In brief - A summary of the key principles that have developed for costs in public interest litigation in the NSW Land and Environment Court
As we begin a new decade with government and private sector development still required to meet existing and new demand, there will inevitably also be a rise in public interest litigation targeting the perceived environmental and social risks associated with these projects.
Whilst there is a usual expectation in civil litigation for a successful party to be compensated for their costs, this will not always be the case in planning and environmental law cases dealing with the elusive concept of the "public interest".
How costs are treated in public interest litigation is a relevant factor that parties to litigation need to bear in mind at all stages of litigation, but also in project due diligence and planning, since ordinary assumptions about costs in civil litigation may not apply as well as in the delivery phase of a project.
Land and Environment Court
There are many exceptions to the usual rules for costs in the Land and Environment Court. For example:
Class 1 merit appeal proceedings are a costs neutral jurisdiction, which means that usually each party pays their own costs irrespective of the result.
In class 3 proceedings, generally an acquiring authority pays an applicant's costs when they challenge the amount of compensation determined by the Valuer-General irrespective of the result.
Public interest litigation in the Court's class 4 jurisdiction is similarly marked by different rules on costs compared to ordinary civil litigation.
General costs rules
Before explaining what the differences are in Land and Environment Court proceedings, it is instructive to firstly explain the general position on costs in litigation. The "ordinary" or "usual" rule for costs in litigation is that costs will follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs (Uniform Civil Procedure Rules 2005 (NSW) (UCPR) rule 42.1).
In determining costs in litigation, the Court has a broad and unfettered discretion, unless a specific statutory provision exists to limit the exercise of that discretion (see section 98 of the Civil Procedure Act 2005 (NSW)).
In addition to being empowered to order a party to pay costs at the end of proceedings, the Court also has the power to require a litigant to provide such security as the Court thinks fit for the costs of the proceedings before the end of the proceedings (see UCPR rule 42.21). This is commonly known as "security for costs" and is generally required to be paid before the substantive litigation can proceed. That is, the Court has the power to stay the proceedings until suitable security is provided.
Naturally, the possibility that an applicant could be ordered to pay security for costs before the substantive matter is heard and or be ordered to pay the costs of a respondent if the applicant is unsuccessful, can be a significant deterrent to those considering commencing litigation, particularly as the quantum of the security can be substantial.
However, there are circumstances in which the Court will allow an exception to the ordinary rule for costs. Of relevance to this article, in public interest litigation costs are not always awarded against unsuccessful applicants.
Given the large financial risk involved with commencing and defending litigation, it is important to understand the general principles for determining costs in public interest litigation.
For completeness, another form of costs order sometimes applied for are protective costs orders under UCPR rule 42.4. An example where a community organisation has obtained such an order is Nerringillah Community Association Inc v Laundry Number Pty Ltd  NSWLEC 157.
There have also been examples where private companies have sought protective costs orders against community groups joined to proceedings, including the recent example in KEPCO Bylong Australia Pty Ltd v Independent Planning Commission  NSWLEC 38. In that case, due to the facts and circumstances of that matter, Moore J rejected the proposition that there should be some protective costs order made in favour of KEPCO Bylong Australia Pty Ltd.
Open standing provisions and public interest litigation
It is instructive to firstly define what public interest litigation is, and then to explain the open standing provisions that allow proceedings to be commenced in the Land and Environment Court by any person, since it is these provisions which make the vast proportion of public interest litigation possible.
The phrase "public interest" is somewhat amorphous, but public interest litigation generally involves challenges by members of the public (individuals or groups of people) to:
enforce compliance with the law by both private citizens and government bodies
administrative decisions of planning authorities
remedy or restrain non-compliances with planning and environmental laws
In relation to NSW's open standing provisions, various pieces of planning and environmental legislation allow members of the public to commence proceedings in the Land and Environment Court to remedy and restrain alleged breaches of certain planning and environmental laws. For example, section 9.45 of the Environmental Planning and Assessment Act 1979 (NSW) states:
Any person may bring proceedings in the Court for an order to remedy or restrain a breach of this Act, whether or not any right of that person has been or may be infringed by or as a consequence of that breach.
Similarly, section 252 of the Protection of the Environment Operations Act 1997 (NSW) and section 647 of the Local Government Act 1993 (NSW) contain open standing provisions to remedy or restrain breaches under those Acts.
These provisions mean that any person can commence proceedings, not only the local council or the relevant State government authority (for example, the NSW Environment Protection Authority, the Department of Planning, Industry and Environment and the Office of Environment and Heritage).
Typically, members of the public commence such proceedings when they are neighbours to development and they oppose the development. Neighbours may be directly adjoining individuals with commercial or private interests that are impacted by the development, or they may be resident action groups opposed to the project's environmental, social or heritage impacts. In most cases, such litigation is considered to be "public interest litigation".
The purpose of the open standing provisions is to afford the public the ability to participate and have access to justice.1 Open standing gives the public the power to ensure the enforcement of planning and environmental laws (both civil and criminal to an extent) against both private individuals and companies, and also government authorities (for example, we discuss a case below where Infrastructure NSW and the Minister for Planning were the first and third respondents in Class 4 proceedings brought by a resident's action group), especially where the government has failed to do so.2
Public interest litigation costs exception
With the benefit of the open standing provisions, public interest litigation has developed throughout the Land and Environment Court's 40 year history. One of the key developments is the principle that where such proceedings are brought, the fact that they have been brought in the public interest may justify departing from the ordinary rule for costs.
Indeed, the Land and Environment Court Rules 2007 (NSW) reflect this principle and promote access to justice. Rule 4.2, for example, affords the Court discretion not to order that:
an unsuccessful applicant pay costs, or
an applicant give security for costs, and
an applicant for an injunction provide an undertaking as to damages,
where it is satisfied the proceedings have been brought in the public interest.
This means that ordinary civil litigation expectations in relation to costs need to be tempered when it comes to potential proceedings in the Land and Environment Court.
These exceptions to the ordinary rules obviously alleviate some of the pressures that come to bear on members of the public when deciding whether to commence litigation, but they provide a countervailing burden to those defending the litigation since even if that party is successful, they may not receive a costs order in their favour.
With litigation becoming more complex and therefore more expensive, not to mention potential delays in momentum, this risk is not something that can be ignored.
One of the most commonly cited cases that has contributed to the development of the public interest litigation exception arises from the High Court decision in Oshlack v Richmond River Council  HCA 11. The majority of the High Court (but by only a slim majority - 3:2) accepted that the public interest character of litigation was relevant to determining the type of costs order that should be made (at [48-49] and ).
However, the Court held "'something more' than the categorisation of proceedings as public interest litigation was needed before a successful defendant should be denied costs". This meant that the public interest nature of the proceedings will not by itself be sufficient to warrant departure from the ordinary rule that would compensate the successful party. After all, the purpose of an order for costs in legal proceedings is that they be compensatory to the successful party, and not punitive to the unsuccessful party: Latoudis v Casey (1990) 170 CLR 534;  HCA 59 at 543 (Mason CJ) and 567 (McHugh J).
So, what is that "something more"? We consider this in the next part of this article.
Three step approach
There have been numerous judgments since Oshlack that have further refined the principles around costs in public interest litigation.
For example, in Caroona Coal Action Group Inc v Coal Mines Australia Pty Ltd (No 3)  NSWLEC 59, the Chief Judge of the Land and Environment Court established (at ) a three step approach to determining whether the ordinary rule should be departed from:
Can the litigation be characterised as having been brought in the public interest?
If so, is there “something more” than the mere characterisation of the litigation as being brought in the public interest?
Are there any countervailing circumstances, including relating to the conduct of the applicant, which speak against departure from the usual costs rule?
The second step involves the "something more" test that we will now explore in further detail using separate decisions from the Court of Appeal and the Land and Environment Court in the last year. Our discussion below is informed by the litigation commenced by an incorporated association challenging the State government's decision to demolish the Sydney Football Stadium.
At first instance, the Land and Environment Court in judicial review proceedings dismissed the appeal. The applicant then appealed that decision to the Court of Appeal where it was also dismissed.
As a result, the Land and Environment Court and the Court of Appeal provided separate judgments on costs in relation to the cases that were before each Court. These cases contain useful analysis of the principles in this area of law.
Firstly, in Local Democracy Matters Incorporated v Infrastructure NSW (No 2)  NSWCA 118, in attempting to discharge its duty to establish that the appeal involved the requisite "something more", the applicant "identified the five factors which were stated in Caroona Coal Action Group v Coal Mines Australia Pty Ltd (No 3) as contributing to the requisite “something more”:
a) the litigation raises one or more novel issues of general importance;
b) the litigation contributed, in a material way, to the proper understanding, development or administration of the law;
c) where litigation is brought to protect the environment or some component of it, that environment or component is of significant value and importance;
d) the litigation affects a significant portion of the public;
e) there was no financial gain for the applicant in bringing the proceedings" (at ).
The above five principles from Caroona are commonly cited grounds when attempting to establish "something more". However, as stated by Pain J in Local Democracy Matters Incorporated v Infrastructure NSW; Waverley Council v Infrastructure NSW (No 4)  NSWLEC 140, at :
[w]hat is required is a principled consideration of the evidence filed in support of the application for a variation of the usual costs rule and consideration of the nature of the issues in the proceedings as identified non-exhaustively in Caroona. It is likely that a number of factors will inform the Court’s consideration given that any single factor may well not be decisive.
Whilst the cases before the Land and Environment Court and the Court of Appeal involved the same parties and the same general principles were used to determine costs, different orders were made:
In the Land and Environment Court proceedings, Pain J made no order as to costs finding the proceedings were brought in the public interest (and not for political interests) and the necessary "something more" was found to have existed.
The Court of Appeal ordered the applicant to pay the Minister's costs of the appeal and did not find the necessary "something more" existed.
In determining that the "something more" existed in the Land and Environment Court proceedings, Pain J found that two of the three grounds of review brought by the applicant "did provide something more in elucidating the relevant statutory provisions and raised matters of importance in doing so" at .
In particular, the Court said:
"Given the significance of the SFS [Sydney Football Stadium] building the approach to design excellence by the Minister was significant in a legal and environmental sense and this was an important ground in my view" at .
Ground 3 of the proceedings concerned the application of clause 7(1) of the State Environmental Planning Policy No. 55 - Remediation of Land. The Court considered that it "did raise new issues concerning the application of that clause in the context of the concept plan approved by the Minister which had not previously been explored" at .
Consequently, the applicant was successful in its application for the exemption to be applied in the first instance Land and Environment Court proceedings.
On the other hand, as indicated above, the Court of Appeal ordered the applicant to pay the Minister's costs of the appeal that concerned similar, but narrower, questions than before the Land and Environment Court. It was common ground that the appeal was "not a case where the public interest was such that it was of itself of such moment or magnitude as to justify a departure from the usual rule" [at 8]. The Court of Appeal also did not find that there was "something more" to displace the ordinary rule that costs follow the event.
Notably, the Court of Appeal gave weight to the following principles in its judgement:
Whilst the case may involve novel submissions, "it is hard to see how clarification of the law could amount to a factor tending strongly in favour of a departure from the usual rule as to costs" (citing at  Botany Bay City Council v Minister for Local Government (No 2)  NSWCA 127 at ).
“… considerations associated with the bringing of proceedings in the public interest may weigh less heavily in appeal proceedings than in first instance proceedings” (citing at  Kindimindi Investments Pty Limited v Lane Cove Council (2007) 150 LGERA 333;  NSWCA 38 at ).
It was insufficient in and of itself to warrant departure from the ordinary rule that the applicant was to receive no financial gain in bringing the proceedings (at ).
Weight was to be given to the fact that the appeal was dismissed instanter. At , the Court of Appeal cited Bat Advocacy NSW Inc v Minister for Environment Protection, Heritage and the Arts (No 2)  FCAFC 84; 280 ALR 91 at  where the Full Court said whilst "the appeal was arguable (and well argued), it could not be thought to have strong prospects of success. There was a carefully reasoned judgment at first instance. The appeal, while listed and heard urgently, was dismissed instanter. It would be a significant burden on scarce public resources if every ‘public interest’ body were open to run unconvincing appeals free of any costs risk. As a matter of public policy, that course is to be discouraged.”
Whilst the Local Democracy Matters cases explored above involved the same parties and facts, the Land and Environment Court and the Court of Appeal each had to approach the question of whether there was "something more" based on the cases heard before each Court. This is reflected in the judgments whereby:
the Court of Appeal awarded costs to the Minister given it was an appeal and it was dismissed instanter (which appears to have been a main distinguishing factor from the Land and Environment Court's decision), and
the Land and Environment Court did not award costs having considered there was merit in some of the questions raised by the applicant, although it also dismissed the appeal.
The third step established by Preston CJ in Caroona is to consider whether there are any countervailing considerations which speak against departure from the ordinary costs rule.
At  of Caroona, Preston CJ explained that even where satisfied that litigation falls into the category of public interest litigation, the Court can decline to depart from the ordinary costs rule. Countervailing considerations include (but are not closed categories per Friends of Malua Bay Inc v Perkins (No 2)  NSWLEC 172 per Craig J at ):
"where the applicant is an incorporated association, the private interests of members of the association would be affected, legally or financially, by the outcome of the litigation".
"the applicant is supported financially by persons or bodies who would benefit from, or would have their legal or financial interests affected by, the outcome of the litigation".
"the narrowness of the question of public interest raised, such as only involving a discrete point of interpretation without broad ramifications".
"the applicant “unreasonably pursues or persists with points which have no merit” … or issues that were not “eminently arguable”".
"there is disentitling conduct of the applicant, such as impropriety or unreasonableness in the conduct of the litigation".
Public and community groups, public authorities and developers should understand the public interest litigation costs principles
Public interest litigation is expected to continue to feature in NSW's planning and environment system this decade.
When such litigation does arise, generally questions about costs are separated from and determined after the substantive proceedings and involve the unique principles that we have discussed above.
Whilst decisions about costs generally come later, having an understanding of these principles and how they are applied is important at all stages of a project.
It is most important for members of the public or community groups considering commencing Land and Environment Court proceedings.
It is equally important for public authority decision makers whose decisions are susceptible to challenge.
As for developers who can quickly be caught up in injunctive proceedings and have to defend (for example) development consents, the principles are important for developing cost protective strategies during the litigation.
1 Preston B J, "Operating an environment court: the experience of the Land and Environment Court of New South Wales and 12 benefits of judicial specialisation in environmental law", keynote address at Renewing Environmental Law: A Conference for Public Interest Environmental Law Practitioners, 3 February 2011 (http://www.lec.justice.nsw.gov.au/Documents/preston_keynote%20address_canada%202011.pdf).
2 Preston B J, "Enforcement of Environmental and Planning Laws in New South Wales", paper presented to The Law and Sustainability Symposium, 11 March 2011 (http://www.lec.justice.nsw.gov.au/Documents/preston_enforcement%20of%20environmental%20and%20planning%20laws.pdf).