McDonald v Department of Transport & Main Roads

[2016] QLC 8

LAND COURT OF QUEENSLAND

CITATION:

McDonald v Department of Transport & Main Roads
(No. 2) [2016] QLC 8

PARTIES:

Alyssa Jade McDonald
(applicant)

v

Chief Executive,
Department of Transport and Main Roads

FILE NO:

AQL058-14

DIVISION:

General Division

PROCEEDING:

Application for costs 

DELIVERED ON:

29 January 2016

DELIVERED AT:

Brisbane

HEARD AT:

Written submissions - 14 August, 15 September 2015

PRESIDENT:

CAC MacDonald

ORDER:

The application for costs is refused. 

CATCHWORDS:

SOLICITORS:

COSTS – COMPULSORY ACQUISITION – s 27 Acquisition of Land Act 1967 – where the constructing authority was almost wholly successful – whether costs should be awarded to the constructing authority – factors governing the exercise of discretion – conduct of the applicant more relevant than the closeness of the constructing authority’s offer to the judgment amount.

COSTS – applicant’s conduct in pursuing CGT exemption claim justified – compensation claim not held to be unreasonable or unnecessary – application for costs refused.

Acquisition of Land Act 1967
Land Court Act 2000

Barns v Director-General, Department of Transport (1997-98) 18 QLCR 133
McDonald v Department of Transport & Main Roads [2015] QLC 28
Pastrello v Roads and Traffic Authority (NSW) (2001) 110 LGERA 223
Vass and Lambert v Coordinator-General (No. 2) [2015] QLAC 2
Wyatt v Albert Shire Council [1987] 1 Qd R 486
Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 401

Clayton Utz for the respondent

Background

1. On 3 August 2015 I delivered judgment in this matter, in which the applicant sought compensation for the compulsory acquisition of her property at 5/29 Lamington Avenue, Lutwyche[1].

   [1]        McDonald v Department of Transport & Main Roads [2015] QLC 28.

2. I determined compensation at $434,659.95 made up of:

   Agreed value of the property                $420,000.00
     Disturbance   $ 14,659.95
     Total  $434,659.95

3. Disturbance items were made up of:

   Removal and storage fees  $    1,937.00
     Legal fees:
     McCullough and Robertson               $    3,722.95
     Ellison Moschella  $    9,000.00
     Total  $  14,659.95

1. With respect to interest, the respondent submitted that the applicant should only receive half the interest from the time the property was resumed on 29 August 2008 to when the sum of $420,000 was paid into Court on 10 October 2012.  The respondent submitted that the applicant had been dilatory in progressing her claim and accepting the advance, and she had unreasonably delayed this matter[2].

   [2] At [64].

2. After reviewing the evidence, I formed the view that the applicant’s delays in pursuing her claim were not such as to render the payment of interest unreasonable, and I determined that interest be paid in full from 29 August 2008 to 10 October 2012[3].

   [3] At [70].

3. The respondent now seeks an order that its costs of and incidental to the determination of the claim for compensation be paid by the applicant[4].  The applicant submits that no order for costs should be made[5].

   [4] Respondent’s submissions on costs filed 14 August 2015 at [1].

   [5]Applicant’s costs submissions filed 15 September 2015 at p 25. The applicant, at pp 12 and 25 of her submissions, appears to seek costs for unrequired expert reports from Mr Monaghan and Mr Hunt. Pursuant to s 27(2) Acquisition of Land Act 1967 the applicant is unable to obtain a costs order in her favour.

Statutory Framework

1. Section 34 of the Land Court Act 2000 (LCA) provides that:

   “34  Costs 

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

(2)    If the court does not make an order under subsection (1), each party to the proceeding must bear the party’s own costs for the proceeding.”

1. Section 27 of the Acquisition of Land Act 1967 (ALA) provides that:

   “27  Costs

   (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.

   (2)   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.

   (3)   Subsection (2) does not apply to any appeal in respect of the decision of the Land Court or to costs awarded pursuant to section 24(3) or section 25(3).”

2. Section 27 ALA is a provision to the contrary of s 34 LCA and prevails over s 34 for the purposes of determining costs in these proceedings.

3. In terms of s 27(2) ALA the applicant’s final claim was $663,412.45 including disturbance items[6].  The “amount of the valuation finally put in evidence” by the respondent may include not only a sum for the value of the estate or interest taken but also any disturbance losses[7].  In this case the amount of the valuation finally put in evidence by the respondent was $432,722.95 made up of $420,000 for the value of the applicant’s estate or interest in the land taken and $12,722.95 for disturbance being agreed legal costs incurred by the applicant in preparation for filing her claim for compensation in this Court. 

   [6]        Applicant’s submission of quantum filed 4 June 2015.

   [7]        Vass and Lambert v Coordinator-General (No. 2) [2015] QLAC 2 at [42] – [45].

4. Compensation was determined in the amount of $434,659.95 including disturbance costs[8]. As the compensation awarded is closer to the respondent’s final valuation than the applicant’s final claim, the operation of s 27(2) ALA means that costs, if any, can only be awarded to the respondent.

   [8]        McDonald v Department of Transport & Main Roads [2015] QLC 28 at [60].

Legal Principles

1. In exercising the discretion to award costs in compulsory acquisition cases, the following principles should be considered:

   (a)The discretion is to be exercised judicially, that is for reasons that are not arbitrary, and must be justified by reference to relevant considerations.[9]

   [9]Wyatt v Albert Shire Council [1987] 1 Qd R 486 at 489; Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 401 at 407.

   (b)The fact that the claim is for compensation for the compulsory acquisition of land must be taken into account.  Compulsory acquisition cases are different from ordinary claims in the significant respect that the claimant, unlike the ordinary plaintiff, has no choice whether to make a claim or not.  The mere acquisition by a compulsory process gives the claimant a claim to compensation which he or she could hardly be expected to renounce[10].

   [10]        Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 401 at 407.

   In Barns v Director-General, Department of Transport[11], the Land Appeal Court said:

   [11] (1997-98) 18 QLCR 133 at 135,136.

   “This Court has an unfettered discretion as to the costs of and incidental to an appeal before it.  An unfettered discretion is not an unprincipled one, and on ordinary principles, costs in circumstances such as these would follow the event.  The general rule that costs will usually follow the event is one which is deeply embedded in our law. Although it has attracted some criticism in recent years, there was no attempt by the legislature to modify it when the practice of this Court was given attention in the Land Act 1994. It is a general rule which prima facie should be applied in this case.

   The respondent submitted that the rule is not always applied by Courts exercising jurisdiction in land compensations matters.  He cited Moyes v Townsville City Council, Theo v Brisbane City Council, Minister for the Environment v Florence and Banno V Commonwealth of Australia.  These cases show that in compensation cases, the Land Court must take into account the fact that an appeal to that court is the only way in which a dispossessed owner can obtain an independent determination of the value of the land taken.  As Wilcox J said in Banno:

   “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 case 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”.”

   Similarly, in Pastrello v Roads and Traffic Authority (NSW)[12], Talbot J said:

   “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.”

   (c)        The conduct of the parties is relevant, particularly the conduct of the applicant.

   When considering whether to award costs against a claimant, the Land Appeal Court said in Yalgan[13]:

   “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.

   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 (Moyes 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).”

   [12] (2000) 110 LGERA 223 at 225.

   [13] (1997) 17 QLCR 401 at 408.

Submissions as to costs

1. The respondent concedes that easy access by parties to the Land Court is desirable in acquisition cases.  However in the present case where the respondent has been almost wholly successful, it submits that the general rule that the successful party should have its costs should apply.

2. The respondent submits that the rationale for a costs order in its favour is that it is just and reasonable for a party to reimburse another party for its costs in litigation where it has been proven that the other party was fully unjustified and unnecessarily initiated that litigation[14].  In this case, the Court’s decision was so close to the respondent’s position that this is an exceptional case where costs should be awarded in favour of the constructing authority[15].

   [14] Respondent’s submission on costs at [18].

   [15] At [20].

3. The respondent submits that the following circumstances are relevant to the exercise of the Court’s discretion as to costs[16]:

   (a)The result was not borderline but the respondent succeeded in all substantial respects.

   (b)The conduct of the applicant, including making the capital gains tax (CGT) claim, was such as to force the respondent unreasonably and unnecessarily into litigation.

   (c)The respondent acted reasonably and responsibly in the proceedings, in particular in agreeing from the outset the amount of $420,000 for the value of the property and making a payment into Court. Certain disturbance items were also agreed by the respondent.

   (d)At no time did the applicant attempt to resolve this matter for an amount even significantly less than the amount of her final position.

   [16] At [19].

4. The applicant submits that her CGT exemption claim was warranted because:

   (a)The claim was unique and complex thereby requiring a full investigation and a fair and measured decision by the Court[17].

   (b)The Court has indicated that it could not find any precedents where a similar CGT claim had been made previously, and the legal principles were not straightforward, particularly for non-lawyers[18].

   (c)The respondent agreed on various occasions that the CGT issue/claim was complex[19].

   [17]        Applicant’s cost submission page 15 at [13.5].

   [18]        McDonald v Department of Transport & Main Roads [2015] QLC 28 at [29] and [70].

   [19]        Applicant’s Cost Submission p. 18 at [13.13].

5. The applicant denies that she deliberately delayed her compensation payout.  The applicant submits there was no reason for her to delay the matter and in fact she was always open to settlement discussions[20].  The applicant submits that she and her family acted as best as they could and at all times earnestly requested expert guidance from tax/law experts and the Australian Taxation Office[21].

   [20] P 6 at [6] and Part 2, p. 29 from [10].

   [21] P 1 at [1].

Consideration of Issues

1. This is a case where the respondent has been almost wholly successful in the position it took relating to the quantum of compensation payable.  The respondent estimated the value of the land at $420,000.  In addition the respondent had agreed the quantum of the legal fees ($12,722.95) claimed as disturbance.  The only additional amount gained by the applicant as a result of the hearing was $1,937 for removal and storage fees. 

2. The applicant agreed that the value of the land was $420,000 and the legal costs claimed as disturbance were also agreed.  As explained in my judgment determining compensation, the applicant’s principal reason for pursuing the claim to hearing was her belief that she was entitled to compensation for loss of a CGT exemption[22].  There were also differences between the applicant and respondent as to whether and how much of the disturbance items were allowable. 

   [22]        McDonald v Department of Transport & Main Roads [2015] QLC 28.

3. The respondent’s submissions are to the effect that costs should be awarded to the respondent because the respondent substantially succeeded, and the applicant’s pursuit of the claim, including the CGT based claim, was such as to force the respondent unreasonably and unnecessarily into litigation. 

4. Although the respondent has been almost wholly successful in relation to the quantum of the claim, the Land Appeal Court said in Yalgan, as set out above, that 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.  What is more relevant is whether the applicant’s conduct forced the authority, unreasonably and unnecessarily into litigation, or whether the claim was vexatious, dishonest or grossly exaggerated or was put in such a way as to impose unnecessary burdens on the constructing authority[23].

   [23]        Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 401 at 407.

5. I expressed the view, in the decision determining compensation, that while the applicant was mistaken as to the liability of the respondent to pay compensation for loss of the CGT exemption, she was entitled to pursue a claim which she honestly and reasonably believed to be valid[24].  In that regard, I note that the applicant had obtained professional advice from an accountant and also from a barrister, Mr Alan Hyam, in support of her position.  It is also noted that Mr Hyam is a specialist in land valuation law, being the author of the monograph “The Law Affecting Valuation of Land in Australia”.  Mr Hyam’s opinion was that the CGT claim was arguable. 

   [24]        McDonald v Department of Transport & Main Roads [2015] QLC 28 at [69].

6. In those circumstances I do not consider that the applicant’s pursuit of the CGT based claim can be said to be vexatious or dishonest.  Indeed the respondent has not submitted that it was. 

7. It is also the case that, between 26 February 2014 (the date the applicant filed an originating application) and 4 June 2014 (the date the applicant finally identified the amount of her claim), the applicant’s CGT claim varied from $1,782,534 to $2,307,102 to $180,348.  At various times the applicant’s claim also included items for general damages ($50,000) and punitive damages ($150,000) and these claims were only abandoned at the beginning of the hearing.  However, the respondent did not submit that these fluctuations in the amounts claimed provided reasons for an award of costs against the applicant.  

8. While the respondent has undoubtedly succeeded in its response to the claim, that in itself is not sufficient, in my opinion, to justify an award of costs against the dispossessed landowner in this case.  The principal difference between the parties was as to the viability of the applicant’s claim for the loss of the CGT exemption.  Although the applicant did not succeed in that aspect of her claim, the applicant was, as I have said previously, entitled to pursue that claim.  While there were authorities from other jurisdictions that rejected similar claims, there was no clear authority in Queensland dealing with the claim as formulated by the applicant.  The claim required detailed consideration of the authorities and the underlying facts, in the light of the relevant provisions of the ALA.  Give those circumstances, I do not consider that the litigation was unreasonable or unnecessary.  The case was akin to a test case requiring resolution of a point of law.  My conclusion is, therefore, that the respondent’s application for costs should be refused. 

ORDER

The application for costs is refused. 

CAC MacDONALD

PRESIDENT OF THE LAND COURT