Houston v State of New South Wales

Consideration and determination 16 Rule 40.51 states: 40.51 Maximum costs in a proceeding (1) A party may apply to the Court for an order specifying the maximum costs as between party and party that may be recovered for the proceeding. Note Costs as between party and party is defined in the Dictionary. (2) An order made under subrule (1) will not include an amount that a party is ordered to pay because the party: (a) has failed to comply with an order or with these Rules; or (b) has sought leave to amend 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 not conducted the proceeding in a manner to facilitate a just resolution as quickly, inexpensively and efficiently as possible, and another party has been caused to incur costs as a result. 17 There was substantial agreement between the parties as to the relevant principles guiding the exercise of the Court's discretion under r 40.51. The discretion is to be exercised judicially, having regard to all the relevant circumstances. Those circumstances include the nature of the relief sought, the complexity of the litigation and the interests of the parties in both prosecuting and defending the litigation, whether the applicant's claims are reasonably arguable, whether a party would otherwise be forced to abandon a proceeding if such an order were not made, whether there was a public interest element to the proceeding, the costs which are likely to be incurred in the proceeding, the timing of the maximum costs application and whether the party opposing the making of the orders has been uncooperative and/or delayed the proceedings. 18 I emphasise that those factors are not exhaustive. In my view, another relevant factor is the normal rule in civil litigation that costs are awarded to the successful party, not to punish the unsuccessful party but rather to compensate the successful party against the expense to which it has been put by reason of the legal proceedings. It is well settled that this normal rule can be displaced in an appropriate case. The applicant's application for a maximum costs order effectively seeks to displace the normal rule at this relatively early stage of the proceeding, rather than defer the matter of costs to when the proceeding has been determined. 19 It has been acknowledged in various cases relating to r 40.51 that the principal purpose of the provision (and its predecessor, order 62A) was not so much a desire to limit the exposure of a respondent to an adverse costs order in complex and lengthy commercial litigation, but rather with concerns as to access to justice, public interest, and a desire to limit the costs of all parties, particularly in less complex and shorter cases. As Drummond J noted in Hanisch v Strive Pty Ltd [1997] FCA 303; 74 FCR 384 at 387: 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… 20 I respectfully agree with those observations. Subject to the overarching requirement to avoid unduly narrowing the discretion under r 40.51, I also respectfully agree with Beach J's observations in McKay Super Solutions Pty Ltd (Trustee) v Bellamy's Australia Ltd (No 2) [2019] FCA 215 at [74] that "if the proceeding is complex forensically and also lengthy then this may militate against the making of such an order". 21 I shall now address the factors relied upon by the parties for and against the making of a maximum costs order in the present proceeding.

(a) Public interest litigation 22 The applicant contends that the "public interest of these proceedings is palpable", citing cases such as Woodlands v Permanent Trustee Company Limited (1995) 58 FCR 139, Corcoran v Virgin Blue Airlines Pty Ltd [2008] FCA 864 and Bare v Small [2013] VSCA 204; 47 VR 255. 23 In Corcoran, Bennett J acknowledged that the applicants had a private interest in the outcome of that case, but her Honour also took into account the broader question of the ability of disabled persons to fly with a major commercial airline in Australia without the extra cost of a carer and viewed this as a matter of public interest which went beyond the private interests of the applicant. Her Honour also took into account other factors which she said favoured the making of a maximum costs order in a proceeding, stating at [57] that the factors to be weighed were "very finally balanced". Those additional factors were that the applicants did not claim any personal financial reward, the claims advanced were arguable and not frivolous, that if costs were not capped the applicant's may discontinue the litigation or, at the very least, be inhibited from continuing, as well as the timing of the application (see [54]). On the particular issue of whether the proceeding was in the public interest, Bennett J said at [45] that the existence of a public interest in the determination of the issues is a factor "of some significance in the awarding of costs". But her Honour emphasised at [45] that "public interest and an arguable case are not necessarily decisive and not, of themselves, sufficient to prevent the usual costs order being made" (citing Ruddock v Vadarlis (No 2) [2001] FCA 1865; 115 FCR 229 at [18] to [19]; Woodlands at 148 and Physical Disability Council of NSW v Sydney City Council [1999] FCA 815 at [7]). 24 As was said by the High Court in Oshlack v Richmond River Council [1998] HCA 11; 193 CLR 72 at [30] per Gaudron and Gummow JJ (and see also McHugh J's observations at [71]), the category of "public interest litigation" is a "nebulous concept", unless it is given "further content of a legally normative nature". 25 It is important to note some special features of Oshlack. The applicant there brought proceedings under s 123(1) of the Environmental Planning and Assessment Act 1979 (NSW), which provided that "any person" had standing to seek an order in the Land and Environment Court to remedy or restrain a breach of that Act. Under s 69(2) of the Land and Environment Court Act 1979 (NSW), costs were in the discretion of the Court. Although the applicant failed in his legal challenge, the primary judge ordered that there be no order as to costs taking into account, among other things, the public interest nature of the litigation. On appeal, the Court of Appeal reversed the primary judge but, on further appeal, the primary judge's decision was restored by a majority of the High Court. The majority (Gaudron and Gummow JJ at [20], [47]-[49] and Kirby J at [112]-[119]) emphasised the importance of the statutory extension of standing in s 123(1), with its implied invitation to any member of the public to bring proceedings in the Land and Environment Court in respect of a breach of the Act. 26 It is also relevant to bear in mind that proceedings are not to be characterised as public interest litigation merely because they involve "elements of public law or the judicial review of the exercise of executive power" (see De Silva v Ruddock (in his capacity as Minister for Immigration and Multicultural Affairs) [1998] FCA 311 at [8] per Merkel J and Smith v Airservices Australia [2005] FCA 997 at [63] per Stone J). 27 While it may be accepted that persons other than the applicant may have an interest in whether or not the relevant legislation is valid, that of itself is insufficient to characterise the matter as involving public interest litigation. 28 An equally important factor is that it cannot be said that the applicant has no private interest in the proceeding. He currently faces criminal prosecution and, if his proceeding here is successful, he would avoid the financial consequences associated with prospective fines, remediation orders and/or conservation agreements that would follow from a conviction. 29 I accept the State's submission that it is not possible to characterise the "public interest" nature of the litigation at a level of abstraction which is divorced from the particular claims raised by Mr Houston and their strength. The relevant question is not whether there is a segment of the community which continues to reject the legitimacy of the impugned legislation. Rather, the relevant question is whether there is a public interest in litigating what can reasonably be described as a broad and novel Constitutional challenge to the impugned State legislation, relying not only on an alleged limitation on Commonwealth power in the Constitution, but also on various alleged acts and arrangements between the Commonwealth and the State. This is in circumstances where the Commonwealth is no longer a party to the litigation and where it has to be said there is a substantial overlap with issues which have been heard and determined in the earlier Spencer litigation. 30 I am not persuaded that, having regard to Mr Houston's self-interest because of the criminal proceedings pending in the Land and Environment Court, together with the other matters described above, this litigation can properly be described as public interest litigation.

(b) The nature of the relief sought 31 It is noted that the only relief sought in the proposed FASOC is a declaration that the impugned legislation is "inoperative or wholly invalid". Mr Houston does not seek damages. I have explained above, however, why even in the absence of a claim for such relief, Mr Houston has a strong self interest in the matter.

(c) The complexity of the litigation 32 As noted at [19] above, the Court's power to order a maximum costs order is generally directed to proceedings which are not complex or lengthy. These proceedings are not of that nature. I cannot accept Mr Houston's estimate that the hearing would take only two to three days. I consider that the State's estimate of five days is more reasonable, having regard to the complexity of the Constitutional issues which Mr Houston wishes to agitate, not to mention the factual matters within which he wishes those issues to be assessed. Those factual matters relate to events which have occurred over many years. Similar factual issues were raised in the Spencer litigation and they were hotly contested. The trial before Mortimer J occupied an 11 day hearing, while the appeal there occupied three days. It is true that both the Commonwealth and the State were respondents to those proceedings, but even allowing for the fact that the Commonwealth is no longer a party here, the experience and history of the Spencer litigation highlights the complexity of the issues which Mr Houston wishes to raise and the likely time required to hear and determine those issues. These matters do not favour Mr Houston's application.

(d) The interests of the parties in both prosecuting and defending the litigation 33 As noted, Mr Houston has a strong personal interest in bringing the litigation having regard to the criminal proceedings in the Land and Environment Court. The State has no alternative but to defend the proceeding. 34 I have already indicated that I agree with the State's position that the litigation cannot objectively be described as public interest litigation. This is a matter of objective assessment and does not turn on Mr Houston's subjective views. 35 Even if it is accepted that the State is a larger and better resourced litigant than Mr Houston, as contended by him, I reject his submission that his application for a maximum costs order is strengthened by the fact that the respondent party is the executive government because such a body is obliged to "discharge its powers for the public good". The State's obligations as a model litigant do not prevent it from taking an appropriate role in litigation, including opposing a maximum costs order on legitimate grounds, as has occurred here.

(e) Whether the applicant's claims are reasonably arguable 36 For the purposes of this application, I am prepared to accept that Mr Houston's claims are at least arguable, however, they do not appear on their face to be very strong, particularly having regard to the Spencer litigation. If the proceeding continues, Mr Houston will need to persuade the Court how the Spencer litigation is distinguishable.

(f) Whether a party would otherwise be forced to abandon a proceeding if such an order were not made 37 In his affidavit, Mr Houston deposed that, in the event that he did not obtain a maximum costs order, "we will likely walk away from this litigation". His evidence falls short of an unambiguous statement that he would be forced to abandon his claim in this Court. His submissions take the matter no further. The possibility of him discontinuing the proceeding is raised, but it is not put any higher than that. For example, he made submissions that he "may have no choice but to abandon his case" and that this would be the "most likely, if not inevitable" result. Furthermore, in his reply submissions, there is a statement that he "would likely abandon the proceedings". All these matters fall short of an unambiguous statement that this is what would occur. Mr Houston contends that, in circumstances where he was not required for cross-examination, the Court should be slow to reject his evidence as to his intentions if the relief he seeks in this interlocutory application were not granted. This submission does not overcome the absence of any unambiguous statement from Mr Houston that he would abandon the proceeding and accordingly I give it no weight.

(g) The costs likely to be incurred in the proceeding 38 It was appropriate and desirable for Mr Houston to seek a maximum costs order at an early stage of the proceeding, but the timing of his application also makes it difficult to estimate with any confidence what are the likely costs of the proceeding. Assuming, however, that the hearing will take up to five days as I believe is likely to be the case, the costs are likely to be significant. It can be assumed that Mr Houston will seek discovery, including possibly discovery against a third party (i.e. the Commonwealth). There are also likely to be interlocutory matters which will arise for hearing and determination. 39 It is notable that Mr Houston has made no attempt to assess what the costs of the proceeding are likely to be. The State has provided evidence which demonstrates that its costs of appearing at a five day hearing would be approximately $45,000. Allowance also needs to be made for discovery, preparing evidence and submissions, interlocutory matters and preparation for the hearing. 40 There is considerable force in the State's submission that, in view of the uncertainty regarding total costs, the preferable course is to be deal with the issue of costs retrospectively rather than prospectively.

(h) The timing of the application 41 Mr Houston has sought a maximum costs order at an early stage of the proceeding, which weighs in his favour but this still needs to be balanced against other relevant matters.

(i) Whether the party opposing the making of the order has been uncooperative and/or has delayed the proceedings 42 There is no suggestion that the State has been uncooperative or has delayed the proceedings. On the contrary, it has been entirely cooperative, including by agreeing to have the matter determined on the papers which has enabled the application to be determined earlier than might otherwise have been the case.

(j) The relevance of the criminal proceedings pending in the Land and Environment Court 43 The parallel proceedings in the Land and Environment Court have obvious relevance to this Court's consideration of Mr Houston's interlocutory application. They are not only relevant in demonstrating Mr Houston's strong personal interest in having the impugned legislation which underpins those criminal proceedings set aside, but it is also well established that the Court needs to wary of encouraging the fragmentation of criminal proceedings which are on foot (see, for example, the observations of the Full Court in Flanagan v Commissioner of the Australian Federal Police (1996) 60 FCR 149 at 187 ff and the cases cited therein per Beaumont, Ryan and Lindgren JJ).

Conclusion 44 It is notable that at no stage has Mr Houston indicated that he would be willing to entertain a maximum costs order other than one which specified a nil amount. This is all the more notable because the State in its outline of submissions in chief raised the possibility that, if the Court was inclined to make a maximum costs order, it should be set at a maximum of say $250,000 above the costs which the State had incurred to date. Mr Houston did not respond to that suggestion in his reply submissions. The Court infers that Mr Houston's position is that the only costs order he seeks is one with a nil amount. 45 For the reasons given above, I am not persuaded that this is an appropriate case to make such an order. Mr Houston's interlocutory application will be dismissed, with costs. I certify that the preceding forty-five (45) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Griffiths.