Update: Further to our May 2014 newsletter entitled ‘Water fight leaves Reed barely afloat’, the Land Court has released its decision from Mr Reed’s appeal of an order requiring him to pay a portion of QCoal’s costs.

Background

The Department of Natural Resources and Mines (Department) granted a water licence permitting a redirection of a section of Coral Creek to accommodate coal mining where the creek was naturally located.

The coal mine in question is the Sonoma coal mine, about six kilometers south of Collinsville, Queensland.

The initial decision to grant the water licence was reviewed by the Department, and was substantially upheld.

Mr Garry Reed appealed to the Land Court to:

  1. set aside the Department’s reviewed decision; or in the alternative
  2. amend the conditions of the Department’s reviewed decision.

Mr Reed was unsuccessful in that appeal.1

QCoal Sonoma Pty Ltd and the other second respondents2 (together, QCoal) subsequently filed a General Application for an order that Mr Reed pay QCoal’s costs of and incidental to the appeal.

In a judgment delivered on 16 April 2014,3 Mr Reed was ordered to pay a portion of QCoal’s costs. Mr Reed appealed this decision to the Land Appeal Court of Queensland.

On 1 October 2014, the Land Appeal Court (constituted by North J, Member Smith and Member Cochrane) delivered a combined joint judgment,4 allowing Mr Reed’s appeal and reversing the costs order against him.

Recap – the original costs decision

To recap, s 882(3) of the Water Act 2000 (Qld) (Act) provides that each party to an appeal must bear its own costs of the appeal. However, the court may make orders as to costs for the appeal as it considers appropriate in certain circumstances, including where the court considers the appeal is frivolous or vexatious.5

QCoal relied on various letters relating to the primary litigation to substantiate its application for costs, on the basis that Mr Reed was a vexatious or frivolous litigant. Primarily, QCoal relied upon a letter dated 13 December 2013 where the solicitor for Mr Reed suggested a settlement proposal, and stated that:

‘In our view, given the state of the expert evidence filing in the present proceeding, it is more likely than not that the Land Court will uphold the review maker’s decision to grant the water licence to QCoal but with amended conditions which address our client’s grounds of appeal…’

QCoal was awarded costs on and from 13 December 2013, insofar as those costs related to Mr Reed’s first ground of appeal (being the setting aside of the grant of the water licence).

In its judgment, the Land Court confirmed that there was no punitive element in an award of costs, and that the appropriate starting point was always that each party bears its own costs in accordance with s 882(3) of the Act.

However, the Land Court stated that Mr Reed, in holding the opinion that the application to set aside the water licence was unlikely to be successful, meant that the court must characterise that part of the appeal ‘as frivolous in that it became of little weight, worth or importance and not worthy of serious notice since the appellant did not believe it was likely to be successful’.

The appeal to the Land Appeal Court of Queensland

At the hearing of the appeal from the Land Court’s decision, Mr Reed advanced the following grounds of appeal:

  1. The learned trial judge erred in concluding that the contents of the 13 December letter (and particularly the statement that ‘it is more likely than not that the Land Court will uphold the review decision’) required the Court to characterise that part of the appeal related to setting aside the review decision as frivolous.
  2. The learned trial judge erred in inferring from the 13 December letter that the appellant’s appeal seeking to set aside the review decision was ‘characterised by a lack of seriousness and sense’.
  3. The learned trial judge erred in concluding that no dispute existed between the parties as to setting aside the review decision.
  4. The learned trial judge erred by failing to consider the entirety of the 13 December letter.

QCoal lodged a notice of contention seeking that the original costs order be affirmed on other grounds, which was dismissed by the Land Appeal Court.

The appeal judgment

The Land Appeal Court considered the meaning of ‘frivolous or vexatious’ in the context of the facts of the Reed case, along with other judgments where these words were also considered, particularly the Mudie6 case and the Stevenson7 case.

The Mudie and Stevenson judgments provided, relevantly, the following principles that were applied in the Reed appeal judgment:

  1. For public policy reasons, the Act provides a limited discretion regarding costs. Ordinarily each party must bear its own costs.
  2. The (limited) discretionary power under s 882(4) of the Act to award costs is not necessarily exercised ‘liberally or energetically’ even where the circumstances suggest that an appeal or part thereof may have been frivolous or vexatious.
  3. Whether proceedings are frivolous or vexatious will depend on the circumstances and, relevantly, ‘will include public policy considerations and the interests of justice’.
  4. Determining whether a case is frivolous or vexatious is a factual issue, and different courts may interpret the evidence differently and therefore reach different conclusions.
  5. The words ‘frivolous or vexatious’ should be given their ordinary meaning, and something ‘much more’ than merely losing a hearing or appeal must be shown.

In reversing the original costs order, the appeal court determined that:

  1. The 13 December letter was not frivolous or vexatious, and was simply a genuine attempt to promote a compromise by way of a settlement proposal.
  2. The statement that ‘it is more likely than not that the Land Court will uphold the review maker’s decision’ was not apt to indicate the author thought the case was not of serious notice, but was merely a statement of professional opinion that in the circumstances of the evidence it was more probable that there would be a certain outcome.
  3. The mischaracterisation of the 13 December letter was an error with respect to the exercise of the discretion to award costs.

Ultimately, the appeal court determined that:

‘...it cannot be said that the letter of 13 December 2013 as a fact required the court to categorise the further prosecution of the appeal as frivolous. A concession as to the probability of an outcome is not per se a concession of frivolity in the maintenance of litigation.’

The Land Appeal Court also ordered QCoal to pay for Mr Reed’s costs of his appeal, on the basis that the costs should follow the event (pursuant to the Land Appeal Court’s discretionary powers to award costs under the Land Court Act 2000(Qld)).

Where to from here?

This decision emphasises that, under the Act, parties must ordinarily bear their own costs and that there is a judicial reluctance to find proceedings are ‘frivolous or vexatious’ in light of public interest considerations.

The many public interest groups that are currently involved in or agitating towards litigation will no doubt gain considerable comfort from this judgment.

On the other hand, the reduced scope for without prejudice offers to lead to negative costs consequences may result in more fully contested hearings, which the resources sector will need to defend at their own cost in order to uphold approvals and permits granted for projects by the Queensland Government.

Finally, despite the outcome in the appeal, this case should continue to serve as a reminder of the care that needs to be taken when formulating without prejudice correspondence.