Gilles v Valuer General of NSW

[2011] NSWLEC 1114

Land and Environment Court

New South Wales

Medium Neutral Citation:

Gilles v Valuer General of NSW [2011] NSWLEC 1114

Hearing dates:

9 February 2011

Decision date:

19 May 2011

Jurisdiction:

Class 3

Before:

Registrar Gray

Decision:

The Court orders that:

1. The applicants pay the respondent's costs of the section 34 conference on 22 November 2010, in the sum of $2,459.75;

2. The applicants pay the respondent's costs of the notice of motion filed 6 December 2010, as agreed or assessed.

Catchwords:

COSTS; conciliation conference; obligation to participate in the conference in good faith; whether fair and reasonable to order costs.

Legislation Cited:

Civil Procedure Act 2005
Land and Environment Court Act 1989
Land and Environment Court Rules 2007
Valuation of Land Act 1916

Cases Cited:

Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299

ROI Properties Pty Ltd v Council of City of Sydney [2010] NSWLEC 22

Category:

Costs

Parties:

FIRST APPLICANT
Joseph John Gilles

SECOND APPLICANT
Geoffrey Michael Gilles

RESPONDENT
Valuer General of New South Wales

Representation:

APPLICANTS
Ms Becker, Solicitor

RESPONDENT
Ms Carpenter (Respondent)
APPLICANTS
Giles Payne & Co

RESPONDENT
Crown Solicitor's Office

File Number(s):

10/30662

Judgment

1. This is an application made by the respondent, the Valuer General of NSW, for the applicants to pay its costs of the conciliation conference on 22 November 2010 and the directions hearing on 17 September 2010. The substantive proceedings are an appeal pursuant to section 37(1) of the Valuation of Land Act 1916 against the determination by the Valuer-General of NSW of an objection by the applicants to the value of land at Matraville. The substantive proceedings were heard by the Senior Commissioner on 1 April 2011.

The conciliation process

1. The conciliation conference on 22 November 2010 was conducted pursuant to section 34 of the Land and Environment Court Act 1989 , which provides for a hybrid conciliation and hearing process. The conciliation phase involves the parties, with the assistance of a commissioner of the Court, discussing the issues in dispute with a view to resolving those issues. If an agreement is reached, such as an agreement on the value of the subject land, the commissioner is required, pursuant to section 34(3), to dispose of the proceedings in accordance with the agreement. However, if an agreement is not reached, the commissioner terminates the conference and pursuant to section 34(4)(b) the parties can consent to the commissioner disposing of the proceedings following a hearing held either forthwith or later, or on the basis of what has occurred at the conciliation. If one or both parties do not consent to the commissioner so disposing of the proceedings, then the commissioner prepares a report to the Court and the matter is re-listed for allocation of a hearing date.

1. In order to ensure that the parties attend a section 34 conference with the intention of seeking to achieve a resolution, section 34(1A) provides that:

"(1A) It is the duty of each party to proceedings where a conciliation conference has been arranged under subsection (1) to participate, in good faith, in the conciliation conference."

Similarly, to allow full and frank discussions at the conciliation conference, section 34 also provides:

"(11) Subject to subsections (10) and (12):

(a) evidence of anything said or of any admission made in a conciliation conference is not admissible in any proceedings before any court, tribunal or body, and

(b) a document prepared for the purposes of, or in the course of, or as a result of, a conciliation conference, or any copy of such a document, is not admissible in evidence in any proceedings before any court, tribunal or body.

(12) Subsection (11) does not apply with respect to any evidence or document if the parties consent to the admission of the evidence or document."

1. In these proceedings the matter was listed for a conciliation conference pursuant to section 34 at the first directions hearing on 17 September 2010. At that directions hearing, Mr Rankins appeared on behalf of the respondent and mentioned the appearance of the applicants with their consent. Whilst the Practice Note for Class 3 Valuation Objections requires that a conciliation conference be listed within 14 days of the first directions hearing, in these proceedings the matter was listed for a conciliation conference on 22 November 2010, some two months after the directions hearing.

1. The matter did not resolve at the conciliation conference, and the Acting Commissioner made the following notation on the section 34 report:

"The applicant considered that there was no point in arranging for its valuer to attend the conference as the applicant came to the conclusion that the matter could not be resolved at the conference where Mr Glitsos was the valuer. It is the applicant's experience that where Mr Glitsos is the valuer, he has never shifted his value in the past. The applicant considered it to be futile to have its valuer here incurring costs for the purposes of today."

Evidence

1. For the purpose of determining the respondent's notice of motion, the parties consent to the admission into evidence of affidavits deposing of what occurred at the conciliation conference. In that respect, a number of affidavits were read by the parties at the hearing of the notice of motion.

1. The evidence establishes that the applicants only had their solicitor present at the conciliation conference, whereas the respondent had its valuer, solicitor and counsel present. The evidence also establishes that the applicants' solicitor was not in a position to discuss methods of valuation, but was in a position to negotiate a figure up to that which had already been offered by the applicants and refused by the respondent prior to the conciliation conference. The evidence also shows that the parties participated in an informal mediation prior to the conciliation conference, and that the valuers were both present at the mediation and were unable to reach an agreement. The affidavit of Mr Gilles, the first applicant, demonstrates that he reached a certain view in relation to the prospects of resolution of the proceedings as a result of the particular valuer retained by the respondent.

1. On the evidence, it is common ground that no discussion took place in relation to methods of valuation at the conciliation conference, and that there was no negotiation in relation to the value of the property. However, there is a conflict as to whether the reason for not engaging in negotiation was because of the applicants' solicitor's inability to discuss methods of valuation, or because the respondent chose not to engage in those discussions in absence of the applicants' valuer.

Submissions

1. The respondent made a number of submissions in relation to why costs ought to be awarded in its favour. Principally, the respondent says that various aspects of the applicants' conduct demonstrate that at worst, the applicants did not come to the conciliation conference in good faith and at best, were inadequately prepared to discuss the issues at the conciliation conference. The respondent submits that regardless of where the applicants' conduct fell between these two extremes, the respondent still incurred costs in preparing for and participating in the conciliation conference that ought to be reimbursed by the applicants.

1. The respondent says that where a conference is arranged the parties have a duty firstly to participate and secondly to do so in good faith. In that respect Ms Carpenter, counsel for the respondent, draws to the Court's attention the provisions of sections 56 and 57 of the Civil Procedure Act 2005 . Section 56(3) imposes a duty on a party to civil proceedings to assist the court to facilitate the quick, just and cheap resolution of the real issues in the proceedings in accordance with s 56(1). This includes participating "in the processes of the court". Section 56(5) allows the Court to take into account a failure of a party to comply with s 56(3) in exercising its discretion in relation to costs. Further, s 57(1)(c) provides that in furtherance of the objectives in s 56(1), proceedings must be managed having regard to the efficient use of court resources. The respondent submits that the applicants caused unnecessary costs to the parties and inconvenienced other litigants by moving forward with a conciliation conference that they knew would be futile, in circumstances where the dates for the conciliation conference could have been given to other litigants.

1. The respondent also submits that, in accordance with rule 3.7(3)(d) of the Land and Environment Court Rules 2007 , the applicants acted unreasonably in their conduct of the proceedings and that contrary to s34(1A) the applicants did not participate in the conference in good faith.

1. The respondent points out a number of aspects of the applicants' conduct that the respondent says demonstrates that either they did not participate in good faith or they acted unreasonably. Firstly, on the applicants' evidence Mr Gilles, the first applicant, was of the opinion that following the mediation on 13 October, the conciliation conference would have no utility. The respondent submits that the appropriate course in those circumstances would be for the matter to be re-listed pursuant to the provisions of the Practice Note. Secondly, the applicants knew that the respondent had already refused the same offer that the applicants instructed their solicitor to give at the conciliation conference. Further, the applicants indicate in their evidence that they wanted to save costs by not having their valuer attend. However, the respondent says that this ought to have been conveyed to the Court and to the respondent. The respondent also submits that the reasons given by Mr Gilles as to why there would not be any utility in the conciliation conference were not genuine reasons that would prevent discussion and resolution of the issues at the conference, even without the valuer there. Further, the respondent submits that it was not sufficient for the solicitor to attend alone without the ability to discuss methods of valuation in circumstances where the Valuer-General cannot agree on a quantum without understanding the method by which that quantum has been reached.

1. The respondent also submits that there were various opportunities at which the applicants ought to have exercised liberty to restore in order to avoid the costs of the parties' attendance at the conciliation conference. The respondent says that at each point when the applicants were of the view that there would be no utility in a conciliation conference, such as following the mediation, following receipt of the statement of basic facts, and following the refusal by the respondent of the offer, they had the opportunity to either re-list the matter or advise the respondent of their position in relation to the conciliation conference. The respondent submits that their failure to do so caused the respondent to incur costs unnecessarily.

1. The applicants oppose a costs order being made and assert that they did have the intention of discussing and resolving the issues at the conference. The applicants submit that their solicitor was fully instructed to participate in the conference in good faith. In that regard, they rely on the affidavits of Mr Gilles dated 16 December 2011 and Ms Rossides dated 8 February 2011. Those affidavits depose that Ms Rossides, who attended the conciliation conference on behalf the applicants, had sufficient instructions to negotiate a settlement and agree on an acceptable figure.

1. Secondly, the applicants submit that there was no requirement for them to have their valuer present at the conciliation conference. In support of this submission, the applicants rely on the decision of Pain J in ROI Properties Pty Ltd v Council of City of Sydney [2010] NSWLEC 22 . The applicants say that they received no communication from the respondent advising that the attendance of their expert was required. Rather, the applicants say that they were of the view that the methods of valuation were not going to be discussed at the conciliation conference because they had already been discussed at an informal mediation.

1. The applicants also submit that the respondent's decision not to enter into discussions with the applicants' representative simply because the applicants' valuer wasn't present demonstrated that the respondent failed to participate in the conciliation conference in good faith.

1. Further, the applicants submit that the Court should have regard to the parties' conduct leading up to the conciliation conference in order to determine whether they participated in the conference in good faith. In particular, the applicants point out that the Statement of Basic Facts filed by the respondent contained a land value greater than that contained in the original Notice of Valuation. Following receipt of this document, the applicants then made an offer that substantially altered its position from the figure proposed in the originating process. On the Wednesday prior to the conciliation conference, the respondent declined that offer and gave a counter offer equal to that contained in the Statement of Basic Facts. The applicants submit that such a counter offer is no real compromise.

1. The applicants also ask that the Court consider the history between the parties, and the fact that the applicants had been successful in two prior appeals to the Court. The applicants say that in one of those previous proceedings, Mr Glitsos was the valuer used by the Valuer-General and that in filing of the Statement of Facts in these proceedings he had ignored the previous determination of the Court in relation to the method of valuation. Further, the applicants say that following the mediation, and Mr Glitsos' refusal to change his position on methodology, they were of the view that the conciliation conference would be an attempt to negotiate a settlement rather than to discuss the issues that were ventilated but not resolved at the mediation. The applicants therefore submit that there was nothing unreasonable about their inability to discuss methods of valuation, and that there was no reason why an agreement could not have been reached in relation to quantum.

1. The applicants also say that they complied with all of the courts direction ahead of the conciliation conference, and submit that on receipt of the respondent's refusal of their offer there was insufficient time to vacate the conciliation conference. Further, the applicants submit that any application to vacate the conciliation conference would result in "substantial" costs being incurred by the parties.

Determination

1. The Court's power to award costs arises pursuant to section 98 of the Civil Procedure Act 2005. In appeals commenced pursuant to section 37(1) of the Valuation of Land Act, that power must be exercised in accordance with rule 3.7 of the Land and Environment Court Rules 2007. Rule 3.7(2) provides:

"(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances."

1. The result of this rule is a preposition that there is no order as to costs in proceedings to which rule 3.7 applies. This is often referred to as the non-discouragement principle. That is, a person ought not to be discouraged from commencing proceedings for a merits review by the prospect of an adverse costs order: Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299.

1. However, the non-discouragement principle does not allow a party free reign to conduct proceedings however it chooses. Rather rule 3.7 makes it clear that there is an exception to the non-discouragement principle if a party acts unreasonably. A number of examples of circumstances in which the Court may consider it fair and reasonable to award costs, including where there has been unreasonable conduct, are set out in rule 3.7(3). I accept that a party's failure to attend a section 34 conference in good faith is another circumstance in which it is appropriate for there to be an exception to the non-discouragement principle. That is, where a party incurs costs unnecessarily by virtue of another party's failure to attend a section 34 conference in good faith contrary to section 34(1A), then it is fair and reasonable for the offending party to reimburse those costs.

1. This is consistent with the decision of Pain J in ROI Properties Pty Ltd v Council of City of Sydney [2010] NSWLEC 22 , which provides that one party ought not cause another party unnecessary costs at any stage of proceedings, including conciliation conferences.

1. In my view, one particular aspect of the applicants' conduct clearly demonstrates that they did not attend the section 34 conference with the intention of participating in good faith. On the applicants' own evidence the solicitor who attended the conference on their behalf only had instructions to make an offer up to the value of an offer that had been previously rejected by the respondent. Page 5 of the affidavit of Mr Gilles, sworn 16 December 2010, sets out that he gave his solicitor instructions to accept "the offer previously put in writing to the Respondent". Such instructions clearly have no prospect of progressing negotiations, particularly in circumstances where that offer was refused by the respondent prior to the conciliation conference. This demonstrates that the applicants failed to approach the conference with a genuine intention of seeking to reach a resolution of the proceedings or of the issues in dispute. Accordingly, they did not participate in the conference in good faith, as required by section 34(1A).

1. Further, the evidence contained in the affidavit Mr Gilles clearly shows that prior to the conciliation conference the applicants had formed the view that there was no utility in participating in negotiation at the conference. Paragraph 10 of the affidavit states that he was convinced "that the Section 34 conference would not resolve the matters in dispute" due to two events - firstly, receipt of the statement of basic facts, which he says "ignored the principles decided by this Honourable Court" and secondly, receipt of the respondent's counter offer of 17 November 2010 which also rejected what Mr Gilles refers to as "a very generous Offer of Compromise". At paragraph 11, Mr Gilles further states that "given the very strong position taken by Terry Glitsos at the Mediation on the 13 th October 2010 and the subsequent position he took in the Statement of Basic Facts served upon the Applicant indicated to me that the conference would not even resolve the issues in the Appeal to this Court." It is clear, therefore, that well before the conference itself the first applicant had formed the view that there was no utility in a section 34 conference.

1. Notwithstanding that the applicants formed this view, they failed to take any steps to re-list the proceedings or seek a vacation of the section 34 conference by notice of motion. Such steps could have been taken following the mediation on 13 October 2010, following the receipt of the statement of basic facts on 5 November 2010, or following the receipt of the respondent's letter on 17 November 2010. Their failure to do so caused the respondent to unnecessarily incur the costs of attendance at the conciliation conference.

1. Paragraphs 14-16 of the affidavit of Mr Gilles assert that there was insufficient time to seek a vacation of the section 34 conference following receipt of the respondent's letter of 17 November 2010. I do not accept those assertions. Applications of any kind, including the vacation of a conciliation conference, can be made on short notice either by re-listing the matter on an urgent basis or by seeking an abridgement of time for service of a notice of motion. Further, even if such an application on short notice could not be made, it was open to the applicants to take steps to notify the respondent of their position. However, the applicants failed to take any steps to notify the respondent of their belief that there would be no utility in a conciliation conference. Following receipt of the respondent's letter on Wednesday 17 November 2010, there were two clear working days prior to the conference on which the applicants', through their solicitor, ought to have taken steps to either notify the respondent, re-list the proceedings or seek short service of a notice of motion. I do not accept the applicants' submission that taking such a course would have been unreasonably costly. Any costs incurred in appearing on a notice of motion to vacate the conciliation conference could not be greater than the cost to the parties of having their representatives (and experts) appear at a conciliation conference.

1. Even if it were not possible for the proceedings to have been re-listed or brought back by way of notice of motion seeking a vacation of the conciliation conference, the applicants were nonetheless obligated to participate in the conciliation conference in good faith. This obligation exists regardless of their opinion in relation to the utility of the same. The applicants were therefore required to come to the conciliation conference prepared to discuss the issues in the proceedings, including the methods of valuation and the quantum of the valuation itself, regardless of whether or not they had formed an opinion in relation to the utility of doing so.

1. Their failure to give their solicitor instructions other than to give an offer that had been previously refused demonstrates that they were not prepared to discuss those issues in good faith. Further, there were a number of other factors about the applicants' conduct that demonstrated that the applicants were not adequately prepared to participate in the conciliation conference. The applicants' decision not to have their valuer present at the conference prevented the valuers from having a discussion in relation to the valuation of the land and the methods for valuation, particularly in circumstances where the conference was listed before an Acting Commissioner with valuation expertise. That the valuers had previously had those discussions at a mediation does not prevent them from having those same discussions with the assistance of a commissioner with valuation expertise. In the absence of the valuer, the failure of the solicitor to be adequately prepared to discuss methods of valuation also prevented such discussions from taking place. A conciliation conference is not simply an opportunity to negotiate on figures for the value of the property. Rather, it is an opportunity to discuss, with the assistance of a commissioner with appropriate expertise, the issues in dispute, including issues in relation to the method of valuation. The parties should come prepared not only to discuss the issues in dispute in the conciliation phase of the conference, but also to properly consider whether the commissioner conducting the conference can proceed to hearing the proceedings if there is no agreement reached in the conciliation phase. Finally, the failure of the applicants to make themselves available for the conference to give instructions to their solicitor was also demonstrative of their failure to participate in good faith. This meant that the solicitor was unable to obtain instructions as the conference progressed.

1. The applicants were therefore unreasonable firstly in failing to take steps to vacate the conciliation conference in circumstances where they were not prepared to negotiate and had formed the view that there was no utility in the conference, and secondly in merely attending the conference through their solicitor without the genuine intention of participating in a negotiation or conciliation process.

1. As a result of that unreasonable conduct, the respondent incurred the costs of attendance at the section 34 conference, including the attendance of their solicitor, their counsel and their expert. Those costs could have been avoided had the applicants taken steps to either communicate with the respondent through their solicitor, file a notice of motion, or have the matter re-listed to consider whether the section 34 conference ought to have proceeded. Alternatively, those costs may have been properly incurred and borne by the respondent if the applicants had attended the conciliation conference with the intention of participating in good faith. The applicants' failure to do so meant that those costs were, in effect, thrown away. Accordingly, the applicant ought to reimburse the respondent for those costs.

1. The respondent also seeks the costs of the directions hearing on 17 September 2010. However, there is no evidence that demonstrates that the applicants had formed a view prior to the directions hearing that there was no utility in a section 34 conference. It was only after the directions hearing that the applicants formed the view that there was no prospect of a successful resolution at the conciliation conference. Accordingly, there was nothing unreasonable in the applicants' conduct in having the respondent's solicitor attend on 17 September 2010 to obtain a date for the conference. I will therefore exclude the directions hearing from the costs order. Excluding the costs of the directions hearing, the costs sought by the respondent are in the sum of $2,459.75. This comprises professional fees for counsel, for the solicitor, and for the expert valuer. In my view that sum is reasonable.

1. Finally, given that the respondent has been largely successful on its notice of motion, it is appropriate that the applicant pay the respondent's costs of the notice of motion.

Therefore, the Court orders that:

1. The applicants pay the respondent's costs of the section 34 conference on 22 November 2010, in the sum of $2,459.75.

2. The applicants pay the respondent's costs of the notice of motion filed 6 December 2010, as agreed or assessed.

Decision last updated: 19 May 2011