High Court clarifies rule on presumption against costs in environmental case

In a recent environmental case, the High Court has clarified the applicable rule on presumption against costs.

The Waituna Lagoon, a part of Awarua Wetlands, had previously periodically opened to the sea to drain farmland. The Waituna Control Association held a resource consent to open the lagoon at two locations; after the consent expired, Waituna applied for a replacement consent to enable farmland drainage and manage water and fish.

The Royal Forest and Bird Protection Society of New Zealand accepted the application as a "non-complying activity" under s. 88 of the Resource Management Act 1991 and decided to allow Waituna to continue operating in reliance on its expired consent pending the determination of the new application.

The applicant, Southland Fish and Game Council applied for judicial review, contending that the decision is unlawful due to new regulations. Southland claimed that Forest & Bird's decision to accept the application for a replacement resource consent and to allow Waituna to continue to rely on the expired consent was ultra vires as the application was for "a prohibited activity." The respondent argued that the lagoon was not a natural wetland for the new regulations and that the activities were not "earthworks, land disturbance and diversion of water."

Waituna withdrew the application following discussions with Environment Southland, the Department of Conservation, and Te Runaka o Awarua regarding a third-party application. The judicial review proceedings were discontinued, but the parties disagreed about costs.

Under Rule 15.23 of the High Court Rules, if the plaintiff discontinues the proceeding, they must pay costs to the defendant unless the defendants agree otherwise or the court orders otherwise. Since Waituna disagreed with the costs, the court must determine whether the applicant has discharged the onus of persuading the court to exercise its discretion in its favour.

The High Court noted that rule 15.23 carries a presumption that removes any requirement for the defendant to demonstrate that the plaintiff acted unreasonably in commencing and then discontinuing the proceeding. The defendant has the advantage of the presumption even where there has not been such unreasonableness.

The applicants argued that the presumption in rule 15.23 was displaced because they acted reasonably in commencing the proceeding and had properly discontinued the proceedings once it had become moot. They contended that the presumption against costs might be displaced where circumstances are making it just and equitable to do so, such as when the respondents implement a change or otherwise act in a manner that renders the proceedings unnecessary.

The applicants said they achieved their desired outcome with Waituna's withdrawal of its application. That application would have permitted drainage at a lower level than would have occurred if drainage was only for wetland restoration. The third-party application has the primary purpose of wetland restoration. While acknowledging that the case's merits are not so one-sided as to influence the court's assessment, the applicants refer to the issues raised in the proceedings to justify the engagement of expert evidence. They pointed to the lack of evidence offered by the second respondent. They argued some of the favourable defences pleaded by the respondents were "entirely misplaced," necessitating a reply and incurring the cost.

The court acknowledged that the presumption against costs might be displaced if the proceeding was discontinued because it serves no practical purpose in light of a subsequent decision made by the respondents. The court explained that the proceedings were issued to challenge a resource consent application and the interim use of that consent. The subsequent withdrawal of the consent application obviated the need for the judicial review to proceed. However, the court stressed that this was not a case whether the discontinuance of the judicial review proceeding itself indicates the merits of the competing case or mark of the respondents' admissions of error or fault. The respondents asserted that the applicant was withdrawn due to fruitful discussions with third parties.

The court further said that in considering a costs award, the court will not consider the merits of the respective cases unless they are so obvious that they rightly influenced the assessment of what is just and equitable.

The court noted that two days before the applicants filed their judicial review application, Waituna's solicitors informed the applicants that there were ongoing discussions and a process to work towards a mutually agreed outcome regarding the consent applications. The applicants filed proceedings despite this information, concerned that the second respondent had interim permission to operate as if a consent was in place.

However, the court held that the second respondent provided enough information to indicate a promising avenue for resolution, and it would have been appropriate for the applicants to make further inquiries before filing proceedings. Consequently, the court concluded that the reasonableness factor does not heavily influence the cost determination.

The court was ultimately persuaded that the applicants had discharged the rule 15.23 presumption against costs. The court's decision was primarily based on the finding that the applicants had succeeded in securing their intended outcome. However, the competing arguments led the court to rule that it was just and equitable that each party bear their own costs.