Denar Pty Ltd & Shepherd v Mackay Sugar Co-Operative Association Ltd

[2002] QLC 33

LAND COURT

BRISBANE

19 APRIL 2002

Re:	Claims for Compensation Granting of Easements by Queensland Sugar Corporation
Sugar Industry Act 1991 and the Acquisition of Land Act 1967 (A2000/0025 and 2000/0026)

Denar Pty Ltd
v.

Mackay Sugar Co-Operative Association Ltd

AND
RW, JW, RA and IR Shepherd
v.

Mackay Sugar Co-Operative Association Ltd

DECISION ON APPLICATION FOR COSTS

This is an application for costs by the Mackay Sugar Co-Operative Association Ltd (the respondent). It arose following the hearing and determination of compensation payable to the claimants RW, JW, RA and IR Shepherd (the Shepherds) and Denar Pty Ltd (the Shepherds' development company). The claim for compensation arose following the granting on 12 February 1996 of three easements by the Queensland Sugar Corporation (the QSC) on the application of the respondent. The easements are in respect of two tramline sidings and for an access road to one of the sidings, situated on the lands of the claimants.

Background
The lands upon which the sidings are situated were part of a former cane farm
held by the Shepherd family. Many years ago a cane tramline and two sidings were
constructed on the subject lands by the mill owner for the purposes of transporting the
claimants' cane, as well as cane from other nearby farms, to the Farleigh Mill. In
those days, there were no formal agreements for the construction of tramlines and
sidings by sugar mills. Cane farmers were willing to make land available for such
infrastructure, as it reduced the haulage distance for their cane. Compensation was
not requested nor paid.
These "unofficial easements" were regularised by legislation. Where they had
been constructed prior to 25 October 1948, the Queensland Sugar Corporation could
grant an easement to a mill owner without payment of compensation. However,
where the tramline or siding was constructed after that date, compensation was to be
paid for the granting of an easement. The two tramline sidings easements were in that
latter category.
The respondent applied to the QSC for the grant of easements in respect of the
two sidings on the subject land and for the access to one of them, under the provisions
of the Sugar Industry Act 1991. Under s.11.6 of that Act, an affected landowner was
entitled to claim compensation and for that purpose the provisions of Part 4 of the
Acquisition of Land Act 1967 applied. Part 4 of that Act includes s.27 which deals
with costs.
The hearing of the claimants' claim for compensation occupied three days at
Mackay and I delivered judgment on 9 January 2002, determining compensation at
$71,604, which included an amount of $20,589 for disturbance items (including
interest thereon), which had been agreed between the parties.
The Final Positions of the Parties

The claimants' claim for compensation was filed in the Land Court on 20 November 2000, for a total of $537,421.31, including disturbance of $187,421.31. On the final day of hearing, the claimants amended their claim to $400,589 (which became the claimants' final position), comprising $380,000 based on the valuation of their valuer, Mr Deacon, and $20,589 being the agreed disturbance items and interest thereon.

The respondent's valuation finally put in evidence by its valuer, Mr Dodds, was $29,000, making the respondent's final position $49,589 with the inclusion of $20,589 for agreed disturbance items and interest thereon.

The parties provided written submissions as to costs, the respondent seeking an order that its costs be paid by the claimants, or alternatively, that the claimants pay one-third of the respondent's costs. On the other hand, the claimants submitted that there should be no order as to costs.

The Power of the Land Court to award Costs

The general power of the Land Court to award costs is contained in s.34(1) of the Land Court Act 2000, which provides:

"Subject to the provisions of this or another Act to the contrary, the Land Court may order costs of a proceeding in the Court as it considers appropriate."

However, in cases such as the present involving the determination of compensation under the Acquisition of Land Act, that general discretionary power is restricted. Section 27 of that Act provides:

"(1) Subject to this section, the costs of and incidental to the hearing and determination by the Land Court of a claim for compensation under this Act shall be in the discretion of that Court.

If the amount of compensation as determined is the amount finally claimed by the claimant in the proceedings or is nearer to that amount than to the amount of the valuation finally put in evidence by the constructing authority, costs (if any) shall be awarded to the claimant, otherwise costs (if any) shall be awarded to the constructing authority. "

(2)

These provisions and similar provisions in land acquisition statutes in other States and in the Commonwealth, have been considered by Courts on a number of occasions. In Yalgan Investments Pty Ltd v. Council of the Shire of Albert (1997) 17 QLCR 401, the Land Appeal Court of Queensland considered the leading cases on the scope and exercise of the Land Court's discretionary power to award costs. In doing so, the Land Appeal Court identified a number of general principles which must be considered. In addition to Commissioner for Railways v. Buckler (1994) 15 QLCR 262 (Queensland Court of Appeal), those authorities considered by the Land Appeal Court included Moyses & Others v. Townsville City Council (1979) 6 QLCR 271 (Land Appeal Court), Minister for the Environment v. Florence (1980-81) 45 LGRA 127 (South Australia Supreme Court), Banno & Anor v. Commonwealth of Australia (1993) 81 LGERA 34 (Federal Court) and Kabale Holdings Pty Ltd v. Director- General, Department of Transport (1997) 18 QLCR 166, in which the Land Appeal Court quoted passages from decisions of the Full Court of the Supreme Court of Queensland in Wyatt v. Albert Shire Council [1987] 1 QdR 486 and Assignment Pty Ltd v. Kirby [1981] 1 QdR 129.

The Land Appeal Court in Yalgan stated the principles derived from those authorities at pp.406-408, those relevant to this matter being:

• Compulsory acquisition cases differ from ordinary claims in the significant respect that the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not. The mere acquisition by compulsory process gave the claimant a claim to compensation which he or she could hardly be expected to renounce (Florence at p.149, Banno at p.53).

• The discretion whether to award costs may not be exercised in an arbitrary manner but must be exercised on principled grounds (Banno at p.53) or judicially, that is, for reasons that can be considered and justified (Wyatt at p.489) by reference to relevant considerations (Moyses at p.273).

• In general, a party who is wholly successful in litigation can expect an order for costs in his favour. Where compensation is awarded to one who had already been given, by statute, the right to receive it, it is just to say 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. But costs are discretionary and no hard and fast rules 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. In some cases, the Land Court may consider that there are sufficient reasons for departing from the general rule (Moyses at p.278, Florence at pp.149-50).

• Although the exercise of the power does not exclude resort to the "settled practice" of a court where such a practice has evolved, a purported exercise of discretion which fails because the mind is closed to relevant considerations through a rigid adherence to preconceptions involves an error of law that is open to correction on appeal (Wyatt at p.489).

• Section 27(2) of the Acquisition of Land Act 1967 should not be regarded as a legislative suggestion that, where the claim is substantially more than the amount awarded, and the amount put in evidence by the constructing authority is not substantially less than the amount awarded, the Court should not merely refrain from awarding any costs to the claimant but should award costs to the authority. (Moyses at p.274).

• Where the Land Court is considering whether it should award costs to a constructing authority, it could be wrong to have regard merely to the amounts of the claim and of the award and of the value put in evidence by the authority. Usually it would be more relevant to inquire whether the conduct of the claimant (such as, for example, making an exorbitant claim) has been such as to force the authority, unreasonably and unnecessarily, into litigation (Moyses at p.274) or whether the claimant has pursued a vexatious, dishonest or grossly exaggerated claim or presented his case in such a way as to impose unnecessary burdens on the constructing authority or the Court (Banno at p.53).

Buckler at pp.268-69, McPherson JA pointed out that compensation cases are different and to apply the general rule in an unqualified way would enable the claimant to contest the amount of compensation with more or less complete impunity as to costs, as it is rare for no compensation to be awarded. His Honour then traced the history of the various legislative devices enacted "with a view to encouraging early settlement and discouraging exorbitant claims in compensation cases". Those provisions limited the general discretion of the Land Court as to costs by making it subject to a rule that costs, if any, were to be awarded to the constructing authority, unless the amount of compensation determined by the Court was the amount claimed by the claimant or was nearer to it than the amount offered by the authority, in which case costs, if any, were to be awarded to the claimant.

The General Rule successful party will be awarded costs, unless there are circumstances which require departure from the general rule. But in

His Honour went on to say at pp.269-270:
"Section 27(2) of the Acquisition of Land Act 1967 is thus the third in
this line of attempts to resolve the question by means of a statutory
provision governing costs. It preserves the device used in the earlier two
provisions by treating nearness to the amount awarded as decisive, but
does so with two changes. One is that, in deciding the question, it is not
the first amount but the 'final' amount claimed by the claimant that is
relevant; the other is that it is not the amount of any offer made by the
constructing authority but 'the amount of the valuation finally put in
evidence by the constructing authority' that matters.

Stated in general terms, what the court is now required to do in fixing the incidence of costs under this rule is to look at the final positions taken up by the parties. In the case of the claimant, it is the quantum of compensation last claimed. Theoretically at least, its amount might not be known until the final address of counsel for the claimant. In practice, however, section 24(2A) furnishes a disincentive against conduct like that. It does so by restricting the right to amend a claim once it has been filed in accordance with section 24(2A) of the Act. Thereafter an amendment may be allowed; but on terms including payment of costs: see section 24(3).

On the other hand, there seems to be no comparable restriction preventing the constructing authority from deferring disclosure of its final position until a late stage in the proceedings. It will be discoverable only from 'the amount of the valuation finally put in evidence by the constructing authority', which means that it cannot with confidence be known what the amount of it is until the constructing authority closes its case."

In the present case, the claimants have been partially successful. However, the amount of compensation determined by the Court is much nearer to the amount of the valuation finally put in evidence by the respondent than to the amount claimed by the claimants. Therefore, by virtue of s.27(2) of the Act, the claimants cannot be awarded costs and it is only the respondent that can be awarded any costs.

However, as the principle established in Moyses states, that does not mean that the Court should simply award costs to the respondent, as it would be wrong to simply have regard to the amounts of the claim, and of the award and of the valuation finally put in evidence by the respondent. Rather the authorities suggest that other criteria must be considered in deciding whether costs should be awarded to the respondent:

• whether the conduct of the claimants (eg making an exorbitant claim) has been such as to force the authority, unreasonably and unnecessarily into litigation; or

• whether the claimants have pursued a vexatious, dishonest or grossly exaggerated claim; or

• whether the claimants have presented their case in such a way as to impose unnecessary burdens on the constructing authority or the Court.

I turn now to consider the written submissions of the parties as they relate to the above-described principles.

The respondent's submissions were based on the simple argument that
compensation determined by the Court was nearer to the valuation finally put in
evidence by the respondent than to the amount finally claimed by the claimants.
However, the respondent conceded that on the principle stated in Yalgan, this by itself
is not sufficient to justify an award of costs to the respondent. The respondent went
on to submit that the conduct of the claimants, coupled with the circumstance, justifies
such an award. The Respondent's Submission the amount of disturbance (including interest thereon) of $20,589, the issue litigated was whether the granting of the easements caused loss of an amount of $380,000, or alternatively, $29,000. The vast difference between the parties arose because the valuers adopted different methodologies; Mr Deacon (the claimants' valuer) considered the land to be ripe for subdivision at the date of resumption and adopted the hypothetical subdivision method of valuation for assessment of compensation on the before and after approach. Mr Dodds, the valuer for the respondent, did not consider the land to be ripe for subdivision and based his before and after valuations on direct comparison with sales of land with only longer-term subdivisional potential. The Court found that the land was not ripe for subdivision and that the use of the hypothetical subdivision method was not appropriate.

The respondent went on to catalogue the Court's findings against Mr Deacon's

assumptions:

• he assumed that the sidings could have been removed at the request of the claimants;

• he was aware of, but did not consider, the conditions of the 1993 Planning and Environment Court consent order that relocation of the tramline and sidings was the responsibility of the claimants;

• he made assumptions which were unexplained or proven to be of doubtful validity;

• he either ignored or discounted five factors which would have led a potential prudent purchaser to consider the land to have only longer-term subdivision potential, all of which was identified and taken into account by Mr Dodds.

The respondent submitted that the claim was based and pursued on an incorrect premise as to the ripeness of the land for subdivision; the claimants did not give the necessary careful consideration to the basis of their claim: Kemi Nominees Pty Ltd v. Chief Executive, Department of Transport (A95-71) (Land Court, 20 December 1996); by doing so they unreasonably and unnecessarily forced the respondent into litigation. Furthermore, it was contended, the claimants amended their claim from $350,000 to $380,000, with the inevitable consequence of driving the parties further apart.

The claimants argued that having regard to the respondent's contended value of $29,000 for the land taken and the Court's award of $51,015 (exclusive disturbance), some 75% higher than contended for by the respondent, the claimants were forced to institute and conduct proceedings at their own expense to receive just compensation. The claimants referred to the general principles relating to the exercise of the Land Court's discretionary power to award costs and submitted that this is not a case in which the general rule that costs follow the event should be applied. They referred to the recent decision of this Court on costs in Savina v. Chief Executive, Department of Main Roads (A2000-0010) 29 November 2001, which they regarded as a similar case. In that case, the Court considered the general principles where the claimants had been partially successful and made no order as to costs. The claimants' argument proceeded as follows: there is no suggestion that they have made an exorbitant claim such as to force the respondent unreasonably and unnecessarily into litigation; their claim was supported by competent professionals, a town planner and a registered valuer; although the Court preferred the evidence of Mr Dodds, there is nothing in the decision of the Court which suggests that the approach of the claimants and their advisors was other than honestly held and that their contentions were arguable; however, the approach of Mr Dodds was not accepted without criticism, as the Court found that he had somewhat underestimated the effect of the sidings. The claimants further contended that they had to pursue their claim in Court in order to achieve what the Court found to be appropriate compensation; for the Court to award costs there would have to be a finding that the claim was either vexatious, dishonest or grossly exaggerated; notwithstanding that the Court preferred the approach of Mr Dodds, finding that the land was not ripe for subdivision, the fact that a contention is not accepted does not make it vexatious, dishonest or grossly exaggerated; furthermore, there was no suggestion that the case was presented in such a way as to impose unnecessary burdens on the constructing authority or the Court.	The Submissions of the Claimants Banno, that it would be wrong to have regard merely to the amounts of the claim and of the award and of the value finally put in evidence by the respondent, but it would be more relevant to inquire whether the conduct of the claimants had been such as to force the respondent unreasonably and unnecessarily into litigation.
Having regard to the final positions taken up by the parties with regard to compensation as discussed by McPherson JA in Buckler, the claimant has been partially successful to the extent of $22,015. However, the compensation determined by the Land Court is $328,985 less than the claimants' final position, the amended claim of $400,589. In terms of amount, the respondent has clearly been successful. If regard is had to issues, the respondent succeeded in all issues except one. However, the Land Appeal Court in Moyses has warned against having regard merely to the amounts of the claim and of the award and of the value put in evidence by the respondent. Usually it would be more relevant to consider whether the conduct of the claimant had been such as to force the respondent, unreasonably and unnecessarily into litigation, to which the Federal Court in Banno has added the further criteria, whether the claimant has pursued a vexatious, dishonest or grossly exaggerated claim, or has presented his case in such a way as to impose unnecessary burdens on the constructing authority or the Court. In the present case, there is no suggestion that the claim was vexatious or dishonest. However, the respondent has contended that the claim is excessive, as it was based on an incorrect principle that the land was ripe for subdivision; by doing so the claimants unreasonably and unnecessarily forced the respondent into litigation. By amending their claim (excluding disturbance items) from $350,000 to $380,000, they drove the parties further apart. Against this, the claimants succeeded in obtaining an amount of $42,604 more than it seems that the respondent was prepared to offer before litigation commenced and they had to go to Court to do so. Furthermore, the claimants were entitled to seek expert advice on the impact of the granting of the easements. The case put forward by their valuer, Mr Deacon, was not frivolous, but was arguable on the assumption that the land was ripe for subdivision. The Court found that assumption to be incorrect and the claim based on that premise was over seven times the Court's award. In my view, it would not be unreasonable in these circumstances to characterise the claim as excessive (exceeding the usual or proper limit or degree). However, it could not be characterised as grossly exaggerated (magnified beyond the limits of truth) or exorbitant (exceeding the bounds of custom, propriety or reason). (Definitions from the Macquarie Dictionary Second Edition 1991). I was not informed if there were any attempts by the parties to settle the matter, but the experts' reports were exchanged well in advance of the hearing so each was aware of the other's case. However, at the conclusion of the evidence, counsel for the respondent raised a matter which had not previously been raised concerning proprietary estoppel and the existence of an equity enforceable by the respondent. This obviously came as a surprise to counsel for the claimants (Transcript p.60). In the event, I found that the arguments in favour of the existence of an equity in favour of the respondent would at least create doubt in the mind of a hypothetical prudent purchaser of the land. Had this matter been raised before the hearing, it may have caused Mr Deacon to reconsider whether the sidings could simply be removed at the request of the claimants and the effect that would have on the subdivision potential of the land.
Conclusions litigation would be entitled to costs, compulsory acquisition cases are not ordinary litigation. In cases such as this where the parties are far apart, the only way that a dispossessed owner can obtain an independent determination of compensation is to take the matter to the Land Court. As Wilcox J said in Banno at p.53:

"The acquisition left the applicants in the position of either accepting the Commonwealth's assessment of the proper compensation or of having the Court rule on its adequacy. Perhaps people in that position should be allowed access to the Court, to present an arguable and well organised case, without being deterred by the prospect of being ordered to pay the Commonwealth's costs if their case proves unpersuasive. I distinguish the situation of resumees who pursue a vexatious, dishonest or grossly exaggerated claim or present their case in such a way as to impose unnecessary burdens on the Commonwealth or the Court."

In Barnes v. Director-General, Department of Transport (1997) 18 QLCR 133 at 136, the Land Appeal Court found that such cases justify some flexibility in the application of the general rule against a dispossessed owner.

Similar reasoning was adopted by the New South Wales Land and Environment Court in Pastrello v. Roads and Traffic Authority (NSW) (2000) 110 LGERA 223, where Talbot J said at 225:

"It has been said many times that the compulsory acquisition of land from an unwilling owner is a serious interference with that person's entitlement to quiet enjoyment and generally wide discretion to do with their own land as they see fit. It is a power of the state which is exercised for the public benefit. Very seldom does the resumption work to the benefit of the dispossessed owner. There needs to be a strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation recovered as a consequence of the Court's determination. It is only in special cases that the Court will deprive the owner of the full benefit of the compensation which is determined as fair and just in the circumstances of the case.

And again in Johnston v. RTA (NSW) [2000] NSWLEC 226, where Cowdroy J

said at [9]:

"The claim for compensation in respect of the subject land was formulated by the applicant on a basis which was unsuccessful. However during the hearing the respondent conceded that adjustments needed to be made to its own assessment of the value of such land. In this respect the applicant's claim could not be said to have been wholly unsuccessful, for without it, the respondent would not have increased its compensation payment. Further, the mere fact that the Court did not adopt the method of calculation proposed by the applicant does not lead to the conclusion that the claim was baseless. The applicant was entitled to have its claim considered and the conduct of the applicant was not unreasonable."

In the present case, although I am reluctant to erode the claimants' compensation by an award of costs, the fact remains that the respondent has had very substantial success and in my view it would be unjust to deprive it of at least part of its costs. The difficulty is to make an appropriate award in the circumstances of this case. To order costs of the three-day hearing would substantially deprive the claimants of their just compensation recovered.

It seems to me that the alternative submission of the respondent should be considered. The respondent submitted that if the Court was not persuaded that there was a proper basis for an award of costs wholly in favour of the respondent, the claimants should pay part of the respondent's costs. The respondent argued that had the claimants given careful consideration to their claim, it would not be unreasonable to suppose that the case might have concluded in two days instead of three, submitting that the claimants should pay one-third of the respondent's costs.

The hearing of the matter occupied three days: the first day included an inspection of the subject land and sales; the second day was shortened to allow counsel for the respondent to consider the freshly raised aspect of the issue of proprietary estoppel; the third day was occupied by addresses, with later written submissions dealing with proprietary estoppel. In my view, if that issue had been raised earlier, the case may have been concluded sooner.

In all the circumstances of this case, having regard to the principles to be followed in such matters, I have come to the conclusion that the claimants should pay one-third of the respondent's costs, as submitted in the alternative by the respondent.

Order incidental to this matter, such costs to be decided by the appropriate assessing officer of the Supreme Court, under the scale of costs prescribed by law for proceedings in the Supreme Court.

The claimants shall pay the costs of this application.

JJ TRICKETT
PRESIDENT OF THE LAND COURT