pleaded in the original statement of claim of 21 October 2010, as a separate ground on which Eclipse asserted that it was not liable to pay the levy. At that stage, none of the Matters had been pleaded. Matter 2 was not pleaded until more than 2½ years later, in the statement of claim filed on 25 June 2013.[4]

17 In that pleading, Eclipse introduced Matter 2, and reintroduced the No Emissions Argument.[5]

18 As I have said, the Government Parties contend that the No Emissions Argument was always redundant in the context of Matter 2. They contend that:

(a) if Eclipse established its contention in Matter 2, then the 2008 Levy Regulations were invalid on the ground that they were beyond power, and there would be no need for or purpose in establishing the No Emissions Argument;

(b) conversely, if Eclipse failed to establish its contentions in Matter 2, the 2008 Levy Regulations were valid and were to be applied according to their terms, under which the criterion of liability was whether the premises were actually licensed.

19 I do not accept that Matter 2 gave rise only to these two alternatives. The Government Parties' case in relation to Matter 2 raised a third possibility: that as a matter of proper construction, the Levy Regulations applied only to an occupier who held a licence and who was required by s 56 of the EP Act to hold a licence. That construction was advanced by the Government Parties in their pleadings[6] and in their submissions dated 12 June 2014 in relation to the preliminary issues concerning validity.[7] It was also referred to by the Government Parties in their solicitors' letter of 21 March 2014.[8]

20 In determining the Matters, the court would have determined the proper construction of the 2008 Levy Regulations including whether, notwithstanding the terms in which the regulations were expressed, the regulations should, as pleaded and contended by the Government Parties, be read down so as to apply only to an occupier who not only held a licence but who was required by s 56 of the EP Act to hold a licence. If that construction had been adopted, it would have been necessary to determine the No Emissions Issue in order to determine whether Eclipse was required to hold a licence. The result of Matter 2 falling away by virtue of the passage of the Validation Act was that the No Emissions Issue became moot.

21 Generally speaking, where issues in litigation are rendered moot by the supervening passage of legislation, an order that each party bear its own costs will usually be appropriate. However in this case, the State of Western Australia and the Minister for the Environment are parties to the litigation. The Government Parties have caused the Validation Act to be put before parliament and ultimately enacted with the objectively ascertained intention, and with the effect, of removing as issues all of the invalidity issues the subject of the Matters. As I have explained, that also had the consequence of rendering the No Emissions Issue moot. In my view, the considerations sustaining the costs order in favour of Eclipse in relation to the Matters also support a costs order in favour of Eclipse in relation to the No Emissions Issue. In the circumstances, in my view it is appropriate to order that the Government Parties pay Eclipse's costs of the No Emissions Argument incurred after 25 June 2013.

22 The Government Parties contend, and Eclipse accepts,[9] that the costs of whether the materials filled at Eclipse's sites were 'waste' should be specifically excluded from any costs order in favour of Eclipse.

1. Eclipse's costs to be paid by the Government Parties pursuant to Order 3 of the Orders made on 3 September 2014 include the following costs, insofar as such costs were incurred after 25 June 2013:

(a) the costs of the discontinued cause of action set out in paragraph 49 of the further reamended second substituted statement of claim dated 9 May 2014 in CIV 1364/2009;

(b) the costs of the withdrawn defence to counterclaim set out in paragraphs 40, 43 and 46 of the reply to reamended second substituted defence and defence to reamended second substituted counterclaim dated 30 May 2014 in CIV 1364/2009;

(c) the costs of the withdrawn defence set out in paragraphs 8 and 15 of the reamended defence dated 4 June 2014 in CIV 2385/2013;

but in each case excluding the costs relating to the issue of whether the materials filled at Eclipse's sites were 'waste'.

1. The Government Parties are not entitled to their costs thrown away by reason of the discontinued and withdrawn pleadings referred to in paragraph 1.

[1] Eclipse's submissions dated 15 December 2014 [10], [20], [24]; Eclipse's reply submissions dated 9 January 2015 [3].

[3] Re Western Australian Planning Commission; Ex parte Solomon [2010] WASCA 236 (S) [9] (Pullin JA).

[4] Affidavit of Jean Shaw dated 31 October 2014 [28].

[6] Reamended second substituted defence and counterclaim dated 20 May 2014 in CIV 1364/2009 [35]; Amended reply in CIV 2385/2013 [19].

[7] Submissions dated 12 June 2014 [72] - [74].