Land and Environment Court of New South Wales CITATION : Blue Mountains Conservation Society Inc v Delta Electricity (No 2) [2009] NSWLEC 193 PLAINTIFF PARTIES : Blue Mountains Conservation Society Inc DEFENDANT Delta Electricity FILE NUMBER(S) : 40358 of 2009 CORAM: Pain J PRACTICE AND PROCEDURE :- application by defendant for stay of proceedings pending appeal on protective costs order - condition requiring points of defence to be filed imposed to facilitate progress of matter KEY ISSUES: PRACTICE AND PROCEDURE:- application by defendant for security for costs - undertaking provided by plaintiff for security for costs in sum of protective costs order amount - whether order for greater amount should be made - security for costs order in amount of protective costs order made LEGISLATION CITED: Civil Procedure Act 2005 s 67 Uniform Civil Procedure Rules 2005 r 42.21 Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 Blue Mountains Conservation Society Inc v Delta Electricity [2009] NSWLEC 150 Burrell Place Community Action Group Incorporated v Griffith City Council [2009] NSWLEC 120 CASES CITED: Ervin Mahrer and Partners v Strathfield Municipal Council [2001] NSWLEC 228 Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523 Jazabus Pty Ltd v Haddad [2007] NSWCA 291 Pacific Acceptance Corporation Ltd v Forsyth (No 2) [1967] 2 NSWR 402 Partnership Pacific Ltd v Killen (NSW Court of Appeal, Moffit P, Reynolds and Hutley JJA, 10 April 1979, unreported) 22 October 2009 DATES OF HEARING: 23 October 2009 26 October 2009 (written submissions) 27 October 2009 (written submissions) DATE OF JUDGMENT: 30 October 2009 PLAINTIFF Mr T Howard SOLICITORS LEGAL REPRESENTATIVES: Environmental Defender's Office DEFENDANT Ms H Irish SOLICITORS Middletons JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Pain J 30 October 2009 40358 of 2009 Blue Mountains Conservation Society Inc v Delta Electricity (No 2) JUDGMENT 1 The Defendant has filed a Notice of Appeal dated 8 October 2009 in the Court of Appeal against my decision to make a protective costs order on 9 September 2009 (Blue Mountains Conservation Society Inc v Delta Electricity [2009] NSWLEC 150) (Blue Mountains No 1). The Defendant has filed a Notice of Motion dated 29 September 2009 seeking a stay of these proceedings pending the outcome of that appeal and an order that the Court suspend the operation of the protective costs order until the decision of the Court of Appeal. 2 The Plaintiff agrees that a stay ought be granted in the unusual circumstances of this case but subject to the following conditions: (i) That the Defendant provide an undertaking to seek expedition in respect of the Court of Appeal proceedings; (ii) That the Defendant file and serve its Points of Defence on or before 5 November 2009 (or such other date as the Court considers appropriate); and (iii) That the subpoenas to the Department of Environment, Climate Change and Water (DECCW) and to the Defendant, each issued by the Plaintiff and dated 25 September 2009, be made returnable on 5 November 2009 (or some other date considered fit by the Court) and that any Court process in respect of those subpoenas be excluded from the ambit of the stay. 3 These conditions are opposed by the Defendant. 4 The relevant provision for the grant of a stay of proceedings is s 67 of the Civil Procedure Act 2005 (the CP Act) which provides as follows: Subject to rules of court, the court may at any time and from time to time, by order, stay any proceedings before it, either permanently or until a specified day. 5 The parties agree that the Court has discretion to grant the stay and the terms of any stay, in accordance with the unanimous decision of the Court of Appeal in Alexander v Cambridge Credit Corporation Ltd (1985) 2 NSWLR 685 at 694. Defendant's evidence and submissions 6 An affidavit of Timothy Webster, solicitor for the Defendant, sworn 29 September 2009 was read. Referring to his affidavit of 5 August 2009 in which he estimated the legal costs the Defendant was likely to incur in defending the matter, Mr Webster states that he estimated the costs of the Defendant of reviewing the summons, reviewing the points of claim, requesting particulars and preparing Points of Defence, to be approximately $9765. In his affidavit of 5 August 2009, Mr Webster estimates the costs incurred by the Defendant for the Plaintiff's protective costs order application at $27,285 with counsel fees of $11,500. To date the Defendant has incurred actual legal costs of more than $97,000. Mr Webster states that if the proceedings continue in the absence of a stay, costs may continue to be incurred and be irrecoverable in circumstances where the Plaintiff will not prosecute the proceedings unless the protective costs order is upheld. 7 Additional correspondence referred to included letters between the parties' solicitors tendered at the hearing on the protective costs order application on 18 August 2009 and two additional letters dated 11 June 2009 and 24 July 2009 from the Plaintiff's solicitors to the Defendant and the Defendant's solicitors respectively both dealing with procedural matters related to the protective costs order notice of motion. The first letter enclosed the Plaintiff's Notice of Motion and supporting affidavits for the protective costs application. The second letter sets out additional affidavit evidence on which the Plaintiff intends to rely if the matter proceeds to a substantive hearing. 8 A letter written since the determination of the protective costs order was also before the Court. In that letter dated 29 September 2009 to the Defendant's solicitors from the Plaintiff's solicitors, the Plaintiff's solicitors stated that if the matter proceeded in this Court on the basis of the protective costs order then the Plaintiff would consent to providing security for costs in the sum of $20,000. Defendant's submissions on stay application 9 In relation to the issue of expedition, the Defendant considers that the appropriate party to seek expedition is the Plaintiff, not the Defendant. The Plaintiff has moved slowly in contesting the litigation and has not sought expedition of the main proceedings or the application for a protective costs order. An application for expedition in the Court of Appeal is unlikely to succeed. The progress of the matter by the Plaintiff with a six month period between the Plaintiff's solicitors writing to advise of court action and the commencement of proceedings suggests an application for expedition is doomed to fail. 10 There is no reason given as to why additional work should be required to be done by the Defendant in terms of it filing a defence, given that the Plaintiff has consistently stated that it is only able to proceed if it has the benefit of a protective costs order. On the Plaintiff's own admission it could become liable to pay costs in an order of magnitude beyond its means to pay if the proceedings continue to finality without such an order. It would be illogical for the Court to impose conditions or make directions requiring further steps to be taken in this Court in these circumstances. 11 The following issues remain outstanding: the costs of the Court of Appeal proceedings, the costs of the Plaintiff's motion seeking a protective costs order and the outcome and costs of the Defendant's undetermined motion seeking security for costs. If the Defendant succeeds in the Court of Appeal the Plaintiff will discontinue or seek dismissal of the substantive proceedings in this Court and the Plaintiff may not be able to compensate the Defendant for the costs incurred. Further, it would be an abuse of process to require compliance with subpoenas issued by the Plaintiff on 25 September 2009 to the Defendant and DECCW where there is a real likelihood that the Plaintiff will discontinue the proceedings. 12 The Defendant's appeal is on a unique matter which is not simply a matter of practice and procedure and it is not therefore analogous to cases which have considered stay applications where there are appeals on interlocutory matters. It is not a matter of practice and procedure but the outcome will determine whether the case proceeds at all. As there is presently no security for costs order in place there must be real doubt that if there are additional costs beyond those already incurred that the Plaintiff will be able to meet any costs order made in favour of the Defendant. Inquiries of the Court of Appeal suggest that a hearing date in February 2010 is likely regardless of whether expedition is granted or not. The two principles identified by the Court of Appeal in Alexander at 695 apply here. 13 The Defendant stated in the Notice of Motion for the stay that it sought its costs of the motion but has now advised that it does not do so. Plaintiff's submissions on stay application 14 The Plaintiff is not seeking an indulgence from the Court, rather the Defendant is asking the Court to stay the proceedings. Cases demonstrate that courts are reluctant to stay proceedings where an appeal is made against an interlocutory order which would prevent the substantive proceedings continuing, see Partnership Pacific Ltd v Killen (NSW Court of Appeal, Moffit P, Reynolds and Hutley JJA, 10 April 1979, unreported) and Ervin Mahrer and Partners v Strathfield Municipal Council [2001] NSWLEC 228. Because of the unusual circumstances the Plaintiff is consenting to the stay given the possibility that substantial costs may be incurred by the Plaintiff which it could not pay in the event that the appeal was successful and the matter proceeded. While it is preferable that such an appeal on a matter of practice and procedure not interfere with the substantive proceedings, if a stay is to be granted it is preferable that the impact on the proceedings be minimised, hence the conditions proposed. 15 It is not appropriate to say that an application for expedition is doomed to fail as it is the disruptive impact on the substantive proceedings which is the principal issue to consider. If the Defendant seeks expedition the Applicant will support such an application. 16 Requiring the Defendant to file a defence is important as it keeps the matter proceeding and is not an unreasonable requirement. It would enable both parties to know what the case is which may result in a cost saving. The subpoenas have already been issued. The additional costs to be incurred by requiring Points of Defence and making the subpoenas returnable are not substantial in the scheme of costs already incurred in the matter. 17 It will not work a grave injustice upon the Defendant to impose the conditions sought by the Plaintiff. The Defendant assumes that the Defendant will be successful on the appeal. The position however is that the orders of this Court stand as correct unless overturned. From this perspective, to file a defence to Points of Claim filed more than four months ago as a condition of granting a stay of the proceedings pending the determination of an appeal is not unreasonable. The filing of a defence is a basic and preliminary step which the Defendant should be required to take in the interests of the just and efficient disposal of the proceedings which were commenced four months ago. The filing of the defence would clarify the issues between the parties and facilitate settlement or resolution of the claim in whole or part. At this stage the Plaintiff is unaware of the issues the Defendant would seek to raise in its defence. Security for costs application by the Defendant 18 In the course of argument concerning the stay application the issue arose in the Defendant's submissions that its Notice of Motion seeking an order for security for costs dated 12 August 2009 was undetermined (see par 11). This was raised as supporting the grant of an unconditional stay. The Defendant's counsel raised the matter in submissions on 22 October 2009 as being relevant to the stay application in light of the conditions sought by the Plaintiff in relation to the filing of the defence by the Defendant. The Notice of Motion for security for costs was listed before the Court at the same time the protective costs motion by the Plaintiff was heard on 18 August 2009. The security for costs motion was not pressed on that day. It was considered appropriate that the outcome of the application for the protective costs order should be known before a determination of the security for costs application. Judgment on the motion for the protective costs order was delivered on 9 September 2009. As noted above (par 8) the Plaintiff's solicitor wrote to the Defendant's solicitor by letter dated 29 September 2009 stating that security in the amount of $20,000 would be provided if the action in this Court was to proceed on the basis that costs were to be governed by the protective costs order. 19 In Court before me on 23 October 2009 the Plaintiff's counsel gave an undertaking on behalf of his client that it would provide security for costs by 4 pm on 2 November 2009 in the form of a bank cheque or equivalent in the sum of $20,000. The Defendant having sought the determination of the security for costs motion in the course of argument before me on 22 and 23 October 2009, the motion for the security for costs will also be determined. 20 Rule 42.21 of the Uniform Civil Procedure Rules 2005 (the UCPR) deals with security for costs orders and relevantly provides as follows: (1) If, in any proceedings, it appears to the court on the application of a defendant: …. (d) that there is reason to believe that a plaintiff, being a corporation, will be unable to pay the costs of the defendant if ordered to do so, or (e) that a plaintiff is suing, not for his or her own benefit, but for the benefit of some other person and there is reason to believe that the plaintiff will be unable to pay the costs of the defendant if ordered to do so, the court may order the plaintiff to give such security as the court thinks fit, in such manner as the court directs, for the defendant's costs of the proceedings and that the proceedings be stayed until the security is given. (2) Security for costs is to be given in such manner, at such time and on such terms (if any) as the court may by order direct. (3) If the plaintiff fails to comply with an order under this rule, the court may order that the proceeding on the plaintiff's claim for relief in the proceedings be dismissed…. Defendant's submissions on security for costs 21 I gave leave to each party on 23 October 2009 to file additional written submissions. The Defendant submits that if in the exercise of its discretion on the stay application the Court grants the stay without imposing the Plaintiff's conditions or otherwise requiring any steps in the main proceedings pending the Court of Appeal decision, then the Court need not determine the Defendant's security for costs application before determining the application for stay. If the Court does propose to impose conditions requiring work on the Defendant's part which will result in legal costs being incurred then it seeks the prior determination of its security for costs application. That is an unsatisfactory submission in my view in light of the Defendant's position that it wishes to have the security for costs application determined. I either determine the motion or I do not, whether I do so should not be contingent on how I consider the stay application. 22 The arguments in support of the motion seeking a security for costs order are set out at par 51-61 of the Defendant's written submissions dated 18 August 2009, which were filed in support of the motion for security for costs and opposing the Plaintiff's motion dated 17 August 2009 for a protective costs order. The Defendant submits that the members of the Plaintiff have limited liability of $20 per member as provided for in the Plaintiff's constitution. This means that the mischief r 42.41 of the UCPR is designed to prevent is present, as referred to in Harpur v Ariadne Australia Ltd (No 2) [1984] 2 Qd R 523 at 532 which was considered in Jazabus Pty Ltd v Haddad [2007] NSWCA 291 and Burrell Place Community Action Group Incorporated v Griffith City Council [2009] NSWLEC 120 at [9] - [11]. The Defendant has incurred and will incur substantial legal costs in these proceedings which the Plaintiff will be unable to pay if ordered to do so. The large amount of costs incurred or likely to be incurred is detailed in the affidavits of Mr Webster of 5 August 2009 and Wendy Ashe sworn 17 August 2009 (both read on the motion for the protective costs order). The affidavit of Tara Cameron, President of the Plaintiff, sworn 2 June 2009 makes clear that the Plaintiff lacks the financial resources to meet a costs order. 23 In Burrell, Lloyd J sets out matters to be considered by the Court in deciding whether to make an order for security for costs. In that case his Honour held that the application for security for costs had been brought promptly, the impecuniosity of the plaintiff did not result from the defendant's conduct, the application for security was not oppressive in the sense of denying a right to litigate, there were persons behind the plaintiff likely to benefit who may be willing to provide the security and there were others who might prosecute the case under the open standing provision if the plaintiff failed to comply with an order and who had not offered any undertaking to be liable for the costs of the plaintiff. The strength of the plaintiff's case was not known at the time of the application. 24 The Defendant relied on Pacific Acceptance Corporation Ltd v Forsyth (No 2) [1967] 2 NSWR 402 per Moffit J at 407 (referred to by Lloyd J in Burrell at [28]) in submitting that the Court should make an order for security for costs and leave to the plaintiff to determine how it can best overcome any problems arising from its impecuniosity with or without the assistance of individuals interested in the assets of the company and the outcome of the litigation. 25 In its supplementary written submissions dated 26 October 2009 the Defendant submitted that the Plaintiff's undertaking to provide security of $20,000 is not relevant if the protective costs order is suspended until the Court of Appeal makes its decision (which the Defendant has sought in its motion for stay). It is insufficient security even if the protective costs order is not set aside because of the contingency of conduct falling outside that order. It also represents insufficient security for the Defendant's costs of the proceedings in the circumstances that the appeal is successful, given the matter will be aborted by the Plaintiff in such circumstances. Plaintiff's submissions on security for costs 26 The Plaintiff submitted that the Defendant cannot ask the Court to require the Plaintiff to provide additional security beyond the amount of $20,000 already offered as to do so would require the provision by the Plaintiff of security exceeding the maximum amount which the Defendant may recover from the Plaintiff in these proceedings, based on the protective costs order made by the Court. Such an order would be inconsistent with the protective costs order already made. The Defendant's application for security for costs appears to be in part an attempt to persuade the Court to grant an unconditional stay but any security for costs order is an irrelevant matter to consider in the context of the stay application. Finding (a) Application for stay of proceedings 27 I will consider the stay application first. I have broad discretion, to be exercised judicially, to order a stay of proceedings and the terms of that stay, in accordance with the unanimous judgment of the Court of Appeal in Alexander at 694. The Defendant has appealed an interlocutory order made in relation to costs, a matter of practice and procedure, for which leave to appeal is required in the Court of Appeal. The order appealed against is the first protective costs order made in this Court and the Plaintiff's evidence is that it will not continue the proceedings if the appeal is successful in overturning the protective costs order. That situation does not alter the essential circumstance that the appeal is in relation to a matter of practice and procedure determined in the course of the preparation of a matter for hearing. I do not consider it is a unique matter solely because the outcome of the appeal will determine if the Plaintiff proceeds. I have determined protective orders can be made under the CP Act and the UCPR as set out in Blue Mountains No 1 at [4]-[5]. 28 The Plaintiff relied on a number of authorities including Partnership Pacific and Ervin Mahrer to suggest that a stay of proceedings would not usually be granted in these circumstances. Partnership Pacific Ltd was an application for expedition of an appeal in respect of an interlocutory order which was filed on the day the hearing of the substantive matters was to commence. The appellant was a witness served with a subpoena to produce documents who applied unsuccessfully to the trial judge to have the subpoena set aside. Moffit P stated that the Court of Appeal formed the preliminary view on the application for an expedition of the appeal that the appeal completely lacked merit. In obiter his Honour stated that any application to stay the main proceedings would have been refused. Moffit P expressed concern about the interruption of the main proceedings by the applicant's appeal, referring to such applications as indulgent, distractive diversions. The application to expedite was dismissed. 29 In Ervin Mahrer the respondent council filed a notice of motion seeking to vacate fixed hearing dates. Effectively a stay of proceedings was sought to allow for an appeal against an interlocutory decision which granted the applicant leave to rely upon amended plans in the main proceedings which was a Class 1 appeal against the council's deemed refusal of a development application. Bignold J stated at [12] that the stay application to allow for the appeal against "an interlocutory judgment given solely on a matter of practice and procedure…is in my view, an extraordinary state of affairs and one that is totally unsatisfactory from the point of view of the Court's commitment to promptly and efficiently discharge its business". His Honour considered that any prejudice to the council in having to incur costs were the hearing dates not vacated had to be measured against the prejudice to the applicant in facing inordinate delay in having its merits appeal heard. Stating at [18] that "it would be an unusual case indeed for proceedings generally to be stayed on the basis of a legal grievance with an interlocutory judgment", his Honour refused the council's application. These cases identify what I understand to be the usual attitude taken by courts to an application for a stay which is its refusal where an interlocutory matter has been appealed. 30 In Alexander, two principles were stated at 695 in relation to whether a stay against execution of a judgment should be granted pending an appeal. These were: 1. Where it is apparent that unless a stay is granted an appeal will be rendered nugatory, this will be a substantial factor in favour of the grant of a stay 2. Without speculating on the appellant's prospects of success, the court will still consider the specific terms of a stay that will be appropriate fairly to adjust the interest of the parties and that this will necessarily involve some preliminary assessment about whether the appellant has an arguable case Contrary to the Defendant's submissions, the first principle is not relevant and the second principle does not apply given the interlocutory nature of the matter appealed against, as referred to already in par 27. 31 The usual position would be that there be no stay of the proceedings, however in light of the agreement of both parties that a stay is appropriate for quite sensible reasons, I must determine whether such an order should be made subject to the conditions sought by the Plaintiff. This matter should be considered on the basis that the protective costs order is on foot, as I see no reason to suspend it pending the appeal (as prayer 2 in the Defendant's motion seeks) and no reason was provided by the Defendant as to why that should be ordered. I will not make the order sought in prayer 2 of the Notice of Motion. 32 The success of the appeal cannot be assumed. It is therefore desirable that the proceedings be placed on a footing where the issues as between the parties are known in the near future. I consider that I should stay the proceedings on the basis that the Defendant files a defence by the end of November in light of its solicitor's evidence that particulars must be sought before doing so. The parties will need to advise the Court of appropriate dates for this to occur. It is appropriate that a defence be filed so that the issues between the parties can be clarified. In the event that the appeal is unsuccessful and the matter proceeds with the protective costs order in place, future progress of the matter will be less delayed if the parties are clear as to what issues lie between them. 33 I do not consider I should make the order sought in relation to the subpoenaed documents as that relates to evidence preparation. It also requires efforts to be undertaken by a government department which is not a party in the litigation. 34 I will not make an order that expedition of the appeal must be sought by the Defendant in part because of the likelihood of listing in February 2010 according to inquiries made by the Defendant. Either party can apply for expedition in any event. 35 I will make the order for the stay of the proceedings on the condition that points of defence are filed. I will first clarify with the parties the appropriate timetable for a defence to be filed. (b) Security for costs 36 I must determine the security for costs motion on the basis that I have made a protective costs order in the amount of $20,000 which stands. In light of that circumstance it would be contradictory of me to make a security for costs order in a sum greater than $20,000. It is unclear to me why the Defendant pressed the security for costs application after the undertaking given in Court on 23 October 2009 by the Plaintiff's counsel that security of $20,000 would be provided by 2 November 2009. 37 Reference is made in the Defendant's written submissions to the determination of the security for costs judicially and in accordance with judicial process but I am not sure what is intended by that submission. No elucidation is provided. I infer that the written submissions dated 18 August 2009 and summarised above should be considered but the relevant circumstances of the determination of the security for costs application are as set out in the previous paragraph. 38 Matters otherwise raised in submissions (par 25) such as the amount of $20,000 being insufficient even if the protective costs order is not set aside by the Court of Appeal because of the need for a contingency where conduct falls outside that order, are fanciful. Nor is it clear on the evidence that there is insufficient security for the Defendant's costs if the appeal in the Court of Appeal is successful and the Plaintiff becomes liable for the Defendant's costs of the discontinued proceedings. The Plaintiff has financial assets which it can potentially call on, according to the affidavit of Ms Cameron, over and above the $20,000 already to be offered as security. It is not automatic that the Defendant would recover all the costs it has incurred to date, approximately $97,000 according to the affidavit of Mr Webster, in the event that it did have the benefit of a costs order in its favour. Mr Webster attests that costs of approximately $10,000 will be incurred in obtaining particulars and filing a defence. In these circumstances it is not beyond doubt that the Plaintiff will not be able to meet an order that it pay the Defendant's costs. 39 The undertaking given by the Plaintiff on 23 October 2009 identified in par 19 is sufficient to answer the security for costs application of the Defendant. While strictly no additional order is therefore necessary, in the interests of finality I will order the Plaintiff to pay $20,000 as security for costs by 2 November 2009. Orders 40 The Court orders: 1. The Plaintiff is to provide security for costs of the Defendant in the sum of $20,000 in the form of a bank cheque or equivalent by 4pm 2 November 2009. 2. Each party to pay its own costs of the Notices of Motion. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.