Hamzah Pty Ltd v Department of Main Roads

[2008] QLC 123

LAND COURT OF QUEENSLAND

CITATION:	Hamzah Pty Ltd v Department of Main Roads [2008] QLC 0123
PARTIES:	Hamzah Pty Ltd (A.C.N 010 489 273) (claimant/respondent)
v.
Chief Executive, Department of Main Roads (respondent/applicant)
FILE NO.:	A2006/0787
DIVISION:	Land Court of Queensland
PROCEEDING:	Application for costs.
DELIVERED ON:	17 June 2008
DELIVERED AT:	Brisbane
HEARD AT:	Brisbane
MEMBER	Mr RS Jones
ORDER:	The claimant Hamzah Pty Ltd is to pay fifty percent (50%) of the Chief Executive, Department of Main Roads costs of and incidental to the hearing and determination of the compensation proceedings in the Land Court.
CATCHWORDS:	Costs - s.27 - Acquisition of Land Act 1967 - s.34 Land Court Act 2000 - Award of compensation less than advance - Effect of advance on cost orders - factors relevant to exercise of discretion - amendment of claim at hearing.
COUNSEL:	Mr W Cochrane, for the applicant/respondent. Mr S Fynes-Clinton, for the respondent/claimant.
SOLICITORS	Ms P Pavey, Crown Law, for the applicant./respondent Condon Charles Lawyers, for the respondent /claimant

1. The Chief Executive, Department of Main Roads seeks orders that Hamzah Pty Ltd pay his costs of and incidental to the hearing and determination of the company's claim for compensation.

Background

1. Prior to 22 July 2005, Hamzah was the registered proprietor of four adjoining parcels of land near Toowoomba comprising an area of 71.616 ha.  On 22 July 2005, the Chief Executive resumed the whole of one of the four parcels (lot 4) for road purposes.  The highest and best use of all the land at the date of resumption was for residential subdivision.

2. Pursuant to s.19 of the Acquisition of Land Act 1967 (ALA), on 16 October 2006, Hamzah filed a claim for compensation in the registry of this Court in the amount of $4,600,000 ("plus applicable GST").  Orders were also sought to the effect that the Chief Executive pay appropriate compensation under the heading of disturbance and interest.  On 6 November 2006 an amended claim was filed seeking $5,015,000 as compensation for the value of the land taken (including severance) and $31,390 under the heading of disturbance plus interest.  Pursuant to s.23 of the ALA, on or about 3 October 2006, the Chief Executive paid to Hamzah $3,000,000 as an advance against compensation. 

3. On the first day of the hearing of these proceeding, Hamzah amended its claim to $6,088,000 for the value of the land taken, including injurious affection to the balance lands and $34,897.32 under the heading of disturbance.  Hamzah also had an alternative claim in the amount of $5,797,000. 

4. The final position of the Chief Executive was that compensation should be determined in the amount of $2,000,000, or at a figure marginally above that to take into account the agreement reached between the parties on disturbance and the before value of the land.  The Chief Executive, like Hamzah, had an alternative compensation figure in the amount of $2,460,000. 

5. At the conclusion of the hearing of the evidence it was submitted on behalf of Hamzah that "on the evidence before the Court" compensation for the value of the land taken including injurious affection ought be determined at $4,750,000, or, in any event, not less than $3,850,000.  Disturbance was agreed between the parties on an "all up" basis in the amount of $23,000. 

6. Compensation was determined by me in the amount of $2,946,000 made up of $2,923,000 for the value of the land taken, injurious affection and severance and $23,000 (as agreed) for disturbance items.

7. The reason for each of the parties having alternate assessments of compensation was because of the dispute between them about how many lots might be capable of being developed on the balance land after the resumption.  Hamzah's primary position was that the number of lots in the after case would be only 284 whereas the Chief Executive contended for 302 lots. 

Costs

The Discretion to Award Costs

1. The jurisdiction of the Land Court to make costs orders is the creation of statute. Relevant to this application the power to award costs is contained in s.27(1) of the ALA and s.34(1) of the Land Court Act 2000 (LCA). Subject to s.27(2) of the ALA the discretion is a wide one but of course it must be exercised judicially.[1] 

   [1]            Yalgan Investments Pty Ltd v Council of The Shire of Albert (1997) 17 QLCR 401 at 407 para (f).

2. In this application the discretion is constrained by the operation of s.27(2) of the ALA which effectively provides a formula for determining which of the parties involved in the litigation may be entitled to beneficial orders as to costs.  There is no dispute that in this case it is only the Chief Executive who is so entitled.

3. It is well recognised that costs orders are intended to be compensatory in nature and not punitive.  That is, they are intended to indemnify as far as is possible the successful party against the expense to which he or she has been put by reason of the legal proceedings.  Ordinarily, costs orders are not made by way of punishment of the unsuccessful party.[2]

   [2]Latoudis v Casey (1990) 170 CLR 534, at 543 and 567; Oshlack v Richmond River Council (1998) 193 CLR 72, at 75 and 97.

4. The common law principle which usually tends to dominate the exercise of the discretion to award costs is that such orders should "follow the event".  However, as the Land Appeal Court recently said, in PT Limited and Anor v Department of Natural Resources and Mines[3] costs, being discretionary, no presumptive rule or principle should control the proper exercising of that discretion.  In this context it is also recognised that cases involving the compulsory acquisition of land differ from more usual commercial actions in that the dispossessed landowner, unlike the usual plaintiff in civil proceedings, through no choice or fault of his or her own, is often forced into the situation of having to make a claim for compensation.[4] 

The Arguments of the Parties

[3][2007] QLAC 0121 at paras [20] to [23]; see also Yalgan at pp. 407 and 408, paras (h) and (i).

[4]Banno & Anor v Commonwealth of Australia (1993) 81 LGERA 34 at 53; Minister for the Environment v Florence (1980 – 81) 45 LGRA 127 at 149; Yalgan at 407, para (e).

The Chief Executive's Arguments

1. The submissions made on behalf of the Chief Executive are straightforward and to the effect that:

   (i)In circumstances where compensation as determined by the court was less than the advance, the conduct of Hamzah could only be described as being so excessive and unrealistic as to force the Chief Executive into litigation.

   (ii)By maintaining a figure (albeit a varying one) "substantially in excess" of the determination of the Court and "very substantially in excess" of the Chief Executive's valuations, it was open to infer that the company had effectively "shut the gate" on any chance to settle the claim without resorting to litigation.

2. There was no suggestion that the case prosecuted by the company could or should be described as being vexatious or frivolous. 

   The Arguments Advanced on behalf of Hamzah

3. In summary, the major matters raised on behalf of the company were:

   (i)The position of the Chief Executive is wrong in principle.  It erroneously focuses on the monetary differences between the parties rather than on the conduct of the parties.  In this context particular reference was made to the observations of the Land Appeal Court at sub-paragraph (k) in Yalgan.

   (ii)In any event, when the final figures are looked at objectively, the company had substantial success in achieving compensation of nearly $1,000,000 more than the Chief Executive's final position.  And, was successful in avoiding having to refund a significant proportion of the advance.

   (iii)It was not the quantum of the claim which "shut the gate" on any prospects of settlement.  Rather, it was the respective positions of the parties about the extent of any injurious affecting the balance land which made settlement unlikely.  And, while Hamzah's position concerning injurious affection was a justifiable one, it being supported by relevant experts, the Chief Executive' position was, in many respects unjustifiable or simply wrong.

4. Essentially it is submitted on behalf of Hamzah that when the facts and matters summarised in paragraph 6 of its written submissions are considered, it could not be said that the conduct of the company was so unreasonable, and/or exorbitant that it forced the Chief Executive into otherwise avoidable litigation.

The Respective Positions of the Parties

1. From the date of resumption to the date the hearing concluded both sides contended for a range of figures.  On or about mid-June 2006 the Chief Executive' assessment of compensation was $3,000,000.  At the commencement of the hearing his primary case was for $2,000,000 and his fall back position $2,460,000.  This position remained unchanged save for some minor adjustment (upwards) to take account of disturbance items and the agreement about the before value of the land.

2. The position of Hamzah was more fluid.  The original claim dated 16 October 2006 was for $4,600,000 plus disturbance.  Before trial this was amended to just over $5,000,000.  On the first day of the hearing the claim was amended to a figure of just over $6,000,000 including disturbance with an alternate claim of just over $5,800,000 including disturbance.  By the close of its case, Hamzah was contending for $4,750,000 or in the alternative $3,850,000 plus disturbance.

3. In paragraph 22 of the written submissions for the Chief Executive, various "mid points" for the operation of s.27(2) of the ALA are set out. Mr Fynes-Clinton, counsel for Hamzah, takes issues with these figures and submits that the relevant figures for the statutory formulae prescribed in s.27(2) are $2,000,000 for the respondent and $4,750,000 for Hamzah, being the primary final sums contended for by the parties. I agree.

4. This approach is consistent with the observations of McPherson JA in Commissioner for Railways v Buckler[5] and the approach adopted by the Land Appeal Court in Department of Transport v Nadco Pty Ltd[6] and by the President of this Court in Savina v Department of Main Roads (No. 2)[7].

   [5] (1996) 1 QdR 18 at 23-24.

   [6] (1998) 18 QLCR 408 at 416.

   [7] (2001) 23 QLCR 29.

Determination of Costs Issue

1. Both counsel have referred me to the decision of the Land Appeal Court in Yalgan, where at sub paragraph (k) the Court observed that in compulsory acquisition cases:

   "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 enquire 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)."

2. In my respectful opinion the application of the principles enunciated in sub paragraph (k) of Yalgan is in accordance with the proper exercise of the discretion to award costs in cases such as this. It would be wrong to only have regard to the respective positions of the parties and the amount of compensation determined by the Court. It is not uncommon, in the case of a claimant in proceedings in the Land Court, for compensation to be determined at a figure below the notional halfway point prescribed in s.27(2) of the ALA but still materially more than that finally contended for by the resuming authority. An approach which had regard only to, or gave too much weight to, which party notionally "won" for the purposes of s.27(2) could lead to a claimant's compensation being significantly and unjustly eroded by it having to pay, not only its costs of litigation but also those of the resuming authority.

3. However, unlike the situation for fixing the incidents of costs for the purposes of s.27(2) of the ALA, to focus on the final position of the parties when exercising the discretion given under s.27(1) of the ALA and s.34 of the LCA, may often be unhelpful. Such an approach could provide the opportunity for the unjustly frugal resuming authority or the unrealistically ambitious claimant to, after the testing the waters by running all of the evidence, on the final day of the hearing amend its final position to gain a superior tactical advantage not only in respect of the operation of s.27(2) but also in respect of the overall discretion as to costs. The restriction to or disincentive against such a course of conduct in the case of the claimant provided by s.24(3) of the ALA will not, in my opinion, in every case be sufficient to deal with such situations.  Even more surprisingly and potentially unfairly, no such restrictions or disincentives seem to apply to the resuming authority.

4. In the circumstances of this case the relevant figures are, in my opinion, $6,088,000 and $2,000,000. 

5. Accordingly, excluding the agreed allowance for disturbance and interest the determination of the Court is in the order of $3,000,000 less than the claim faced by the Chief Executive at the commencement of the hearing, $452,000 less than the mid point prescribed by s.27(2) and $77,000 less than the advance paid. These figures strongly suggest that the Chief Executive had a substantial success in the litigation. However, it also needs to be borne in mind that the company achieved $923,000 more than the Chief Executive finally contended for at trial and, as a consequence, avoided having to repay nearly $950,000 of the advance monies.

6. Mr Fynes-Clinton submits that up until less than two working days out from trial, Hamzah believed that the substantive issue between the parties was the treatment of the injurious affection to the balance land and that the Chief Executive's position was that compensation would not be less than the advance of $3,000,000.

7. In his written submissions Mr Fynes-Clinton refers to a valuation prepared sometime before 13 June 2006 by Mr Horrigan, the valuer relied on by the Chief Executive, assessing compensation at $3,000,000.  Important differences between that valuation and his valuation for $2,000,000 relied on at trial are; the number of lots lost as a result of the resumption and the method of valuing the combined effect of the loss of lots and the injurious affection to the balance land.  In the earlier valuation these two items were valued separately whereas in his report at trial (exhibit 10) a more theoretically correct before and after valuation exercise was undertaken.  However, Mr Horrigan consistently in both reports dealt with injurious affection on the basis of it being limited to only one of the retained parcels of land, Lot 3.  This is to be contrasted with Mr Thiel's approach, the valuer relied on by Hamzah, of assessing injurious affection over the whole of the balance lands. 

8. There is no doubt that the extent and effect of injurious affection was always a major difference between the parties. 

9. It was also an issue that occupied a significant amount of the hearing time.  It really dominated the evidence of three witnesses[8] and occupied a material part of the time spent with the two valuers.

   [8]            Messrs Thorne, King and Smale.

10. The respective positions of the parties, supported by the advice of relevant experts, about the extent and effect of injurious affection made litigation virtually inevitable.  As Mr Fynes-Clinton said in his oral submissions it was this issue that effectively "shut the gate" on the possibility of any settlement.[9]

    [9]            Cost submissions T. 10.8,  and 15.8.

11. It is also my opinion that the reduced valuation of the Chief Executive from $3,000,000 to $2,000,000 would have had little (if any) effect on Hamzah's decision to proceed to trial.  To an extent this is confirmed by the company increasing its claim from about $5,000,000 to just over $6,000,000.  In this context I should record that there was no suggestion by Mr Fynes-Clinton that the Chief Executive in some way acted in any inappropriate way in contending for a figure at trial less than the advance.

12. According to Mr Fynes-Clinton, in respect of two of the more important issues litigated, namely the number of lots lost and injurious affection the first was a "draw" and the second a win "on points" to his client.

13. I accept the first proposition but not the second.  In Hamzah's favour I did find the visibility of the roadworks had to be taken into account and that traffic noise would extend beyond Lot 3.[10]  However, while I found that Mr Horrigan had underestimated the extent and effect of injurious affection, I also found that Mr Thiel had materially overstated those matters in his valuation.[11]

    [10]          Reasons for Judgment (RJ) paras 39-47.

    [11]          RJ paras 67 - 68.

14. Further, in support of its case concerning injurious affection, Hamzah relied on the evidence of Mr Smale, a building designer.  While it is not necessary to go into the details of his evidence it is fair to say that much of it was found wanting.  However, while acknowledging this, the company still sought to justify its higher figure of $4,750,000 by relying on Mr Smale's evidence in support of a "fairly arbitrary" additional allowance of $900,000 under the heading of injurious affection.  Leaving aside any factual difficulties associated with Mr Smale's evidence the claim for the additional $900,000 was rejected as being contrary to sound valuation principle and practice.[12]

    [12]          RJ 53 – 54 and 62.

15. In support of his client, Mr Fynes-Clinton referred me to two decisions of the Land Court, Robertsons Furniture and Design (Qld) Pty Ltd v Department of Main Roads[13] and Bowers & Anor v the Shire of Council of Pine Rivers.[14]  In those cases, notwithstanding quite substantial success on the part of the resuming authority the Court made no orders as to costs.  That was so in both cases because the Court determined compensation at an amount significantly above that contended for by the authority and the cases were otherwise conducted in an appropriate and professional manner.[15]

    [13] (2005) QLC 0025.

    [14] (2005) QLC 0053.

    [15]          See also Savina (supra).

16. In his oral submissions, Mr Fynes-Clinton drew comfort from that part of the decision of the President in Robertsons Furniture where he declined to have regard to the advance paid by the authority.  However, that approach needs to be considered in context.  The authority's primary position was nil compensation, the advance was $146,247 and the determination of the Court was significantly more than the advance paid.

17. The determinations of the Court in Savina and Bowers & Anor also exceeded to a material extent the advance paid by the resuming authority.  That is not the case here.  When the advance was paid it was open to Hamzah to accept it.  Had it done so it would have received more than the compensation (excluding) interest determined by the Court.  The time and costs associated with the subject litigation would also have been largely avoided.

18. The payment of the advance in this case significantly alters things.  In circumstances where the claimant rejects an advance which exceeds the determination of the Court and prosecutes a claim double that of the advance, how might it be said otherwise than that the claimant had forced the resuming authority into avoidable litigation.  In such circumstances there is, in my opinion, quite a strong argument that the claimant should have to pay all of the resuming authority's costs.

1. However, it still needs to be borne in mind that the Courts primary function is to determine just compensation in circumstances where the landowner has had its land taken by compulsory process.  Any orders as to costs in this case will materially erode the actual amount of compensation retained by the company.

2. In Haber v Department of Main Roads[16] the Land Appeal Court was relevantly concerned with an appeal against an order made by the President of the Land Court requiring the claimant to pay 50% of the respondent's costs of the hearing.  The relevant facts were; an original claim of $2,684,000 finally amended to $1,591,000, no advance was paid and the department's initial offer was $1,000 and its final figure $111,000.  The Land Court determined compensation in the amount of $273,000.

   [16] [2004] QLAC 0087.

3. In dismissing the appeal, the Land Appeal Court agreed that the claim was appropriately characterised as excessive and that the respondent was substantially successful in most of the live issues and was of course substantially successful in defending the excessive claim against it. However, the Land Appeal Court refused to upset the orders of the President as there had been no error of principle revealed in the exercising of the discretion given under s.27(1) of the ALA.  In determining that costs should be limited to 50% the President had regard to :

   (i)notwithstanding the substantial success of the department, the claimant achieved some success in obtaining an award greater than contended for by the department at trial;

   (ii)the claimant had not acted in a vexatious or dishonest way;

   (iii)the claimant's case was well organised and placed no unnecessary burden on the respondent or the Court;

   (iv)however, some of the issues argued by the claimant were contrary to well established legal and/or valuation practice;

   (v)to order the claimant to pay all of the respondent's costs of a five day hearing would substantially erode the compensation actually received.

4. Most if not all of those matters before the President in Haber are present in this case to varying degrees.  However, apart from the significant differences in the amounts involved, in Haber, no advance was paid and the respondent's original offer was only $1,000.  To receive just compensation the claimant in Haber really had no choice but to litigate. 

5. In Pastrello v Roads and Traffic Authority (NSW), Talbot J declined to have regard to an offer to settle made by the resuming authority in considering the question of costs.[17]  However, in that case the offer was apparently no longer on the table after the land was resumed.  In this case the advance was paid some fifteen months after the date of resumption and, on the material before me, it seems reasonably likely that it was available for some time after that.  In Pastrello, by the time the land was taken, the claimant had no choice but to litigate or accept the respondent's lower revised assessment of compensation.  That is not the case here.  Hamzah for some significant time after the date of resumption had the option of not proceeding to litigation but instead accepting a figure which exceeded (albeit not by much) compensation as determined by the Court. 

   [17] (2000) 110 LGERA 223 at 225 L14-15.

6. Absent the advance, in circumstances where Hamzah achieved in excess of $900,000 more than the Chief Executive's primary case there would be an arguable case for making no orders as to costs or making only strictly limited orders to bring into account the time spent dealing with the issues raised by Mr Smale.  However, for the reasons outlined above, when the advance is brought into account there is also a strong argument for making full costs orders.  

7. However, in the circumstances of this case I have reached the conclusion that the advance itself is not determinative.  On the material before me, by the time this hearing was to commence keeping the advance of $3,000,000 was no longer an option open to Hamzah.  The situation probably facing the company was to agree to return $1,000,000 or some figure thereabouts or continue with its litigation.  In that narrow context it could be said that Hamzah had a "win". 

8. It is also relevant in my view that an advance pursuant to s.23 of the ALA, unlike an offer to settle in more usual commercial litigation, is the consequence of the exercising of compulsory acquisition powers.  The dispossessed landowner, through no fault of his or her own, is forced into the situation of seeking advice from appropriate experts about matters including whether to prosecute a claim for compensation or accept the advance paid by the resuming authority.  In this context the sentiments expressed by Wilcox J in Banno v Commonwealth of Australia[18] are pertinent[19]:

   "… 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.  …"

   [18](1993) 81 LGERA 34 at 53.

   [19]See also Pastrello at 225 L17-19.

9. With the exception of one witness there could be no suggestion that Hamzah did not seek and act upon appropriate advice.  It is clear that I did not accept significant parts of the case advanced on its behalf but, to a not insignificant extent, the same could be said about the case advanced on behalf of the Chief Executive.  The claim while clearly an excessive one is not, in my opinion, one which should be characterised as being "grossly exaggerated" in the context contemplated by the Land Appeal Court in Yalgan or Wilcox J in Banno. 

10. In attempting to balance the competing elements in this case and, in particular, the need for the Chief Executive to be fairly compensated for the costs he incurred in having to defend against the excessive claim made against him with the desirability of ensuring that Hamzah receives fair compensation, I have decided that it would not be appropriate to order that the company pay all of the costs of the Chief Executive but that it should have to pay a significant proportion of his costs. 

11. In the circumstances of this case, I have reached the conclusion that Hamzah should pay 50% of the Chief Executive's costs.

Order

The claimant Hamzah Pty Ltd is to pay fifty percent (50%) of the Chief Executive, Department of Main Roads costs of and incidental to the hearing and determination of the compensation proceedings in the Land Court. 

RS JONES

MEMBER OF THE LAND