Land and Environment Court of New South Wales CITATION : Tubbo Pty Limited & Ors v Minister Administering the Water Management Act 2000 [2008] NSWLEC 128 FIRST APPLICANT Tubbo Pty Limited SECOND APPLICANT Tubbo Irrigation Management Pty Limited PARTIES : THIRD APPLICANT Orchard Farms Pty Limited FOURTH APPLICANT Four Arrows Rural Management Pty Limited RESPONDENT Minister Administering the Water Management Act 2000 FILE NUMBER(S) : 41283 of 2006 CORAM: Jagot J KEY ISSUES: Costs :- notice of motion for discovery - motion not determined as documents produced by consent - whether costs of motion should be ordered or costs be costs in the cause - aplication for separate costs order dismissed Cassaniti v Commissioner of Taxation [2001] FCA 362 Gambro Pty Ltd v Fresenius Medical Care Australia [2002] FCA 581 CASES CITED: Kiama Council v Grant (2006) 143 LGERA 441 One.Tel Limited v Deputy Commissioner of Taxation (2000) 101 FCR 548 Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 DATES OF HEARING: 20 March 2008 EX TEMPORE JUDGMENT DATE : 20 March 2008 APPLICANTS Mr Shane Prince SOLICITORS Watson Mangioni LEGAL REPRESENTATIVES: RESPONDENT Mr Jeremy Kirk SOLICITORS Crown Solicitor's Office JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Jagot J 20 March 2008 41283 of 2006 TUBBO PTY LIMITED First Applicant TUBBO IRRIGATION MANAGEMENT PTY LIMITED Second Applicant ORCHARD FARMS PTY LIMITED Third Applicant FOUR ARROWS RURAL MANAGEMENT PTY LIMITED Fourth Applicant MINISTER ADMINISTERING THE WATER MANAGEMENT ACT 2000 Respondent JUDGMENT Jagot J: 1 This is an application by the applicants in proceedings 41283 of 2006 that the respondent pay the applicants' costs of and incidental to a notice of motion filed on 31 August 2007. The notice of motion sought an order (order 1) that the respondent discover documents in accordance with categories 1 to 25 as set out in a letter dated 9 May 2007 from the applicants' solicitors to the respondent's solicitor. 2 This notice of motion for discovery has never been substantively determined on its merits. Instead, after the notice of motion was filed the Court made a series of consent orders providing for discovery of documents by the respondent. 3 The applicants' position with respect to the question of costs can be shortly stated. The applicants say that they sought an order for discovery of documents within 25 categories by the letter dated 9 May 2007. Thereafter, the respondent in fact provided such discovery through the mechanism of the various consent orders. The applicants thus obtained the relief sought in order 1 of the notice of motion, even though the notice of motion was not determined on its merits. Further, the documents referred to during the hearing this morning show that the conduct of the respondent was unreasonable in that it took a very lengthy period of time and a significant amount of correspondence for the applicants ultimately to achieve that result. The applicants refer in this regard to eight tranches of documents produced by the respondent, one tranche before the notice of motion was filed, that is on 19 July 2007, and seven tranches thereafter. Putting it another way, one folder of documents was discovered before the notice of motion, and thirteen folders of documents thereafter. Accordingly, the applicants say that there should be an order for costs on the notice of motion in their favour. 4 The respondent takes a more complicated position with respect to the notice of motion. The respondent's position is that the hearing today on the issue of costs should never have occurred. The respondent's position is that, first, the costs of the notice of motion should be costs in the cause. Secondly, the applicants should pay the costs of today to the respondent. Otherwise, the notice of motion itself (which events have overtaken) should simply be dismissed. 5 The respondent refers to the principles in Re Minister for Immigration and Ethnic Affairs; Ex Parte Lai Qin (1997) 186 CLR 622 in support of its primary position, as there has been no hearing on the merits of the applicants' motion for discovery with orders having been made by consent. Although this is a notice of motion for discovery and not a hearing of an actual suit or action, the respondent says the same principles apply, namely that: - (i) a court will not try a hypothetical action between the parties because to do so would burden them with the costs of the action which their settlement, in this case by way of consent orders, has effectively avoided, (ii) it will be a rare case in which a court would feel confident that one party was almost certain to have succeeded if the matter had been fully tried, and (iii) as a consequence the relevant test is one of the reasonableness of the conduct of the parties, so that a court would not make any order for costs in such a case unless satisfied that the conduct of one party has been so unreasonable as to attract a costs order. 6 The respondent also points to the observations of Tamberlin J in Gambro Pty Ltd v Fresenius Medical Care Australia Pty Ltd [2002] FCA 581 at [25] and [26], in particular the observation in [26] that: In relation to the question of costs I propose to reserve them pending determination of the main proceedings. The orders which I have made embody to some extent the constructive compromise and negotiation between the parties which is to be encouraged. Accordingly, I do not think it is appropriate to make any order as to costs and the Court will be in a better position to consider this question in context after the substance of the matter has been heard. 7 The respondent also drew attention to the decision of Hely J in Cassaniti v Commissioner of Taxation (2001) 49 ATR 104, in particular at [2] and [3] where his Honour succinctly observed that: I am guided by the decision of Hill J in Australian Securities Commission v Aust-Home Investments Ltd (1993) 44 FCR 194 at 201 and by the judgment of Finkelstein J in Gribbles Pathology Pty Ltd v Health Insurance Commission, Commonwealth of Australia and Grayson (1997) 80 FCR 284 and in particular at 287. As Finkelstein J points out, in the absence of a hearing on the merits it is difficult to see how any order other than an order that each party should bear its own costs can be made, except in exceptional circumstances. As Hill J pointed out in Aust-Home Investments Ltd, the principal inquiry is whether the applicant acted reasonably in commencing the proceedings and whether the respondent acted reasonably in defending them. 8 At [3] his Honour said he thought he should obey the injunction issued in the cases to which he had referred, namely, that without a hearing on the merits it is difficult to make any order other than no order as to costs. 9 I should also note for completeness that many of these principles have been summarised by Preston J, the Chief Judge of the Land and Environment Court, in Kiama Council v Grant (2006) 143 LGERA 441 at [43] onwards including (of particular relevance to one of the submissions made by the applicants) a reference to the decision of Burchett J in One.Tel Limited v Deputy Commissioner of Taxation (2000) 101 FCR 548 at [6] where his Honour said: …it is important to draw a distinction between cases in which one party, after litigating for some time, effectively surrenders to the other, and cases where some supervening event or settlement so removes or modifies the subject of the dispute that, although it could not be said that one side has simply won, no issue remains between the parties except that of costs. In the former type of case there will commonly be lacking any basis for an exercise of the Court's discretion otherwise than by an award of costs to the successful party. It is the latter type of case which more often creates problems since there may be difficulty in discerning a clear reason why one party, rather than the other, should bear the costs. 10 I understand the applicants' submissions in part to be to the effect that the documents originally sought in the letter of 9 May 2007 were largely provided by the respondent, albeit after numerous court attendances and correspondence between the parties. In consequence, there should be a finding that the respondent in fact surrendered to the orders sought by the applicants in the notice of motion. 11 To return to the respondent's submissions, the respondent's other main point about reasonableness involved a detailed consideration of the nature of disputes about discovery generally. The respondent observed that such disputes are particularly apt for resolution between the parties rather than extensive use of court time. The sequence of events disclosed by the many communications and consent orders made by the Court was to the effect that, after the respondent's initial objection as to the relevance of some of the categories of documents, the applicants filed and served the notice of motion without having made a substantive response to a letter from the respondent of 27 August 2007 identifying the respondent's concerns about the relevance of various categories of the documents. After this mediation occurred, from which I could readily infer that the respondent obtained a better understanding of the applicants' case. There then followed a complicated series of communications in which the applicants sought further and better discovery of numerous additional categories of documents. Although the respondent accepted that some of these additional categories may well have overlapped with the original categories and there may well have been some lack of timeliness on the respondent's part, this was all explicable by reference to the nature of the discovery sought. In any event, such documents were produced as requested. 12 With respect to one particular tranche of documents which has become exhibit B4 in the proceedings, the applicants make the point that this important set of documents was only produced in February 2008, that is very late in the piece. The respondent makes the point that documents were not sought in that form until 5 February 2008. It is worth looking at this issue in slightly more detail because I accept that no doubt there will be overlap between what was originally sought in 9 May 2007 and the subsequent categories of discovery sought by the applicants. It is evident that paragraph 12 of the letter of 9 May 2007 sought all documents relating to, referring to, or recording the consideration by, a certain committee of claims made by licence holders. On 5 February 2008 further discovery was sought, identified as any documents recording the material the same committee considered at its meeting on 10 May as referred to in paragraph 38 of a certain affidavit not in evidence in the proceedings. 13 It seems to me that this discloses some of the potential complexities of discovery in a matter such as the present. There is a difference between what was sought, namely documents recording a consideration by the committee itself, and documents recording the material that the committee in fact considered. These are two different types of documents, even though they may potentially overlap. Having looked at the numerous letters that passed between the parties, this is just one example of what I consider to be some of the complexities that attended the discovery in this case. 14 All of this leads to the respondent's submissions that: - (i) it acted reasonably, and certainly did not act unreasonably, and (ii) any difficulties it had in respect of the timing of production did not make its conduct unreasonable in the circumstances of the case. The respondent also noted that the notice of motion was stood over on many times, perhaps up to eight by consent, and costs had not been reserved or sought on those occasions. 15 The respondent also says the Court could by no means be satisfied that the applicants were certain to have succeeded on the motion and the claim for costs is misconceived. As the documents show, the notice of motion sought discovery of documents in categories 1 to 25. Accordingly, complaints about lateness of discovery were not in issue on the notice of motion. Further, there were 51 supplementary categories requested in total, and even if there was overlap, those additional categories were not in issue on the notice of motion. There is much correspondence and debate about whether there had been full, adequate and proper discovery of categories which were agreed. Again, the respondent says that was not a matter in issue on the notice of motion. There was a claim for public interest immunity, and much correspondence about that, again not in issue on the notice of motion. Finally there was an issue about verification of discovery, not in issue on the notice of motion. 16 These reasons, the respondent submits, lead to the position that: - (i) this application for costs should not have been made in this way, (ii) the applicants were never likely to meet the high threshold for obtaining a costs order, and (iii) the applicants' position would always have been sufficiently protected by the respondent agreeing, as it has done, to costs of the notice of motion, and the entire discovery exercise, being costs in the cause. 17 I accept the respondent's submissions. The position is that there has never been a hearing on the merits of the notice of motion for discovery. The notice of motion was brought against a background in this Court where, at least from 14 May 2007, paragraph 15 of the Practice Note for Class 4 Proceedings provided that orders for formal discovery will only be made in exceptional cases, and even then will generally be confined to particular issues. The sequence of correspondence and the fact of discovery by the respondent of many of the categories sought by the applicants are not in my view to be treated as a surrender by the respondent to the applicants' notice of motion, for a number of reasons. 18 First, although the number of categories involved is not large, there was a limitation placed on the discovery of documents within categories 1 to 6, where the limitation itself was significant because it related to confining the discovery to categories relating to the amendment order. Further, categories 20 and 21 were not the subject of any order. More importantly, the correspondence shows that discovery in this matter was extremely complicated, involving the respondent in obtaining documents from numerous sources, including for example the Catchment Management Authority and other sources of information. It seems to me also that the categories were complicated in themselves and somewhat shifted over time, although there is no doubt overlap between the categories originally sought and those ultimately agreed to by the respondent. 19 Secondly, after the notice of motion was filed the parties both took the sensible course of trying to avoid a dispute about discovery by entry into a series of consent orders. True it is that the applicants then made further requests for better discovery of certain categories of documents. Although there may have been some delay by the respondent it is not such as to suggest that the respondent's conduct has been unreasonable, and does not warrant dealing with the issue of costs in the way the applicants sought today. 20 Thirdly, I accept the respondent's submissions about the five categories of issues, namely lateness, the supplementary categories, adequacy of discovery itself, public interest immunity and verification of discovery, not being part of order 1 of the notice of motion filed on 31 August 2007. 21 It seems to me that this is a case where the notice of motion was resolved by sensible arrangements between parties doing the best that they could to avoid unnecessary use of court time, by a series of consent orders. This should not be construed as the respondent surrendering to the applicants. The merits of the notice of motion remain unresolved. It could not clearly be concluded that the applicants would inevitably have been successful. In those circumstances the observations of Hely J in Cassaniti are particularly apt, namely, that the principal inquiry is reasonableness and I have already made my observations about that matter. 22 In this case I also accept that the applicants' position would be appropriately and adequately protected by an order to the effect that the costs of the notice of motion be costs in the cause, which is the order I propose to make. 23 What then should be done with the costs of today? The parties agreed that if the applicants were successful today, they should obtain an order for the costs of the day and the respondent if successful should obtain costs. Accordingly, I also propose to make an order that the applicants pay the respondent's costs of the hearing today as agreed or assessed. The only thing that remains is the notice of motion itself. [Discussion regarding notice of motion] 24 The orders are: (1) The costs of the notice of motion filed 31 August 2007 are to be costs in the cause. (2) The notice of motion is otherwise dismissed. (3) The applicants are to pay the respondent's costs of the hearing today as agreed or assessed. **************************** 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.