Redfern v Water Administration Ministerial Corporation of New South Wales and Department of Infrastructure, Planning and Natural Resources

KEY ISSUES: Costs :- discontinuance of proceedings - applicant achieved desired result outside proceedings - whether respondents should pay applicant's costs

Land and Environment Court Act 1979 s 69 LEGISLATION CITED: Land and Environment Court Rules pt 16 r 4 Water Act 1912 s 10, s 11, s 13A, s 97 Water Management Act 2000 s 90

AMP Henderson Global Investors v Valuer General (2004) 134 LGERA 426; CASES CITED: Maurici v Chief Commissioner of State Revenue (No 8) [2007] NSWLEC 37 (31 January 2007); Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622

DATES OF HEARING: 2 July 2007, 3 July 2007

APPLICANT Mr R Lancaster (barrister) SOLICITORS The Law Company

FIRST and SECOND RESPONDENT LEGAL REPRESENTATIVES: Mr P Larkin with him Mr C Norton (barrister) SOLICITORS Department of Natural Resources

SYNDICATE HOLDERS Mr M Walton SC SOLICITORS Kemp Strang

JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

31047 OF 2005 PETER WILLIAM REDFERN V WATER ADMINISTRATION MINISTRERIAL CORPORATION OF NEW SOUTH WALES AND DEPARTMENT OF INFRASTRUCTURE, PLANNING AND NATURAL RESOURCES

1 HIS HONOUR: The applicant in these Class 3 proceedings, Mr Redfern, seeks an order that the first and or second respondents pay his costs of the proceedings. The applicant had discontinued the proceedings by notice of discontinuance filed on 27 April 2007, except as to costs. The applicant's application for costs was reserved for later determination, ultimately fixed for hearing yesterday. 2 In order to determine the applicant's application for costs it is necessary to outline some of the circumstances leading up to the litigation and during the course of the litigation. Circumstances leading up to the litigation 3 The first application Mr Redfern made to achieve his desired result of being able to convey water from the Namoi River to his properties was an application made under s 10 of the Water Act 1912. This application was made in December 1990. An application under s 10 of the Water Act 1912 can be made by a person who is an occupier of land upon which the proposed work to be licensed is constructed or used or proposed to be constructed or used. The subject matter of that s 10 application was the installation of a pump on land in respect of which the applicant could be considered to be an occupier near the Namoi River. The s 10 application was approved on 26 October 1992. It had a life term of five years. 4 The second application in time was made in February 1996. This application was under a different section, s 13A of the Water Act 1912. This section allowed a person who did not occupy land on which the person desired to construct a supply work or to construct works to convey water from a supply work to the land of the applicant, to obtain a licence to construct and use such supply work or conveying works. The application originally was to use an existing channel which ran across neighbours' properties from a position proximate to where the applicant had proposed to install a pump next to the Namoi River to a position about twenty-two metres short of one of the applicant's properties. The existing channel was used by the neighbours to convey water from their own supply works on the Namoi River to the neighbours' properties. The proposal of the applicant was to also use this existing channel to convey water although he would need to install a pump on the Namoi River to pump water into that existing channel and some pipes at the end of the channel to bridge the twenty-two metre gap from the channel to the applicant's properties. 5 The respondents opposed that application on the basis that s 13A of the Water Act 1912 did not permit the grant of a licence to use an existing channel. The respondents were of the view that s 13A only permitted the grant of a licence, first, to construct either supply works or conveying works and, secondly, to use such works when constructed. However, s 13A did not permit the use of either type of works which had already been constructed and in respect of which no further construction was proposed. 6 As a consequence, the applicant amended the s 13A application that he had been made in February 1996. The amendment was to construct a new channel parallel to the existing channel. Such a new channel would, on the respondents' construction of s 13A, be able to be the subject of a licence under s 13A because it would involve new construction and the subsequent use of the newly constructed works. 7 Apparently there was a direction that the applicant's amended application be the subject of a public inquiry by the Local Land Board as to the desirability of granting the amended application. Accordingly, in about November 1999, there was a Local Land Board hearing. However, at this hearing it became evident that the Local Land Board hearing had been improperly constituted. Section 13A(4) requires that there be a Local Land Board hearing in any case: "where the decision of the Ministerial Corporation is that the application should be granted". 8 As events had transpired, there had not in fact been any decision by the Ministerial Corporation that the application should be granted. Accordingly, the condition precedent for the Ministerial Corporation directing that the Local Land Board hold a public inquiry as to the desirability of granting the application had not in fact been satisfied. Accordingly, the Local Land Board did not have jurisdiction to hold a public inquiry into the desirability of granting the amended application. 9 During the course of the Local Land Board hearing, the applicant's representative indicated an intention on the part of the applicant to withdraw the amendment to the application and go back to the original s 13A application. The applicant wished to do that in order to deal with the respondent's interpretation of s 13A. The applicant took issue with the respondent's interpretation of s 13A. Nevertheless, the applicant accepted that it would be desirable to have an authoritative determination of the true meaning of s 13A. The applicant's representative said that what the applicant wanted the respondents to do was to deal with the original application (which proposed using the existing channel), to refuse it, and then the applicant would go and lodge an appeal to the Land and Environment Court pursuant to s 13A(4). The applicant would then be able to argue the proper interpretation of s 13A at the hearing of the appeal before the Land and Environment Court. 10 The Local Land Board hearing was abandoned for the reasons that I have stated. Subsequently, the applicant withdrew its amended application, as he had foreshadowed at the Local Land Board hearing. There was some confusion between the applicant and the respondents as to the consequence of this withdrawal. The applicant thought that he had only withdrawn the amendment to the original application, being the amendment which proposed the construction of the parallel channel, with the consequence that the original application for use of the existing channel would be back on foot. However, the respondents thought that the applicant had withdrawn the amended application with the consequence that there was no longer any application under s 13A on foot. 11 In December 1999, the respondents wrote to the applicant advising of the respondent's view that there was no extant s 13A application. The respondents noted that the applicant wished to use the existing channel and if necessary take litigation to achieve that result. The respondents noted that the neighbours were objecting to the applicant using the existing channel. In the circumstances, the respondents requested that the applicant resubmit a s 13A application. The application should be supported by plans for the pump site and the conveying works. The respondent would then be in a position to properly consider the matter. 12 In February 2000, the applicant did as requested and lodged another application for a licence under s 13A. The application proposed using the existing channel. In April 2000, the respondents wrote back to the applicant noting the application that had been lodged in February but reiterating the respondents' view that s 13A does not allow for conveying works, which included the existing channel, which are already in existence to be the subject of an application under s 13A. Accordingly the respondents stated that the applicant's application does not conform to the requirements of s 13A and cannot be processed. The respondents did not simply refuse the application as had been foreshadowed as being appropriate by the applicant's representative at the Local Land Board hearing. The reason the applicant's representative stated that there needed to be a refusal was because that was the only means by which there could be an appeal to the Land and Environment Court. Unlike other statutes, the Water Act 1912 did not provide for any appeal against a deemed refusal; there had to be an actual refusal. 13 Nevertheless the respondents took the view that because the application did not conform with the requirements of s 13A it could not be processed. There then followed a lengthy period of inaction. The respondents took no action to determine one way or another the application that had been made by the applicant under s 13A. 14 In the end, the applicant was forced to bring proceedings in the Supreme Court of New South Wales for a declaration that the s 13A application that had been made in February 2000 was a valid application. The obvious intention of obtaining such declaratory relief was that if the application was a valid application, then the respondents would be compelled to perform their public duty of determining the valid application one way or another. Only if the application was not valid could the respondents be justified in not making any determination at all. 15 The matter came before Studdert J in the Supreme Court. Justice Studdert delivered judgment on 7 April 2004: Redfern v Water Administration Ministerial Corporation [2004] NSWSC 267. His Honour determined that a declaration should be made that the plaintiff's application dated 17 February 2000 is a valid application under s 13A of the Water Act 1912. The essence of his Honour's determination is set out in para 27 of his Honour's judgment: "[27] Having reflected on the competing submissions, I have reached the conclusion that Mr Robson is correct in the way in which he asked the court to analyse this application and that the necessary elements exist for the plaintiff to pursue an application under s 13A. The application should be treated as an application for a licence to construct the works, being the installation of a pump, the creation of the augment channel and the construction of the connecting pipeline, and the taking and using of the water obtained thereby, for the purposes specified in the application. The plaintiff does not occupy the land where those various works are to be undertaken. In respect of those works the requirements of s 13A are satisfied. True it is that the use of those works will result in water passing along the existing syndicate channel, but the defendant is not being asked to licence use of that channel." 16 Subsequently in a passage relied upon by the respondents, Justice Studdert said at para 32: "[32] Having concluded that the current application is properly to be regarded as an application for a licence to do only that to which s 13A extends rather than an application for a licence to use the existing syndicate channel, I also conclude that the plaintiff is entitled to the declaration sought in para 2 of the summons filed in this matter." 17 Barely two weeks after the judgment was delivered, on 15 April 2004, the respondents wrote to the applicant's solicitors in terms which reveal a clear misunderstanding of the judgment of Studdert J. The letter concluded with a statement that: "It does not seem the Court's decision requires the Department to do anything nor is there any application with it that it must now process." 18 Clearly this was incorrect. Nevertheless after a justifiable response by the applicant's solicitors on 29 April 2004, the respondents wrote again on 27 May 2004 acknowledging that the decision of Studdert J did have the consequence that there was a valid application which enlivened the public duty of the respondents to make a determination and stating that: "It follows that the Department will consider the application…" 19 The letter made clear that the subject matter of the application under s 13A was the construction of the three types of works, being the installation of a pump near the Namoi River, the creation of the augment channel (which was a section of about two kilometres of channel which avoided a dogleg in the existing channel) and the construction of a connecting pipeline from the end of the channel to the applicant's properties and the taking and passing of water through those particular works. However, the letter noted the application did not include an application to approve use of the existing channel or to pass water through that channel. 20 Unfortunately a long period of time then elapsed again before ultimately there was a determination by the respondents of the s 13A application. Some explanations have been provided by the respondents for this delay. One is that it was necessary to carry out an environmental assessment of the proposed works, in particular the construction of the augment channel. Another is that the applicant had indicated a willingness to endeavour to negotiate an arrangement for the use of the existing channel with the neighbours. This was a position that the respondents thought desirable and therefore they encouraged those negotiations. It is not quite clear why this meant that no work should be done on the application while those negotiations took place but nevertheless that provides some explanation for the delay. 21 Ultimately it took until 23 June 2005 before the respondents determined to refuse the s 13A application which had been lodged back in February 2000. 22 The respondents provided reasons in the letter of refusal. Firstly, the respondents noted the fact that the Department had conducted an environmental assessment. The respondents noted that: "The assessment determined that establishment and operation of the various new works would have an acceptable environmental impact." 23 The respondents also noted that no sites of Aboriginal culture or heritage were identified as being affected by the application. 24 The respondents then stated the critical reason for the decision to refuse to grant the licence. The respondents stated: "The environmental and Aboriginal cultural or heritage issues notwithstanding, the Department believes that it is critical that there be a capacity to convey water from the pump site on the Namoi River to "Warrawee" [the applicant's property]. Access to the existing 'syndicate' channel is essential for this conveyance of water. A number of owners of the 'syndicate' channel have objected to this application and have stated that it is their intention to deny you access.

The Department must determine ultimately whether it is in the public interest to approve the application. In light of the above matters and the existing groundwater entitlement that you have, DIPNR is not satisfied that it is in the public interest to grant the licence. Accordingly, your application is hereby refused." The appeal in this Court 25 The applicant commenced the Class 3 proceedings appealing against the refusal of the applicant's s 13A application on 13 September 2005. The application the subject of the appeal remained that which had been originally proposed back in February 2000, namely the installation of a pump near the Namoi River, the construction of a two kilometre augment channel to avoid the dogleg about midway along the existing channel and the construction of pipes at the end of the existing channel to connect with the applicant's properties and otherwise to use the existing channel and the new works to convey water from the Namoi River to the applicant's properties. 26 The applicant had relevant entitlements to extract water from the Namoi River and to use it for irrigation purposes on his properties. However, he did not have any legal entitlement to convey the water from the Namoi River to his properties across his neighbour's properties. The neighbours would not agree to the applicant using their existing channel. The application under s 13A was intended to remedy this problem. The grant of a licence under s 13A would grant an entitlement to construct and use works on the neighbours' properties and to take and convey water to the applicant's properties. Of course, at issue was whether any licence granted under s 13A would extend to an entitlement to convey water along those parts of the existing channel that were not proposed to have any new construction work carried out in it. 27 Ultimately, the Court did not make a substantive determination on the merits of the proceedings. At the hearing on 1 and 2 August 2006, the neighbours over whose properties the existing channel passed, applied to and were permitted to be heard. On the second day of the hearing, the applicant, the respondents and the neighbours sought and were granted an adjournment to allow settlement discussions. Ultimately, the applicant and neighbours were able to reach an agreement whereby they would form a new syndicate and the new syndicate would apply for a joint water supply works approval under the now in force Water Management Act 2000. 28 This was done and the relevant respondent granted the joint water supply works approval under s 90 of the Water Management Act 2000. That approval entitled the applicant, along with the other syndicate members, to extract water from the Namoi River in accordance with the applicant's existing water access licences and pump approval, construct and use a channel to convey water across the properties of the neighbours who were also syndicate members to the applicant's properties, and to use the water so obtained on the applicant's properties in accordance with existing water use approvals. 29 The grant of such an approval under s 90 of the Water Management Act 2000 rendered futile the existing Class 3 proceedings. The applicant considered that the substance of the outcome achieved by the grant of the approval under s 90 of the Water Management Act was the same as that which the applicant had sought to achieve by the Class 3 proceedings, namely a grant of a licence under s 13A of the Water Act 1912. For that reason, the applicant discontinued the Class 3 proceedings except as to costs. The applicant's submissions 30 The applicant accepts that where there has not been a hearing and determination by the court of the merits of a case, and it is not possible to say that one party or the other has simply capitulated, it is often the case that the court will make no order as to costs: see re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622 at 624-625. 31 However, the applicant submits that this is a case where the applicant has in substance achieved, by a settlement and the grant of an alternative approval, the result he was seeking in the proceedings. Further, the applicant submits that the respondents' conduct was so unreasonable that the applicant should obtain the costs of the proceedings. In summary, the applicant submits that it is fair and appropriate that the respondents pay the applicant's costs of the proceedings for the following reasons:

" (a) The substance of the outcome achieved by the applicant is the same as that sought in his application that is the subject of these proceedings;

(b) The discretionary considerations relied upon by the applicant in the proceedings were overwhelmingly in favour of the grant to him of the requisite approval: see the list of discretionary consideration in the applicant's outline of submissions [in the substantive proceedings];

(c) The respondents have acted unreasonably in relation to the consideration and determination of the application made in February 2000, by reason of the substantial delay in determining it (which occurred only after the applicant's application to the Supreme Court);

(d) The respondents in these proceedings raised no objection to the applicant's proposal on the merits (including the acceptability, in environmental terms, of the applicant's intended use of its existing surface water entitlements). So much was accepted by the respondent's counsel at the commencement on the hearing on 1 August 2006;

(e) Rather, the respondents unreasonably adopted a technical defence of the application based on the alleged inapplicability of s 13A Water Act 1912 to works that have already been constructed. The applicant would have submitted in the proceedings that the respondent's construction of the legislation was wrong - but for present purposes (since it is not appropriate to suggest a determination of the merits of the case merely to resolve a dispute on costs), it is enough to point out that it was unreasonable for a government authority to persist in the defence of a claim only on a technical ground of that nature, while accepting that there was no issue on the merits, only later to grant an approval (under a different section of a different statute) for substantively the same entitlements for the applicant." The respondent's submissions 32 The respondents oppose the applicant's application for costs. They submit the proper order is that there be no order as to costs. 33 The respondents submit that no case has been made out by the applicant warranting a departure from the usual approach, as stated in re Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1997) 186 CLR 622, that where the proceedings have been discontinued without any determination of merits, there should be no order as to costs. 34 The respondents submit that the discontinuance was due to a supervening event, namely the making of a successful application for approval under the Water Management Act 2000 following the applicant reaching agreement with the members of the syndicate for access to the existing channel. The outcome achieved by the grant of the approval under the Water Management Act 2000 was not an outcome which could have been achieved in the Class 3 proceedings which involved the applicant, alone and not as part of a syndicate, applying for a licence under s 13A of the Water Act 1912, being a different section of a different statutory regime. 35 The respondents, as an integral component of their defence of the applicant's proceedings, had contended that on a proper construction of s 13A of the Water Act 1912, it did not authorise the grant of a licence to use works that had already been constructed. Since the channel which the applicant wished to use to convey water from the Namoi River to his properties had already been constructed, the respondents' case was that the Court would not have had power in the proceedings to grant a licence under s 13A to use that existing channel. 36 The applicant did propose some limited new works, including the installation of a pump to pump water from the Namoi River into the channel and the construction of a connecting pipeline from the end of the existing channel to the applicant's properties, as well as, in the amended application, a proposal to carry out repair and maintenance work on the existing channel, however, the respondents' case was that the grant of a licence to carry out even these works would not permit the use of the balance of the existing channel. Hence, any licence under s 13A would be ineffective to achieve the outcome the applicant desired of being entitled to convey water from the Namoi River along to his property. 37 By reason of the discontinuance, the Court never had to determine the respondents' argument as to the correct construction of s 13A of the Water Act 1912. 38 Furthermore, the respondents raised in their defence that, even if there were to be power to grant a licence, the Court would not in the exercise of its discretion exercise the power to grant a licence under s 13A authorising the use of an existing channel without the applicant being a member of the syndicate or otherwise having reached appropriate arrangements with the neighbours for the use and maintenance of the existing channel over the neighbours' properties. This latter argument was, of course, the motivation for the intervention in the proceedings of the neighbours. Again, the discontinuance removed the necessity to determine this argument. 39 The respondents submit that the grant of the new approval should not be seen to involve the capitulation or surrender of the respondents to the applicant. The circumstances involved in the grant of the new approval under the Water Management Act 2000 were materially different. First, the applicant had reached agreement with the neighbours to form a new syndicate for the construction, use and maintenance of the channel to convey water to their respective properties. Secondly, the approval was granted under a different statutory regime, namely the Water Management Act 2000, rather than the former Water Act 1912. 40 The respondents submit that on a proper construction of s 90 of the Water Management Act there is a capacity to grant approval to carry out limited work such as maintenance and repair of an existing channel (this now coming within the express definition of "construct"). There is also the distinction that under the Water Management Act 2000 an approval can only be granted if the granting authority is satisfied that all of the persons whose land will be affected by the construction and use of the works has agreed to such works: see s 97(5). This contrasts with s 13A of the Water Act 1912 which, as I have noted before, allowed the grant of a licence notwithstanding no agreement had been able to be reached. 41 Accordingly, the respondents submit that they did not capitulate on their arguments that the Court did not have power under s 13A of the Water Act 1912 to grant, or the Court should not in the proper exercise of its discretion grant, a licence to use existing works constructed by others with whom the applicant had no arrangement. 42 The respondents also disputed that their conduct leading up to or during the proceedings up to the time of the applicant's discontinuance could be classified as being so unreasonable as to justify an order for costs. The respondents provided explanations of the events that have occurred and that I have set out above. 43 Furthermore, the respondents submitted that the raising of some merit issues in the original points of defence, which merit issues were abandoned at the time of commencement of the hearing, should not be seen to be unreasonable. There were grounds for raising the merit arguments. For example, the merit argument in relation to the environmental impact of the proposed works, particularly the augment channel, was a matter that was considered prior to the determination in June 2005. The applicant did not discontinue its proposal to construct the augment channel until the first day of the hearing. The merit arguments in relation to the capacity of the channel, which were raised in the original points of defence, were refined in the amended points of defence. However, there was not an abandonment of the argument. As the amended points of defence put the argument, it was that absent mutual arrangements and co-operation between the neighbours and the applicant as to the use of the existing channel, the existing channel may not have the capacity to deal with the water that each of the neighbours and the applicant may have an entitlement to convey. Hence this point, whilst it was not articulated as clearly in the original points of defence, still was maintained in the amended points of defence. There was some issue raised in relation to the economic viability which argument was subsequently abandoned. However, it does not seem that this was a particularly large point in the overall scheme of the issues joined between the parties. 44 The respondents also point out that a number of the merit arguments that the respondents had raised originally were embraced and would have been run by the neighbours who intervened in the proceedings. Hence any evidence obtained and preparation done by the applicant to meet those issues would still have been useful to meet the arguments that would be put by the neighbours. Analytical framework for exercise of costs discretion 45 The Court has a discretion as to costs under s 69(2) of the Land and Environment Court Act 1979. That discretion is guided by the Land and Environment Court Rules in certain circumstances. At the time the proceedings commenced in 2005, and indeed up to the hearing and subsequently up to 5 April 2007, the Rules did not govern proceedings under s 13A and s 11 of the Water Act 1912 (which the subject proceedings were). However, from 5 April 2007, Pt 16 r 4 of the Rules was amended to apply to such proceedings. That rule provides that, in proceedings to which the rule applies, no order for the payment of costs will be made unless the Court considers the making of a costs order is, in the circumstances of a particular case, fair and reasonable. As I have noted, the notice of discontinuance, was not ultimately filed until 27 April 2007. However, the applicant and neighbours had reached agreement and had made the application for the works approval prior to April 2007. The works approval was granted on 2 April 2007. There were some amendments made to the approval by 19 April 2007. The notice of discontinuance was signed by the applicant on 18 April 2007 and by, the respondents on 24 April 2007 and filed on 27 April 2007. 46 Therefore, all of the costs of the proceedings preceed the coming into force of the amendment to Pt 16 r4 which applied the rule to the proceedings. 47 Nevertheless, the respondents submit that Pt 16 r 4(2) does apply to any determination of the question of costs in these proceedings: see Maurici v Chief Commissioner of State Revenue (No 8) [2007] NSWLEC 37 (31 January 2007), para [68] and cases therein cited. This means that the Court would make no order as to costs unless it is satisfied, in the particular circumstances of the case, it is fair and reasonable to order the respondents to pay the applicant's costs. The respondents conceded, however, that in exercising the discretion under s 69, as modified by Pt 16 r 4, there would be no error in taking into account that part of the proceedings that were conducted prior to the extension of Pt 16 r 4 to these proceedings: AMP Henderson Global Investors v Valuer General (2004) 134 LGERA 426 at [81]. 48 The circumstance that there has been a discontinuance is a factor that can be taken into account in determining whether it is fair and reasonable to order costs. 49 The applicant ultimately accepted that Pt 16 r 4(2) applied to the Court's determination. However, the applicant submits that the tests stated in the decision of McHugh J in Minister for Immigration and Ethnic Affairs; ex parte Lai Qin (1007) 186 CLR 622 places a stricter test than that which would apply under Pt 16 r 4(2). The applicant submits that if the applicant is able to establish the exceptions in Lai Qin where a costs order will be made, notwithstanding there has been no determination on the merits, then it would logically follow that the fair and reasonable test under Pt 16 r 4(2) would also be satisfied.

The Court's determination 50 In my opinion, no order for costs should be made in the circumstances of this particular case for the following reasons. 51 First, by reason of the discontinuance of the proceedings, there has been no concluded hearing on the merits and no determination of the proceedings by the Court. The Court has, therefore, been deprived of the usually relevant factor of a determination of which party has been successful in the proceedings. 52 Secondly, it would be inappropriate to try a hypothetical action between the parties as part of determining the question of costs. 53 Thirdly, there were supervening events that rendered the further prosecution of the proceedings futile, namely the agreement between the applicant and the neighbours in February 2007, the making of a joint application under s 90 of the Water Management Act 2000 and the grant of an approval under s 90 of the Water Management Act 2000. 54 Fourthly, it cannot be said that the respondents have effectively surrendered to the applicant. The applicant discontinued the proceedings without obtaining substantive relief in the proceedings. The respondents did not submit to the Court upholding the appeal and granting a licence under s 13A of the Water Act 1912; to the contrary, the respondents maintained their defence to the end on the grounds I have previously summarised. The grant of the water supply works approval under s 90 of the Water Management Act 2000 is a different approval to a licence under s 13A of the Water Act 1912. The terms of each of the approvals and the circumstances in which each of the approvals can be granted are different under the Water Management Act 2000 and the Water Act 1912. One obvious difference is the fact that under the Water Management Act 2000 an approval can only be granted under s 90 where there is the consent of all persons on whose lands the works are to be constructed and used: see s 97(5). In contrast, there is no requirement for such approval under s 13A of the Water Act 1912: contrast s 10 of that Act. 55 Fifthly, the respondents' conduct in the lead-up to the commencement of the proceedings was not causative of the applicant incurring costs that it would not otherwise have incurred. The applicant, justifiably, focuses on the delay by the respondents in determining the s 13A application that had been lodged back in February 2000. The applicant submits that if the respondents had always taken the view that they espoused in the Class 3 proceedings that s 13A did not empower the grant of a licence to use existing works, then the proper course should have been to refuse the application shortly after it had been lodged in February 2000. Certainly it did not justify not making any decision or then delaying after the judgment of the Supreme Court but as I have noted, the respondents sought to justify the conduct over the five years plus between February 2000 and July 2005. 56 However, it is not necessary for me to determine whether such conduct amounts to manifestly unreasonable conduct which would warrant an order for costs in circumstances where, as I have noted, it cannot be shown that the delay, even if it did constitute unreasonable conduct caused the incurring of costs that the applicant would not otherwise have incurred. 57 The matter can be tested this way. Let us suppose that the respondents did what the applicant said they should have done, namely refused the s 13A application shortly after it had been lodged in February 2000 on the ground that s 13A did not empower the grant of a licence to use an existing work. As the applicant's representative had said at the Local Land Board hearing, upon such refusal the applicant would have appealed to the Land and Environment Court. The Land and Environment Court would then have had to determine the question of whether the respondent's interpretation of s 13A was correct or not. This would have occurred in 2000. However, whilst it took another five years, the same position ultimately occurred. The respondents refused the s 13A application, essentially on the ground that s 13A did not authorise the grant of a licence for the use of an existing work. Upon the refusal, the applicant lodged an appeal to the Land and Environment Court. The respondents raised that issue of interpretation to be determined in the proceedings. Hence, exactly the same result has occurred in the appeal. There has been no change in the issues in the appeal, merely the date upon which the appeal has occurred. However, this does not found a basis for ordering costs on the basis of unreasonable conduct. 58 The applicant also submitted that, but for the lodging of the appeal, the result that was ultimately obtained, namely the reaching of an agreement with the neighbours and the grant of an approval under the Water Management Act 2000, would not have occurred. It also referred to other facts which were disclosed during the course of the hearings which enabled that result to occur. 59 However, as the respondents correctly note, the mere fact that a settlement has occurred, by reason of the proceedings having been commenced in the first place, cannot by itself be sufficient to constitute conduct which justifies a costs order. The policy considerations underpinning the rule that there be no order for costs where there has been no determination by the court on the merits would be undermined if a mere settlement always justified the making of a costs order. 60 Furthermore, it is often the case that the bringing of proceedings enables the coming together of previous disputants and facilitates dialogue and ultimate settlement. That result could have occurred whenever the proceedings were brought. It is not a ground by itself to justify a making of a costs order. 61 In relation to the conduct of the proceedings, there was nothing about the conduct of the respondents which would give rise to the classification of being so unreasonable as to warrant a costs order. I have dealt above with the respondents' arguments in relation to the raising and subsequent abandoning of certain merit issues. In my opinion, the respondents' answers are correct and the raising and abandoning or modification of the merit issues do not provide a justification for making a costs order. At the end of the day, there was both the power question, which turned on the interpretation of s 13A, and the discretionary question which turned partly on the interpretation of s 13A but also partly on merit matters to do with the proper management of the existing channel. These were issues that were raised by the respondents and would have been continued to be raised by the intervening neighbours. The settlement between the parties and the grant of the approval under the Water Management Act 2000 removed the necessity for the Court to determine these issues. 62 Sixthly, the arguments raised by the respondents were clearly arguable. The grounds of power and discretion were sufficient to raise a substantial case against the granting of the licence under s 13A of the Water Act 1912. The power ground may be technical but if it were to be correct, it would be decisive against the grant of a licence under s 13A to use the whole of the existing channel. The discretion ground is a form of merits issue in that it relates to the orderly and efficient administration of water use under the Act. 63 By the applicant being able to reach agreement with the neighbours to form a new syndicate for the orderly and efficient construction, use and maintenance of the water supply works and to obtain a new approval under the Water Management Act 2000, there was no longer a need to determine the respondent's power or discretion grounds. These supervening events did not make, however, the respondent's raising of the power or discretion grounds unreasonable. 64 For all these reasons, the Court does not consider that it is fair and reasonable that there be an order for costs. 65 This brings me then to the question of the costs of the application for costs. Often it is the case that the application for costs is determined according to the usual rule that costs follow the event. In this case, I have determined that there should be no order as to costs as to the substantive proceedings. In this sense, the applicant has been unsuccessful in its application that there be an order for costs in its favour. 66 However, it is not an invariable rule that the costs must follow the event on every determination of an application for costs. Again, there should be a consideration of whether it is fair and reasonable in the circumstances. 67 In this case, the applicant's application for costs had some merit, notwithstanding that ultimately I have determined it should not be upheld. There was indeed significant delay and bureaucratic wrangling from February 2000 through to the determination in July 2005. Even after the proceedings had commenced, the respondents have taken considerable time to reach their ultimate position of focusing upon the question of interpretation and the question of discretion, all revolving around s 13A. It was not unreasonable for the applicant, having regard to that conduct, to believe that an application for costs may have some merit. 68 The parties have now, of course, reached consensus by means of the agreement between the applicant and the neighbours to form the new syndicate and by the grant of the new approval under the Water Management Act 2000. This is clearly the best outcome that could be achieved. It was a result which ultimately all parties, that is the applicant, the respondents and the neighbours, would see to be beneficial. It is unfortunate, of course, that it has taken so long for that result to be achieved. 69 I do not consider that it would be fair and reasonable for the applicant to pay the costs of the respondent for its unsuccessful application for costs. Accordingly, there should be no order for costs in relation to that application as well. Orders 70 For these reasons I make the following orders:

1. The Court makes no order for costs in relation to the substantive proceedings.

2. The Court makes no order for costs in relation to the applicant's application for costs.

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