ECLIPSE RESOURCES PTY LTD -v- THE STATE OF WESTERN AUSTRALIA [No 2] [2015] WASC 137 (22 April 2015)

Supreme Court of WA|2015-04-22|Before: Beech J

1 On 2 July 2014, the Waste Avoidance and Resource Recovery Amendment (Validation) Act 2014 (WA) (the Validation Act) was given Royal Assent and came into operation.

2 The passage of that legislation rendered nugatory what, up to then, had been issues in these actions concerning the validity of the Waste Avoidance and Resource Recovery Levy Regulations 2008 (WA) (the 2008 Levy Regulations). Those issues had been listed for hearing as preliminary issues on 17 June 2014, but the hearing was adjourned in light of the apparently impending passage of the Validation Act.

(a) discontinue the four causes of action set out in paragraphs 23 to 37 (inclusive) of the Further Re-Amended 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 Re-Amended 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.

The Government Parties pay the costs of Eclipse Resources of and incidental to the Matters to be taxed if not agreed.
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 These reasons deal with the issue identified in order 4 of the Orders.

5 In the course of the preparation of affidavits and submissions in relation to this issue, a dispute emerged between the parties as to the ambit of order 3 of the Orders.

6 The parties filed affidavits and submissions in relation to that dispute. I determined it by reasons delivered on 15 January 2015 (the January Reasons).[1] I ordered that the Government Parties pay Eclipse's costs of the No Emissions Issue incurred after 25 June 2013, excluding the costs relating to the issue of whether the materials filled at Eclipse's sites were 'waste'.

7 These reasons deal with Eclipse's application for an indemnity costs order or special costs orders in relation to the costs referred to in order 3 of the Orders and order 1 of the orders of 15 January 2015.

8 In these reasons, I will use the terminology that I used in the January Reasons. These reasons must be read with the January Reasons, as they provide the background and context to the questions now arising for decision.

9 I begin with Eclipse's application for an indemnity costs order.

10 An order for indemnity costs is exceptional. It will only be made if there is a special or unusual feature in the case to justify departure from the ordinary practice of awarding costs on a party and party basis.[2]

11 I adopt the general principles outlined by Pullin JA and Kenneth Martin J in Swansdale Pty Ltd v Whitcrest Pty Ltd [10]. Most of the situations in which indemnity costs have been awarded have involved an element of improper or unreasonable conduct on the part of the unsuccessful party or its advisers in the conduct of the case.[3] The categories of cases in which indemnity costs may be awarded are not closed.[4]

12 Eclipse contends that an indemnity costs order is justified because the Government Parties caused the Validation Act to be enacted with the intention and effect of removing as issues all of the invalidity issues the subject of the Matters, thereby rendering the No Emissions Issue moot and defeating Eclipse's accrued rights in relation to the Matters.[5]

13 Alternatively, Eclipse contends that this conduct on the part of the Government Parties, coupled with its belated timing, warrants the making of an indemnity costs order.[6]

14 Eclipse's submissions rely heavily on the decision of the New South Wales Court of Appeal in Attorney General (NSW) v World Best Holdings Ltd.[7]

The reasons why I decline to make an order for indemnity costs

15 I am not satisfied that the circumstances of this case justify an award of indemnity costs. In particular, I am not satisfied that the matters relied upon by Eclipse sustain the exercise of the exceptional power to award indemnity costs.

16 In relation to Eclipse's first contention, it is the case, as I found in the January Reasons,[8] that the Government Parties caused the Validation Act to be put before Parliament and enacted with the objectively ascertained intention, and with the effect, of removing as issues all of the invalidity issues the subject of the Matters, thereby rendering the No Emissions Issue moot. In my view, those circumstances sustain the making of a costs order in favour of Eclipse, but do not sustain an award of indemnity costs.

17 As I have said, Eclipse relies on what was said by Spigelman CJ and Mason P in World Best Holdings.[9] In my view, nothing said in World Best Holdings requires a different conclusion to the one that I have reached. That is so for four reasons.

18 First, the costs discretion is broad. Observations made by one judge in exercising the costs discretion do not constitute a firm proposition of law, and do not control the exercise of the discretion in other cases. There are no hard and fast rules controlling the broad costs discretion conferred on the court. It is true that general principles in the nature of guidelines may develop.[10] In jurisdictions where there is no rule of the court to that effect, the general rule that a successful party should receive its costs unless there is a good reason to the contrary is one such guideline.[11] Nothing said in World Best Holdings in relation to costs orders is of the character of a general principle or guideline.

19 Secondly, what was said in World Best Holdings must be understood in the context of the issues for decision in that case. The appeal concerned a question of statutory interpretation. The question was whether the legislation applied retrospectively to the matter the subject of the appeal notwithstanding that it had been passed after the decision at first instance. The observations about costs orders were made in that context.

20 Thirdly, the orders proposed and made by the majority in World Best Holdings were for costs on a party and party basis, not on an indemnity basis.[12]

21 Fourthly, in any event, the circumstances in World Best Holdings were materially different to those in the present case, in that there the legislation was passed after the decision at first instance had been given.

22 I turn to Eclipse's alternative contention that the Government Parties' conduct, coupled with its timing, sustains an order for indemnity costs.

23 In support of that contention, Eclipse submits that:

(1) Matter 1 was pleaded in late 2011, Matters 2 and 3 in June and August 2013 respectively, and Matter 4 in May 2014;

(2) an email sent by the State Solicitor's Office to Eclipse's solicitors dated 6 December 2011 foreshadowed that, in the event of an unfavourable decision in relation to Matter 1, the Government Parties would cause legislation to be passed validating the 2008 Levy Regulations; and

(3) the Government Parties did not cause legislation to be introduced promptly upon the attack on the validity of the 2008 Levy Regulations first being raised.[13]

24 I am not persuaded by these submissions that an order for indemnity costs is appropriate.

25 The circumstances of this case, as well as the Minister's Second Reading Speech for the Validation Bill,[14] support the inference that the Government Parties' concerns regarding their prospects as to Matter 4 were the immediate catalyst for the introduction of the Bill leading to the Validation Act.

26 The Validation Bill was introduced into Parliament expeditiously within about one month of Matter 4 first being raised.[15]

27 The need to adjourn the hearing of preliminary issues listed for 17 June 2014 arose in the following circumstances. The hearing of preliminary issues in respect of Matters 1 and 2 was originally listed for 5 August 2014. The date of that hearing was changed by consent orders. At the time of consenting to the new hearing date, the Government Parties had not had an opportunity to consider Eclipse's amended defence, which raised Matter 4 for the first time.

28 The Validation Bill was introduced into Parliament in response to Matter 4 as soon as could reasonably have been expected. The Validation Act did not deal only with Matter 4. As I have said, it was enacted with the objectively ascertained intention, and with the effect, of removing as issues all of the invalidity issues the subject of the Matters. To my mind, however, that is not conduct of an unreasonable or improper kind such as to sustain an order for indemnity costs.

29 For these reasons, I would not order that the costs orders in favour of Eclipse be made on an indemnity basis.

30 I turn to Eclipse's application for special costs orders.

31 Eclipse applies for special costs orders under s 280(2) of the Legal Profession Act 2008 (WA) removing the limits on the hourly rates for senior counsel, counsel and senior practitioner, and removing the limit on the number of hours provided for getting up or preparation of the case.

32 The principles regarding the uplift or removal of the costs limits in the scale are wellknown, and were not in dispute on this application. The parties agreed[16] that the applicable principles were those stated in Alliance Contracting Pty Ltd v James;[17] The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2];[18] and Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq).[19]

33 In Mentha v Hughes, Martin CJ said:[20]

The principles governing the exercise of the powers conferred upon the court by s 280(2) of the [Legal Profession Act] are well established. The discretion conferred by the section can (but need not) be exercised if the court is of the opinion first that the amount of costs allowable in respect of a matter the subject of a cost determination is inadequate, in the sense that a limit or other amount imposed by the determination would preclude the presentation of a fairly arguable case for the allowance of costs at a greater amount and second, that the inadequacy arises because of the unusual difficulty, complexity or importance of the matter.

When a party moves for an order pursuant to s 280(2) of the [Legal Profession Act], the questions arising under the section are addressed as matters of impression rather than science or mathematical precision. In some cases it will be necessary to adduce evidence to enable the formation of the requisite opinion. However, in other cases, a court might be able to form the necessary opinion from its knowledge of the case and its circumstances. Moreover, it must be remembered that when an order is sought removing limits on costs fixed in an applicable determination pursuant to s 280(2)(c), the order made will do no more than that. Accordingly, the court considering the application for such an order need go no further than determine whether there is a fairly arguable case for the allowance of costs at an amount greater than the amount allowable under the relevant determination - it is for the taxing officer to consider the necessity for the work that was done and the reasonableness of the remuneration claimed (footnotes omitted).

34 Since the parties filed their submissions, Martin CJ has delivered his decision in Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd.[21] Martin CJ declined to follow in one respect the decision of Edelman J in Pourzand v Telstra Corporation Ltd,[22] which I followed in Alliance Contracting. In Pourzand, Edelman J said that the question of 'unusual difficulty, complexity or importance' is directed separately to each individual scale item for which lifting or removal is sought. In Electricity Generation v Woodside, Martin CJ held that the adjectival characterisation of 'unusual difficulty, complexity or importance' falls to be applied to the litigation the subject of the costs application, not to each relevant scale item.[23]

35 In my respectful view, the reasoning of Martin CJ in Electricity Generation v Woodside is persuasive. I propose to adopt his Honour's approach.

36 When that approach is applied to this case, the question of 'unusual difficulty, complexity or importance' is directed to the Matters and to the No Emissions Issue, as these are the controversies covered by the costs orders in favour of Eclipse. That is how the parties framed their submissions.[24] Thus, there was no need to invite further submissions from the parties in light of the decision in Electricity Generation v Woodside.

37 The question is whether the costs allowable under the scale are inadequate because of the unusual difficulty, complexity or importance of the Matters or the No Emissions Issue. That question can be addressed in respect of individual items of a costs determination, or in respect of a costs determination as a whole, as is appropriate to the circumstances of the case.[25]

The disposition of the application for special costs orders

38 Eclipse has established that the hourly rates for counsel and senior practitioner in the relevant determinations are inadequate, in the sense that Eclipse has paid or is liable to pay its legal representatives more than the hourly rates provided for in these determinations. That applies at least to the hourly rates paid or payable to Dr Hardcastle, Mr Fletcher and Mr Penglis.

39 However, the court does not lift the limit on hourly rates merely because a party's counsel or instructing solicitor has charged at a rate higher than the scale. The position was explained by Pullin J in Flotilla Nominees:[26]

[T]here should be no expectation that, as a matter of course, rates in the costs agreement which are above scale will be ordered to be the rates to apply in taxation as between party and party. There would have to be evidence justifying the higher rate. The whole point of the existing scale is that the rates are struck by reference to what is being charged within the profession. It is true that the hourly rates can only be an average or mean of the upper rates determined in the survey, and there will be some cases where the unusual complexity or importance of the case warrants the special expertise of the practitioner involved and warrants an increase in the hourly rate. In some cases not involving unusual complexity or importance, the higher rates paid will not be recoverable. A party is always entitled to the luxury of retaining the highest paid practitioners in the conduct of their case, but they cannot always expect to recover these costs from the other party. If the hourly rates in the scale are thought by parties or practitioners to be too low for work which is not of unusual complexity or importance, then submissions should be made to the Legal Costs Committee to increase the rates in the scale.

40 There is no evidence that the hourly rates for Dr Hardcastle, Mr Fletcher and Mr Penglis were a result of the importance of the Matters or the complexity of any aspect of the No Emissions Issue. The inference is that what Eclipse paid or is liable to pay for these practitioners represents their standard rates.

41 In some cases, taking into account the court's impression of the case and the evidence, the court may infer that there is a fairly arguable case that a taxing officer might properly allow costs for counsel or an instructing solicitor in an amount greater than the amount allowable under the scale due to the importance of the case to the parties or, alternatively, its complexity.[27] In this case I am not satisfied that the inadequacy of the hourly rates, in the sense already explained, is because of the importance of the Matters or any complexity relating to the No Emissions Issue. I am not persuaded that the scale limits on hourly rates should be lifted or removed.

42 I am, however, satisfied that the relevant scale limits for getting up should be removed. I am satisfied by Eclipse's evidence[28] that:

the amount of costs allowable for getting up in the relevant costs determinations are inadequate, in the sense that there is a fairly arguable case that Eclipse's bill may properly be taxed at more than the 120 hours that the scale provides for getting up; and
the inadequacy referred to in (1) arises from the importance of the Matters and the complexity of the No Emissions Issue.

43 In my view, it is not necessary to deal in detail with the points made in the Government Parties' submissions in relation to Eclipse's costs for getting up.[29] Those are matters appropriately dealt with by the taxing officer.[30]

44 In summary, I am satisfied that the importance of the Matters and the complexity of the No Emissions Issue make the scale allowance for getting up inadequate, but I am not so satisfied in relation to the scale allowance for hourly rates.

Eclipse's application for an order that the Government Parties pay Eclipse's costs of and incidental to the Matters, including the No Emissions Issue, on an indemnity basis, be dismissed.
Pursuant to s 280(2) of the Legal Profession Act 2008 (WA), the taxation of Eclipse's costs pursuant to order 3 of the orders of 3 September 2014 and order 1 of the orders of 15 January 2015 shall be without regard to the limits imposed in Item 17 of the Table to cl 11 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2010 (WA) and Item 17 of Table B in cl 9 of the Legal Practitioners (Supreme Court) (Contentious Business) Determination 2012 (WA) and of the Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (WA).

[1] Eclipse Resources Pty Ltd v The State of Western Australia [2015] WASC 13.

[2] Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122(S); (2003) 28 WAR 95 [8] (Pullin J); Swansdale Pty Ltd v Whitcrest Pty Ltd [2010] WASCA 129(S) [7] (Pullin JA & Kenneth Martin J).

[3] Flotilla Nominees [9] (Pullin J); Colgate Palmolive Co v Cussons Pty Ltd [1993] FCA 536; (1993) 46 FCR 225, 233 234 (Sheppard J).

[4] Swansdale v Whitcrest [10] (Pullin JA & Kenneth Martin J).

[5] Eclipse's submissions dated 4 March 2015 [7], [15].

[6] Eclipse's submissions dated 4 March 2015 [7], [15].

[7] Attorney General (NSW) v World Best Holdings Ltd [2005] NSWCA 261; (2005) 63 NSWLR 557.

[8] Eclipse v The State of Western Australia [21].

[9] World Best Holdings [62], [63], [66] (Spigelman CJ), [182] (Mason P).

[10] Oshlack v Richmond River Council [1998] HCA 11; (1998) 193 CLR 72 [35] (Gaudron & Gummow JJ).

[11] Oshlack [35] (Gaudron & Gummow JJ).

[12] World Best Holdings [142] (Spigelman CJ), [200] (Mason P).

[13] Eclipse's submissions dated 4 March 2015 [16] [18].

[14] Western Australia, Parliamentary Debates, Legislative Assembly, 11 June 2014, 3664 (Mr AP Jacob, Minister for Environment).

[15] Western Australia, Parliamentary Debates, Legislative Assembly, 11 June 2014, 3664 (Mr AP Jacob, Minister for Environment).

[16] Eclipse's submissions dated 4 March 2015 [20]; Government Parties' submissions dated 30 March 2015 [35].

[17] Alliance Contracting Pty Ltd v James [2014] WASC 212 (S) [3] [7].

[18] The Pilbara Infrastructure Pty Ltd v Brockman Iron Pty Ltd [No 2] [2014] WASC 345 (S) [6].

[19] Mentha as Receiver and Manager of Westgem Investments Pty Ltd (in liq) v Hughes as Liquidator of Westgem Investments Pty Ltd (in liq) [2014] WASC 478 (S) [4] [5] (Martin CJ).

[21] Electricity Generation and Retail Corporation trading as Synergy v Woodside Energy Ltd [2014] WASC 469 (S).

[22] Pourzand v Telstra Corporation Ltd [2012] WASC 210 (S2) [24] [25].

[23] Electricity Generation v Woodside [6] [12].

[24] Eclipse's submissions dated 4 March 2015 [25]; Government Parties' submissions dated 30 March 2015 [44], [54] [56], [68], [83].

[25] Electricity Generation v Woodside [12] (Martin CJ).

[26] Flotilla Nominees [22] (Pullin J).

[27] See, for example, Pilbara Infrastructure [16] - [17] (Edelman J).

[28] Affidavit of Bushra Tariq dated 9 October 2014 and affidavit of Bushra Tariq dated 9 February 2015.

[29] Government Parties' submissions dated 30 March 2015 [69] [85].

[30] See, for example, Mentha v Hughes [5], quoted at [33] above.

Waste Avoidance and Resource Recovery Amendment (Validation) Act 2014(WA)

Avoidance and Resource Recovery Levy Regulations 2008

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