Challenger Property Asset Management Pty Ltd v Stonnington City Council (No 2)

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

No. 2702 of 2010

CHALLENGER PROPERTY ASSET MANAGEMENT PTY LTD

CHALLENGER LISTED INVESTMENTS LTD

First Plaintiff

Second Plaintiff

STONNINGTON CITY COUNCIL

VALUER GENERAL VICTORIA

First Defendant

Second Defendant

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JUDGE:	CROFT J
WHERE HELD:	Melbourne
DATE OF HEARING:	18 November 2011
DATE OF JUDGMENT:	1 March 2012
CASE MAY BE CITED AS:	Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor (No 2)
MEDIUM NEUTRAL CITATION:	[2012] VSC 67

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COSTS – Costs as to site value on a solicitor and client basis – Costs as to the capital improved value on a party and party basis – Degree of openness in sharing information – Unreasonable conduct – Role of the Valuer-General – Costs consequences of joinder of the Valuer-General – Whether the Valuer-General ran a “test case” – Minimising the overall level of legal and valuation costs – Offer of compromise – Valuation of Land Act 1960, s 26 – Supreme Court Act 1986, s 24 – Supreme Court (General Civil Procedure) Rules 2005, Order 63 – Vicgrain Pty Ltd v Hindmarsh Shire Council (No. 2) [1999] VSC 89 – Esso Exploration & Production Australia Inc v President Councillors and Ratepayers of The Shire of Morwell [1986] VR 289 – Roads Corporation v Love [2010] VSC 581 – DPP v Ali(No. 2) (2009) 25 VR 656 – Main-Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd [2007] VSC 43.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr D.J Batt SC with Mr C.O.H. Parkinson	Gadens Lawyers
For the First Defendant	Mr C. Wren SC	Maddocks
For the Second Defendant	Mr G. Garde QC	Victorian Government Solicitor

TABLE OF CONTENTS

INTRODUCTION.............................................................................................................................. 1

SITE AND CAPITAL IMPROVED VALUE.................................................................................. 1

COSTS ISSUES.................................................................................................................................. 1

COSTS JURISDICTION................................................................................................................... 4

GENERAL AND SPECIAL COSTS ORDERS – RELEVANT FACTORS............................ 12

Any offer, whether or not made without prejudice, by a party in respect of the Valuation [paragraph 26(2)(b)] 13
Extent of any adjustment to the valuation made by the Court [paragraph 26(2)(c)]...................... 13
Degree of openness in sharing information [paragraph 26(2)(d)]................................................... 13
Unreasonable conduct on the part of any party [paragraph 26(2)(e)]............................................ 14
Failure of a party to give adequate information or supply supporting material when permitted or required to do so [paragraph 26(2)(f)]........................................................................................................................ 14
An excessively low value stated by the objector under section 24(2) [paragraph 26(2)(g)]............ 15

CONDUCT OF THE TRIAL BY THE DEFENDANTS............................................................. 22

CONCLUSION AND ORDERS ON COSTS ISSUES.............................................................. 38

INTRODUCTION

This is an application for final orders, including orders as to costs, in this proceeding. Reasons for judgment were delivered on 5 May 2011 reserving the question of costs and in relation to the form of orders following from those reasons.[1]
[1]Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, [344]. The party references and abbreviations used in the 2011 reasons for judgment are also used in these reasons.

SITE AND CAPITAL IMPROVED VALUE

The parties are in agreement as to the form of substantive orders determining the site value and the capital improved value of the subject property as at 1 January 2008. The form of the agreed order is as follows:

Pursuant to section 25(1) of the Valuation of Land Act 1960, the First Defendant’s assessment of the site value and capital improved value of the subject land as at 1 January 2008 is amended to be:
(a) Site value: $ 53,500,000;
(b) Capital improved value: $104,000,000.

This agreed form of order, which reflects the position on these substantive matters as set out in my reasons for judgment, will be made accordingly.
COSTS ISSUES

The agreement of the parties does not, however, extend to the question of costs and related issues.

On 24 August 2010, an offer of compromise on behalf of both the Valuer-General and Stonnington was served on Challenger. The offer concerned the site value and was more beneficial to Challenger as to site value than was the ultimate decision of the Court.

On 14 September 2010, an offer of compromise was served on Stonnington and the Valuer-General by Challenger. This offer concerned site value and capital improved value. The values determined by the Court significantly exceeded the values as proposed by Challenger and as a result Challenger’s offer has no application or significance.

All parties treated the offer of compromise, or Calderbank offer, as having the usual operation and effect though operating in the context of the costs provisions of s 26 of the Valuation of Land Act 1960.[2] There was agreement between Challenger and Stonnington that the Calderbank offer should operate to require payment of costs as to site value on a solicitor client basis following the expiry of the offer, as opposed to from the date the Calderbank offer was made.[3] In my opinion, this is the correct position.[4] Nevertheless, this issue does not resolve the extent of the solicitor client costs claims against Challenger, as explained in the reasons which follow.
[2]It appears to be the case that the Court is not strictly bound by the terms of a Calderbank offer in this context, though its terms are appropriately given substantial weight (see Cole v Mornington Peninsula Shire Council(Land Valuation) [2010] VCAT 1266, at [17]; and see Minister for Environment and Conservation v Kupfer (2004) 16 VPR 67, at [10] (Morris J, sitting as President of VCAT).
[3]Plaintiff’s outline of submissions in reply (16 November 2011), [13]; Outline of submissions on behalf of Stonnington City Council as to final orders and as to costs {11 November 2011), [45]. The Valuer-General did not address this timing issue.
[4]See Auswest Timbers Pty Ltd v The Secretary of the Department of Sustainability and Environment (No 2) [2010] VSC 513, at [16]; Cavanough J in Love v State of Victoria (No 2) [2009] VSC 531, at [62]-[64].

Apart from the operation of the offer of compromise, the Calderbank offer, made by the Valuer-General and Stonnington, the issues between the parties in relation to the question of costs are whether:

(1)the Valuer-General should bear his own costs of the proceeding;
(2)the trial costs of Stonnington which Challenger is to pay should be limited to 12 days of the 20 day trial; and whether
(3)a special costs order should be made against Challenger in respect of site value issues because of the conduct of Challenger in relation to the objection and appeal in this Court and in VCAT.

The first two issues arise out of the joinder of the Valuer-General in the appeal in the proceedings before VCAT and the impact this had on the length of the trial in this Court. The third issue concerns Challenger’s conduct in the objection and appeal process, including in the proceedings before VCAT and in this Court, in relation to the entitlement of both Stonnington and the Valuer-General to a special costs order.

In relation to site value and capital improved value the Valuer-General and Stonnington seek the following orders:

“2. The Plaintiff pay the costs of the First and Second Defendants of the proceeding in relation to site value on a solicitor and client basis.
3. The Plaintiff pay the costs [of] the First and Second Defendants of the proceeding in relation to capital improved value on a party-party basis.”

Challenger seeks the following orders in relation to site value and capital improved value:

“2. The Plaintiffs pay the costs of the proceeding of the First Defendant in relation to site value:
(a) before and on 8 September, on a party party basis;
(b) after 8 September 2010, on a solicitor and client basis, but only for 12 days of trial.

3. The Plaintiffs pay the costs of the proceeding of the First Defendant in relation to capital improved value on a party party basis, but only for 12 days of trial.”

Finally, issues arise as to the items or matters, more generally, to be included in the costs order. The Valuer-General and Stonnington made submissions detailing various items or matters it sought to have included, as follows:[5]
[5]See Outline of Submissions on behalf of the Valuer-General as to final orders and as to costs (8 November 2011), [51]; Outline of Submissions on behalf of Stonnington City Council as to Final Orders and as to Costs (11 November 2011), paragraph 4. The reference to paragraphs 2 and 3 of the orders argued for by Stonnington is to costs orders in relation to site value and capital improved value issues.

“4.
(a)The costs to be taxed and paid by Challenger pursuant to paragraphs 2 and 3 of this order include -
(i) the costs of Stonnington and the Valuer-General in proceeding L32/2009 before the Victorian Civil and Administrative Tribunal;
(ii) the costs of the mediation;
(iii) reserved costs;
(iv) post trial costs;
(v) the costs of transcript of the trial and interlocutory and directions hearings and the post-trial hearing; and
(vi) the costs relating to the court book.
(b)Certify for senior counsel for Stonnington, and for two counsel, including senior counsel, for the Valuer-General.

(c) Certify for opening and closing written submissions.
(d) Certify for planning and valuation expert witnesses.”

Challenger did not advance any basis for the non-inclusion of any of these items or matters except for the “post trial costs” and the “costs of transcript of … the post-trial hearing”. Challenger submitted that even if Stonnington and the Valuer-General were successful in seeking a special costs order in relation to site value, the post trial hearing should not be subject to that order.[6]
[6]Transcript of the costs hearing, 111.21 – 112.9; and see below, paragraph 71.
COSTS JURISDICTION

The jurisdiction of the Court as to costs is found in various legislative provisions, including s 26 of the Act. Section 26 gives the Court a wide discretion as to costs and requires the Court to take into account various factors, as appropriate, and is now cast in the following terms:

“26 Costs
(1) On a review or appeal, VCAT or the Court (as the case requires) may make an order as to the payment of costs, or no order as to the payment of costs, as it thinks appropriate.
(2) In determining any questions concerning costs, VCAT or the Court must take into consideration the following factors, as appropriate—
(a) the desirability of minimising the overall level of legal and valuation costs;
(b) any offer, whether or not made without prejudice, by a party in respect of the valuation;
(c) the extent of any adjustment to the valuation made by VCAT or the Court;
(d) the degree of openness in sharing information between the parties—
(i) during the objection process; and
(ii) during the review or appeal;
(e) any unreasonable conduct on the part of any party—
(i) during the objection process; or
(ii) during the review or appeal;
(f) the failure of a party to give adequate information or supply supporting material when permitted or required to do so;
(g) an excessively low value stated by the objector under section 24(2) or an excessively high value contended by the valuation authority, valuer or valuer general (as the case requires).

(3) The Court may make an order with respect to the assessment of costs in the same manner as it may in respect of any other matter before the Court.”

Section 26 applies to objectors, valuation authorities, valuers and the Valuer-General alike, as the reference to each of these in paragraph 26(2)(g) of the Act makes clear.

The current form of s 26 of the Act came into effect on 1 July 2006 and removed the previous limitations on the Court’s discretion that the party in whose favour it was intended to order costs must be the party in whose favour the appeal was determined. Prior to 1 July 2006, the predecessor provision provided for the Court to have a wide discretion to order costs in favour of the successful party, in the following terms:

“26 Supreme Court appeals
...
(2) The Court may in its discretion by order award the costs of an appeal under this Division—
(a) to the party in whose favour the appeal is determined; or
(b) if the appeal was lodged in respect of the matter under section 22(1), but was not proceeded with by the objector, to the rating authority.

...”

It was submitted against Challenger that unlike a costs determination by VCAT under the provisions of s 26 of the Act, sub-s 26(3) preserves the general discretion of the Court as to costs under s 24 of the Supreme Court Act 1986 and also Order 63 of the Supreme Court (General Civil Procedure) Rules 2005 (“the Rules”). Consequently, the Court has three sources of power under which an award of costs might be made in this matter, s 26 of the Act which prescribes statutory criteria for consideration as the Court regards as appropriate; s 24 of the Supreme Court Act which confers a general discretion to award costs; and Order 63 of the Rules which confers a discretion to award costs on higher scales than the usual costs order on a party and party basis. Challenger, on the other hand, submitted that this was not the effect of sub-section 26(3). It said that this is both apparent from the current terms of s 26 itself and is also made clear in the Explanatory Memorandum to the Valuation of Land (Amendment) Bill 2006 by which s 26 in its current form was enacted, together with other amendments to the Act. Clause 16 of the Explanatory Memorandum made reference to what is now sub-s 26(3) of the Act:

“Sub-section (3) is an enactment of a similar provision to section 91(2) of the Land Acquisition and Compensation Act 1986. It empowers the Court to order the assessment of costs if the court has decided to award them. VCAT already has this power under section 111 of the VCAT Act.”

In my opinion, this position as advanced by Challenger does not follow from the current terms of s 26 of the Act, or on the basis of any analogy with the provisions of s 91 of the Lands Acquisition and Compensation Act 1986. Under sub-s 26(1), the Court has a general discretion to award such costs as it thinks fit, including a discretion to make no order as to costs. Sub-section 26(2) requires the Court to take account of the various factors specified in those provisions as appropriate. Sub-section 26(3) then, in my view, preserves the discretion of the Court to assess the basis on which costs are to be paid, a matter not otherwise the subject of sub-ss 26(1) or (2), or other provisions of the Act. Thus, and consistently with the reference in the Explanatory Memorandum to the sub-s 26(3) provisions, a clear and consistent analogy is drawn between the provisions of sub-ss 26(1) and (2) of the Act and sub-s 91(1) of the Lands Acquisition and Compensation Act and sub-s 26(3) of the Act and sub-s 91(2) of the Land Acquisition and Compensation Act.[7]

[7]And see Roads Corporation v Love [2010] VSC 581, at [10]-[12] (Vickery J) (set out below, paragraph 18); and see also Vicgrain Pty Ltd v Hindmarsh Shire Council (No 2) [1999] VSC 89, at [5] (Balmford J) (set out below, paragraph 15).

Section 26 of the Act was introduced into Parliament by way of the Valuation of Land (Amendment) Bill 2006, together with other amendments. I accept that one of the more significant amendments was the requirement for greater exchange of information between objectors and councils. This is indicated and emphasised in the Second Reading Speech of Mr Hulls, as Minister for Planning, who introduced the Bill in the Legislative Assembly:[8]

“Setting a clear requirement for information exchange
The primary focus of the bill is enhancement of the objection process, which will encourage both the objector and the municipal valuer to enter into meaningful discussions. This is designed to encourage early resolution, or mediation, of valuation disputes without resort to litigation.
A key element in achieving this outcome is better exchange of information during the objection process. Information exchange between the council valuer and the objector will be mandatory only for higher value properties. The prescribed amount for high-value properties will be set by regulation following the completion of a regulatory impact statement.
The prescribed amount is likely to be of the order of $1 million. …”

The subject property was one of the “higher value properties” to which the information exchange requirements were applied.[9]

[8]See Victoria, Hansard, Legislative Assembly, 1 March 2006, 401-402 (Mr Hulls).

[9]See s 20 of the Act.

The Second Reading Speech also addressed substantial changes to s 26 of the Act in relation to the award of costs in proceedings:[10]

“Awarding of costs
The existing provisions do not provide the tribunal or the court with flexibility in the award of costs. This has deterred councils from appropriately defending matters as they often have to cover the costs of a case. The amendments introduced by this bill will allow the tribunal or the court to consider a number of factors when awarding costs. These factors include openness in exchanging information during all stages of the objection and the behaviour of parties throughout proceedings.” [Emphasis added in Stonnington submissions]

The emphasised sentence in this part of the Second Reading Speech indicates the problems and risks which councils experienced under the previous form of s 26 of the Act. Those provisions empowered the Court in its discretion to award costs of an appeal “to the party in whose favour the appeal is determined”. This meant that any reduction in assessed values raised the prospect of an award of costs against the relevant council. Challenger submitted that as the current terms of s 26 of the Act are quite different from the terms of the former s 26, the current s 26 should be interpreted according to its terms. I accept this proposition as obviously correct in that the current terms of the section must govern. Nevertheless, reference to the previous provisions and decisions on their interpretation provide the legislative context in which the amending provisions were introduced and potentially shed some light on the legislative intent behind the amendments. It is on this basis that reference is made to the previous provisions and the various decisions referred to in submissions.

[10]See Victoria, Hansard, Legislative Assembly, 1 March 2006, 401-402 (Mr Hulls).

The predecessor to the current form of s 26 of the Act was considered by Balmford J in Vicgrain Pty Ltd v Hindmarsh Shire Council (No. 2)[11] where Her Honour said -

“I am satisfied that the effect of section 26(2) of the Act, as of the former section 43(3) and (4), is that the Court has the same discretion as to costs as it would have in making an order under section 24 of the Supreme Court Act 1986 and Order 63 of the Rules of Civil Procedure, fettered only by the limitation, not relevant to these proceedings, that the discretion may be exercised only in favour of the parties referred to in paragraphs (a) and (b) of the section.”

[11][1999] VSC 89 at [5].

In Esso Exploration & Production Australia Inc v President Councillors and Ratepayers of The Shire of Morwell,[12] Kaye and O’Bryan JJ with whom Tadgell J agreed on the costs issue gave an indication of the manner in which the Court’s discretion to make an order for costs should be exercised under the then operative ss 43(3) and (4) of the Act. The Court adopted the following comments of Lord Wilberforce from Commissioner of Valuation v Jamaica Gypsum Ltd[13] as pertinent where an objector was successful:

“In principle their Lordships consider that a person who successfully secures a reduction in the valuation, unless this is of a minimal amount, should be entitled to his costs, and that, unless by doing so he has added to the length or expense of the proceedings, the fact that he has supported a figure which turns out to be less than that finally accepted should not be to his detriment. It is a matter of experience that there are not many cases where a valuation body, after the full enquiry which is its duty to make, accepts a figure which is necessarily put forward before all of the relevant factors have been ascertained and weighed: to confine the right to recover full costs to such cases would bear hardly on individuals.”

[12][1986] VR 289 at pages 297-299.

[13](1971) 14 RRC 4 at 11.

The Full Court continued at pages 300-301:

“The principle as to costs described by his Lordship applies to an appeal under s 43 of the Land Valuation Act, save that the Court’s discretion thereunder may be exercised only for the benefit of the party in whose favour the valuation is made; and whether it awards that party full or only a portion of those costs is within its discretion. If an appellant were to achieve a minimum reduction upon revaluation, the Court might deny its costs; however, in such an event it would not be competent for the Court to award the respondent (rating authority), not being the party in whose favour the appeal was determined, all or any part of its costs.”

It is of some assistance to consider the Court’s power as to costs in land compensation matters although there are significant differences in the provisions themselves as well as differences as a consequence of the fact that claims for compensation are a compulsory consequence of land acquisition whereas objections against land valuations are more akin to ordinary litigation. In Roads Corporation v Love,[14] Vickery J held that s 91 of the Land Acquisition and Compensation Act 1986 (“the LAC Act”) conferred on the Court a general discretion to award such costs as it thinks appropriate after taking into account the specific matters listed in sub-ss 91(1)(a), (b) and (c) of that Act.[15] His Honour said:[16]

“10. Section 91(1) LAC Act creates no pre-disposition in favour of an award of costs either to a claimant or to an acquiring authority. Although an acquisition of land under the LAC Act in effect provides ‘no choice’ for the claimant, who is compelled to enter into the process to gain an award of compensation, s 41(1)(f) makes provision for compensation to include: ‘any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest’. This covers the expenses of the claimant incurred in the formulation of a claim. However, if the dispute becomes a ‘disputed claim’ and is referred to the Court for resolution, as occurred in this case, the costs discretion provided for in s.91(1) presents a neutral arena for the parties.
11. Under s.91(1) LAC Act, the Court has a general discretion to award such costs as it thinks proper. However, it must if it thinks appropriate to do so, take into account the specific matters in ss 91(1)(a), (b) and (c). However, they are not the only matters to be considered. The discretion which s 91(1) confers is a broad one, to be exercised by the application of accepted principles. As disclosed in the opening text of the sub-section, namely ‘... the Court (as the case requires) may award such costs as it thinks proper’, the discretion has a wide operation and is not necessarily limited by the specific criteria in paragraphs 91(1)(a), (b) and (c).
12. Further, s 91 LAC Act preserves the discretion of the Court to assess the basis on which costs are to be paid. Pursuant to r.63.28 of the Supreme Court (General Civil Procedure) Rules 2005 (the ‘Rules’), four bases of assessment are open: party party, solicitor client, indemnity or such other basis as the Court directs. Solicitor client costs are dealt with in r.63.30.” [Footnotes omitted]

[14][2010] VSC 581.

[15]And see 15 Lorimer Street Pty Ltd v Secretary for the Department of Infrastructure (unreported) Supreme Court, 24 April 1998 per Byrne J: “This section has been construed as preserving the court’s overriding discretion as to costs, even where the specified matters have been taken into account”; Coastal Estates Pty Ltd v Shire of Bass [1994] 1 VR 210 at 218-9 per Gobbo J; Roads Corporation v Dacakis [1995] 2 VR 508 at 545 per Batt J and Roads Corporation v Onans (No 2) [2001] VSC 160 per Balmford J at [5].

[16][2010] VSC 581, at [10]-[12].

A broad approach has been taken to the application of s 26 of the Act, both in its present and previous form, in a number of VCAT decisions. In Delacom Pty Ltd v Greater Geelong City Council,[17] VCAT made an order in the circumstances of that case requiring the Greater Geelong City Council to pay the costs of the taxpayer and the Valuer-General. This was followed by another decision of VCAT, Sutton and Carew v Greater Geelong City Council,[18] where the taxpayer was ordered to pay the costs of the City of Greater Geelong on a party and party basis before an offer of compromise was made, and on a solicitor and client basis thereafter. Costs on a party and party basis confined to certain attendances at VCAT, and expert witness costs were ordered to be paid by the Monash City Council in United Energy Limited v Monash City Council (Land Valuation).[19] In Cole v Mornington Peninsula Shire Council (Land Valuation),[20] VCAT ordered the taxpayer to pay the costs of the valuation authority which was, in this case, a council. VCAT analysed each of the matters listed in sub-s 26(2) of the Act before ordering that the objector pay a substantial amount of the costs claimed by the council. The Melbourne City Council and the Valuer-General failed to obtain an order for costs in a proceeding before Morris J, sitting as President of VCAT, in ISPT Pty Ltd v City of Melbourne (Land Valuation).[21] The broad approach adopted by VCAT, as is evident from these decisions, is, in my view, entirely justified having regard to the statutory language, its history, including the light shed on the legislative intent by Mr Hulls in the Second Reading Speech to which reference has been made, and the decisions of this Court which have been mentioned.
[17][2003] VCAT 1485.
[18][2004] VCAT 2181.
[19][2006] VCAT 1484.
[20][2010] VCAT 1266.
[21][2007] VCAT 652.

In the context of this broad approach, Morris J, sitting as President of VCAT, said in Perpetual Nominees Ltd v Monash City Council:[22]

“Generally speaking in valuation matters, costs can be justified on two different bases. One basis might be that the party has succeeded in the case in either having the valuation reduced or in maintaining the valuation and they should get costs in the same way that a successful litigant generally gets costs in civil proceedings. Indeed, last week in HSBC Asset Management Pty Ltd v Whitehorse City Council (reference L10/2003) I made an order for costs essentially on this basis. The second basis for which costs might be awarded could generally be described as the conduct of a party.”

The Perpetual case was decided by Morris J under the previous form of s 26 of the Act. Nevertheless, these comments underscore the notion that costs in land valuation disputes (for rating and taxation purposes) should be treated similarly to civil litigation matters in which costs ordinarily follow the event. The position is, in contrast, different in compulsory acquisition matters which are treated as proceedings of a different nature. This appears clearly from the following statement by Wells J in Minister for the Environment v Florence:[23]
“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. But 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. ….”

[22][2003] VCAT 1728, at [14].

[23](1979) 45 LGRA 127 at l49-150.

On this basis, the position of Stonnington was that it had chosen to appropriately defend its assessments, though it had endeavoured to reach settlement, as the rating and valuation authority and in the course of proceedings in VCAT and ultimately in this Court, the taxpayer, Challenger, clearly lost. The Valuer-General was also successful in the case he argued.

GENERAL AND SPECIAL COSTS ORDERS – RELEVANT FACTORS

As indicated previously, a special costs order, payment of costs on a solicitor and client basis, was sought against Challenger with respect to the site value issue. In support of the application for a special costs order, reliance was placed on the provisions of s 26 of the Act and the costs jurisdiction of the Court more generally, as discussed previously.

In this context, I turn first to the factors which sub-s 26(2) of the Act provides that the Court must take into consideration in determining costs questions. Paragraph 26(2)(a) is of primary relevance to the impact of joinder of the Valuer-General, a consideration to which I will return in that context. For the present, I direct attention to paragraphs 26(2)(b) to (g). It should be borne in mind that many of these factors are closely related. In the present circumstances, the conduct of Challenger with respect to the site value issue has a number of facets. These, as indicated below, raise factors (d) to (g) in a way which means that much of the same conduct raises more than one of these factors. It is also the case that, as submitted by the Valuer-General, factors (d) to (f) and, in my view, (g), also overlap and in many respects encapsulate many of the same considerations that would warrant the exercise of the discretion to award costs over and above the ordinary basis.[24]

Any offer, whether or not made without prejudice, by a party in respect of the Valuation [paragraph 26(2)(b)]

[24]See paragraphs 39 to 45, below.

As has been noted previously both Stonnington and the Valuer-General made an offer of compromise, Calderbank offer, to Challenger in respect of its site value claim. That offer was more favourable to Challenger than the result ultimately achieved in these proceedings. It was submitted against Challenger that the costs of the site value claim should be awarded at a higher level, that is on a solicitor and client basis, having regard to the failure of Challenger to accept the offer, and also having regard to the other circumstances; factors relevant to the exercise of the discretion under s 26 of the Act and the other bases upon which a costs order might be made.

Extent of any adjustment to the valuation made by the Court [paragraph 26(2)(c)]

The site value specified in the rate and valuation notices issued by Stonnington, dated 30 July 2008, was $48,176,000 and the capital improved value $103,855,000. As a result of the hearing of Challenger’s appeal against these assessments, the Court concluded that the site value as at 1 January 2008 was $53,500,000 and the capital improved value was $104,000,000. Consequently, as submitted against Challenger, it was wholly unsuccessful on both the site value and capital improved value issues and lost particularly significantly in relation to the site value issue.

Degree of openness in sharing information [paragraph 26(2)(d)]

As submitted against it, Challenger was coy in producing documents relating to the Jam Factory Redevelopment Proposal despite their importance and currency at the relevant date. An article on this proposal was published in The Age in June 2008. Comment was made in this respect by the Court in the 2011 judgment.[25] Comment was also made on Challenger’s failure to brief its own witnesses with any documents relating to its own scheme of redevelopment.[26] I accept that, far from displaying openness and sharing information, Challenger did the very opposite. It attempted to exclude its own scheme of redevelopment from the proceedings despite the sophistication, expense and currency of that scheme, being compelled ultimately to do so by notice to produce dated 29 September 2010.
[25]See Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [100], [101], [112] and [113].
[26]See Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [114]–[122].

Unreasonable conduct on the part of any party [paragraph 26(2)(e)]

I accept, as submitted against Challenger, that its failure to provide information to the Court and to its own expert witnesses was unreasonable conduct. Not only was the Jam Factory Redevelopment Proposal a most sophisticated analysis of the development potential of the subject property, it was, in any event, current as at the relevant date and had been undertaken by an expert team of consultants covering all relevant professions and disciplines. The Valuer-General, in his submissions, described the consultants as the “A team”, which I accept as a fair and accurate description. Clearly, this information was of the highest importance, and would have obviated the need for Mr Negri and Mr McNamara to undertake a first principles analysis of site potential without access to this information.

The Valuer-General submitted that Challenger chose to put its very comprehensive study of development potential in the “bottom drawer” because it was in its financial interests to downplay the development potential of the subject property, the Jam Factory site. Review of the discovery process as undertaken by Challenger does show that its discovery was very limited and, as submitted by the Valuer-General, Challenger was resistant to any disclosure which might be seen as adverse to its case.

Failure of a party to give adequate information or supply supporting material when permitted or required to do so [paragraph 26(2)(f)]

The Court concluded in the 2011 judgment that:[27]

“In my view, it is clear that the documentary evidence and evidence of experts in relation to the Challenger proposal would have assisted in establishing facts going to the determination of highest and best use. …”

[27]See Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [131].

Further, it was submitted that both Stonnington and the Valuer-General were prejudiced as to the time and costs expended on uncovering the Challenger Jam Factory Redevelopment Proposal and placing that evidence before the Court in relation to the site value. In this respect, the Court made extensive comments in the 2011 judgment in relation to the application of the rule in Jones v Dunkel.[28] Challenger’s failure to provide information in relation to the Proposal meant that, despite being in a position of having less intimate knowledge than Challenger as to the highest and best use and profitability of the subject property as at the relevant date, Stonnington and the Valuer-General were ultimately required to “paint this picture” for the Court.
[28](1959) 101 CLR 298 at 308 (Kitto J); and see Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [124] -[131].

In these circumstances, I accept that there was a failure by Challenger to give adequate information concerning the Jam Factory Redevelopment Proposal.

An excessively low value stated by the objector under section 24(2) [paragraph 26(2)(g)]

In its notice of objection, which was signed by Mr Jackson and dated 26 September 2008, Challenger contended for a site value of $38,600,000 and a capital improved value of $80,000,000. It was submitted that these values were excessively low, and found to be so by the Court. Nevertheless, Challenger sought to maintain these values, or values at around these levels, throughout the trial. This was despite evidence that the subject property, the Jam Factory site, was not a property in a “limited to Minimal Change” area but rather, in a “Substantial Change Area” under the Chapel Vision policy, and a “key site” in what is one of the best, if not the best, suburban shopping strips in Australia.[29]
[29]Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [138] and [143].

It was submitted against Challenger that the discovery that the subject property, the Jam Factory site, was in a “Substantial Change Area” at least demanded an upwards revision of values by Challenger and Mr Jackson. Nevertheless, Mr Jackson, in his evidence, ultimately contended for a site value of $38,540,000 and a capital improved value of $84,050,000, which were little different from the valuations set out in the original objections which he signed on behalf of Challenger.

It was submitted against Challenger that the proceedings were commenced with the knowledge on its part that:

(a)the Jam Factory was located in an area of Substantial Change under Chapel Vision;
(b)Challenger’s own development proposal, entirely consistent with Chapel Vision, was well advanced at the relevant date (or certainly by the return date) and had State level support;
(c)Challenger's own announcement of its development proposal was reported in The Age article of June 2008; and
(d)a huge amount of work had been undertaken on behalf of Challenger preceding The Age newspaper article, most of which was not discovered by Challenger and without any or any appropriate explanation for its non-discovery.

The issue of the objection process and the information available to Mr Jackson was the subject of extensive cross-examination during the course of the trial. I accept that whether Mr Jackson knew or did not know of Challenger’s proposal is, perhaps at the end of the day, irrelevant in the sense that he was acting as the agent of Challenger. Accordingly it is Challenger’s corporate knowledge that needs to be weighed against the early valuation submitted and the basis relied upon to justify the exceptionally low figure, especially when compared against the Court’s final figure for site value.

In relation to Mr Jackson’s approach, the following observation is contained in the 2011 judgment:[30]

“167. Returning to the original objection. Mr Jackson acknowledged that he did not prepare any working document for the original objection, setting out adjustments and allowances as he did later for his witness statement. It was submitted by the Valuer General that this indicated that the fact of the matter was that at the initial objection stage he had limited comparable sales evidence and there was little, if any, basis upon which to make an assessment of the highest and best use of the site, given that he had no planning evidence and little, if any, knowledge of the Challenger proposal. Further, it was submitted that Mr Jackson’s site value of $38,600,000 as shown in the Notice of Objection was exactly the same as the site value shown in the 2008 Savills Report, which it is noted was dated 30 June 2008. The evidence established that the Savills Report was in Mr Jackson’s possession at the time of making the objection. None of these preliminary matters would, necessarily, be of any great significance had Mr Jackson, in his evidence, been willing to acknowledge misconceptions and errors and accommodate their consequences in terms of his expert opinion evidence. However, this was not the position and, as submitted by the Valuer General, Mr Jackson doggedly maintained his values regardless of new information such as the sales evidence of Mr Cundall and Mr Fitzgerald and did not acknowledge significant errors such as the fact that the Jam Factory was a major development site in a ‘significant change area’ in terms of Chapel Vision.”

[30]Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [167].

Finally, I note that the Savills reports were assessments of market value of the Jam Factory for financial reporting purposes. Despite containing a figure for site value, they were not in any real sense proper analyses of land value, that being the task which Mr Jackson took up on behalf of Challenger. Nevertheless, Mr Jackson arrived at the same figure as Savills. Although Mr Jackson stood by his objection site value figure, the Court found that there was an avoidance of proper analysis in light of known facts.[31]
[31]Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [160]-[168], [174], [186]. .

Quite apart from the factors to be considered under s 26 of the Act, it was submitted by the Valuer-General and Stonnington that a special costs order with respect to the site value issue was warranted on the basis of the usual considerations applicable to such an application.

It was submitted in this respect that the principles justifying or providing the basis for an exercise of the discretion to award costs over and above the ordinary basis include where the losing party has engaged in unmeritorious, or deliberate or high-minded or other improper conduct such as to warrant the Court showing its disapproval and at the same time preventing the successful party from being left out-of-pocket. In this respect, reference was made to PCRZ Investments Pty Ltd v National Golf Holdings Ltd and Anor[32] and Marchesi v Vasiliou.[33] Reference was also made to Civil Procedure Victoria with respect to rule 63.02 of the Supreme Court (General Civil Procedure) Rules 2005:[34]
[32][2002] VSCA 24.
[33][2009] VSC 213.
[34]Civil Procedure Victoria, P5617.12, [63.02.200].

“In Shepherd v National Mutual Life Assn of Australasia Limited,[35] Hedigan J, at p 5 - 6 gave the following examples of conduct on the part of a party against whom costs are awarded that might justify an order for costs on the basis of solicitor and client:-
[35]VSC F4199 (15 November 1994), Unreported BC 9406421.
(a) making an allegation of fraud knowing it to be false or irrelevant to the issues in dispute;
(b) making an allegation with an ulterior motive;
(c) misconduct causing loss of time and inconvenience to the parties and the court;
(d) proceeding in wilful disregard of known facts or established law;
(e) making wild and contumelious allegations.

For other examples, see Colgate Palmolive Co v Cussons Pty Ltd[36]; Czerwinski v Syrena Royal Pty Ltd (No 2).[37]
[36](1993) 46 FCR 225 at 233–4; 118 ALR 248 at 256.
[37][2000] VSC 135 at [3]
In Ugly Tribe Co Pty Ltd v Sikola,[38] Harper J said that circumstances in which it had been held proper to order indemnity costs, characterised as special circumstances, included the following (citation omitted):
[38][2001] VSC 189.
‘(i)The making of an allegation, known to be false, that the opposite party is guilty of fraud.
(ii)The making of an irrelevant allegation of fraud.
(iii)Conduct which causes loss of time to the Court and to other parties.
(iv)The commencement or continuation of proceedings for an ulterior motive.
(v)Conduct which amounts to a contempt of Court:
(vi)The commencement or continuation of proceedings and wilful disregard of known facts or clearly established law.
(vii)The failure until after the commencement of the trial, and without explanation, to discover documents the timely discovery of which would have considerably shortened, and very possibly avoided, the trial.’

For recent reference to Ugly Tribe, above, see GT Corp Pty Ltd v Amare Safety Pty Ltd[39]; Vink v Tuckwell (No 3).[40] ”

[39][2008] VSC 296.

[40][2008] VSC 316.

These common law principles, particularly the wilful disregard of known facts and the failure to discover documents in a timely manner when this might otherwise have avoided the litigation (in whole or in part), are reinforced by paragraphs 26(2)(d), (e), (f) and (g), which have been discussed.

It was submitted against Challenger that most relevant to this case is the position that a special costs order is warranted because Challenger continued its case when properly advised it should have known that it had no prospects of success. In this respect, Woodward J said in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd:[41]

“I believe that it is appropriate to consider awarding ‘solicitor and client’ or ‘indemnity’ costs, whenever it appears that an action had been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.”

More particularly in this respect, it was submitted that, in relation to site value, this proceeding was commenced and continued by Challenger in the knowledge that:
(a)the development potential of the subject land, the Jam Factory site, was far greater than its valuer was contending during the objection process; and
(b)if properly advised based on the then known potential of the subject property, the Jam Factory site, Challenger would have been told that it had no prospect of success in relation to its contended site value.

[41](1988) 81 ALR 397 at 401.

As further submitted against Challenger, some of the facts relating to this issue are set out in the 2011 reasons for judgment:[42]
[42]Challenger Property Asset Management Pty Ltd & Anor v Stonnington City Council & Anor [2011] VSC 184, at [95].

“95. Almost consistently with the approach taken by Mr Negri, Mr Jackson appeared to discount or misunderstand planning considerations applicable to the Jam Factory site and, consequently, saw its development potential as being quite limited. In a letter dated 19 December 2008 from Mr Jackson, as a Director of M3 Property Strategists, to Mr M. Webb, Deputy City Valuer of the City of Stonnington, he said:[43]
‘The subject property is subject to the City of Stonnington’s strategic planning document “Chapel Vision Structure Plan 2007-2031”. This document aims to “guide development and change” and the subject property is identified as being within a “Limited/Minimal Change Area”. Given [the City of Stonnington’s] clear intentions regarding the current and future planning of the subject property at the date of valuation, we have assessed the Site Value with reference to the current use of the land as its highest and best use.’

Mr Jackson was questioned by Mr Garde in light of the radically different state of affairs in terms of the future development potential of the site as between the position as set out in this letter, and what Mr Jackson knew to be the case at the time of the trial, namely that the Jam Factory site is in fact in a substantial change area as specified in Chapel Vision. Mr Jackson was asked whether, consequently, he felt impelled to revisit his $2,000 per square metre valuation. Mr Jackson then sought to explain how he was able to reconcile his first valuation with the second, as follows:[44]
‘So, my approach was [to] set aside whatever has been done, having regard to the experts’ advice, particularly in relation to the site. I found both planning experts to be of extreme help. They have not only managed to outline some of the issues that you’ve just said in relation to the specific aims for the site, but they have identified very helpfully what you might develop on the site, height limitations on the site and also given a very helpful view of the sort of level of development and density you might put on the site. So to me that was very helpful. Any preliminary views that I previously had were clearly just set aside. They didn’t guide me in any way. When you have expert planners and the benefit of expert planners providing you with that insight, you take it into account and assess the value accordingly.’”

[43]At p 5 of the letter. It is noted that the letter is marked “Without Prejudice”, but no objection was raised to its admissibility on this basis.

[44]Transcript, 639.

Stonnington, in its submissions, also made reference to Mr Webb’s initial response to Mr Jackson’s objection, on behalf of Challenger, of 10 October 2008:[45]

“The Site Value for the assessment was derived by utilising comparable sales evidence. Attached to this letter please find a list of land or land equivalent sales Council believes to be relevant. We believe that our assessment took into account all pertinent matters. We are aware also that various redevelopment scenarios have been mooted for the Jam Factory. For your benefit, we would comment that given the sales evidence available to us it would be hard to envisage a formal review of the valuation that did not result in Council recommending a higher site value.” [emphasis added in Stonnington submissions].

[45]This document, which is not referred to in the 2011 reasons for judgment, is contained in Court Book, p 1037.

Ordinarily when considering the basis upon which costs are to be awarded, the parties’ conduct before the commencement of proceedings is not relevant.[46] Nevertheless, the knowledge that a party has is relevant to an assessment of his or her conduct as a litigant.[47] Additionally, paragraphs 26(2)(d) and (e) of the Act make directly relevant to the question of costs the conduct of a party during the objection process. More particularly, as appears from the 2011 judgment, it is clear that Challenger did not properly consider the matters raised in Mr Webb’s response or, alternatively, proceeded with its objection and the proceedings despite what was said to Mr Jackson, its valuer, in clear terms. I accept the submissions against Challenger that it would be implausible to think that Mr Jackson would not have discussed Mr Webb’s initial response letter with representatives of Challenger. The alternative factual hypothesis would be even worse for Challenger in relation to this issue. I have, as indicated, already expressed views on these matters in the 2011 reasons for judgment so the only new point raised in the Challenger submissions is to the effect that Challenger reasonably and properly relied on the expertise and advice of Mr Jackson in assessing its position. I reject this argument for two reasons. First, the evidence indicated that Challenger was itself well aware of the development potential of the subject property, the Jam Factory site, and did not ensure that its experts were fully informed in this respect. Secondly, it is not open to a party, particularly, a sophisticated and experienced public company such as Challenger, to seek to avoid the consequences of its own omissions by relying upon the mistakes and omissions of an expert, such as Mr Jackson.[48] The final irony in the Challenger submission was the argument that when Mr Jackson was informed of his mistakes and omissions, he re-assessed the position and, at least substantially, maintained his position, his expert opinion. It is not necessary now to re-open my consideration and comments on the expert evidence which are contained in the 2011 reasons for judgment, save to say that I do not regard Mr Jackson’s adherence to his position as a positive feature of his evidence or conduct as an expert. Quite the contrary, it reinforced my criticisms and adverse assessment.
[46]NMFM Property Pty Ltd v Citibank Ltd (No 2) (2001) 109 FCR 77.
[47]Harrison & Anor v Schipp; Cameron & Anor v Schipp [2001] NSWCA 13; Hypec Electronics Pty Ltd (in liq) v Mead (2004) 61 NSWLR 169, Moyes v J & L Developments Pty Ltd (No 3) [2007] SASC 268; Ali v Hartley Poynton Pty Ltd (No 3) [2002] VSC 292 and Velissaris v Fitzgerald [2008] VSCA 152.
[48]And see below, paragraph 64.

On the basis of the above, I am satisfied that the factors or criteria specified in paragraphs 26(2)(b) to (g) are enlivened in favour of the costs orders sought by Stonnington and the Valuer-General. In relation to s 26 of the Act, it only remains to consider the factors specified in paragraph 26(2)(a), the desirability of minimising the overall level of legal and valuation costs, which, as indicated previously, raises the issue of the conduct of the trial by Stonnington and the Valuer-General in consequence of the joinder of the Valuer-General as a party. I am also satisfied, for the reasons indicated, that a special costs order is warranted under the other bases upon which such an order might be granted, but, again, subject to consideration of the conduct of the trial by the defendants.

CONDUCT OF THE TRIAL BY THE DEFENDANTS

I turn now to the issues raised by the Challenger submissions that the Valuer-General should bear his own costs of the proceeding and that the trial costs of Stonnington which Challenger is to pay should be limited to 12 of the 20 days of the trial.

Challenger’s submissions in this respect turn on the nature and circumstances of the Valuer-General’s joinder to the proceeding, and the consequences of that joinder. It was submitted that, in essence, the Valuer-General sought and obtained joinder in the course of the VCAT proceedings before this matter was uplifted to the Supreme Court by submitting that any prejudice caused by his joinder could be compensated by an order that he pay any additional costs resulting from the joinder. It was said by Challenger that Stonnington agreed with this submission. Challenger submitted that neither party should now be able to depart from those submissions as it was on the basis of those submissions that VCAT granted the Valuer-General’s joinder application against Challenger’s opposition. Additionally, it was submitted that the Valuer-General’s fundamental reason for joinder was to run the matter as a “test case” on the issue of “vacant to let” allowances. This, it was said, provides a basis for making no order as to costs with respect to the Valuer-General.

It is uncontroversial that Challenger raised at an early stage the possibility of prejudice in the course of the application by the Valuer-General for leave to join the proceeding, made to VCAT under s 60 of the Victorian Civil and Administrative Tribunal Act 1998. The application was granted by VCAT Deputy President Dwyer after considering the issue of prejudice at a directions hearing on 7 August 2009 and then at a hearing on 18 September 2009.

Deputy President Dwyer asked Senior Counsel then appearing for the Valuer-General whether the Valuer-General’s joinder would give rise to additional costs of an unreasonable level and whether Stonnington and the Valuer-General were intending to put two separate cases.[49] Mr Morris QC responded:[50]

“… there have been discussions as to whether the council and the Valuer-General would be jointly represented and have only one representative. My instructions are that it is likely that that will be the case, but no final agreement has yet been reached. … [I]n the event that those discussions do not produce a situation where there will be one joint representation of the council and the Valuer-General, but rather there would be separate representation, my submission is that that will not effect [sic] the timeliness of the hearing.
It is unlikely to have any significant effect on the time of the hearing; that is the length of the hearing. And if it does have an effect on the length of the hearing, then it would be open for the tribunal to compensate for any prejudice that might have been caused in that regard by an order as to costs. And hence the appropriate position to adopt at this stage is not to refuse joinder, but rather to keep open the possibility that if prejudice emerges that it be compensated with costs.” [emphasis added in Challenger submissions]

Immediately following this submission on the question of prejudice, Deputy President Dwyer asked the solicitor then appearing for Stonnington whether Stonnington was in general agreement with what Mr Morris QC had then just said. Stonnington’s solicitor said that it was, subject to there being then no final position as to joint representation.[51]

[49]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 3.23-32. See Affidavit of Patrick John Walsh dated 4 November 2011 (“Walsh affidavit”), Exhibit PJW8. [

[50]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 3.37-4.4. See Walsh affidavit, Exhibit PJW8.

[51]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 4.9-11. See Walsh affidavit, Exhibit PJW8.

Following these exchanges and other discussion, including submissions in opposition on behalf of Challenger, Deputy President Dwyer ordered the joinder of the Valuer-General to the proceeding and, in relation to material prejudice issues, said:[52]

“In terms of material prejudice, I think whilst there is no certainty that there will be subrogation in this matter, the tribunal can rely on its own experience to a degree that in these sorts of matters it is common for subrogation to either occur or for there to be reasonably similar positions adopted that don’t increase materially the costs or delay.”

[52]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 8.24-28. See Walsh affidavit, Exhibit PJW8.

Challenger submitted that the submission by Mr Morris QC that VCAT could compensate Challenger for any prejudice by reason of the Valuer-General’s joinder by an order for costs is of particular significance. Reference was made to sub-s 110(1) of the Victorian Civil and Administrative Tribunal Act 1998 which provides that:

“The Tribunal may order that a person given leave to intervene in a proceeding pay an amount specified by the Tribunal to a party as compensation for all or part of the costs reasonably incurred by the party as a result of the intervention.”

There is no equivalent to sub-s 110(1) of the Victorian Civil and Administrative Tribunal Act 1998 specifically conferring power on this Court to compensate a party for costs reasonably incurred as a result of an intervention once a proceeding has been uplifted from VCAT pursuant to sub-s 23(3) of the Act. The matter now having been uplifted to this Court,[53] Challenger submitted that the circumstances referred to in the course of the VCAT proceedings and as set out in the affidavit evidence in support of its position[54] should be taken into account within, and given effect to, under the provisions of s 26 of the Act.
[53]By order of Osborn J dated 25 June 2010, pursuant to s 23(3) of the Act.
[54]i.e. the Walsh affidavit.

Challenger submitted that as matters transpired, the Valuer-General did not subrogate Stonnington, and Stonnington and the Valuer-General were not jointly represented. It was said that, instead, Stonnington and the Valuer-General were separately represented and called separate valuation evidence. Challenger submitted that this was in circumstances where Stonnington and the Valuer-General ran cases that were substantially similar, thereby duplicating time and hence increasing cost. Further, it was said that the position was exacerbated because there were also material differences in their cases, which caused the trial to be further prolonged. In particular, it was said that it was only the Valuer-General that disputed Challenger’s position as to the proper interpretation of the definition of “capital improved value” in the Act. Consequently, Challenger submitted that had the proceeding remained between the “true protagonists”, this issue would not have arisen in the proceedings as it did. Additionally, it was said that Stonnington and the Valuer-General contended for different values, in reliance upon separate valuers, with materially diverging analyses, and cross-examined each others’ valuers. The effect was, it was claimed, a very substantial prolongation of the trial, which was quite the reverse of the basis on which the joinder application was made and allowed by VCAT. More particularly, Challenger submitted that the trial would have taken not more than 12 days, rather than 20 days, had Challenger faced only the Stonnington case against it.[55] Consequently, it was said that as a result of the joinder of the Valuer-General, Challenger has been prejudiced by having to run this proceeding at trial for an additional eight days and, further, by reason of this joinder, Challenger has costs exposure which it would not otherwise have had. If the Valuer-General’s application for costs succeeds, it says, Challenger would be prejudiced by having to pay the Valuer-General’s costs, including 20 days of trial with both senior and junior counsel. If Stonnington’s application for costs succeeds, it says, Challenger would be prejudiced by having to pay Stonnington’s costs for an additional eight days. Finally, Challenger noted in its submissions that it put Stonnington and the Valuer-General on notice of these issues and the position it would take as to costs if it were unsuccessful at trial.[56]
[55]Referring to the calculations in this respect contained in the Walsh affidavit, paragraphs 34 and following. Mr Walsh estimated that approximately 8.75 days of the trial were spent by counsel for the Valuer-General in addressing the court or examining witnesses and by the Valuer-General’s witnesses in giving evidence. In addition to this, Counsel for the Plaintiffs and Stonnington needed to address the Valuer-General’s case in submissions. On the other hand, Challenger conceded that in the absence of the Valuer-General, Stonnington may have needed to lead evidence from a planning expert and also make further submissions on law. Mr Walsh’s evidence was that he conservatively estimated that the Valuer-General’s participation in the trial added around 8 days.
[56]See Walsh affidavit, paragraphs 27-33 and Exhibit PJW12.

Additionally, Challenger submitted that the Court has strong grounds to exercise its discretion to order the Valuer-General to bear its own costs in this proceeding on the basis of the well established principle that costs may not be awarded where a party has used the proceeding to run a test case of wide application,[57] especially where a test case has been run by a state agency.[58] In this respect, Challenger said that the Valuer-General sought and was granted leave to join the proceeding principally to run it as a test case on the issue of vacant to let allowances for the calculation of capital improved value as defined by the Act, and that is what the Valuer-General proceeded to do. Challenger submitted that was explicit in the Valuer-General’s Further and Better Particulars of his joinder application.[59] At the hearing in VCAT of the Valuer-General’s application for joinder on 18 September 2009, Mr Morris QC, Senior Counsel for the Valuer-General, identified this as a question of principle “that raises very interesting important valuation issues”.[60] Mr Morris QC submitted that “that point of principle is one that has very important ramifications in breadth and depth – that is in the amount of value it will affect and the amount of properties it will affect”.[61] This submission was accepted by Deputy President Dwyer.[62] Later, on 25 June 2010, Osborn J, in this Court, accepted the Valuer-General’s submission that the proceeding raised legal questions of general importance and ordered the uplift of the matter from VCAT to this Court.[63] This position was emphasised, Challenger said, at the opening of the trial in this Court when Senior Counsel for the Valuer-General described the interpretation of the definition of capital improved value under the Act concerning the “vacant to let” allowance as the “fundamental” reason for the Valuer-General’s involvement.[64] It was, nevertheless, submitted against Challenger that the Valuer-General’s involvement in this respect does not take the proceeding into the realm of being a “test case” – at least vis-à-vis the Valuer-General and Challenger. In my opinion, this is the correct view in light of the authorities relied upon by Challenger and the other parties in relation to this issue. The position (generally and with respect to these proceedings) is encapsulated in the following passage from the judgment of Kyrou AJA in DPP v Ali(No. 2):[65]

“43. As the President has stated, KA relied on Nguyen in support of his submission that, if the court determined that it had power to award costs, no order for costs should be made in the proceeding because it was in the nature of a ‘test case’.
44. In my view, this case stands in a different position from Nguyen. It cannot be described as a test case. While this court’s decision in the substantive judgment on this proceeding clarifies the position in relation to an important provision of the Confiscation Act, it cannot be said that the question was either of the significance or general application that would be expected of a proceeding in the nature of a test case. Nor was the proceeding conducted by any party in the public interest or on the basis that it was a test case. Accordingly, I would not decline to order costs on the basis that this was a test case.” [Footnotes omitted]

Clearly it cannot be the position that every case that sheds light on the interpretation of important statutory provisions – and is thereby in a sense of general public interest and application – should be regarded as a “test case”.

[57]CSR Ltd v Eddy (2005) 226 CLR 1, [81] (Gleeson CJ, Gummow and Heydon JJ); Oshlack v Richmond River Council (1998) 193 CLR 72, [137] (Kirby J); Director of Housing v Sudi [2011] VSCA 266, [304] (Weinberg JA).

[58]DPP v Ali (No 2) (2009) 25 VR 656, 660-661 [16]-[19] (Maxwell P), 664 [43]-[44] (Kyrou AJA).

[59]See Walsh affidavit, paragraph 14 and Exhibit PJW5.

[60]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 2.45. See Walsh affidavit, Exhibit PJW8.

[61]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 3.10-12. See Walsh affidavit, Exhibit PJW8.

[62]Challenger Diversified Property Trust v Stonnington City Council, L32/2009, transcript dated 18 September 2009, 8.14-17. See Walsh affidavit, Exhibit PJW8.

[63]Challenger Property Asset Management Pty Ltd v Stonnington City Council [2010] VSC 298, [3].

[64]See Walsh affidavit, paragraph 25 and Exhibit PJW11.

[65](2009) 25 VR 656, at [43], [44]; and see (2009) 25 VR 656, at [16]-[19] (Maxwell P). References are to DPP v Nguyen (2007) 179 ACrimR 5.

Neither Stonnington nor the Valuer-General disputed that Challenger raised at an early stage the prospect of prejudice that it might suffer by reason of additional time and costs of trial flowing from the joinder of the Valuer-General. Stonnington submitted, nevertheless, that there was no material prejudice as a result of the joinder or of its effect on the duration of the trial, for the following reasons:

(a)if subrogation had occurred, it remains possible that there still would have been two valuers called by the Valuer-General;
(b)the order for joinder made in VCAT was not conditioned by any assumption as to joint representation;
(c)the additional time taken due to opening and closing submissions was inevitable; and
(d)there was no additional or unnecessary time taken by either of Stonnington or the Valuer-General in cross-examination of witnesses.

Further, Stonnington submitted that it would be unjust for it to be left out of pocket as a party legitimately taking part in the proceeding but without reason to oppose the Valuer-General’s involvement. Further, it said that had the Valuer-General not been joined it would have still been necessary for Stonnington to address the matters raised by the Valuer-General, in particular the “vacant to let” issue with respect to the proper construction of the definition of capital improved value under the Act and to adduce further evidence. The extent of the prejudice that Stonnington would suffer was highlighted, referring in its submissions to the compensation sought by Challenger, namely the relief from the costs of eight of 20 days of trial time.

Against this background both Stonnington and the Valuer-General directed attention in their submissions to the role of the Valuer-General in Victoria. In general terms, it was said that the Valuer-General has a direct interest in proceedings such as this, an interest conferred by Parliament under the Act in complex cases.

In this context, as submitted by the Valuer-General, he or she has the role of overseeing the operation of the land valuation system for rating and land tax purposes in Victoria. The Valuer-General’s responsibilities in this respect, and as relevant to the present case, are illustrated by reference to the following specific provisions of the Act:

(a)The Valuer-General carries out valuations as valuation authority when nominated to do so by councils.[66]
(b)The Valuer-General reviews and certifies all valuations carried out by councils,[67] including any variations made to a valuation upon objection.[68] Under s 7AC of the Act, the Valuer-General is required to determine whether the valuation is generally true and correct and, under sub-s 21(4), in the case of an objection, the Valuer-General must determine whether or not a recommended adjustment should be confirmed or disallowed.
(c)The Valuer-General establishes and maintains the valuation record.[69]
(d)The Valuer-General collects, collates, and then makes available any material which he or she thinks would be of assistance to valuers in the making of valuations.[70]
(e)The Valuer-General is entitled to be notified of any appeal to VCAT or to the Court.[71] This ensures that the Valuer-General is given notice of proceedings in which valuations are challenged and has the opportunity of deciding whether he or she will seek to become a party to the proceeding.

[66]See paragraph 5(1)(ab) of the Act.

[67]See ss 7AC and 13DFA of the Act.

[68]See ss 21(3)(b), 21(4), 21(5) and 21(6) of the Act.

[69]See ss 5(1)(ac) and 7C of the Act.

[70]See ss 5(1)(b) and 5(1)(c) of the Act.

[71]See ss 22(7) and 23(5) of the Act.

These provisions were also referred to in the Second Reading Speech on the Valuation of Land (Amendment) Bill 2006 in the Legislative Assembly in which Mr Hulls, as Minister for Planning, said:[72]

“Valuer-General to be given notice of applications to VCAT/Supreme Court
When an objector applies to either the tribunal or the Supreme Court, both jurisdictions are to advise Valuer-General Victoria so that it can determine if it wishes to become a party to any matter. The Valuer-General will not join all valuation matters but will generally become involved in complex cases which relate to important or significant state-wide issues.”

[72]See Victoria, Hansard, Legislative Assembly, 1 March 2006, 401-402 (Mr Hulls).

Further, it is helpful in this context to make reference to the decision of Deputy President Dwyer in Kayray Pty Ltd v Whittlesea City Council and Valuer-General Victoria.[73] Deputy President Dwyer described the Valuer-General’s role in the following terms, in the course of considering an application by the Valuer-General to be joined as a party to a land valuation proceeding:[74]

“6. The reference to ‘interests’ in s 60(1)(b) [of the Victorian Civil and Administrative Tribunal Act 1998] has commonly been given a broad interpretation in its application in other Lists in the Tribunal, including ‘any interest in a proceeding which a person has beyond that of an ordinary member of the public’. Based on such an interpretation, the Valuer-General will always have a sufficient interest, for the purpose of s 60(1)(b), given his statutory functions in relation to valuations in the State of Victoria under the Valuation of Land Act 1960. Moreover, under s 22(7) of the Valuation of Land Act 1960, this Tribunal must notify the Valuer-General of all applications for review under s 22 of the Act. This carries with it an implicit expectation that the Valuer-General will use such notice, amongst other things, to determine those proceedings in which he might seek joinder. In the Tribunal’s experience, the Valuer-General seeks to be joined in somewhere between 10 and 15 percent of proceedings. These generally relate to high-value properties (such as office buildings in the CBD, shopping centres and the like), large land parcels in urban growth corridors, or matters where there is an unusual valuation issue or matter of statutory interpretation in issue. Although of less relevance to the matter before me, municipal valuations are commonly used as a basis for matters other than Council rates (for example, State land tax) and the Valuer-General will therefore commonly have an interest in protecting valuations over and beyond the interests of the Council as rating authority.”

[73][2008] VCAT 1942.

[74][2008] VCAT 1942, at [6].

The possible involvement of the Valuer-General in proceedings, if not already a party, is by way of joinder rather than intervention.[75] Intervention is generally reserved for specified persons with public interests and duties, with the costs of intervention capable of being awarded. By contrast, there is no special rule in relation to costs following joinder of an interested party. Clearly, as indicated in the VCAT aspect of these proceedings before Deputy President Dwyer, joinder of an additional party has the potential to increase overall costs, assuming separate representation and witnesses. Although the Valuer-General was joined to the proceeding by VCAT under s 60 of the Victorian Civil and Administrative Tribunal Act, the principles with respect to the possible consequences of joinder are similar to those arising under rule 9.02 of the Rules. The need to balance considerations going to the desirability of joinder and possible prejudice were referred to by Bell J in Main-Road Property Group Pty Ltd v Pelligra & Sons Pty Ltd where his Honour said:[76]

“The court should take the course most conducive to the just resolution of the dispute between the parties, having regard to the desirability of reducing, as far as practicable, costs and delay in litigation. If joinder will increase costs and delay without a sufficient corresponding benefit, this may be a compelling negative consideration.
Regard should be had to practical matters and the unfairness or prejudice that joinder may cause to any party, as well as the powers of the court to manage the case so as to address or minimise such consequences, which will include the specific powers in rule 9.04. In some cases 'there may be competing considerations of relative inconvenience and relative fairness or unfairness which need to be resolved.’ The advantages of joinder should be identified and weighed against any disadvantages, having regard not only to the impact on the parties but also to the need to efficiently use the resources of the court.”

Consequently, it was submitted that the real question to be considered is, having regard to the statutory role and responsibilities of the Valuer-General, the separate and distinct statutory role of Stonnington and the issues before the Court in these proceedings is the manner in which the trial was run and whether costs and delay were reduced as far as practicable, given that the decision to order joinder was made in circumstances where the consequences in terms of the cost and time involved in the trial could not be predicted with any degree of accuracy.

[75]In respect of which see ss 73 and 110 of the Victorian Civil and Administrative Tribunal Act 1998.

[76][2007] VSC 43 at [24]-[25], citing Newman v Hold Pty Ltd [2001] VSC 282, [6].

It was submitted, against Challenger, that it is not to the point that a trial may be extended as a result of joinder leading to additional submissions or if there are additional witnesses with legitimately differing professional opinions, as in the case of Mr Fitzgerald and Mr Cundle in these proceedings. However, this may not always be the result of joinder. For example, Stonnington noted that it led no planning evidence but that this would have been necessary had Mr McNamara not been instructed by the Valuer-General. Nor, it was said against Challenger, is it to the point that Stonnington and the Valuer-General chose to be represented separately. Although subrogation, or joint representation, was raised as a possibility at the time of the joinder application in VCAT, it is clear that there was no certainty in relation to this issue when it was discussed before VCAT in the context of the joinder application. It was submitted that had the Stonnington and Valuer-General’s cases not differed in the significant manner in which it was said they did, the costs consequences of separate representation would justify greater scrutiny. Stonnington submitted that, in other words, the question would have been “what benefit would have been then gained by the VG’s involvement, or by Council remaining separately represented?”.[77] The question, however, Stonnington submitted, does not arise. More particularly, it was submitted that issues raised by Challenger with respect to the time spent by the Valuer-General in presenting his case and in cross-examination are not relevant to the question of material prejudice in the particular circumstances of this case because, the joinder of the Valuer-General was for clear and legitimate reasons; there was legitimate separate representation of both Stonnington and the Valuer-General; and the valuers relied upon by Stonnington and the Valuer-General held differing opinions.
[77]Outline of Submissions on behalf of Stonnington City Council as to Final Orders and as to Costs (11 November 2011), paragraph 59.

It was submitted that the interests of the Valuer-General which led to his joinder as a party were summarised in submissions made by Mr Morris QC on his behalf in the VCAT application for joinder,[78] as follows:

“1.1 The high value of [Stonnington’s] valuation and the difference between the amount of the Respondent’s valuation and [Challenger’s] contended valuation;
1.2 [Challenger's] valuation of capital improved value has been assessed assuming vacant possession with a significant discount given for letting up the property. The Valuer-General does not agree with this approach; and
1.3 [Challenger’s] valuation of site value is based on the existing use of the Subject Land, namely a cinema based entertainment complex, as being the ‘highest and best use’. This is not in accordance with the Court of Appeal’s decision in ISPT Pty Ltd v Melbourne City Council & Anor.”

These interests, it was said, follow from and are the product of the statutory responsibilities reposed in the Valuer-General by Parliament under the Act, which are referred to above.[79]

[78]Affidavit of Domenico Cristiano dated 4 November 2011 (Cristiano affidavit), DC4, paragraph 36.

[79]See, particularly, paragraph 57.

The separate interests of the Valuer-General and Stonnington arising from their separate and distinct statutory responsibilities did, in the circumstances of these proceedings, lead to some different positions being taken which affected the possibility of joint representation. Thus, the Valuer-General submitted:[80]

“29. Whilst there was common ground on many issues between Valuer-General and Stonnington, it is to be noted that there were important differences in position between Valuer-General and Stonnington.
30. In his valuation, Mr Fitzgerald gave evidence in support of a site value of $58M, compared to that contended for by the Valuer-General of $53.5M.
31. With respect to capital improved value, Mr Fitzgerald applied a vacant to let allowance, with a discount rate of 8.25% (CB Vol 1 page 253) making a vacant to let allowance of $8,855,809 (CB Vol 1 page 254). The Valuer-General did not agree with this methodology. Mr Fitzgerald also had different approaches to the adjustments to be made, particularly for time and capitalization rates.
32. It is therefore submitted to have been reasonable and appropriate in these circumstances for Valuer-General to call evidence before the Court as to the valuation methodology and values which the Valuer-General submitted to be appropriate. Without the Valuer-General’s participation in the proceeding it is possible that the evidence as to value and the submissions on valuation methodology and the correct construction of the VL Act which the Court ultimately accepted would not have been put before the Court.”

Having regard to the responsibilities of these parties, I am of the opinion that the different positions taken should not be treated as a basis for criticism – nor that this resulted in a decision in favour of separate representation or the calling of more than one valuer as an expert witness. The Valuer-General also submitted and, in my view, without any serious contradiction from Challenger, that in important high value valuation cases in this Court it is customary for up to two valuers to be called by the respective parties and the costs of two valuers allowed accordingly.

[80]Outline of Submissions on behalf of the Valuer-General as to Final Orders and as to Costs (8 November 2011), paragraphs 29 to 32.

It is also the position that notwithstanding these separate interests, the Valuer-General and Stonnington were able to reduce costs that might otherwise have been properly incurred by them. In this respect, the Valuer-General submitted:[81]

“33. At all times, the Valuer-General has acted to minimise the overall level and incurrence of legal and valuation costs. The Valuer-General promptly complied with directions at the VCAT and Court levels (unlike, on many occasions, Challenger). The Valuer-General did not oppose Challenger's application for the proceeding to be treated as an appeal to the Court, even though the proceeding was ready to be set down for hearing by the VCAT.

34. The Valuer-General relied on one planner, Mr McNamara, an expert in the retailing aspects of planning, and one valuer Mr Cundall who was very familiar with the Prahran district. Their evidence was of substantial assistance to the Court and accepted by the Court. For its part, Challenger relied on the evidence of one planner Mr Negri and one valuer Mr Jackson whilst Stonnington relied on the evidence of the City Valuer Mr Fitzgerald.
35. Points of Agreement between planning witnesses were prepared by Mr McNamara and Mr Negri dated 16 February 2010. Likewise, a Joint Statement of Valuers was prepared by Messrs Jackson, Fitzgerald and Cundall dated 16 April 2010. A geotechnical assessment was prepared by Mr Pedler of Coffey Geotechnics Pty Ltd dated 30 October 2009. It was not ultimately necessary to call Mr Pedler.”

As discussed previously and in the 2011 reasons for judgment, the failure by Challenger to provide information in relation to the development potential of the subject property, the Jam Factory site, had very significant consequences for the time and cost of the trial. In my view, the Valuer-General’s submissions in this respect were more than justified.[82]

[81]Outline of Submissions on behalf of the Valuer-General as to Final Orders and as to Costs (8 November 2011), paragraphs 33 to 35.

[82]In this respect, Mr Garde QC, on behalf of the Valuer-General, submitted (transcript, pp 73-74):

“Now, Your Honour, one significant reason why we do submit that there ought to be a solicitor/client costs order relating to the site value issue, which not only takes into account the offer of compromise but also takes into account the conduct of the parties and indicates the court’s disapproval of a state of affairs where a leading public company, a leading commercial body does not either produce that documentation to the court, other than under compulsory process, and secondly does not put very important information in front of its own experts or anyone else.

Now, there have been a number of cases in this court about expert evidence and the need for that process to have integrity. There is no explanation that’s been advanced or could be advanced that challenges what can only be deliberate failure to put a very substantial body of expert work before either Mr Negri or Mr Macnamara or Mr Jackson. Now, that is I’ll use the term ‘Unforgivable’. It’s just not on for a party to conduct itself in a way that fails to disclose, and one can only conclude that the instructions given to Gadens and the instructions to brief the valuers deliberately omitted to provide this very important information, very expensive development and analysis of highest and best use to the experts.

Whether it’s an oversight or whether it’s done intentionally, to put all that material in the bottom draw and to just not tell the experts about it because it’s against your financial interests, or whether it’s a great oversight, it doesn’t really matter, Your Honour. It’s something that does, we would respectfully submit, call for the exercise of the discretion of this court as to costs, and it a class of [wilful] disregard of known information known by the party itself. In any event, it picked up in (d), (e) and (f) [of s 26(2) of the Act].

Finally, the Valuer-General submitted that Challenger, as a well informed public company, would clearly have understood that the Valuer-General would be a likely party in relation to a valuation dispute with respect to such a high value property. This does not mean, of course, that Challenger was not entitled to press its objection to the valuations, but it does mean, in my view, that it must be taken to be aware of the statutory landscape and the likelihood of the Valuer-General taking part in the proceedings in the exercise of his statutory responsibilities. In other words, Challenger had to assess its position in this light and should not now be heard to say or imply that the Valuer-General was not a necessary party. These considerations also go to the point made against Challenger that its pursuit of the capital improved value issue stood to yield little advantage to it in monetary terms and so it might be said that any adverse costs consequences in that respect were brought on by itself.[83]
[83]See below, paragraph 68.

In relation to Challenger’s position with respect to the additional time of the trial, Stonnington raised a variety of issues in its submissions, submissions which are conveniently set out as follows:[84]
[84]Outline of Submissions on behalf of Stonnington City Council as to Final Orders and as to Costs (11 November 2011), paragraphs 61-65.

“61. The Plaintiff’s position as to the additional time of trial appears to be premised upon:
(a) a prima facie entitlement to compensation for costs incurred by reason of the VG’s involvement alone, rather than the VG’s conduct as a successful party (which is not impugned); and
(b) prima facie liability for only that portion of Council’s costs that would have been incurred by Council had the VG not been joined.

62. It is submitted this premise is an improper basis for considering costs, notwithstanding the discussed [sic] that ensued before the Tribunal on 18 September 2009 (as to which see paragraphs 16ff of the Walsh affidavit). The Court’s discretion as to costs under Order 63 and section 26 of the VLA should not be constrained by those discussions.
63. Further, even if the particular circumstances of the VG joinder application are relevant, it cannot be said that the Defendants (and certainly not Council) agreed that the Plaintiff should be compensated because of any addition whatsoever to the length of trial.
64. The Plaintiff also ignores the extensive time, both prior to trial and during it, in uncovering and addressing the ‘Challenger proposal’ as discussed in the reasons at paragraphs [91] – [158], occupying 42 pages of the reasons. The issue was, quite obviously a substantial and necessary part of the proceeding. Had the Plaintiff been more forthcoming about the Challenger proposal, it is likely the issue would have taken up substantially less time since it was necessary for there to be extensive submissions and for each valuer to comment upon it.
65. Gadens letter of 1 October 2010 (see exhibit PJW12 to the Walsh affidavit) had already put the Defendants on notice in relation to the Plaintiff’s concern to avoid additional costs and time of trial by reason of separate representation leading to duplication of cross-examination or any leading questions in relation to common interests. Although the letter stated that the Plaintiff would raise these matters with the Court during the hearing, there was no need for objections from Counsel for the Plaintiff as to any such instances, nor any directions from the Court. It is therefore submitted that the Plaintiff’s concerns were observed in the running of the trial.”

Reference was also made in the Stonnington submissions to the judgment of Young J in which his Honour considered the power of the Court to allow or refuse cross-examination in ensuring a fair trial, including where parties have common interests.[85] It is not necessary to examine this judgment in great detail, save to note that Young J expressed the view that where there are parties with the same interest, the trial judge will ordinarily not permit any more than one counsel to cross-examine the same witness.[86] Finally, Young J said that: “Ordinarily a judge should permit cross-examination of all witnesses by all counsel unless one or more of the above rules apply”.[87] On the basis of these principles, it was submitted against Challenger that unless it can be shown that these principles were substantially disregarded so as to occasion prejudice, the Court should accept that the cost and additional time caused by the joinder of the Valuer-General was reduced “as far as practicable”. Where there were common issues or interests, it was not the case that Senior Counsel for Stonnington and for the Valuer-General put to the other witnesses[88] any leading questions, or cross-examined the Challenger witnesses[89] for any collateral purpose. Clearly, had that been the case, the Court would have been called upon to manage the evidence in the sense indicated by Young J in the judgment to which reference has been made. Further, in relation to the “vacant to let” issue arising with respect to the capital improved value definition under the Act, it is the case that this was not a topic the subject of any detailed submissions by Mr Wren, as Senior Counsel for Stonnington.
[85]See GPI Leisure Corp Ltd v Herdsman Investments Pty Ltd (No 3) (1990) 20 NSWLR 15, at [22]-[23]; cited with approval in Cheers v & El Davo Pty Ltd (in liq) [2000] FCA 144, at [8].
[86]See paragraphs (5) and (6) in the summary of the principles to be applied in this situation as set out in the judgment of Young J at (1990) 20 NSWLR 15, at [22]-[23].
[87](1990) 20 NSWLR 15, at [23], paragraph (13).
[88]Namely, Messrs McNamara, Cundall and Fitzgerald.
[89]Namely Messrs Negri and Jackson.

Finally, in relation to the “test case” issue and Challenger’s submission that its objection to the capital improved value assessment was being used as a “test case”, Stonnington submitted that leaving aside the issue of joinder of the Valuer-General, the maximum benefit to be gained by Challenger had it succeeded on the “vacant to let” issue was a rates refund of approximately $21,800.[90] Continuing, Stonnington said that the rates refund would not have been attributable to the tenants in any case. Given this, it was said, and faced with what it regarded as a test case, Challenger was not compelled in financial terms to proceed with the capital improved value argument. Rather, it could have withdrawn that aspect of the proceeding in light of the far greater financial consequences in relation to the site value issue. In any event, for the reasons already indicated, the Valuer-General joined in these proceedings in the exercise of his statutory responsibilities having regard to the separate and distinct interests of the Valuer-General in the issues raised by Challenger.
[90]Based on a $20M difference in contended site values (attributable to that issue) and a rate in the dollar of CIV of 0.0010926.

For the reasons set out above, I am of the opinion that it could not be said that either Stonnington or the Valuer-General agreed in the course of the joinder application in VCAT that Challenger should be compensated as a result of any additional time and consequent cost consequences of the Valuer-General’s joinder. Further, both Stonnington and the Valuer-General had separate and distinct statutory responsibilities, hence interests in the issues raised in the proceedings by Challenger; both having regard to the issues raised and the high value of the subject property. Challenger could reasonably have expected to meet these two parties as defendants in the proceedings. Thus the joinder of the Valuer-General cannot properly be regarded as in the nature of an “indulgence” – so that it could run a test case or on any other basis – hence the only issue of relevance, in my view, is whether there is any basis to say that Stonnington and the Valuer-General did not take responsible steps to ensure that any additional time flowing from the joinder of the Valuer-General was reduced “as far as practicable”. In my opinion, this was achieved, as submitted by Stonnington and the Valuer-General, and any duplication in the proceedings flowing from the joinder of the Valuer-General was minimised as far as was practicable having regard to the nature of the proceedings. Further, and importantly, having regard to the statutory responsibilities conferred on the Valuer-General by Parliament under the provisions of the Act, it could not be contemplated, in my view, that it would necessarily follow that a successful application by the Valuer-General for joinder to proceedings in discharge of these statutory functions or obligations would result in a denial of entitlement to costs under the provisions of the same legislation conferring these responsibilities - particularly where any additional time spent and consequent cost flowing from the joinder was reduced as far as practicable having regard to issues properly raised in this context. I therefore reject Challenger’s claim that there was any relevant prejudice as a result of joinder of the Valuer-General. Consequently, Stonnington is entitled to its costs for the proceeding for the entire 20 days of the trial and the Valuer-General is also entitled to costs on the bases otherwise found.

CONCLUSION AND ORDERS ON COSTS ISSUES

For the reasons set out above, I am of the opinion that it is appropriate in the circumstances of this case to order Challenger to pay the costs of the Valuer-General and Stonnington. Further, I am of the opinion that solicitor and client costs should be ordered in relation to that part of the proceedings concerned with site value having regard to the non-disclosures, the general conduct of the proceeding by Challenger and the service of the offer of compromise, the Calderbank offer, by Stonnington and the Valuer-General on 24 August 2010.

Challenger submitted that the costs of the hearing on final orders and costs should not be the subject of any special costs order.[91] I do not accept this submission for two reasons. First, it is my view that the conduct of Challenger, which has given rise to the special costs order, is what necessitated this hearing, or at least a substantial part of it. In the absence of this conduct costs orders based on the Calderbank offer could likely have been made by agreement between the parties. Secondly, as the Calderbank offer, made jointly by the Council and the Valuer-General on 24 August 2010, was made on the basis that each party bear its own costs in relation to the site value issue Challenger had an opportunity to accept an offer as to costs that was more favourable than what it has ultimately achieved.
[91]Transcript of the costs hearing, 111.28 – 112.5.

Consequently, I will make orders in relation to costs as follows:[92]
[92]Paragraph (1) of these orders being in relation to the substantive issues in dispute (see above, paragraph 2).

(2)The Plaintiffs pay the costs of the First and Second Defendants of the proceeding in relation to site value on a solicitor and client basis.
(3)The Plaintiffs pay the costs of the First and Second Defendants of the proceeding in relation to capital improved value on a party and party basis.

(4)
(a) The costs to be taxed and paid by the Plaintiffs pursuant to paragraphs (2) and (3) of this order include –
(i)the costs of the First and Second Defendants in proceeding L32/2009 before the Victorian Civil and Administrative Tribunal;

(ii)      the costs of the mediation;
(iii)     reserved costs;
(iv)     post trial costs;
(v)the costs of transcript of the trial and interlocutory and directions hearings and the post-trial hearing; and

(vi) the costs relating to the court book.
(b)Certify for senior counsel for the First Defendant, and for two counsel, including senior counsel, for the Second Defendant.
(c)Certify for opening and closing written submissions.
(d) Certify for planning and valuation expert witnesses.

In relation to the orders contained in paragraph (4), I am of the view that it is appropriate for the Court to make these orders and give the certifications sought so as to inform the Costs Court that the trial judge considers it appropriate that costs be allowed in the manner set out. This is intended to be helpful and convenient and to assist the Costs Court on these matters by simplifying and expediting the process of taxation, bearing in mind that the Costs Court cannot be expected to be familiar with the nature and circumstances of the significantly complex proceedings when called upon to undertake the taxation.

[2012] VSC 67

1 March 2012