Relevant principles in relation to stay application

1. The relevant principles in relation to a stay application under s 50(3) of the Victorian Civil and Administrative Tribunal Act 1998 were not materially in dispute. On behalf of Hazelwood, Mr Morris referred me to three leading Tribunal decisions that have discussed these principles[1]. Although none of these decisions cover similar subject matter to the facts and circumstances of this case, the principles remain generally applicable in a matter such as this.
2. From these cases, the guiding principles can be summarised as follows[2]:

(a) The power to grant a stay is discretionary to be exercised after full consideration of the circumstances and facts of each particular case.

(b) The dominant principle is whether or not the failure to grant a stay would render the application for review before the Tribunal nugatory.

(c) Whether or not there is a serious question to be tried on review is a matter of some importance.

(d) Whether or not it is in the community interest to grant a stay is properly to be taken into account. This involves the balancing of private interests against the public interest.

(e) It is relevant for the Tribunal to take into account the period of time which will elapse before the hearing of the application for review.

1. In addition, s 50(5) of the Victorian Civil and Administrative Tribunal Act 1998 allows the Tribunal to require any undertaking as to costs or damages that it considers appropriate, or the lifting of the order if specified conditions are met. Although these matters are perhaps already embodied in the principles set out above, they are matters that the Tribunal should also properly consider where appropriate.
2. I have adopted and applied these principles in the exercise of my discretion in this case. In doing so, I have also considered the evidence comprised in the four affidavits provided by the parties (albeit not tested through cross-examination), and the parties' respective submissions. Given the nature of this interim decision, I will not detail that evidence or submissions save where necessary to explain a specific aspect of my reasons.

Will the failure to grant a stay render the application for review nugatory?

1. At a simplistic level, if Hazelwood is required to comply with the Section 110 Notice and immediately undertake the study and remedial works without a stay, and is then ultimately successful in its review proceeding, it is arguable (as Hazelwood contends) that this success would be of little value to it. Hazelwood would already have spent in the order of $4 million to $6 million (based on the affidavit evidence of Mr Rienerts) and completed the works.
2. Without first having the hearing of the review, Hazelwood would lose the opportunity to contest its liability under the Section 110 Notice before having to expend a significant sum to complete the works or, perhaps more importantly in the context of the stay application, the opportunity to contest the reasonableness of the required works or their timing. Without any undertaking as to costs or damages proffered by DPI, Hazelwood may find it difficult to recover damages if the Section 110 Notice is later set aside or varied on review. Without responsibility for the care and management of the Morwell Main Drain being first resolved, Hazelwood may be undertaking works over an asset it does not own or control - with potential third-party liability. Without the stay, Hazelwood is also potentially exposed to a criminal prosecution for any non-compliance with the Section 110 Notice.
3. However, whether the failure to grant a stay would render the review proceeding nugatory is perhaps not as simplistic as this initial analysis suggests. DPI effectively contended that the urgency of the study and remedial works overrode these considerations in this case. (I will deal with this further, below). Moreover, it seems reasonably clear that some further remedial works are required to the Morwell Main Drain, and probably sooner rather than later. Although the scope and timing of the study and works is contested, the real or underlying question may be more about who bears ultimate responsibility for the study and the works that need to be undertaken, rather than whether they are undertaken.
4. This is not a situation where, if a stay is not granted, Hazelwood will suffer some permanent or irreversible impediment to its mining operations at the Hazelwood Coal Mine. On the evidence before me, the works to prevent further leakage to the Morwell Main Drain are not claimed by anyone to be likely to have an adverse effect on Hazelwood's operations. Indeed, DPI's material infers that the works will benefit Hazelwood if they lead to the prevention of water flows that have the potential to destabilise the northern mine batters. If this is the case, and no stay is granted, Hazelwood will simply have spent money to undertake a study and to undertake works for which it says it is not responsible. This may not therefore render the review proceeding completely nugatory if a successful outcome for Hazelwood in the review proceeding is in some way compensable by damages.
5. To this end, if no stay is granted, any study or works completed by Hazelwood may still be compensable by damages if its responsibility for the study or works under the Section 110 Notice is later set aside or varied. This includes the third-party action already commenced by Hazelwood against the Council under the Water Act 1989. Although DPI was initially unwilling to provide any undertaking as to damages, it proposed a limited undertaking on the second day of hearing. I also have the power, under s 50(5) of the Victorian Civil and Administrative Tribunal Act 1998, to require any form of undertaking I consider appropriate either as basis for granting the stay or as a condition for any stay to be lifted.
6. Accordingly, although Hazelwood may suffer some disadvantage in its ability to obtain a satisfactory outcome in the review proceeding if a stay is not granted, I do not consider that this factor in this case by itself renders the proceeding completely nugatory or necessarily warrants the grant of a stay in the manner argued by Hazelwood. It nonetheless remains a factor in balancing the various principles in the exercise of discretion.

1. In my opinion, there are a number of serious issues to be tried in the review proceeding. Without limiting the issues to be tried, they include the following:
   • What is the proper construction of the Section 110 Notice? Is it based on an 'act or omission which is likely to result in a risk to the environment' (as the Section 110 Notice itself states) or is it based on a 'contravention or non-compliance' by Hazelwood with the relevant Act, Regulations or mining licence (as DPI now asserts)? Is the Section 110 Notice therefore justified by s 110(1)(a) or (b) of the Mineral Resources (Sustainable Development) Act 1990? What are the implications of this for the lawfulness or reasonableness of the study or remedial works that DPI requires under the Section 110 Notice, particularly having regard to the wording used in s 110(2)(a)? For example, Hazelwood contends that the Section 110 Notice appears to be based on s 110(1)(a), and that there is no contravention or non-compliance on its part through which the works could be required.
   • Depending on the justification for the Section 110 Notice, is the alleged act, omission, contravention or non-compliance made out, as a matter of evidence? For example, Hazelwood contests the allegation that it has failed to adequately control the risk of batter failure by not controlling the egress of water in the Hazelwood Coal Mine due to leakage from the Morwell Main Drain.
   • What is the status and relevance of the GHD draft report (prepared for DPI following the February flood event) in terms of its preliminary findings and recommendations?
   • What is the status of the Morwell Main Drain in the area where the remedial works are required to be undertaken? Is it a public drain vested in the Council under the Local Government Act 1989 despite traversing Hazelwood's land in the relevant area, or does it have some other status arising from its historical construction as an asset of the former State Electricity Commission of Victoria? If the Morwell Main Drain is a private drain controlled by Hazelwood, what are the implications of this for the sorts of works Hazelwood might undertake to it?
   • Irrespective of its vesting or ownership, is there some other legal responsibility for the care and management of the Morwell Main Drain arising from its function or the past contributions of Hazelwood and/or the Council to its maintenance? Hazelwood contends that the Council bears responsibility for the Morwell Main Drain.
   • Is the Section 110 Notice still effective even if Hazelwood does not have responsibility for the care and maintenance of the Morwell Main Drain?
   • Even if the Section 110 Notice is legally effective, at a more 'merits'-based review level are the obligations and timeframes under the notice reasonable?
2. Hazelwood contends that its arguments on these issues are sufficiently compelling at a prima facie level, such that it should be considered to have a very high prospect of success in its review proceeding. I do not consider that there is sufficient evidence or submissions to yet form such a view. I agree with the Council that Hazelwood's arguments to this point in time are largely assertions and assumptions not fully supported by evidence. The affidavit evidence provided by Hazelwood provides some support on some of the issues, and has not yet been properly tested.
3. Despite this, I am satisfied by Hazelwood's overall material that there are very real issues to be tried in the review proceeding. Indeed, DPI did not seriously attempt to persuade me otherwise - preferring to emphasise the urgency of the remedial works as the more pressing issue in determining this stay application.

1. This principle involves the balancing of private interests against the public interest, and squarely raises the question of whether the necessity for the study and remedial works is of sufficient importance and urgency in the public interest that it overrides the commercial and legal disadvantage to Hazelwood that may be caused if the stay is not granted. It is similar in some respects to the 'balance of convenience' test applied to the granting of injunctive relief, albeit that this review proceeding is not strictly inter partes and the balance potentially raises broader community interests.
2. The private interests of Hazelwood are that it will be required to spend $4 million to $6 million to complete a study and works that it claims it is not liable for, over a drain it claims it does not control, and that it claims are not reasonable or urgent. The community interest is that, until further works are undertaken, there is argued to be a risk of further leakage from the Morwell Main Drain and the potential for further land instability adjacent to Morwell township, the Hazelwood Coal Mine and the Princes Freeway.
3. The affidavit evidence of John Mitas (Chief Inspector under the Mineral Resources (Sustainable Development) Act 1990 ) is that the structural integrity of the Morwell Main Drain has been under investigation since mid-2009. A Technical Review Board has monitored the situation, in particular since the February flood event. Mr Mitas deposes that the remedial works under the Section 110 Notice need to be implemented as a matter of urgency as there could be very serious consequences that would follow a further high-intensity rain event and the failure of the northern mine batter. At worst, these include permanent loss of a section of the Princes Freeway, loss or damage to houses in Morwell and the potential for evacuation, and loss of transmission lines or power.
4. On this basis, the balance may initially seem to favour the community interest and the refusal of a stay. However, the evidence before me is far from conclusive.
5. According to Mr Mitas, 34 Section 110 Notices have been served in relation to the Hazelwood Coal Mine between February and 19 April 2011. All relate to the northern batter, and some but not all relate to the Morwell Main Drain. However, Hazelwood submitted that it has only contested the single notice that forms the subject matter of this proceeding, and it has carried out (or is in the process of investigating and carrying out) most other required works.
6. As indicated earlier, some emergency works have already been carried out, and there is at least some indication in the GHD draft report that those works have led to a stabilisation of the ground movement in the area.
7. This is supported by the affidavit evidence presented by Hazelwood. Mr Polmear, Hazelwood's Director of Mining, also notes the comments of the Technical Review Board in its Status Report of 13 April 2011. That report states, amongst other things, that following a further rain event from 9 to 12 April 2011 (of similar magnitude to the February event):
   • 'there was little or no movement of the main movement block';
   • 'the general conclusion is that the drains are working very effectively and have controlled development of adverse water pressures in the mine batters'; and
   • 'overall there is cause for cautious optimism that the remedial works are having an effect and stopping rainfall related movements'.
8. Further, Mr Butler, a consultant scientist specialising in water and environmental management, expresses an expert opinion that the emergency works already completed 'should continue to perform adequately and prevent water from the Morwell Main Drain entering the Hazelwood Coal Mine for many years'.
9. These views suggest that the further remedial works required by the Section 110 Notice may not be as urgent as DPI contends, important though they may be in the medium or longer term. There is also a very real issue to be tried as to the reasonableness of the scope and timeframes for the works in the Section 110 Notice, even if DPI's decision on the notice is affirmed on review.
10. On the second day of the preliminary hearing, three things became more readily apparent:
    • the Tribunal indicated it could accommodate a priority final hearing in late May 2011 (which may have militated in favour of a short stay). However, both DPI and the Council indicated this was too short a timeframe to a hearing given the further investigations and interlocutory processes that would need to be undertaken. A hearing date is therefore not practically possible before July/August 2011.
    • DPI reversed its position on the question of an undertaking as to damages if a stay was refused, and offered an undertaking (which may therefore militate against a stay). However, as Hazelwood pointed out, the undertaking proposed was not as broad as the "usual undertaking" given for injunctive relief.
    • There is some benefit in considering the study (i.e. the first of the matters required by the Section 110 Notice) separately from the remedial works and processes that the study may recommend (i.e. the second and third of the matters required by the Section 110 Notice). The study was estimated to cost in the order of $100,000 whereas, as previously indicated, the works may cost upwards of $4 million. It was intimated that the study might be capable of being completed in 3 to 4 weeks, with DPI arguing it should be able to be completed sooner.
11. In my view, given the community interest factors outlined above, there is a strong desirability in having the study completed quickly. In relative terms, the estimated $100,000 cost is not high in terms of the financial cost to Hazelwood, or the 'risk' to DPI under a more broadly based undertaking. I would form the same view even if the estimated cost of the study was doubled. Undertaking the study would serve to 'keep matters moving', whilst other investigations or proceedings take their course. The information generated by the study on the scope and timing for the remedial works may also be useful in informing other relevant considerations in the proceeding, including whether a stay over the works component is necessary or desirable over the medium or longer term.
12. On balance therefore, I consider the community interest here is best served by a solution that allows for the study to be undertaken promptly, with an appropriate undertaking from DPI to compensate Hazelwood for its cost if Hazelwood is successful in its review proceeding. Given that date for the study in the Section 110 Notice has already passed, and to protect Hazelwood from possible prosecution for technical non-compliance to date, and to secure a proper undertaking from DPI, I consider this is best achieved by granting a conditional stay in the form of the order I have proposed, which can be lifted in the next few days if DPI meets the specified conditions - i.e. allowing until the end of this month for the study to be completed, and providing an undertaking in a form I consider more appropriate. I consider that 3 to 4 weeks represents a more realistic opportunity to complete the study, given that the draft GHD report prepared for DPI cannot be relied upon by Hazelwood, and the probable need to obtain expert consultants to assist with that task.
13. If DPI is unwilling to meet these simple conditions by which the stay might be lifted, and in circumstances where it did not agree with an urgent priority hearing that the Tribunal could have accommodated in May 2011, it would be appropriate for the stay to remain. The balance would in my view then revert to being in Hazelwood's favour.
14. Given that the works cannot be undertaken until the study is completed, a decision on the 'works' component of the Section 110 Notice can be deferred until the study is completed at the end of this month, with an appropriate stay over the Section 110 Notice in the meantime. By this time, more information about the background issues, the 'urgency' of the remedial works, and 'community interest' factors may be available, in order to make a more informed decision about whether a stay over those works should continue to be maintained pending the hearing, or whether that part of the stay should then also be lifted subject to similar (or other) conditions.
15. Hazelwood should not assume that the temporary stay I have effectively granted over the works will be maintained indefinitely through to a hearing. Equally, DPI should not presume the contrary. In my view the community interest is best served by the parties working collectively and co-operatively to address the very real and substantive issues 'on the ground' at Morwell whilst the legal proceeding takes its course, and the continuance of any stay will have regard to this factor.

What period of time will elapse before the hearing of the application for review?

1. As I have indicated, the Tribunal had been able to arrange a priority hearing of the review proceeding in May 2011. With two of the three parties contesting the practicality of this timing, the Tribunal is unable at this stage to provide an alternative listing (with relevant Tribunal expertise) before 1 August 2011.
2. Given this timeline, I consider that this principle favours the grant of the stay subject to it being lifted in relation to the study component if DPI meets the relevant conditions. It also favours the temporary grant of the stay over the works component, subject to that being reviewed when the study has been completed. Should there be any delay in the final determination of the review proceeding caused by Hazelwood, the operation of the stay may need to be revisited.

1. The guiding principles outlined earlier in these reasons indicate that the power to grant a stay is discretionary, to be exercised after full consideration of the circumstances and facts of each particular case. This suggests that the individual principles I have canvassed above need to be considered holistically as well as individually.
2. In this case, the principles lead to a delicate balance that does not emphatically favour any party.
3. Having reviewed all of the material presented at the preliminary hearing, I consider that a stay should be granted subject to the conditions I have outlined. Whilst there is perhaps a delicate balance here, the potential disadvantage to Hazelwood, and the seriousness of the issues to be tried, favour the grant of a stay. The community interest factor is however such that the stay should be lifted in relation to the 'study' component if DPI allows a short additional period to complete the study (i.e. until the end of this month) and provides an undertaking as to costs and damages. The community interest factor is also such that the stay should continue to operate as an interim measure only, and that the 'works' component of the Section 110 Notice might conceivably be similarly lifted once the study has been completed and further information is known.
4. The parties have indicated that they are seeking an externally-facilitated mediation of the overall issues in dispute between them. For this reason, I have not ordered a Tribunal-facilitated mediation in this proceeding. I would encourage such a course of action. The external mediation of all issues may lead to a speedier and consensus outcome that addresses the underlying issues of the Morwell Main Drain leakage, rather than focussing on the legal implications of the Section 110 Notice.

[1] Bell and Eager v Liquor Licensing Victoria & Ors [2000] VCAT 214 per Kellam J, Aavelaid v Dental Practice Board of Victoria [2002] VCAT 1376 per Macnamara DP, and Duncan v Nurses Board of Victoria [2006] VCAT 4 per Macnamara DP.

[2] See Duncan at [9], summarising the principles in Bell and Eager at [10]-[15]