Landmark Decision On Protective Costs Orders

The successful party recovers its costs from the unsuccessful

party? Not always!

Background

Usually, the successful party recovers its costs from the

unsuccessful party in the litigation. However, if a protective

costs order (PCO) is made, the unsuccessful party is not

necessarily burdened by all of the successful party's

costs.

The Environmental Defenders Office (EDO) sought a protective

costs order in the Land and Environment Court on behalf of the Blue

Mountains Conservation Society Inc (BMCS) in proceedings claimed to

be in the public interest.

In June 2009 the EDO filed proceedings in the Land and

Environment Court alleging that a State owned electricity generator

had polluted the waters of the Coxs River.

In addition to the claim, the EDO filed a motion seeking a PCO

prior to the substantive proceedings being heard by the Court.

PCO's have not been widely granted by the Australian courts.

This was the first time a PCO had been sought in proceedings in the

Land and Environment Court prior to the hearing of the substantive

matter.

The hearing

The EDO argued that the litigation was in the public interest

and of critical importance to the water quality in the Sydney

drinking water catchment.

It stated, however, that the BMCS would not proceed with the

litigation unless an order was made limiting the costs payable in

the event that the case was unsuccessful.

The EDO relied primarily on the English decision of R (on

the application of Corner House Research) v Secretary of State for

Trade and Industry [2005] 4 ALL ER 1 (Corner House),

and the Federal Court decision of Bennett J in Corcoran v

Virgin Blue Airlines Pty Limited [2008] FCR 864 which dealt

with applicants who were legally aided.

The defendant conceded that while the Court had power to make a

PCO, consideration must be given to the obligations imposed by

section 60 of the Civil Procedure Act 2005 (NSW) to ensure

proportionality of costs to the importance and complexity of the

issues raised.

In the substantive proceedings the EDO seeks declarations that

the defendant has committed a criminal offence by polluting water.

The defendant argued that it was also in the public interest that

it be able to fully defend its reputation and preserve its business

as a state owned corporation, without being limited to recovering a

small portion of its costs if successful.

The reasoning

When determining whether a PCO should be made, Pain J adopted

the following principles and found:

Timing of...