Hy-Tec Industries (Queensland) Pty Ltd v Tweed Shire Council

Brief chronology

1. The following chronology was adapted from Hy-Tec (No 1): 4 November 2004 The consent including condition 2 was granted by the Council. 4 April 2019 By letter to the Applicant, the Council conveyed to the Applicant its position that the volumetric limit imposed by condition 2 of the consent pertains to the volume of material in its "bulked state", rather than its in situ state. 21 August 2019 EPA varied the EPL to reflect the Council's interpretation of condition 2. 11 September 2019 Applicant's summons filed and served. 17 September 2019 EPA filed submitting appearance save as to costs. Council filed and served its points of defence including in respect of the EPA's variation of the EPL. The Council denied the following points of claim: 22 October 2019 20. The Second Respondent's decision to vary Condition A1.2 of the EPL … was based on legal error concerning to the construction of the Consent and, in particular, the extraction limits imposed by Condition 2 of the Consent. … 21. In determining to vary Condition A1.2 the EPL as per the EPL Variation Notice, the Second Respondent constructively failed to exercise its jurisdiction under Chapter 3 of the PEO Act and, in particular under s 45 of the Act. 12 November 2019 Hearing.

Council's submissions

1. Being Class 4 proceedings, costs follow the event. The Court will likely reimburse the Applicant for its costs. Where an order for costs is made against unsuccessful respondents, each of the respondents is jointly and severally liable for the costs unless a different order is made in the exercise of the Court's discretion: Platford v van Veenendaal and Shoalhaven City Council (No 2) [2018] NSWLEC 86 (Platford) at [4].
2. Both respondents ought share in the costs of the proceedings equally because: 1. the Applicant was required to prove its case against both respondents; 2. the EPA is an independent consent authority; 3. the EPL variation was the trigger for the proceedings; and 4. a submitting appearance in Class 4 proceedings does not immunise the EPA from liability for costs.
3. The Court in Hy-Tec (No 1) identified from the outset at [1] that the issue for determination was both " … the extraction limit on material from the quarry imposed by the 2004 consent and the amount of material able to be dealt with under the EPL as varied in August 2019" [emphasis added].
4. While the original error in interpreting condition 2 was the Council's error (at [61]-[62]), the EPA at all times exercised an independent mind as a separate consent authority.
5. Notwithstanding the Council's letter dated 4 April 2019, it was the EPL variation which caused the originating process (Tcpt, 12 November 2019, p 9(15)).
6. The Council made no formal submissions in respect of the EPL.
7. A submitting appearance does not provide an immunity from costs for a consent authority: Cutcliffe v Lithgow City Council (2006) 147 LGERA 330; [2006] NSWLEC 463 (Cutcliffe) at [50]; Bungendore Residents Group Inc v Palerang Council (No 5) [2007] NSWLEC 703 at [18]-[20].
8. The EPA granted the Applicant the EPL under the Protection of the Environment Operations Act 1997 (POEO Act). It then varied the EPL which had the effect of reducing the maximum tonnage that could be extracted by the Applicant. While the EPA's variation to the EPL conformed with the Council's interpretation of condition 2 of the consent, the EPA nevertheless made its own decision in respect of the EPL variation. The Applicant argued the invalidity of the EPL on two bases - firstly, legal error and, secondly, that the EPA constructively failed to exercise jurisdiction under s 45 of the POEO Act. The Applicant was successful in having the EPL set aside. The EPA was therefore a necessary or proper party.
9. In Cutcliffe at [50(b)], Biscoe J considered it was appropriate in some circumstances for a consent authority which had filed a submitting appearance to be liable for costs incurred after the date the submitting appearance was filed. Those circumstances included where an applicant successfully brought proceedings that were necessary to have declared invalid or set aside a decision of a consent authority; where the consent authority was a necessary or proper party; and where the cause of the invalidity was an error of, or attributable to, the consent authority. Each of those circumstances is made out in the current proceedings for the EPA.
10. Notwithstanding the caution expressed by Preston CJ in Platford at [30] against applying the guideline in Cutcliffe at [50(b)] too rigidly, Cutcliffe at [50(b)] remains relevant and applicable having regard to all of the circumstances of this case. There was no contradictor for the EPL case. The Council only took an active part in the Applicant's case against it. It played no active role in the case against the EPA.
11. Being an independent consent authority, the EPA ought to be held at least liable for the costs of the Applicant in establishing by evidence and argument that the Applicant was entitled to the order declaring the EPL variation invalid. However, as the EPL variation caused the originating process, the Court would find it reasonable in the circumstances to apportion costs evenly between the respondents.

EPA's submissions

1. Whether or not a costs order should be made against a submitting party should be determined according to an appraisal of the circumstances: Kisimul Holdings Pty Ltd v Clear Position Pty Ltd (No 2) (2014) 86 NSWLR 645; [2014] NSWCA 317 at [13]-[14]. Ordinarily, a submitting party will not be liable for costs incurred after filing their submitting appearance: Develtor Property Group Pty Ltd v Newcastle City Council [2001] NSWLEC 47 at [42]; Highland v Labraga (No 3) [2006] NSWSC 871 at [20]-[23]; China Shipping (Australia) Agency Co Pty Ltd v DV Kelly Pty Ltd (No 2) [2010] NSWSC 1557 at [8]; Midson v Workers Compensation Commission (No 2) [2017] NSWSC 147 at [28]-[31].
2. A recent example of this practice being applied is Dungog Shire Council v Hunter Industrial Rental Equipment Pty Ltd (No 2) [2018] NSWLEC 153 (Dungog). In Dungog, the Court found, among other things, that a variation to an EPL was invalid: at [895(22)]. The EPA had entered a submitting appearance and no orders as to costs was made against it: at [894]. The active respondents had to pay the successful applicant's costs: at [892].
3. The guidelines formulated by Biscoe J in Cutcliffe at [50(b)] should not be applied as a rule in every case in which a consent authority enters a submitting appearance. The circumstances of each case need to be considered: GPT Re Ltd v Wollongong City Council (2006) 151 LGERA 174; [2006] NSWLEC 658 (GPT) at [29]; see also Platford at [30]-[31]. In GPT, Biscoe J decided at [29] that the bulk of certain costs should be borne by the beneficiary of the development consent.
4. Further, where proceedings are defended by at least one party, the guideline in [50(b)] of Cutcliffe is not engaged because the rationale underpinning the guideline - a successful applicant cannot be properly compensated for costs if the submitting consent authority is not liable - does not apply: see Rossi v Living Choice Australia Ltd [2015] NSWCA 244 (Rossi (CA)) at [73] (Basten JA).
5. The circumstances of this case do not justify a departure from the ordinary practice and costs should not be awarded against the EPA. Firstly, the EPA played no active role in the proceedings and did not contribute to the costs of the proceedings. It filed a submitting appearance on 17 September 2019, within one week of receiving the summons on 11 September 2019, and thus did not file a defence. The EPA was not consulted on the facts agreed between the Applicant and the Council. The Council did not serve its submissions on the EPA. The Applicant issued a notice to produce to the EPA for all documents recording the EPA's consideration of its decision to vary the EPL. The EPA complied with the notice. The documents produced comprised the Applicant's evidence on the EPA's decision to vary the EPL: Hy-Tec (No 1) at [60]-[61]. The EPA's production of documents in compliance with a notice to produce is not a reason for it to be ordered to pay costs in the proceedings.
6. Secondly, unlike in the situation described in [50(b)] of Cutcliffe, these proceedings were actively defended by another party, the Council. The Council chose to take an active defence, including entering points of defence on the EPA's variation of the EPL. This is not a judicial review proceeding where both respondents made submitting appearances and there is a risk of the Applicant not being compensated. Further, the EPA's error was not the driving issue in these proceedings - the Council's construction of condition 2 was - as is apparent from the issues in the case. The EPL variation did not trigger the proceedings. The EPL was varied to reflect the Council's construction of condition 2: Hy-Tec (No 1) at [61]. The Council's error in interpreting the consent was the "original error". Had the Council not pressed for its construction of condition 2, the EPA would not have varied the EPL.
7. Thirdly, the Council submitted that the EPA should be liable for "at least" the costs of the Applicant in establishing that the Applicant was entitled to the order declaring the EPL variation invalid (see [16] above). However, once the Applicant established the legal error of the Council, the order declaring the variation invalid followed for the same reasons: see Hy-Tec (No 1) at [62].

Consideration

1. The Court has a wide discretion to make a costs order under s 98 of the Civil Procedure Act 2005. The general rule for judicial review proceedings is that costs follow the event, as provided for in r 42.1 of the Uniform Civil Procedure Rules 2005. The Applicant was successful in relation to the two overarching matters the subject of the litigation. At issue is whether the costs order in the Applicant's favour ought be made against one or both respondents.
2. In terms of the conduct of the proceedings, the Council defended its construction of condition 2 of the consent at the substantive hearing. It did not address the issues concerning the variation of the EPL at the substantive hearing. The Council's defence stated in relation to the EPL issues that firstly, it denied that the EPA's decision to vary the EPL was based on legal error concerning the construction of condition 2 of the consent and secondly, that it denied that the EPA constructively failed to exercise its jurisdiction under s 45 of the POEO Act.
3. The EPA filed an early submitting appearance save as to costs a week after being served with the Applicant's summons. As it submitted, the usual approach to costs where a submitting appearance is filed is that costs are not awarded after that is filed.
4. The relevant case law is helpfully summarised in the parties' submissions, particularly those of the EPA. In Cutcliffe, Biscoe J stated at [50(b)]: where the beneficiary does not defend the proceedings, the applicant's costs will ordinarily be awarded against the consent authority, whether or not the latter enters a submitting appearance. This is because the cause of the litigation is the error of the consent authority and not of the applicant or the beneficiary. The consent authority cannot immunise itself from costs consequences of its own error by entering a submitting appearance because then a successful applicant cannot be properly compensated in costs. It is not sufficient that a consent authority should bear the applicant's costs only up to the time of the consent authority's submitting appearance because the applicant must continue to incur costs thereafter in order to establish, by evidence and argument at a hearing, that it is entitled to declaratory and injunctive relief.
5. In GPT, Biscoe J stated at [29]: Costs guidelines can be no more than general. They must be flexible. They must be understood to be the servant, not the master, of the interests of justice, and so must yield where appropriate to the circumstances of the individual case. …
6. In Platford both respondents (a council as the consent authority and a beneficiary of a development consent) filed a submitting appearance and the Court considered whether it was appropriate for costs to be awarded against only the council or both respondents. Preston CJ of the LEC ordered costs against both the consent authority and the beneficiary of the consent, holding at [21] that the ordinary rule that no order for costs should be made against a submitting party has less applicability in judicial review proceedings where both respondents file submitting appearances. Application of the ordinary rule would result in the successful applicant not being compensated for the costs of the proceedings.
7. In Rossi (CA), Basten JA stated at [73] (Ward JA agreeing): The circumstance engaging par (b) in Cutcliffe was that the beneficiary of the decision does not defend the proceedings; it was then said that the reason why the consent authority could not "immunise itself from costs consequences of its own error by entering a submitting appearance [was] because then a successful applicant cannot be properly compensated in costs." But that cannot be true in the case of proceedings which are actively defended by another party. The mere fact that the decision-maker is ultimately found to have erred in its approach is not, of itself, a sufficient reason to order costs against it, being costs incurred after the entry of a submitting appearance. So far as the guidelines in Cutcliffe suggest otherwise, they should not be applied.
8. The particular circumstances of this case must be considered in light of the principles referred to above. The primary outcome which must be achieved is that a successful applicant is appropriately compensated. The Council is a consent authority which defended the proceedings as they related to the construction of condition 2. The construction of that condition was the legal issue driving both the construction of the consent issue and the EPA's decision-making in relation to the variation of the EPL, as is clear from Hy-tec (No 1) at [62]. I found at [62] that the EPA exhibited legal error in its approach to the EPL variation based solely on the Council's erroneous purported construction of condition 2 of the consent. There was no evidence of the EPA exercising separate independent thought in making the EPL variation. The bulk of hearing time was spent on the issue of the construction of condition 2.
9. The Council submitted that as the trigger for the summons being filed by the Applicant was the variation of the EPL, as identified during discussion in court in the substantive hearing, costs should also be awarded against the EPA. That circumstance reflected the immediate practical difficulty the Applicant found itself in when the EPL variation was issued in August 2019 as that immediately and considerably reduced the amount of material that could be removed. The overall circumstance which resulted in the proceedings being commenced was however the Council's attempt to construe condition 2 in the way it advocated, which resulted directly in the variation of the EPL by the EPA. The Council defended the proceedings and is a respondent from whom the Applicant can recover costs. In the exercise of my discretion to award costs, it is appropriate in the circumstances of this case that the Council be solely responsible for the payment of the Applicant's costs. Paragraph [50(b)] of Cutcliffe does not need to be considered and according to Rossi (CA), should not apply in these circumstances. I will make an order to that effect in relation to the substantive proceedings.
10. In relation to the costs of the costs determination the subject of this judgment, the EPA has incurred costs in making written submissions and has been successful in doing so. The Council should pay its costs of the costs determination.

Order

1. The Court orders: 1. The First Respondent is to pay the Applicant's costs of the substantive proceedings the subject of Hy-Tec Industries (Queensland) Pty Ltd v Tweed Shire Council [2019] NSWLEC 175. 2. The First Respondent is to pay the costs of the Second Respondent in relation to the costs determination made in Order 1.

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