Chadrysiak v Commissioner of Highways (No 2) - [2018] SASC 191

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division)
CHADRYSIAK v COMMISSIONER OF HIGHWAYS (No 2)
[2018] SASC 191
Judgment of The Honourable Justice Blue
19 December 2018
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - PROCEEDINGS FOR COMPENSATION - SOUTH AUSTRALIA - COSTS
PROCEDURE - CIVIL PROCEEDINGS IN STATE AND TERRITORY COURTS - COSTS - PARTIES AND NON-PARTIES - CROWN OR CROWN OFFICER
Application for costs.
Mr Chadrysiak made claims for compensation for market value and disturbance which were settled in January 2018 shortly before trial and a claim for loss due to a rising market on which he was unsuccessful at trial.
Mr Chadrysiak seeks an order that the Commissioner pay his costs of action. The Commissioner agrees to an order that he pay Mr Chadrysiak’s costs up to May 2016 but contends that each party should bear their own costs thereafter.
Held:
(1) The exercise of discretion in relation to costs in a compulsory acquisition case under section 36 of the Land Acquisition Act 1969 (SA) differs from the exercise of discretion in ordinary civil litigation (at [22]-[26]).
(2) Wielding a broad axe, and considering both the conventional and rising market claims holistically, it is appropriate to order that the Commissioner pay Mr Chadrysiak’s costs up to 26 July 2017 and that each party bear their own costs thereafter (at [32]).
Land Acquisition Act 1969 (SA) s 36, referred to.
Dillon v Gosford City Council [2011] NSWCA 328, (2011) 184 LGERA 179; Minister for the Environment v Florence (1979) 21 SASR 108, considered.

CHADRYSIAK v COMMISSIONER OF HIGHWAYS (No 2)
[2018] SASC 191
Land and Valuation Division
BLUE J:

This is an application for costs. The background to the matter is set out in my principal reasons for judgment in Chadrysiak v Commissioner of Highways.[1]
[1] [2018] SASC 77.
Mr Chadrysiak made conventional claims for compensation for market value and disturbance. These claims were settled in January 2018 shortly before trial. He also made a claim for loss due to a rising market which proceeded to trial and on which he was unsuccessful.
Mr Chadrysiak seeks an order that the Commissioner pay his costs of action. The Commissioner agrees to an order that he pay Mr Chadrysiak’s costs up to May 2016 but contends that each party should bear their own costs thereafter.
Background
On 30 January 2014 the Commissioner compulsorily acquired Mr Chadrysiak’s house property. The Commissioner offered and paid into Court compensation of $419,000 calculated as $385,000 for the value of the land and $34,000 for general disturbance (the costs of Mr Chadrysiak acquiring and moving to a replacement house property). The compensation offered was based on a valuation obtained by the Commissioner in December 2013.
In September 2014 Mr Chadrysiak obtained a valuation from Mr Morgan of $715,000 for the land on the basis of commercial use and $5,000 for general disturbance.
In February 2015 Mr Chadrysiak filed an interlocutory application seeking the assessment of compensation at $720,000.
In March 2015 the Commissioner obtained a valuation from a second valuer of $500,000 for the land on the basis of residential use and $45,000 for general disturbance.
In February 2016 Mr Chadrysiak obtained a further valuation from Mr Morgan of $600,000 for the land on the basis of home business use and $51,000 for general disturbance.
On 3 May 2016 the Commissioner filed and served a formal offer to pay $548,000 comprising $500,000 for the value of the land and $48,000 for distrubance plus interest and costs.
On 19 April 2017 Mr Chadrysiak filed a statement of claim in which he claimed $510,000 as the value of the land, $45,000 for general disturbance and $2,500 for extra disturbance. He also claimed $71,400 for loss due to a rising market based on appreciation in property values from January 2014 to April 2017.
On 17 May 2017 the Commissioner filed a defence pleading that the market value of the land was $500,000, admitting the general and extra disturbance claims of $47,500 and denying the rising market claim.
On 12 July 2017 the Commissioner made an informal offer to settle the action by payment of $555,000 plus interest and costs.
On 28 July 2017 the Commissioner paid to Mr Chadrysiak the difference between $545,000 and the amount previously paid into Court plus interest.
In January 2018 Mr Chadrysiak and the Commissioner agreed that the value of the land as at January 2014 was $505,000. This resolved all claims except the rising market claim.
In February 2018 the loss due to a rising market claim proceeded to trial.
In June 2018 I delivered reasons for judgment, holding that Mr Chadrysiak was not entitled to any compensation for loss due to a rising market. I held that such a loss could in principle be recovered but Mr Chadrysiak had failed to prove causation, ie that the inadequate compensation offered by the Commissioner was a cause of his not purchasing a replacement property.
The parties’ contentions
It is common ground that the Commissioner should pay Mr Chadrysiak’s costs to 17 May 2016 being 14 days after the Commissioner’s offer of 3 May 2016.
Mr Chadrysiak contends that the Commissioner should pay his costs of action after 17 May 2016. He submits that under section 36 of the Land Acquisition Act 1969 (SA) (the Act), the Court has a broad and flexible discretion, unlike the position in respect of civil litigation in which the general rule is that costs follow the event.[2] He cites the decision of the New South Wales Court of Appeal in Dillon v Gosford City Council[3] that a dispossessed owner should usually recover costs if acting reasonably in seeking the judgment of the Court in respect of the adequacy of any compensation offered.
[2] Supreme Court Civil Rules 2006 (SA) rule 263(1).
[3] [2011] NSWCA 328, (2011) 184 LGERA 179 at [70]-[72] per Basten JA (with whom Macfarlan JA and Handley AJA agreed).
Mr Chadrysiak contends that the outcome ultimately achieved was $552,500 which exceeded (by $4,500) the Commissioner’s May 2016 offer and (by $5,000) the amount conceded by the Commissioner in his May 2017 defence. Mr Chadrysiak contends that he did not make an excessive claim and did not engage in unreasonable conduct. The mere fact that he did not succeed on his rising market claim is not a reason to deprive him of an order for his costs.
The Commissioner contends that Mr Chadrysiak made an excessive claim of $720,000 in February 2015 and did not acknowledge that it was excessive until May 2017. The Commissioner contends that Mr Chadrysiak failed to respond to the Commissioner’s May 2016 offer in circumstances in which the Commissioner would have accepted a counter offer of $552,500 (being the amount Mr Chadrysiak ultimately received) or to the Commissioner’s July 2017 offer of $555,000 plus interest and costs which exceeded the amount Mr Chadrysiak ultimately received.
The Commissioner contends that the principal difference between the parties on their pleadings filed in April and May 2017 was the rising market claim, on which Mr Chadrysiak failed. The Commissioner contends that Mr Chadrysiak failed to prosecute his claim with reasonable diligence and if he had done so it would have been finalised at least by May 2016.
Costs principles in compulsory acquisition cases
Section 36 of the Act provides:
36—Costs
In any proceedings under this Act the Court may award such costs as it thinks proper, but, in making an order for costs, shall, where it is, in the opinion of the Court, appropriate to do so, take into consideration—
(a)the amount of compensation awarded by the Court as compared with the amount (if any) offered by the Authority; and
(b)the extent to which, in the opinion of the Court, the proceedings have arisen from, or been affected by—
(i)unreasonable conduct on the part of the claimant or the Authority; or
(ii)an excessive claim by the claimant or unduly depressed offer by the Authority.
In Minister for the Environment v Florence[4] the Minister offered compensation of $240,000 and Mr Florence claimed compensation of $434,000. By the time of trial, Mr Florence contended that the compensation should be $350,000 and the Minister contended that it should be $222,000. Mr Florence offered to accept $350,000 and the Minister offered to pay $270,000. Wells J assessed compensation at $300,000. Wells J ordered that the Minister pay 75 per cent of Mr Florence’s costs. Wells J said:
Compulsory acquisition cases differ of course from ordinary claims within the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s 18 of the Act, a claim to compensation which he could hardly be expected to renounce.
Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who has already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won. Costs are, as always, discretionary; and no hard and fast rule will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sorts of cases.[5]
[4] (1979) 21 SASR 108.
[5] At 134-135.
Wells J set out the terms of section 36 of the Act and said that it begins by stating the general rule and requires the Court to take into consideration the matters referred to in paragraphs (a) and (b) only when in the opinion of the Court it is appropriate to do so. Wells J concluded:
Against the history of a wide-ranging discretion given to this court with respect to costs, I am, I apprehend, to construe s 36 flexibly and not restrictively, to the intent that the special nature of the jurisdiction to which it relates shall be duly recognised, and orders made in that jurisdiction that are just and expedient.[6]
[6] At 135.
In Dillon v Gosford City Council[7] the claimants claimed that the value of the land acquired was $145,000 and the Council claimed that it was $45,000. The Court assessed the value at $45,000. The claimants claimed disturbance compensation of $95,108 for removal and replacement of fill and a vegetation screen, which the Council rejected and the Court upheld the Council’s rejection. The claimants claimed disturbance compensation of $130,000 for scouring control measures, which the Council rejected and the Court deferred to a subsequent hearing. The Court ordered that the Council pay 75 per cent of the claimant’s costs of the first hearing. This costs order was upheld by the Court of Appeal.
[7] (2011) 184 LGERA 179.
The claimants unsuccessfully brought an application to reopen the assessment made at the first hearing. At the second hearing, the Council offered to pay compensation of $80,652 based on its experts’ assessments of 47 per cent of $171,600. The claimants sought a greater percentage contribution and based on greater costs of the works. They also sought various extra costs. The Court assessed compensation for the scouring control measures at $80,652 being the Council’s position plus $17,500 for two of the claimants’ four additional claims (a total of $98,152). The Court ordered that the claimants pay the Council’s costs of the unsuccessful application to reopen the first hearing and 50 per cent of the Council’s costs of the second hearing. The Court of Appeal allowed the claimants’ appeal in respect of the second hearing and ordered that each party bear their own costs. As to general principles, Basten JA (with whom Macfarlan JA and Handley AJA agreed) said:
The appellants … argued that his Honour failed to adopt a strong presumption in favour of claimants for compensation receiving their costs of proceedings in the Court. That presumption was sought to be derived from a number of provisions in the Act, including:
(a)the fact that a compulsory acquisition is, by definition, an exercise of the power of eminent domain over the rights of owners in land;
(b)the guarantee of just terms compensation defined as "not less than the market value of the land (unaffected by the proposal) at the date of acquisition" - see ss 3(1)(a) and 37;
(c)the requirement that the acquiring authority offer compensation in an amount determined by the Valuer-General - s 42(1);
(d) the requirement that the amount of compensation be such as will "justly compensate the person for the acquisition of the land" - s 54(1)
… the appellants' propositions may be accepted. They support the proposition that a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.
That approach is also consistent with the absence of any general presumption that costs should follow the event: the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered.
Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case. These may include a comparison between the positions adopted by the parties at the commencement of proceedings and the final outcome. To the extent that a claimant obtains less than the valuation provided by the Valuer-General, the claimant has been unsuccessful in the litigation. That will be a factor to be taken into account, but the weight given to that factor may depend upon the extent of the failure. The Court may also take into account the time and expense incurred in relation to specific items. Beyond such general statements, it is unhelpful to go, lest the very generality of the discretion be thought to be fettered in some way. In short, the purpose of an award of costs must be taken into account, namely to compensate the party for expenditure incurred in the course of litigation; the nature of the litigation and the reasonableness of the conduct of the litigation are central considerations.[8]
[8] At [67], [70]-[72].
The appropriate order in this case
In considering the question of costs, Mr Chadrysiak’s claims can be divided into two components:
1a conventional claim for compensation by reference to market value and the costs of acquiring and moving to a replacement house property (the conventional claim); and
2an uncommon claim for compensation for loss due to a rising market (the rising market claim).
In relation to the conventional claim, objectively assessed the Commissioner’s initial offer of $419,000 was manifestly inadequate and Mr Chadrysiak’s claim of $720,000 was manifestly excessive. The Commissioner’s offer of $548,000 in May 2016 was slightly less than the figure of $552,500 ultimately agreed in January 2018. The Commissioner’s offer of $555,000 in July 2017 was slightly more than the figure of $552,500. Mr Chadrysiak did not prosecute his claim diligently.
The rising market claim was not advanced until April 2017 when Mr Chadrysiak filed a statement of claim. After the conventional claim was fully settled in January 2018, preparation for trial and the trial itself related exclusively to the rising market claim. Mr Chadrysiak succeeded on the question of law whether a loss caused by a rising market is in principle recoverable under the Act but failed on the issue of causation and hence failed entirely on this head of claim. The quantum of loss (if Mr Chadrysiak had proved causation) which I assessed was relatively small ($16,488) compared to the amount sought ($67,670).
Considering the rising market claim in isolation, if costs were assessed on the ordinary civil litigation basis, I would have ordered that Mr Chadrysiak pay 75 per cent of the Commissioner’s costs on the basis that the Commissioner was successful overall and successful on a majority by time of issues. However, due to the different nature of the exercise of the costs jurisdiction under section 36 of the Act, it would not have been appropriate to order that Mr Chadrysiak pay the Commissioner’s costs and the Commissioner does not seek such an order. Conversely, I do not consider that it is appropriate to order that the Commissioner pay Mr Chadrysiak’s costs. The issues in relation to the rising market claim were not merely the usual quantum issues arising on a conventional claim in respect of which the prima facie approach articulated by Wells J in Minister for the Environment v Florence[9] and the New South Wales Court of Appeal in Dillon v Gosford City Council[10] applies. On a holistic assessment, the costs incurred by Mr Chadrysiak in prosecuting the rising market claim were not caused by the compulsory acquisition of his property (even though they would not have been incurred but for the acquisition). Rather they were caused by Mr Chadrysiak’s prosecution of a claim in respect of which he was unable to prove that the acquisition caused the loss due to a rising market that he claimed.
[9] (1979) 21 SASR 108.
[10] (2011) 184 LGERA 179.
Considering the conventional claim in isolation, the prima facie approach articulated by Wells J in Minister for the Environment v Florence[11] and the New South Wales Court of Appeal in Dillon v Gosford City Council[12] applies. However, by May 2017 when the Commissioner filed his defence the general disturbance claim was agreed at $47,500 and there was only a difference of $10,000 between the parties in relation to the market value of the land. In July 2017 the Commissioner offered slightly more than the amount ultimately agreed in January 2018. On the one hand I do not consider that Mr Chadrysiak should be deprived of his costs as early as May 2016 as contended by the Commissioner. On the other hand I do not consider that Mr Chadrysiak should recover his costs up to January 2018.
[11] (1979) 21 SASR 108.
[12] (2011) 184 LGERA 179.
Wielding a broad axe, and considering both the conventional and rising market claims holistically, it is appropriate to order that the Commissioner pay Mr Chadrysiak’s costs up to 26 July 2017.
Conclusion
I order that the Commissioner pay Mr Chadrysiak’s costs up to and including 26 July 2017. I order that each party bear their own costs incurred after 26 July 2017.