Davies v Sydney Water Corporation (No 2)

[2012] NSWLEC 150

Land and Environment Court

New South Wales

Medium Neutral Citation:	Davies v Sydney Water Corporation (No 2) [2012] NSWLEC 150
Hearing dates:	29 June 2012
Decision date:	06 July 2012
Jurisdiction:	Class 3
Before:	Craig J
Decision:	Orders as set out at [56]
Catchwords:	COSTS - Class 3 compensation - principles applicable to such cases - application for indemnity costs - offer of compromise not in accordance with the rules - offer not identified as a Calderbank offer - Calderbank principles - costs on ordinary basis
Legislation Cited:	Civil Procedure Act 2005 Land Acquisition (Just Terms Compensation) Act 1991 Uniform Civil Procedure Rules 2005
Cases Cited:	Al Amanah College Inc v Minister for Education and Training (No 4) [2012] NSWLEC 26 Calderbank v Calderbank [1975] 3 WLR 586 Caruso v Sydney Water Corporation [2008] NSWLEC 320 Cassidy v Sydney Water Corporation [2008] NSWLEC 223 Davies v Sydney Water Corporation [2012] NSWLEC 130 Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141 Dillon v Gosford City Council [2011] NSWCA 328; (2011) 184 LGERA 179 Jones v Bradley (No 2) [2003] NSWCA 258 Old v McInnes and Hodgkinson [2011] NSWCA 410 Pastrello v Roads and Traffic Authority of NSW [2000] NSWLEC 209; (2000) 110 LGERA 223 SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 Sydney Water Corporation v Caruso [2009] NSWCA 391 Taylor v Port Macquarie Hastings Council [2010] NSWLEC 153; (2010) 175 LGERA 189
Category:	Costs
Parties:	Joseph Leslie Davies (First Applicant) Irene Davies (Second Applicant) Sydney Water Corporation (Respondent)
Representation:	I J Hemmings (Applicants) J J Webster SC (Respondent) Hunt and Hunt Lawyers (Applicants) Bartier Perry (Respondent)
File Number(s):	31229 of 2008

Judgment

1. On 6 June last I delivered judgment on the objection by Mr and Mrs Davies to the compensation offered to them following acquisition of part of their land by Sydney Water Corporation (Davies v Sydney Water Corporation [2012] NSWLEC 130). At that time I did not make final orders but directed the parties to bring in short minutes of order consistent with my reasons for judgment (the principal judgment).

1. In giving this judgment, I adopt the definitions, short forms of reference and references to the land of Mr and Mrs Davies, both before and after acquisition, as they appear in the principal judgment.

1. I took the course of directing the parties to bring in short minutes of proposed orders for two reasons. First, there was a discrepancy among various plans in evidence and the evidence from the valuers as to the precise areas within Lot 57 to which different values were to be assigned on a rate per square metre basis. As my principal judgment reveals, both parties accepted that different areas within that Lot were to be separately considered for the purpose of determining the market value of the acquired land, by reason of the actual or underlying zoning applicable to those different areas.

1. The parties have now agreed on the areas of land within Lot 57 to which the differing values should be applied. Those values are calculated at a rate per square metre. The rates applied to the agreed areas are either those rates agreed between the parties at the hearing or those determined by me in the principal judgment. That agreement enables the market value of Lot 1, the acquired land, to be calculated in accordance with the following table:

Market Value

Before
Land Use zone	Land area (m2)	Rate $/m2	Total ($)
2(a2) above flood line (agreed)	7,106	275 (agreed)	1,954,150
2(a2) below flood line to Bewsher western boundary	5,005	200	1,001,000
2(b1) (agreed)	2,205	250 (agreed)	551,250

Bewsher Creek corridor	5,334	85 (agreed)	453,390
6(a)	575	250	143,750
20,225m2	$4,103,540
After (Lot 1 area: 8,735m2)
2(a2) above flood line	7,106	275	1,954,150
2(a2) below flood line to western boundary of Lot 1	1,163	200	232,600
2(b1)	2,646	250	661,500
6(a)	575	250	143,750
11,490m2	$2,992,000
Summary
Area difference
Lot 57 Lot 1	20,225m2 8,735m2
Lot 2 as per DP1109254	11,490m2
Value of land before after	$4,103,540 $2,992,000
Market value	$1,111,540

1. This table replaces that set out at [202] of the principal judgment. Conformably with the replacement table, I determine the market value of the acquired land to be $1,111,540.

1. As indicated at [204] of the principal judgment, disturbance loss under paragraphs (a) and (b) of s 59 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) has been agreed in the sum of $50,000. Accordingly, the compensation payable to Mr and Mrs Davies by reason of the compulsory acquisition of Lot 1 is $1,161,540. Interest in accordance with the Just Terms Act is payable on that sum.

1. The second reason why I was not in a position to make final orders at the time of delivery of the principal judgment, arose from the need for details of agreements said to have been reached in principle between the parties as to easements or restrictions as to user pertaining to services utilised by Mr and Mrs Davies for the benefit of the residue land but located within the acquired land. My understanding of the agreement in principle related to these matters is reflected in [205] to [210] of my principal judgment. As it happened, dispute remained between the parties as to the details of these agreements until that dispute was resolved during the course of the further hearing before me on 29 June 2012. The agreement reached between the parties is now reflected in the orders that I will make.

Costs

1. The one matter upon which the parties have not reached agreement is the appropriate order for costs to be made in the proceedings. For their part, Mr and Mrs Davies claim an entitlement to costs on the ordinary basis until 12 April 2010. Thereafter, they seek costs on an indemnity basis by reason of an offer then made to resolve their claim. They submit that my determination of compensation has resulted in them receiving a larger sum than that for which they had indicated they were prepared to settle the proceedings. Sydney Water Corporation submits that there should be no order as to costs to the intent that each party pay its own costs.

1. In the alternative, Sydney Water submits that it should have the benefit of costs incurred in debating an aspect of the disturbance claim made by Mr and Mrs Davies, thereby reducing the obligation it would otherwise have to meet a costs order. Further, Sydney Water resists any entitlement by Mr and Mrs Davies to have an order that their costs from 13 April 2010 be paid on an indemnity basis.

Relevant costs principles

1. The statutory foundation for the payment of costs in proceedings of the present kind is s 98(1) of the Civil Procedure Act 2005. That section relevantly provides:

"98 Courts powers as to costs

(1)Subject to rules of court and to this or any other Act:

(a)costs are in the discretion of the court, and

(b)the court has full power to determine by whom, to whom and to what extent costs are to be paid, and

(c)the court may order costs are to be awarded on the ordinary basis or on any indemnity basis."

1. There are no rules of court that apply, in terms, to the determination of costs in proceedings for compensation following the compulsory acquisition of land. The only qualification to be made to that statement is that in proceedings where offers of compromise are made, the provisions of the Uniform Civil Procedure Rules 2005 (UCPR) pertaining to such offers remain applicable.

1. Principles have been developed by courts required to address the question of costs in proceedings brought to determine compensation following the compulsory acquisition of land by a statutory body or Government instrumentality. The principles have recently been summarised in Dillon v Gosford City Council [2011] NSWCA 328; (2011) 184 LGERA 179 where Basten JA (Macfarlan JA and Handley AJA agreeing) said (at [70] - [71]):

"70 ... a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.

71 That approach is also consistent with the absence of any general presumption that costs should follow the event: the owner who is being compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered."

1. In Al Amanah College Inc v Minister for Education and Training (No 4) [2012] NSWLEC 26, Biscoe J at [13] identified the considerations that underpinned those principles. It is important in the context of the present case to summarise those principles as they bear upon the determination of the present question, particularly the submission by Sydney Water that there should be no order for costs.

1. The first of those considerations identified by Biscoe J was that the law seeks to protect property rights, the right to property being a human right. In this context, it is to be remembered that the compulsory acquisition of land involves the unilateral act of the resuming authority: it is not the consequence of a consensual arrangement.

1. The second consideration identified by Biscoe J is the limitation imposed by the Just Terms Act for determination of compensation. The only entitlement of a landowner, whose property has been compulsorily acquired to advance a case for the payment of compensation and to have that case determined is by the commencement of proceedings in this Court: s 66 of the Just Terms Act.

1. The third consideration relates to the mechanism imposed by the Just Terms Act for the determination of compensation to be offered to the dispossessed landowner. That determination is required to be made by the Valuer-General: s 47. The determination so made is the compensation that must be offered by the resuming authority to the landowner: s 42.

1. The experience of the Court is that compensation determined by the Valuer-General rarely reflects the detailed consideration and investigation given to the question of compensation by either the dispossessed landowner or the resuming authority. This has the consequence that in almost all cases that come to the Court, neither party advances the Valuer-General's determination of compensation as being correct.

1. Frequently, the competing claims, informed by valuations founded upon input from disciplines such as town planning, engineering and ecology, differ widely in the compensation propounded as being correct. The present case well illustrates that point. The Valuer-General's assessment of compensation was $345,000. Sydney Water ultimately contended for a market value of the acquired land of $750,000 while the valuer retained by Mr and Mrs Davies considered the market value to be $1,380,000.

Sydney Water Corporation's contentions

1. The grounds on which Sydney Water contended that each party should pay its own costs may be summarised as being:

(i)  delay;

(ii)  the quantum of compensation sought was not awarded;

(iii)  the failure of Mr and Mrs Davies to accept offers made to resolve the disturbance claim;

(iv)  the capacity of Mr and Mrs Davies to sell part of the residue land; and

(v)  the impact of interest to be paid by Sydney Water Corporation when considering offers of settlement.

It is appropriate to address each of these matters in turn.

Delay

1. Lot 1 was acquired on 7 December 2007. Points of Claim were filed on behalf of Mr and Mrs Davies on 17 February 2009 and the Amended Points of Claim upon which they proceeded to hearing were filed on 17 May 2010. Sydney Water accepts that there was a delay in obtaining the Valuer-General's determination of compensation to enable service of the statutory offer pursuant to s 42 of the Just Terms Act. It also acknowledges that the proceedings were commenced within the time allowed by s 66 of the Act. Nonetheless, it is asserted that no explanation for a 15 month delay between the date of acquisition and filing of the first Points of Claim has been forthcoming.

1. I do not accept this submission. While there was a delay between the time of commencement of proceedings and filing of the Amended Points of Claim, this delay is explained, essentially by the Court record. Issues arising for determination in these proceedings had been considered and determined in other proceedings addressing compensation following compulsory acquisition of land in the Balmoral Road Release Area. One such determination by this Court was the subject of appeal in the Court of Appeal (Sydney Water Corporation v Caruso [2009] NSWCA 391). At directions hearings before judges of this Court during 2009, it was accepted that steps necessary for the preparation of the hearing of this matter should be delayed pending determination by the Court of Appeal in that matter. The decision in Caruso was not published until December 2009. Thereafter, the present proceedings were prepared for hearing. This, so it seems to me, provides a reasonable explanation for the delay of which Sydney Water complained.

Quantum of compensation not achieved

1. Compensation claim by reference to the first Points of Claim was $1,984,523. By their Amended Points of Claim, Mr and Mrs Davies sought compensation in the sum of $1,639,000. It is submitted on behalf of Sydney Water that, as my determination of compensation is less than that for which Mr and Mrs Davies then contended, the factor supports the submission that no order for costs should be made.

1. I do not accept this submission. I have earlier referred to the market value for which Sydney Water contended, namely $750,000. Other items of compensation to which Mr and Mrs Davies were entitled were identified but these did not add significantly to that market value. In proceeding to hearing, Mr and Mrs Davies succeeded in obtaining an award of compensation for a considerably greater sum. The essential focus of the hearing was upon the market value of the land, involving the disciplines of town planning, engineering and valuation. Mr and Mrs Davies succeeded on each issue with little time devoted to justifying the precise sum stated in the Amended Points of Claim. Having regard to the position taken by Sydney Water in respect of each issue, Mr and Mrs Davies were justified in proceeding and ought not be deprived of their costs on account of the difference in compensation identified in their "pleading" and that sum which they were ultimately successful in obtaining. As will be apparent, no offer to resolve the claim at or near the sum stated in the amended "pleading" was made by Sydney Water.

Disturbance

1. The claim made by Mr and Mrs Davies under s 59 of the Just Terms Act for compensation by reason of disturbance had a number of components. They included legal and valuation fees to which they were entitled under paragraphs (a) and (b) of s 59. Other claims under the disturbance head related to the need for Mr and Mrs Davies to relocate and provide for stormwater discharge together with effluent irrigation and disposal. These services were located on the acquired land. There was also a need to secure access from the western portion to the eastern portion of Lot 2, as the acquired land, Lot 1, had severed their former landholding.

1. Sydney Water contends that it should be entitled to its costs in relation to an aspect of the disturbance claim. It submits that it was always willing to provide either easements or licences to permit the use of Lot 1 to continue in the manner in which it had been used by Mrs Davies prior to acquisition. For this reason it submits that the "credit" to which it would be entitled in this regard should be offset against the entitlement to costs which it acknowledges may be found against it on other issues, with the consequent practical result that no order for costs should be made.

1. I do not accept the submission for two reasons. First, while there was an indication from Sydney Water of a preparedness to provide easements or licences, the terms on which that would be done were unresolved. Without reciting chapter and verse of the correspondence passing between the parties' solicitors, the position taken by Sydney Water was not always expressed in a consistent way. Relevantly, the terms on which Mr and Mrs Davies could gain access across the acquired land were only agreed during the course of submissions at the end of the principal hearing before me. Moreover, the debate as to the terms of the easement to provide drainage for water remained live until late in the hearing before me last Friday, 29 June 2012, when the terms of final orders to be made in the proceedings were being debated. Absent agreement from Sydney Water, I had no power to order the creation of easements or rights as to user across its land. My only power was to determine compensation for disturbance loss. The belated agreement as to the terms of appropriate easements, the provision of which was the preferred position of Mr and Mrs Davies, removed the necessity to reopen the case in order to consider the compensation that would otherwise require determination.

1. The second reason why I would not sustain Sydney Water's argument in this regard is directed to the general principle which speaks against the denial of costs in respect of an issue upon which a party, otherwise entitled to an order for costs, is said not to have succeeded. There are exceptions to this general principle that are not presently relevant.

1. The provision of an easement for sewage or drainage was but one component of the general issue of disturbance. The first two elements of that head of claim were not agreed until during the course of final submissions at the principal hearing. The debate between the parties on this issue, particularly reflected in the exchange of correspondence between their respective solicitors, indicates that it was a debate that ensued over some time and was of some complexity. Viewing the issue in its entirety, it is not appropriate in the circumstances of this case that components of it be separately considered for the purpose of some apportionment of costs. As Talbot J observed in Pastrello v Roads and Traffic Authority of NSW [2000] NSWLEC 209; (2000) 110 LGERA 223 at [12], when addressing a similar debate:

"It would be a complex, time consuming and messy exercise to differentiate between the success of the parties on the issues related to compensation for disturbance ... . I see no reason to apportion the costs in respect of the disturbance claim."

These observations aptly apply to the present claim.

Sale of part of the residue land

1. Mr and Mrs Davies have now sold the eastern portion of their residue land. Part of that land was zoned 6(a) open space under the 2005 LEP while the remaining part was zoned residential 2(b1). It is submitted by Sydney Water that the sale of this land has provided a considerable advantage to Mr and Mrs Davies as they have been able to realise a price for that land which would not have been achievable had the Bewsher Scheme for drainage been adopted.

1. I must confess that I do not understand the relevance of this submission to the question of costs. Subdivision of Lot 57 that resulted from the compulsory acquisition of Lot 1 always had the consequence that the residue land both to the east and west of that Lot could be separately sold. The Bewsher Scheme had relevance only to identify the advice likely to be given to the hypothetical purchaser of Lot 57, absent acquisition, as to the provision of trunk drainage when developing that Lot for residential purposes. Reference to the Scheme was made for the purpose of determining the market value of the land. It said nothing of the capacity to sell the land consequent upon the subdivision effected on behalf of Sydney Water for the purpose of compulsorily acquiring Lot 1.

1. I do not accept this factor as one speaking against the entitlement of Mr and Mrs Davies to have an order for costs in their favour.

Interest

1. As I understand the submission on behalf of Sydney Water, it relies upon the imposition of interest on compensation payable, not so much to resist an order for costs on the ordinary basis in favour of Mr and Mrs Davies, but to resist the claim for indemnity costs. In this regard, reference is made to an offer of $900,000 made on behalf of Mr and Mrs Davies to settle their claim. That offer was not accepted by Sydney Water. However, it contends that if accumulated interest of $110,000 is added to that figure, Mr and Mrs Davies would have received $1.1M. As the compensation that I have determined is $1.16M (in round figures), Mr and Mrs Davies have not "achieved a significantly higher result than the offer they made."

1. I will refer shortly to the offer of $900,000 in the context of the claim by Mr and Mrs Davies for indemnity costs. However, for the purpose of considering the present submission I am not able to accept its logic. The fact is that the offer of $900,000 was not accepted. Second, the statute carries the entitlement to interest on compensation, whether that compensation is agreed or determined by the Court. While it would be open to the parties in the course of negotiation to stipulate and agree upon a sum for compensation that was inclusive of interest, unless interest was expressly or by necessary implication included, it would always be an additional component. None of the correspondence that passed between the parties' solicitors in the present case could give rise to an understanding that an offer of compromise to be accepted by Mr and Mrs Davies was inclusive of interest.

Mr and Mrs Davies are entitled to an order for costs

1. For the reasons that I have indicated, none of the bases upon which Sydney Water Corporation sought to contend that each party should pay its own costs of the proceedings have been made good. While I bear in mind that the award of costs is discretionary, with no general presumption that costs "should follow the event", that discretion must be exercised in a principled manner. The relevant principles have been identified in the cases to which I have earlier referred.

1. I consider that Mr and Mrs Davies have acted reasonably in pursuing the present proceedings and in so doing did not conduct them in a manner that occasioned unnecessary delay or expense. Having been compulsorily dispossessed of Lot 1, they have taken reasonable steps to seek the decision of the Court in respect of the adequacy of compensation first offered by Sydney Water, pursuant to s 42 of the Just Terms Act, and subsequently offered prior to the commencement of the hearing. In the result both of those offers were inadequate. Mr and Mrs Davies are entitled to an order for costs.

Indemnity costs

1. The claim by Mr and Mrs Davies for indemnity costs arises directly from an offer of compromise made by them on 12 April 2010. They also rely upon the background to that offer in order to substantiate their claim.

1. The compulsory acquisition of Lot 1 by Sydney Water was the last in a series of acquisitions for the purpose of drainage in the Balmoral Road Release Area. Earlier claims for compensation by reason of those acquisitions had been litigated in this Court (Caruso v Sydney Water Corporation [2008] NSWLEC 320; Cassidy v Sydney Water Corporation [2008] NSWLEC 320). The solicitors acting for Mr and Mrs Davies had acted in those claims and sought to have the benefit of the decisions made in the hope that resolution of the present claim could be achieved by negotiation. The time within which proceedings were required to be commenced by Mr and Mrs Davies had also to be kept in mind.

1. The present proceedings were required to be commenced by 5 December 2008. On 27 November 2008 the solicitors acting for Mr and Mrs Davies offered to resolve the claim on the basis that the market value of Lot 1 was $948,655. The addition of disturbance items and costs resulted in a total claim of $1,157,540.42. A response to that offer was received from Sydney Water on 4 December 2008. It stated that "Sydney Water is presently not in a position to make an offer of settlement at the amounts claimed in your letters." That response necessitated the commencement of proceedings the following day.

1. It is accepted by Mr I Hemmings, who appeared for Mr and Mrs Davies, that the letter of 27 November cannot be considered as a Calderbank offer (Calderbank v Calderbank [1975] 3 WLR 586; [1975] 3 All ER 333). However, he submits that as the letter was expressed to be "without prejudice save as to costs" it is relevant to the exercise of the costs discretion, particularly as Sydney Water could have avoided the entirety of the proceedings and been in a better position than it is as a result of my determination of compensation.

1. The critical letter for the purpose of the submission is the letter from the solicitors acting for Mr and Mrs Davies dated 12 April 2010 to the solicitors acting for Sydney Water. The letter commences by indicating that it is an offer of compromise made in accordance with Pt 20, r 20.6 of the UCPR. The letter indicates that, under the offer, Sydney Water is to pay "in full and final settlement" of the proceedings, market value and severance in the sum of $900,000 together with disturbance totalling $156,082 38, the components of that latter figure being specified. The letter further indicates that payment in full and final settlement is "plus costs" and "plus interest". The offer is expressed to be open for acceptance until close of business on 14 May 2010.

1. The response to that offer was a letter dated 23 April 2010 from the solicitors acting for Sydney Water. The letter opens by indicating that it is a response "to the offer of compromise in your letter of 12 April 2010". It contained a counter offer indicating that Sydney Water would pay $800,000 for market value and $45,000 for certain disturbance items. They were the only monetary sums identified in that letter.

1. Part 42, r 42.14 of the UCPR addresses the consequence of an offer of compromise made in accordance with r 20.26 where that offer is not accepted and a decision no less favourable to the offeror is made. The effect of subrule (2) of r 42.14 is that in such a circumstance costs from the day following the offer are payable on an indemnity basis, unless the Court otherwise orders.

1. Mr Hemmings accepts that the offer of compromise contained in the letter of 12 April 2010 does not accord with the requirements of Pt 20, r 20.26 of the UCPR. This is because subrule (2) of that rule provides that such an offer "must be exclusive of costs". As the offer in the present case had included a requirement for payment of costs, it was not an offer that accorded with the rule (Old v McInnes and Hodgkinson [2011] NSWCA 410 at [105]). As a consequence, the provisions of Pt 42, r 42.14 were not engaged.

1. Nonetheless, Mr Hemmings submits that in exercising the discretion afforded by s 98(1)(c) of the Civil Procedure Act, the Court may award costs on an indemnity basis. He points out that by operation of Sch 1 to the UCPR, Pt 42, r 42.2 continues to apply to proceedings for the determination of compensation following the compulsory acquisition of land. While the rule provides that costs are payable "on the ordinary basis", that is expressly so unless the Court otherwise orders. This, he submits, is a case appropriate for an "otherwise order".

1. In support of his submission for such an order he seeks to categorise the letter of 12 April as being a Calderbank offer. So understood, the consequence of the failure of Sydney Water to accept the offer is that it should pay costs on an indemnity basis from the day following submission of the offer by reason of the fact that Mr and Mrs Davies are, as a consequence of my determination, in a more favourable position than they would have been had their offer been accepted.

1. As Biscoe J observed in Al Amanah College Inc v Minister for Education and Training (No 4) at [14], Calderbank offers operate outside the rules of court. They are "a creation of the common law developed in the context of ordinary civil litigation where costs ordinarily follow the event". The operation of a Calderbank offer to entitle the offeror to an "otherwise order", when the offer is not accepted, does not invariably result in an indemnity costs order being made. That position is made clear by the judgment of Giles JA in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 where his Honour said at [37]:

"The making of an offer of compromise in the form of a Calderbank letter ... where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs."

That statement of principle was approved unanimously in Jones v Bradley (No 2) [2003] NSWCA 258 at [8].

1. An antecedent question to be addressed is, whether an offer that is made which does not comply with the rules pertaining to offers of compromise, should be regarded as a Calderbank offer in any event. The preponderance of authority suggests that, for an offer of settlement to constitute a Calderbank offer, it must be identified as such. So much is apparent from the joint judgment of the Court of Appeal in Dean v Stockland Property Management Pty Ltd (No 2) [2010] NSWCA 141. There, as here, an offer of compromise made to resolve proceedings, purportedly made in accordance with the rules for such offers, did not in fact comply with those rules. It was submitted that the offer should be taken to operate as a Calderbank offer, although not stated in terms that it was so intended. That submission was rejected. In so doing the Court said at [34]:

"The intention must be made clear. It would be unfair for a party to be subject to the consequences of a Calderbank offer if it was not made clear that the offer should be treated as such. A party receiving an offer of compromise apparently made under the rules should be entitled to decide whether or not to accept it according to the offer of compromise regime in the rules, including deciding whether or not it is an effective offer of compromise."

1. That principle was applied by Biscoe J in Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 153; (2010) 175 LGERA 189. His Honour rejected, as a Calderbank offer, one which had been made to the unsuccessful party in purported compliance with the rules, but which did not so comply. The terms of the offer did not state that if the requirements of the rules were not met, the offer should nonetheless be treated as a Calderbank offer.

1. More recently the position has been confirmed by the Court of Appeal in Old v McInnes and Hodgkinson. In relation to an offer of the kind made in the present case, Meagher JA (Giles JA agreeing) said at [106]:

"Whether either offer could operate as a Calderbank offer depends upon the intention of the offeror ... as revealed by the terms of the offer [citation of authorities omitted]. Each offer was stated as being made pursuant to the UCPR. Neither contained any statement that it was to operate as a Calderbank offer [citation of authority omitted]. In the circumstances, neither could be relied upon on that basis."

1. The letter dated 12 April 2010 from the solicitors acting for Mr and Mrs Davies clearly and unequivocally stated that it was an offer of compromise made in accordance with Pt 20, r 20.26 of the UCPR. It did not state, in terms, that in the alternative it should be treated as a Calderbank offer, nor do the terms in which the letter is framed imply that an offer of that kind was intended as an alternative.

1. Applying the principles that I have discussed, I do not regard the letter of 12 April 2010 as being a Calderbank offer. For this reason I would not regard it as an offer giving rise to an entitlement on the part of Mr and Mrs Davies to costs on an indemnity basis from 13 April 2010.

1. Even had I been persuaded that the letter of 12 April 2010 should be regarded as a Calderbank offer, I would not have determined that costs on an indemnity basis should be awarded. The case made on behalf of Sydney Water as to the market value of Lot 1, although ultimately unsuccessful, was not without substance. It was a case that was rationally arguable. The divergent facts, and conclusions reached on those facts, in each of the earlier cases to which I have referred that were directed to prior acquisitions within the Balmoral Road Release Area, provided no inevitability as to the conclusion that would be reached in the present case. Sydney Water was entitled to test the position as it did, albeit unsuccessfully.

1. I do not overlook the offer made on behalf of Mr and Mrs Davies in November 2009 prior to the proceedings being commenced. That offer does not, to my mind, add anything to the principles which should inform the proper exercise of discretion.

1. I therefore conclude that the appropriate order to be made is that Sydney Water should pay the costs of Mr and Mrs Davies on the ordinary basis.

Orders

1. The question of costs having been determined, it is now necessary to make orders finally determining these proceedings. To the extent that orders are to be made beyond the determination of compensation and costs, my orders reflect the agreement reached between the parties as to those subsidiary matters.

1. My orders are as follows:

1.  Determine compensation pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition by the respondent of Lot 1, DP 1109254 in the sum of $1,161,540.

2.  Interest is payable on the compensation determined by Order 1 in accordance with ss 49 and 50 of the Land Acquisition (Just Terms Compensation) Act 1991.

3.  Note the agreement between the parties:

(i)  that the respondent will at its cost and within a reasonable time from the making of these Orders:

(a)  grant to the applicants an easement for drainage of water in terms generally set out in Annexure "A" hereto, subject to survey, and the width thereof shall be the width of the existing line of stormwater pipes plus an area for access and maintenance thereof;

(b)grant to the applicants an easement for sewage for the existing enviro cycle system in the terms generally set  out in Annexure "B" hereto;

(ii)  that the respondent will, at its cost, grant to the applicants an easement for sewage within a reasonable time from the applicants providing to the respondent plans approved by the respondent showing the exact location of the proposed sewer connections in terms generally set out in Annexure "C" hereto;

(iii)  that pending the grant of easements referred to in paragraphs (i)(a) and (i)(b) the respondent will permit the applicants to continue to dispose of their sewage and stormwater in the manner that they did prior to the date of compulsory acquisition by the respondent of Lot 1, DP 1109254.

(iv)  that the respondent will grant to the applicants a Licence to Occupy in the terms generally set out in Annexure "D" hereto;

(v)  that statutory interest is calculated in the sum of $182,553.50 provided compensation is received by the applicants on or before 27 July 2012, otherwise interest is to be calculated in accordance with the terms of Order 2.

4.The respondent is to pay the applicants' costs of the proceedings on the ordinary basis.

5.Exhibits may be returned.

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Decision last updated: 06 July 2012