Minister for Energy, Environment and Climate Change v Morton (No 2)

[2018] VSC 583

IN THE SUPREME COURT OF VICTORIA Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

S CI 2017 00788

MINISTER FOR ENERGY, ENVIRONMENT AND CLIMATE CHANGE	Plaintiff
v
PATRICIA SUZANNE MEGSON DAVID ALEX MORTON (as joint executors of the will of JOHN ALEX MORTON)	Defendants

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JUDGE:	Garde  J
WHERE HELD:	Melbourne
DATE OF HEARING:	9 July 2018
DATE OF JUDGMENT:	9 July 2018
CASE MAY BE CITED AS:	Minister for Energy, Environment and Climate Change v Morton (No 2)
MEDIUM NEUTRAL CITATION:	[2018] VSC 583

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PLANNING AND ENVIRONMENT ­­­– Costs – Claim for compensation under s 100 of the Planning and Environment Act 1987 (Vic) – Claim for interest under s 60(1) of the Supreme Court Act 1986 (Vic)­ – Calderbank offer – Claim for indemnity costs – Prematurity – Land Acquisition and Compensation Act 1986 (Vic) s 91 – Hazeldene's Chicken Farm Pty Ltd v Victorian Work Cover Authority (No 2) (2005) 13 VR 435; [2005] VSCA 298 – Award of costs.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Mr G Peake	Victorian Government Solicitor’s Office
For the Defendant	Mr I Munt	Rennick & Gaynor

HIS HONOUR:[1]

Introduction

[1]This is an edited version of an oral judgment given on 9 July 2018.

1. In this proceeding, the claimants were successful in a claim for increased compensation in relation to a residence known as ‘Arva’, located at 1645 Boundary Road, Mount Cottrell in Victoria. The claim was made under s 100 of the Planning and Environment Act 1987 (Vic) (‘PE Act’). The Court awarded compensation, quantified and agreed by the parties at $60,000. A second claim was a claim for interest and was made under s 60(1) of the Supreme Court Act 1986 (Vic) (‘Supreme Court Act’). The Court awarded simple interest in the amount of 10 per cent per annum.

1. The claimants seek an order for the costs of the proceeding at the standard rate from 6 March 2017 to 14 September 2017, and indemnity costs from 14 September 2017.

1. The Minister consents to an order for costs assessed on the standard basis for the s 100 dispute under the PE Act , and for certain remaining issues, but opposes any order for indemnity costs or even for a standard costs order, in relation to the s 60 claim for interest under the Supreme Court Act.

Background

1. On 31 August 2017, the claimants made a Calderbank offer to the Minister, offering to accept the amount of $40,000 in relation to the s 100 claim and $310,000 in relation to the s 60 claim. The offer expired two weeks later on 14 September 2017. Ultimately, the claimants recovered compensation of $60,000 on the s 100 claim, and an amount of $317,245.63, calculated as at the date of the Calderbank offer.

1. The Minister has appealed to the Court of Appeal concerning the decision to award interest under s 60 of the Supreme Court Act.

Statutory framework

1. Section 105 of the PE Act and s 91 of the Land Acquisition and Compensation Act 1986 (Vic) (‘LAC Act’) govern the Court's power to award costs in this proceeding. Section 91 of the LAC Act provides:

(1) In any proceedings under this Part, the Tribunal or the Court (as the case requires) may award such costs as it thinks proper but in making an order for costs must, if the Tribunal or Court considers it appropriate to do so, take into consideration—

(a) the amount of compensation awarded by the Tribunal or Court as compared with the amount (if any) offered by the Authority; and

(b) the extent to which, in the opinion of the Tribunal or Court, the proceedings have arisen from, or been affected by—

(i) unreasonable conduct on the part of the claimant or the Authority; or

(ii) the failure of the claimant to give adequate particulars of the claim or supply supporting material when required to do so; or

(iii)     an excessive claim by the claimant; or

(iv)     an unduly depressed offer by the Authority; and

(c) any other matters which under this Act are to be taken into account in determining the allocation of costs.

(2) The Court may make an order with respect to the assessment of costs in the same manner as it may in respect of any other matter before the Court.

1. In Love v Roads Corporation,[2] the Court of Appeal held that a Calderbank offer may be taken into account when deciding whether and how the court should exercise its power to award costs. The Court held that it was open to a court or tribunal to consider conduct arising from the making of a 'without prejudice' offer, when having regard to unreasonable conduct by one or other of the parties under s 91(1)(b)(i) of the LAC Act.[3]

   [2][2011] VSCA 434.

   [3]Ibid [168].

1. In Hazeldene's Chicken Farm Pty Ltd v Victorian Work Cover Authority (No 2),[4] the Court of Appeal listed relevant considerations when the court is considering whether to award indemnity costs following a Calderbank offer.

   [4](2005) 13 VR 435; [2005] VSCA 298 (‘Hazeldene (No 2)’), cited in Commissioner of State Revenue v Challenger Listed Investments Ltd (No 2) [2011] VSCA 398, [8] (Buchanan, Tate JJA and Sifris AJA).

Prematurity

1. The Minister submits that the Court should not make any order for costs in relation to the s 60 claim, as the outcome of the controversy is not yet known, because of the appeal to the Court of Appeal.

1. The Minister also submitted that the application for indemnity costs with respect to the s 100 claim is premature, because the quantum offered on a 'without prejudice' basis depends on the outcome of the s 60 dispute. As a result, it was said that the Court is not in a position to consider all the relevant factors required under s 91 of the LAC Act.

1. The submission of prematurity cannot be accepted.  No authority is cited in its support.  In general, fragmentation of decision making should be avoided. 

1. The Court of Appeal is assisted if a judge sitting in the Trial Division completely decides the case including the costs outcome.  It is undesirable for the trial judge to leave the case partially undecided or incomplete.

1. Further, if the issue of costs is left undecided, the Court of Appeal is left in uncertainty as to what the trial judge would have done had the outstanding issue been determined.  Not only is this inconvenient, but it may result in the need to approach the Court of Appeal on a second occasion after the trial judge has decided all the issues.

1. If an appeal is successful, cost orders made by the first instance judge are before the Court of Appeal and can be revisited in the light of the decision made on appeal, should it be appropriate to do so.

Cost orders

1. The settled practice is that in the absence of special circumstances, a successful litigant should receive his or her costs.[5]  The practice has been followed in many cases.[6]

   [5]Ritter v Godfrey [1920] 2 KB 47, 52; cited in Donald Campbell & Co Ltd v Pollak [1927] AC 732, 809, 811.

   [6]See Gladstone Park Shopping Centre Pty Ltd v Wills (1984) 6 FCR 496; 59 ALR 109; Raybos Australia Pty Ltd v Tectran Corp Pty Ltd (No 2) (1988) 77 ALR 190, 191; TAC v O'Reilly [1999] 2 VR 436, 456–7; [1998] VSCA 106.

1. In the present case, the claimants were successful on both the s 100 and s 60 claims and on other claims which were resolved between the parties. No special circumstances to displace the general rule have been advanced by the Minister. As a result, the claimants are at least entitled to the costs of the proceeding, to be taxed at the standard rate from the time of the notice of referral.

Indemnity costs claim

1. The claimants seek indemnity costs from 14 September 2017 when the Calderbank offer expired. 

1. When applied to the current case, the considerations listed in Hazeldene (No 2)[7]are:

   [7](2005) 13 VR 435, 442 [25]; [2005] VSCA 298, [25].

(a)   the offer was made at an advanced stage of the proceeding; 

(b)   the time for acceptance of 14 days was reasonable;

(c) the extent of the compromise offered was $20,000 or one-third of the amount ultimately awarded in the s 100 claim. A small discount of around $7,200 was offered in the case of the s 60 claim;

(d) the Minister’s chances of success, based on past decisions of the High Court of Australia and the Supreme Court, were not strong in the case of the s 100 claim;

(e)   the terms of the offer were clearly expressed; and

(f)     the offer referred to the Calderbank decision, and to other relevant decisions. It foreshadowed an application for indemnity costs in the event of the offer being rejected. 

1. The claimants submit that:

(a)   as claimants for compensation, they are in the position where they have to go to court to recover their entitlements;[8] 

[8]Love v Roads Corporation [2011] VSCA 434.

(b)   there is potentially a power imbalance between an acquiring authority and claimants;[9]

[9]Ibid.

(c)    the court should view favourably claims by claimants for costs in compensation proceedings;[10]

[10]Ibid [173].

(d) the Minister decided to test two legal issues governing the general application of s 100 and s 60. The Minister was on notice that if unsuccessful, indemnity costs might have to be paid;

(e)   the Minister made nil offers in relation to each item;

(f) the question under s 100 had been decided by the High Court of Australia in Victorian WorkCover Authority v Esso Australia Ltd,[11] and the Supreme Court in the case of Mario Piraino Pty Ltd v Roads Corporation (No 1).[12]

[11][2001] HCA 53; 207 CLR 520; 75 ALJR 1513; 182 ALR 321 (Gleeson CJ, Gummow, Kirby, Hayne and Callinan JJ).

[12][1991] 2 VR 534.

1. The Minister submits that:

(a) the Minister desired to obtain rulings from the court on complex issues of statutory interpretation relating to the operation of s 100 and s 60. These questions are important to planning authorities, acquiring authorities and claimants. By compromising the major claims by the claimants, the parties isolated the s 100 and s 60 disputes into discrete test cases and minimised the costs borne by the parties;

(b)   the claimants’ offer of compromise was a lump sum offer, but in substance was tantamount to an offer for the Minister to capitulate on the two questions of principle in dispute;

(c)    the Calderbank offer was not a real compromise.  There were comparatively small differences between the sums that the claimants offered to settle for, and the amounts ultimately awarded; and

(d)  there is no authority for the proposition that the claimants should be awarded indemnity costs because of their special position.

1. On balance, and acknowledging the force of the claimant's submissions, I accept the Minister's submissions as to the award of indemnity costs. 

1. The Minister's conduct in the resolution of the dispute was commendably prompt, with all other issues resolved by negotiation. They included the main and much larger compensation claim under s 98 of the PE Act.

1. It was the Minister who referred the claim into court, wished to obtain and sought rulings from the court in relation to the s 100 and s 60 claims. The issues raised by the Minister do have some general importance arising in many compensation claims. Acceptance of the offers would have defeated the Minister's purpose in seeking to bring these claims before the court.

1. I do not consider the Minister's overall conduct to be unreasonable, or such as would persuade me to award indemnity costs despite the fact that the claimants ultimately surpassed the amount of the Calderbank offer. 

1. In all the circumstances, the claim for indemnity costs will fail.  The claimants will receive their costs of the proceeding at the standard rate. 

1. The court will order that the defendants’ costs of the proceeding from the date of the notice of referral on 6 March 2017, be taxed by the Costs Court at the standard rate and when taxed, paid by the plaintiff.