Decision Date: August 8, 2012
Link: Case Summary Document
Citation: [2012] TASSSC 51 (Supreme Court of Tasmania, Blow J)

Summary:

This was an appeal against a decision relating to security for costs. (See Tasmanian Conservation Trust Inc v Gunns Ltd [2012] TASSC 18 casenote: https://wiki.qut.edu.au/display/CPNS/Tasmanian+Conservation+Trust+Inc+v+Gunns+Ltd.) In the original decision, Associate Judge Holt concluded that, using a balancing exercise, the justice of the case did not require that security for costs be provided by the Tasmanian Conservation Trust Inc (the Trust) in its litigation against Gunns Limited (Gunns). Therefore, the application by Gunns for an order for security for costs was dismissed. In this case, Gunns appealed that decision. Its appeal was dismissed for the following reasons.

The appellant (Gunns) proposes to build a paper pulp mill in Tasmania at an estimated cost of about $2.3 billion. The pulp mill has not yet been built. A special Act of Parliament, the Pulp Mill Assessment Act 2007 (Tas), was passed in relation to the proposed development. On 30 August 2007 a permit called the Pulp Mill Permit came into effect as a result of resolutions of each House of the Tasmanian Parliament. That permit authorised Gunns to develop and operate the proposed pulp mill.

The respondent to this appeal, the Tasmanian Conservation Trust Inc (the Trust), commenced an action seeking declaratory relief, hoping to establish that the proposed development could not lawfully proceed. Gunns applied to the court for an order for security for costs. That application was dismissed on 20 April 2012. Gunns appealed under section 191B(4) of the Supreme Court Civil Procedure Act (Tas). That provision states that a judge hearing such an appeal has the same jurisdiction and powers as the Full Court. Therefore, although this appeal was heard by only one judge, he was exercising the same jurisdiction and powers as the Full Court.

Since the original Associate Judge had a discretion to make or refuse the order appealed from, the bases upon which such an appeal could succeed were restricted by section 45(1) of the Supreme Court Civil Procedure Act (Tas). These bases were:

(a) the judge has, in fact, declined or failed to exercise the discretion;

(b) the judge has proceeded on a wrong principle or otherwise contrary to law, or on irrelevant or insufficient materials, or has misapprehended the facts or has failed to consider any material fact;

(c) the adjudication is founded wholly or in part on an erroneous finding of fact or an erroneous determination in point of law; or

(d) by reason of further evidence received by the Full Court in exercise of the powers conferred by section 48, or some special circumstance, the adjudication should be reversed or varied.

The Trust is an incorporated association under the Associations Incorporation Act 1964 (Tas). An incorporated association is a ‘corporation’ for the purposes of rule 828 of the Supreme Court Rules 2000 (Tas). The power to order corporations to provide security for costs exists in order that defendants may be protected from the risk of being unable to recover costs. The power is exercised ‘when justice so requires’. If the litigation commenced by the Trust was ultimately unsuccessful, it is highly likely that it will be ordered to pay Gunns’s costs of those proceedings on a party and party basis. The Associate Judge made a finding, not challenged in this appeal, that there was reason to believe that those costs would be in the order of $300,000 to $400,000. His Honour made another finding, also unchallenged, that there was reason to believe that the Trust would be unable to pay all of those costs if unsuccessful in the case, even if the Trust was liquidated.

Some of the matters taken into account by the Associate Judge at first instance included:

·         The Trust’s case was not lacking merit or weak

·         Success in the litigation would not result in a financial benefit to the Trust or others.

·         The Trust was not litigating on behalf of others, but had brought the proceedings pursuant to the specific objects contained in its constitution.

·         The case was being pursued in furtherance of the public interest in having a binding determination made as to whether authority for the project in the form of the pulp mill permit still existed.

·         The overall cost of the project was in the order of $2.3 billion. Gunns had expended about $239,000,000 so far on it. Gunns estimated its party and party costs to be between $300,000 and $400,000. Even assuming that Gunns was left with a shortfall of about $300,000 in respect of its party and party costs, this was a tiny proportion of the overall cost of the project. Proportionality was relevant.

Gunns raised various grounds of appeal against the Associate Judge’s decision at first instance not to grant an order for security for costs. His Honour did not find in Gunns’s favour in regard to those grounds. There was no failure by the Associate Judge to exercise his discretion against a costs order by reference to the purpose of a security for costs order. There were no ‘wrong assumptions’ about the funds available to the Trust, and there was no failure to provide for alternatives to a costs order. None of the Associate Judge’s findings of fact about the pledges of funds made to the Trust were held to be erroneous. There were no mistakes as to the character or effect of the findings of fact, and adequate reasons were given. No ‘wrong principles’ were involved in the judgement.

On the issues of litigation in the public interest, His Honour in this appeal could see no difference between litigation in the public interest and litigation to enforce individuals’ rights. The same principles applied to both types of litigation, and there had been no error by the Associate Judge in this respect.

On proportionality, His Honour said (at [56]):

If Gunns’[s] party and party costs of this litigation amount to $400,000, that will be less than 0.018% of the estimated overall cost of the project. In my view proportionality was a relevant consideration that the Associate Judge was entitled to take into account, even in the absence of a finding that the making of an order for security for costs might result in the litigation not proceeding.

Therefore, His Honour did not find in favour of Gunns on any of its grounds of appeal, and the appeal was dismissed.

The case may be viewed at: http://www.austlii.edu.au/au/cases/tas/TASSC/2012/51.html

Implications of this case

This is a case involving litigation between two very unequal parties in terms of funding available to support the litigation. Both at first instance and on appeal, the judges took the view that the fact that there was reason to believe that the Trust would be unable to pay Gunns’s costs was a factor to be taken into account, but did not result in a predisposition to order security for costs. Orders requiring the provision of security for costs involve a balancing of the legitimate interests of the applicant to pursue its claimed entitlement to remedies against wrongs allegedly done to it and the legitimate interests of the respondents that they not be exposed to irrecoverable loss by reason of proceedings which cause them to incur substantial expense but are ultimately unsuccessful against them. The outcome of the balancing exercise in this case was that there was no need for an order for security for costs, perhaps mostly because of the proportionality element.