Environment Court Gets Tough on Costs

Two recent decisions of different divisions of the Environment Court illustrate that the Court is prepared to make a significant award of costs against a party where an appeal involves an element of trade competition, is an attempt to relitigate an earlier proceeding, or where a party's tactics are to avoid disclosing its position or delaying the substantive hearing.

Redevelopment of Masonic Tavern

In a costs decision issued on 6 September, the Environment Court issued a majority decision ordering Devonport Heritage Incorporated, Masonic Friendly Society Incorporated and the Historic Places Trust to pay the developer (Redback Develop Limited) a total of $59,600.  One of the Commissioners dissented, preferring to see no costs order made.

The costs decision relates to an earlier substantive decision to confirm the grant of resource consents to develop the site of the Masonic tavern in Devonport by modifying the existing building and constructing new apartments next to it.  Following the substantive decision Redback sought a contribution of $238,571.57 towards its total legal and experts' costs.

The Court examined the substance of the appeals, noting that the two appellant societies were effectively attempting to relitigate a district plan provision.  It also considered the "considerable delays" by the appellants in defining issues, advising the identity and fields of expertise of the witnesses they intended to call, and in exchanging briefs of evidence.  It noted the unusual application by the societies seeking that the presiding Judge should not sit as a member of the Court to hear the appeal (which was declined, and the decision upheld on review by the High Court).  The Environment Court found: "any objective observer would have had the very clear impression... that the appellants' tactics were those of avoiding disclosing their positions for as long as possible; of creating confusion, and of delaying the substantive hearing for as long as possible, on any grounds that could be thought of".

Noting that both appellant societies had nothing to gain in any financial sense in bringing the proceedings, and that RMA litigation carries a strong element of public interest, the Court nevertheless reconfirmed that a public interest group may have costs awarded against it in appropriate cases.  The Court determined an award of 25% of the costs claimed by Redback was appropriate.  It decided that three-quarters of that amount should be met by the two societies equally, and ordered Devonport Heritage Incorporated and Masonic Friendly Society Incorporated to pay $22,350 each.  The Court found that the Historic Places Trust's position was "largely indistinguishable" from the societies, however because its witnesses were "moderate in their views and avoided the more extreme positions taken by some others", the Trust was liable for the remaining one quarter of the total costs award ($14,900).

Three Kings Quarry

In another recent decision, a different division of the Environment Court (constituted of Judge Smith, sitting alone) made a substantial costs award against Envirowaste Services Limited towards the costs of Winstone Aggregates and Auckland Council.

Envirowaste had appealed the Council's decision to grant consent for Winstone's quarry at Three Kings, in Auckland.  Following a substantive hearing, the Court confirmed the Council's decision subject to amended conditions of consent being finalised.  Winstones and the Council both sought costs from Envirowaste.

The Court took into account three factors in reaching its decision on costs:

• Where a trade competitor becomes involved in proceedings and is unsuccessful, then there is a higher likelihood that an order for costs will be made against them.  Envirowaste had earlier acknowledged that it is a trade competitor to Winstones. (The substantive hearing was subject to the pre-2009 RMA).  The Court went on to conclude that Envirowaste's motivation in preparing its submission on the application was related to trade competition.
• Envirowaste's appeal was largely re-litigation of the argument before Council, and was "unmeritorious and technical".
• The primary expert witness for Envirowaste was found to be "acting as an advocate rather than an independent expert".  The Court reached this view reluctantly, having heard that the expert's role was to monitor resource consent and plan change applications for Envirowaste, and that he was involved in the inception and drafting of the submission on the Winstones application.  Further, the Court heard evidence that the expert's income for the 2009/10 and 2010/11 financial years was predominantly (80% and 95% respectively) from Envirowaste and/or its subsidiaries.

The Court concluded that a substantial award of costs was appropriate, but that the quantum should be within the Court's "comfort zone" of between 25% to 33% of the costs incurred (as expressed in earlier decisions such as Emerald Residential Limited v North Shore City Council A51/2004).  Envirowaste was ordered to pay Winstones $200,000 and Auckland Council $37,000.

Comment

The award of costs by the Environment Court remains the exception rather than the norm.  Section 285 of the RMA gives the Court an unfettered discretion to award costs.  There is no presumption that a successful party will be awarded costs, and there is no scale of costs (as there is in the general Courts).  The instances where a substantial award of costs have been made is only a small percentage of the total number of cases.  These are generally where a party advances arguments without substance, abuses the process of the Court, or poorly presents its case such as to unnecessarily lengthen the hearing.  Even then, given the public interest element of the RMA, the Court is often reluctant to make a significant costs award against a public interest group.  The Envirowaste decision is an illustration of the dangers in pursuing trade competition arguments, and may be a timely reminder for consultants on the perils of acting for a principal client.