The Department of Natural Resources and Mines granted a water licence permitting the redirection of a section of Coral Creek to accommodate coal mining.

The coal mine in question is the Sonoma coal mine, about 6km south of Collinsville. 

The initial decision to grant the water licence was reviewed by the Department, and was substantially upheld (known as the ‘review decision’ in the Reed judgment). 

Mr Garry Arthur Reed appealed to the Land Court to:

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

Mr Reed was unsuccessful in his appeal.1

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

In a judgment delivered on 16 April 2014,3 Mr Reed was ordered to pay a proportion of QCoal’s costs.

The law

Section 882(3) of the Water Act (Act) provides that each party to an appeal must bear its own costs.  However, under s 882(4), the court may order costs for the appeal as it considers appropriate in certain circumstances, including where:

  • the court considers the appeal was started merely to delay or obstruct;4
  • the court considers the appeal is frivolous or vexatious;5
  • a party has incurred costs because another party has defaulted in the court’s procedural requirements;6 and
  • a party does not properly discharge its responsibilities in the appeal.7  

QCoal sought an order for costs on the basis that Mr Reed’s appeal was ‘frivolous or vexatious’ pursuant to s 882(4)(b) of the Act.

The application

QCoal relied on three letters relating to the primary litigation to substantiate its application for costs on the basis that Mr Reed was a vexatious or frivolous litigant.

  1. A letter dated 3 July 2013, where the solicitors for the second respondents requested that the appellant’s solicitor provide a copy of the proposed amended conditions sought by the appellant.  
  2. A letter dated 13 December 2013 (being a few weeks before the trial date of 8 to 10 January 2014), where the solicitor for Mr Reed suggested a settlement proposal, stating that: ‘In our view, given the state of the expert evidence filed in the present proceeding, it is more likely than not that the Land Court will uphold the review decision maker’s decision to grant the water licence to QCoal but with amended conditions which address our client’s grounds of appeal…’ This letter was sent ‘without prejudice save as to costs’.  
  3. A letter dated 23 December 2013 from the solicitors for the second respondents to Mr Reed’s solicitor.  This letter stated that the second respondents had previously sought a copy of the proposed amended conditions sought by the appellant (the 3 July letter).  The letter also stated that while it agreed with the appellant that the court would uphold the review decision maker’s decision, it was not accepted that the expert evidence would warrant the court imposing amended conditions to the grant of the water licence.

This letter was also sent ‘without prejudice, save as to costs’.

QCoal’s submissions

QCoal submitted to the Land Court that there was no reasonable basis for commencing and continuing with the appeal and sought orders that:

  1. Mr Reed pay their costs of, and incidental to, the appeal on the standard basis; or, if this is unsuccessful,
  2. Mr Reed pay their costs from 16 September 2013 (the date of the first report of QCoal’s expert); or, if this is unsuccessful,
  3. Mr Reed pay their costs from 13 December 2013 (the date of the letter where Mr Reed conceded that it was more likely than not that the Land Court would uphold the decision to grant the water licence).

The appellant’s submissions

Mr Reed submitted that his lack of success did not establish that the appeal should not have been prosecuted, and that the 13 December 2013 letter was demonstrative of responsible conduct, rather than an acknowledgement of fundamental problems with the appeal.

The judgment

QCoal was awarded costs on and from 13 December 2013, but only in so far as those costs related to Mr Reed’s first ground of appeal, being the application to set aside the grant of the water licence. It recognised, however, that there was still an area of dispute in respect to the licence conditions.

In its judgment, the court reinforced that there is no punitive element in an award of costs, and that the appropriate starting point is always that each party bears its own costs in accordance with s 882(3) of the Act.  Further, the court held that its discretion to award costs under s 882(4) is only enlivened once it is shown that the appeal, or part of it, was frivolous or vexatious, and it adopted the ordinary meaning of those words. 

In awarding costs, it was found that for the appellant to proceed with that part of the appeal seeking to set aside the licence when holding the opinion expressed in the letter of 13 December 2013, was a fact that required the court to 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’.

Where to from here?

Mr Reed is quoted as stating that the costs decision has put his family farm in jeopardy.8 It appears that the court was not asked to, and did not in fact, consider the identity of the appellant as a potential ‘public interest litigant’ or any perceived imbalance in the monetary resources between the parties, when considering the exercise of its discretion as to costs. 

Accordingly, all litigants seeking to challenge similar decisions are now on notice that they may be exposed to a costs order for commencing or continuing an appeal where the litigant believes that some or all of the grounds of appeal are unlikely to be successful. 

This case is also a timely reminder of the significant role that correspondence written on a ‘without prejudice save as to costs’ basis can play in relation to determining a litigant’s state of mind and any resultant costs consequences.