The power of the Land and Environment Court to make protective (or maximum) costs orders – orders which cap the costs that may be recovered by a party from another in litigation – was considered by Pepper J in the recent case of Nerringillah Community Association Inc v Laundry Number Pty Ltd  NSWLEC 157.
The case is mandatory reading for litigants of limited financial means who are seeking to maintain the proportionality of the costs of litigation to the value of the result and to prevent their opponent from engaging in disproportionate expenditure on legal costs.
Whilst the usual rule in litigation is that costs follow the event, r42.4 of the Uniform Civil Procedure Rules 2005 (“UCPR“) empowers the Court to order, of its own motion or on the application of a party, the maximum costs that may be recovered by one party from another.
This blog examines the factors the Court considers before making such an order.
Circumstances of the case
The substantive case involved civil enforcement and judicial review proceedings brought by the Nerringillah Community Association Inc (“Association“) against Laundry Number Pty Ltd (“Laundry”), the beneficiary of a development consent granted by Shoalhaven City Council, for the construction and use of an eco-tourist facility in Bendalong (“Consent“).
The Association sought declaratory relief that the Consent was invalid, an order setting aside the Consent, an injunction restraining Laundry from relying on the Consent and costs.
Moreover, the Association sought a protective (or maximum) costs order (“PCO“) to limit the maximum costs that could be recovered by Laundry to $20,000 if it were to be successful in the proceedings, or in the alternative, such sum as specified by the Court.
The making of a PCO
Justice Pepper held that a PCO should be made. The various factors her Honour considered which favoured the making of a PCO are summarised below.
The timing of the application
Her Honour was satisfied that the Association’s application had been sought early in the proceedings and without delay and therefore without sizeable legal costs already having been incurred.
Whether the claim appears arguable
Her Honour noted at  that the Court is not required to determine whether the case made by the applicant enjoys “good prospects of success” or even to make an assessment as to the prospects of the case, above whether the claims are arguable.
Whether the proceedings could be characterised as public interest litigation
Applying established principles, Pepper J held that the proceedings could be characterised as public interest litigation because the public interest to be served by the litigation was the protection of the natural environment surrounding the site, the amenity of the Nerringillah Valley, the properties located within it, and to ensure the integrity of Council’s decision-making processes and to uphold the planning laws of the State.
Her Honour also noted that there was wider public interest in the subject matter of the litigation than that of the members of the Association in that the decision in these proceedings would:
- have widespread application and provide useful guidance to councils, developers and environmental organisations in the State; and
- contribute in a significant way to the proper understanding of a fundamental concept of planning law as there had been no substantive judicial consideration of the definition of “eco-tourist facility.”
Expected length and complexity of proceedings
Justice Pepper formed the view that the duration of the hearing would be more than 3 days given that expert town planning evidence would be required, and the hearing would become complex and lengthy.
The financial position of the parties
Her Honour accepted that the Association was a litigant of limited financial means and took into consideration that the Association had benefited from counsel’s pro bono legal assistance prior to filing the summons and thereafter the Association had agreed to act on a contingency basis and cap their legal costs. Her Honour also considered that the making of the PCO would not cause undue financial hardship to Laundry.
The reasonableness of the parties’ estimate of costs and the proportionality of costs
The estimates given by the parties of the likely costs of the litigation were $95,000 and $90,000 for the Association and Laundry respectively. Her Honour opined at  that the fee estimate was not sufficient to establish disproportionality of costs to the importance, complexity and subject matter of the proceedings warranting the refusal to make a PCO.
Whether rewarding inefficient litigation
Her Honour was satisfied that there was nothing in the manner in which the Association had conducted the litigation which suggested that the making of a PCO would reward inefficient conduct of the litigation.
Therefore, having regard to the interests of justice and all the circumstances, Pepper J held that it was appropriate to exercise her discretion to vary the amount sought in the PCO to $40,000 for the following reasons:
- the order sought by the Association was unidirectional;
- the matter had the potential to become more complex and therefore more costly than the parties initially envisaged; and
- as a result of Laundry entering into a conditional costs agreement with the Association capped in the amount of $20,000, there was additional money available to meet any adverse costs order against the Association if it were to be unsuccessful. Increasing the PCO by an additional $20,000 would not stifle the litigation.
A copy of the judgment can be accessed here.
If you would like to discuss this post please contact Greg Garrett on 8235 9717 or Stuart Simington on 02 8235 9704.