Bezzina Developers Pty Limited v Leichhardt Municipal Council

[2006] NSWLEC 615

Land and Environment Court

of New South Wales

CITATION:	Bezzina Developers Pty Limited v Leichhardt Municipal Council [2006] NSWLEC 615
PARTIES:	APPLICANT Bezzina Developers Pty Limited RESPONDENT Leichhardt Municipal Council
FILE NUMBER(S):	31415 of 2004
CORAM:	Talbot J
KEY ISSUES:	Costs :- special order in respect of defined issues.
CASES CITED:	Bezzina Developers Pty Limited v Leichhardt Municipal Council [2006] NSWLEC 175
DATES OF HEARING:	28/08/2006
DATE OF JUDGMENT:	09/29/2006
LEGAL REPRESENTATIVES:	APPLICANT Mr M Gilbert (barrister) SOLICITORS Deacons RESPONDENT Mr T Robertson SC SOLICITORS Pike Pike & Fenwick

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Talbot J

29 September 2006

31415 of 2004 Bezzina Developers Pty Limited v Leichardt Municipal Council.

JUDGMENT

1 Talbot J: Following a thirteen day hearing I delivered a judgment on 13 April 2006 (Bezzina Developers Pty Limited v Leichhardt Municipal Council [2006] NSWLEC 175). I made orders regarding the payment of compensation representing the market value of land acquired by the council in the sum of $9,700,000.00 and loss attributable to disturbance in the sum of $31,375.00 a total of $9,731,375.00. The question of costs was reserved.

2 By notice of motion 13 June 2006 the applicant seeks an order that the respondent pay the applicant’s costs of the proceedings and of the notice of motion. Conversely by notice of motion 18 July 2006 the respondent council seeks the following orders:-

a Costs in respect of the Applicant’s claim for disturbance.

b Costs in respect of the “alternative schemes” for highest and best use abandoned by the Applicant at or before the hearing.
c Costs in respect of the following Direction Hearings:
i 5 April 2005
ii 24 May 2005
iii 28 June 2005
iv 29 August 2005
v 29 September 2005
vi 28 October 2005
vii 2 November 2005
viii 29 November 2005
ix 15 December 2005
2. The Applicant pay the First Respondent’s costs of the motion.

3 The claim in respect of the directions hearing on 29 August 2005 was originally conceded. However, the concession was subsequently withdrawn during submissions. A claim for costs in relation to the directions hearing on 28 June 2005 was withdrawn in the course of argument. Mr Robertson SC also conceded that the directions hearing on 29 November 2005 was generally necessary and did not relate to any default on the part of either party. A cost order has already been made in respect of the hearing on 15 December 2005. Otherwise, it is alleged that the directions hearings referred to in the notice of motion were necessary only as a consequence of breaches by the applicant of earlier orders and the timetables set by the Court.

4 The general ambit of the claim in relation to costs in respect of the issue of loss attributable to disturbance is that the applicant is alleged to have made and pursued a very large and unjustified ambit claim most of which was abandoned before or during the hearing of the proceedings. It is the respondent’s contention that the identification of four alternative schemes upon which the applicant relied as a highest and best use of the site (some of which were modified and amended on numerous occasions in various ways), warrants an order that the applicant pays the council’s costs in respect of those abandoned schemes.

5 With some minor concessions the applicant maintains its claims for a general costs order in its favour as the successful party.

6 The assessment of compensation by the Court in the sum of $9,731,375.00 contrasts to the amount of $15,931,467.41 claimed in the Amended Points of Claim. The claim comprised $14,500,000.00 representing the market value of the land acquired and $1,431,467.41 for disturbance, interest and costs.

7 The respondent in its Points of Assessment valued the applicant’s entitlement to compensation as $6,770,000.00 whereas the Valuer-General valued the land at $8,472,500.00. Prior to the hearing, the respondent made an offer of compromise in the sum of $9,000,000.00 inclusive of costs. The applicant also made an offer of compromise in the sum $14,500,000.00 plus costs.

8 The only matters agreed during the course of the hearing were the amount of compensation in the sum of $30,000.00 for legal costs claimed under s 59(a) of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act), and $1,375.00 for valuation costs under s 59(b). The claim itself was disputed. The applicant abandoned part of its disturbance claim for interest it had incurred on a revolving credit facility under s 59(f).

9 Although the actual details and configuration of the potential actual development for the site were in dispute at the commencement of the hearing the parties essentially agreed that the market value of the land for the purpose of assessing compensation should be determined on the basis of the construction of a residential building comprising 6 apartments being the highest and best use.

The applicant’s disturbance claim

10 Although not a great deal of hearing time was involved in dealing with the evidence and submissions in respect of this aspect of the claim it is nevertheless plain that considerable time and cost was spent by both parties seeking to understand the basis of the claim for interest and mortgage costs. Ultimately, a significant part of the claim was abandoned as it became apparent that the applicant was not in the position to provide the necessary evidence to support its case in that regard. The balance of the claim relating to this issue was rejected. The respondent’s argument relating to the relevance of s 26 of the Just Terms Act was also rejected with the consequence that the amounts claimed for loss attributable to disturbance pursuant to s 59(a) (legal cost) and s 59(b) (valuation fees) was allowed. Even so the claim by the applicant for stamp duty and mortgage costs was rejected.

11 The claims in relation to the costs of the identified directions hearings in the majority of cases were incurred as a consequence of the need to clarify the applicant’s claim in relation to disturbance as well as default in providing the evidence in support of the disturbance claim pursuant to earlier directions.

12 I agree with the respondent’s submission that the applicant’s disturbance claim was a significant ongoing issue between the parties that demanded substantial attention by the respondent, its witnesses and legal representatives. Numerous and substantial reports in relation to the financial aspects of the disturbance claim were served upon the respondent necessitating the retention of financial experts to advise the council.

13 It is appropriate for a costs order to be made in circumstances where a respondent incurs costs as a consequence of the successful applicant failing to particularise a significant issue, comprising part of its claim, in any meaningful or intelligible way. That is how I categorise the way in which the applicant dealt with the claim for disturbance as it related to interest and mortgage costs. Although, not necessarily always the entire reason for further directions hearings nevertheless the failure of the applicant to deal with the issue of disturbance in a satisfactory manner was the underlying cause of a number of repetitive directions hearings. I am satisfied that it is just and reasonable to make a special order in relation to the costs in relation to the disturbance issue by specifically excluding from any order in favour of the applicant the costs in respect to the claim for interest and mortgage expenses, including the directions hearings on 5 April 2005, 24 May 2005, 29 August 2005, 29 September 2005, 28 October 2005 and 2 November 2005. Furthermore the respondent is entitled to an order in its favour in respect of those matters. The issues are sufficiently distinct, separate and identifiable to justify a separate costs order in that regard.

The alternative schemes

14 The applicant identified various alternative schemes for the development of the land and by reference to which it supported that part of the claim for compensation assessed as market value of the land at the date of acquisition. These schemes were also modified in several ways during the course of the proceedings.

15 The hearing commenced on 13 February 2006 on the basis that the applicant no longer relied on any scheme other than the scheme referred to as the Amended Scheme. The plans for this hypothetical development were generated under instruction from the applicant in early 2006 and formally adopted at a pre-trial hearing on 9 February 2006.

16 It is important to realise that the land had the benefit of the grant of a development consent made on 14 May 1999. The development consent was subsequently modified but never relevantly commenced. The respondent argued that the consent had lapsed at the date of resumption.

17 A later development application involving use of the subject land and the adjoining Illoura Reserve was undetermined at the date of resumption. The respondent contended that subject to the adjustment of the proposed use of the building known as Bell’s Store the latest proposal was the one most likely to be favourably considered by the council.

18 The Amended Scheme and the scheme the subject of the extant development application, as modified, ultimately formed the basis for the respective arguments between the parties. The valuers took cognisance of each scheme.

19 I found the Amended Scheme would have been the most likely to have been adopted by a prospective developer purchaser on the basis that it had the most likely expectation of obtaining development consent.

20 Although I adopted one scheme as preferable to the others nevertheless it was necessarily to consider each of the alternatives to place myself in the position of the hypothetical purchaser who would undoubtedly seek to achieve the highest and best yield from the land. In that respect the parties to the theoretical transaction would have been aware of and taken into account the history of proposed developments and the reaction of the council in each case. On the basis of that history and looking at the practicalities I was able to assess the expectation of the hypothetical purchaser having regard to all the relevant circumstances.

21 In my view, therefore it was appropriate for the valuers and other experts to give consideration to the various alternative schemes to enable the court to have the necessary opinion evidence for the purpose of assessing the development potential of the land and hence its value to a prospective purchaser at the date of the compulsory acquisition. The cost of providing and adducing that evidence should be included in the costs awarded to the successful applicant.

Conclusion

22 The making of a cost order is in the discretion of the Court. The discretion must be exercised judicially. It is the practice to award costs in favour of the successful party. However, in special circumstances where particular issues that have been raised by the successful party either unnecessarily or in a way that has unreasonably increased the costs of the proceedings the Court may make a special order in respect of those issues, particularly where the party has been unsuccessful in relation to them.

23 Notwithstanding the overall opposition to the applicant’s claim for disturbance it is reasonable and just, in my opinion, that a special costs order be made in respect of the expense incurred by dealing with the claim for interest and mortgage costs, including the particular directions hearings referred to above at [13]. It is appropriate that the costs in relation to the issue of the claim for interest and mortgage costs be excluded from the order for costs in favour of the applicant and included in a costs order in favour of the respondent.

24 The respondent has been unsuccessful in seeking a special costs order in relation to the evidence of the alternative schemes. The result is that both parties have been successful in respect of the costs argument to approximately the same degree. It is reasonable therefore, that each party pay their own costs in relation to the notice of motion of the applicant dated 13 June 2006 and the notice of motion of the respondent dated 18 July 2006.

Orders

25 The Court makes the following orders:-

1. That the respondent pay the applicant’s costs of the proceedings except costs:

a. In respect of directions hearings on: 5 April 2005, 25 May 2005, 29 August 2005, 29 September 2005, 28 October 2005 and 2 November 2005; and
b. In relation to the claim for loss attributable to disturbance in respect of mortgage costs and interest.

2. That the applicant pay the respondent’s costs:

a. In respect of directions hearings on: 5 April 2005, 24 May 2005, 29 August 2005, 29 September 2005, 28 October 2005 and 2 November 2005; and
b. In relation to the claim for loss attributable to disturbance in respect of mortgage costs and interest.


3. That each party pay their own costs in relation to the applicant’s notice of motion 13 June 2006.

4. That each party pay their own costs in relation to the respondent’s notice of motion 18 July 2006.