Mount Lawley Pty Ltd v Western Australian Planning Commission
[2006] WASC 82 (S)
•12 MAY 2006
MOUNT LAWLEY PTY LTD -v- WESTERN AUSTRALIAN PLANNING COMMISSION [2006] WASC 82 (S)
| SUPREME COURT OF WESTERN AUSTRALIA | Citation No: | [2006] WASC 82 (S) | |
| Case No: | CIV:1550/1997 | 13-23 FEBRUARY, 27 FEBRUARY29 MARCH, 34 APRIL 2006, 1819 DECEMBER 2006 & 6 MARCH 2007 | |
| Coram: | TEMPLEMAN J | 12/05/06 | |
| 29/03/07 | |||
| 23 | Judgment Part: | 1 of 1 | |
| Result: | Plaintiff pay defendant's costs of trial and retrial | ||
| B | |||
| PDF Version |
| Parties: | MOUNT LAWLEY PTY LTD WESTERN AUSTRALIAN PLANNING COMMISSION |
Catchwords: | Costs Resumption of land for town planning Relevance of effect of resumption on landowner's use of the land Success in litigation on basis of either party's proximity to judgment value Reasonableness of not accepting Calderbank offer |
Legislation: | Nil |
Case References: | Allison Pty Ltd v Lumley General Insurance Ltd [2005] WASC 37 Brewarrana Pty Ltd v Commissioner of Highways (No. 1) (1973) 32 LGRA 170 Cerini v The Minister for Transport [2001] WASC 309 Den Hoedt v Barwick [2006] WASCA 196 Dobb v Hacket (1993) 10 WAR 532 Downie v Sorell Council [2005] 141 LGERA 304 Duncan & Weller Pty Ltd v Mendelson [1989] VR 386 GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55 Grbavac v Hart [1997] 1 VR 154 Maloney v Cowra Shire Council [2000] NSWLEC 107 Mann v Carnell (1999) 201 CLR 1 Minister for the Environment v Florence (1979) 21 SASR 108 Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273 Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82 Nevitoro Investments Pty Ltd v Hawkesbury City Council [2000] NSWLEC 151 NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77 Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223 Rolls Royce Industrial Power (Pacific) Ltd v James Hardie and Coy Pty Ltd (2001) 53 NSWLR 626 State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32 |
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
- IN CIVIL
DECISION : 29 MARCH 2007 FILE NO/S : CIV 1550 of 1997 BETWEEN : MOUNT LAWLEY PTY LTD
- Plaintiff
AND
WESTERN AUSTRALIAN PLANNING COMMISSION
Defendant
Catchwords:
Costs - Resumption of land for town planning - Relevance of effect of resumption on landowner's use of the land - Success in litigation on basis of either party's proximity to judgment value - Reasonableness of not accepting Calderbank offer
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Legislation:
Nil
Result:
Plaintiff pay defendant's costs of trial and retrial
Category: B
Representation:
Counsel:
Plaintiff : Dr J T Schoombee & Mr P L Harris
Defendant : Mr K M Pettit SC & Ms D E Quinlan
Solicitors:
Plaintiff : Ilberys
Defendant : State Solicitor's Office
Case(s) referred to in judgment(s):
Allison Pty Ltd v Lumley General Insurance Ltd [2005] WASC 37
Brewarrana Pty Ltd v Commissioner of Highways (No. 1) (1973) 32 LGRA 170
Cerini v The Minister for Transport [2001] WASC 309
Den Hoedt v Barwick [2006] WASCA 196
Dobb v Hacket (1993) 10 WAR 532
Downie v Sorell Council [2005] 141 LGERA 304
Duncan & Weller Pty Ltd v Mendelson [1989] VR 386
GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55
Grbavac v Hart [1997] 1 VR 154
Maloney v Cowra Shire Council [2000] NSWLEC 107
Mann v Carnell (1999) 201 CLR 1
Minister for the Environment v Florence (1979) 21 SASR 108
Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273
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Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82
Nevitoro Investments Pty Ltd v Hawkesbury City Council [2000] NSWLEC 151
NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77
Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223
Rolls Royce Industrial Power (Pacific) Ltd v James Hardie and Coy Pty Ltd (2001) 53 NSWLR 626
State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32
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1 TEMPLEMAN J: These reasons deal with the costs of the trial and the re-trial of the actions brought by Mount Lawley Pty Ltd ("Mount Lawley") against the Western Australian Planning Commission ("WAPC"). However, the parties are agreed that, at this stage, matters of detail (such as special costs orders) should not be considered (TS 8561).
Background
2 The history of this litigation is set out in the judgment of the Full Court in Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 29 WAR 273, and my reasons in Mount Lawley Pty Ltd v Western Australian Planning Commission [2006] WASC 82. However, it will be convenient to provide a short summary as a background to the submissions made by the parties in relation to costs.
3 Mount Lawley is the owner of some 309 hectares of land which was zoned rural under the Metropolitan Region Scheme but which was reserved for parks and recreation on 16 October 1992.
4 On 14 December 1994, some 7.9 hectares of the reserved land was re-reserved for a Controlled Access Highway.
5 Following an unsuccessful application to develop the reserved land, Mount Lawley sought compensation from the WAPC. On 7 May 1996, the WAPC elected to acquire the land instead of paying compensation, as it was entitled to do pursuant to s 36(2)(b) of the Metropolitan Region Town Planning Scheme Act 1959 (WA) ("the Scheme Act").
6 The parties were unable to agree the value of the land. Mount Lawley contended that but for the reservation, the land would have been rezoned for urban use and was therefore worth some $15 million. The WAPC contended that the land would never have been rezoned and that it should be valued as rural land worth some $2 million.
7 In these circumstances, it was necessary for the value to be determined, pursuant to s 36(2b) of the Scheme Act. Mount Lawley elected to apply to the Supreme Court for this purpose.
8 The action was tried over some 68 days ("the Mount Lawley trial"). The trial Judge held that the value of the reserved land was $2.918 million. This figure included certain outgoings and expenses paid by Mount Lawley in relation to the land. The trial Judge awarded interest on the various components of value.
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9 Mount Lawley appealed on the issue of value: and the WAPC cross-appealed on the issue of the components of value relating to expenses and outgoings, and on the interest issue ("the Mount Lawley appeal").
10 In the Mount Lawley appeal, the Full Court set aside the judgment of the trial Judge and ordered a re-trial. The Full Court ordered also that the costs of the trial should be reserved to the re-trial Judge.
11 In relation to the valuation issue, the Full Court held that the appropriate approach was to determine the premium, if any, that a hypothetical purchaser, perfectly acquainted with the land and all of its characteristics, would be prepared to pay, over and above the rural value, in order to reflect any development potential the land would have had, but for the reservation.
12 Despite this, in the re-trial, Mount Lawley maintained its contention that the reserved land should be valued on the basis of an urban or urban deferred zoning and that it was therefore worth in excess of $15 million.
13 The WAPC contended that the reserved land had little or no development potential.
14 In the re-trial, I held that if the reserved land was to be valued on the basis that it was suitable for rural use only, it would have been worth $2 million. However, the valuers called by the WAPC were of the opinion that a purchaser would have paid a premium to reflect the possibility that there might be a rezoning at some indeterminate time in the future. I accepted the evidence of the more optimistic of those valuers that, allowing for such a possibility, the reserved land was worth $4 million.
15 In relation to costs, s 37(1) of the Supreme Court Act 1935 (WA) provides that the costs of and incidental to all proceedings in the Supreme Court "shall be in the discretion of the Court or Judge". This provision is repeated in O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA), which goes on to provide:
"but, without limiting the general discretion conferred on the Court by the Act, and subject to this Order, the Court will generally order that the successful party to any action or matter recover his costs."
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16 In the present case, both parties claim to have been successful. Mount Lawley makes that claim on the basis that it succeeded in demonstrating that its land had some development potential: a proposition which (it is said) has always been rejected by the WAPC. The WAPC claims to have been successful on the basis that the value of the land was found to be far less than that for which Mount Lawley contended.
17 Against that background, I turn to consider the parties' submissions in more detail.
Mount Lawley's first argument
18 Mount Lawley contends that because the purpose of the litigation was to determine the price which the State must pay in order to acquire land effectively sterilised by the reservation, Mount Lawley should recover its costs of that exercise.
19 In support of that proposition, Mount Lawley relies on a number of authorities, commencing with Brewarrana Pty Ltd v Commissioner of Highways (No. 1) (1973) 32 LGRA 170. In that case, the issue was the amount of compensation to be paid to a landowner whose land had been acquired compulsorily by the Commissioner of Highways.
20 The case was heard by Wells J sitting in a special division of the Supreme Court of South Australia known as the Land and Valuation Court.
21 Dealing with the question of costs, Wells J referred to the expression the "successful litigant", apparently as it was used in s 46 of the Compulsory Acquisition of Land Act 1925 (SA). His Honour said:
"In this jurisdiction, of course, the notion of the successful litigant is not exactly the same as in other jurisdictions. In all but the most exceptional cases, the claimant is entitled, ex concesso, to some compensation: the only question is whether he is to receive more or less. Ordinarily, too, he can expect to receive his costs to be taxed, because he was in no way responsible for the compulsory acquisition; the statute tells him, in effect, that he must be given fair compensation, and if he disputes the acquiring authority's offer, he is entitled to have a court fix the correct amount. Speaking generally, the practical question will usually be whether there is some ground for depriving the claimant of some or all of his costs, or whether, exceptionally, the authority should be awarded some costs. An
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- open offer may have been made and unreasonably rejected by the claimant; he may have been awarded more than the authority was prepared to allow him, but a great deal less than he was claiming; he may have pursued an issue, or prolonged the hearing on some topic, in circumstances in which it was unreasonable for him to do so. Any one of these may upset the even tenor of the usual practice." (32 LGRA at 206)
22 Wells J rejected the submission that the plaintiff had adduced certain evidence unnecessarily and had subjected one of the defendant's valuers to an unduly long cross-examination.
23 He held that the plaintiff should recover its party and party costs of and incidental to the hearing, on the ordinary Supreme Court scale.
24 Mount Lawley then relies on a later decision of Wells J in Minister for the Environment v Florence (1979) 21 SASR 108. This was also a case arising from a compulsory acquisition of land.
25 The Authority had offered compensation of $240,000 and was met with a claim for $434,000. However, at trial, the Authority's valuations were $222,000 and $194,000, while the owner had reduced his claim to $350,000. He was awarded $300,000.
26 Wells J approached the question of costs much as he had done in Brewarrana. He said:
"Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s. 18 of the Act, a claim to compensation which he could hardly be expected to renounce.
Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who has already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable
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- costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won. But costs are, as always, discretionary, and no hard and fast rule 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." (21 SASR at 134 - 135)
27 By then, it seems that the relevant legislation had been amended to give statutory force to the considerations to which Wells J had referred in Brewarrana. Section 36 of the Land Acquisition Act 1969 (SA) provided that in any proceedings under that Act, the Court might award such costs as it thought proper. However, where the Court thought it appropriate to do so, it was required to take into consideration:
"(a) the amount of compensation awarded by the Court as compared with the amount (if any) offered by the Authority;
and
(b) the extent to which, in the opinion of the Court, the proceedings have arisen from, or been affected by -
(i) unreasonable conduct on the part of the claimant or the Authority;
or
(ii) an excessive claim by the claimant or unduly depressed offer by the Authority."
29 On that basis, counsel urged on Wells J that he should create a new principle in awarding costs in matters such as these, according to which the Court would make its orders after asking and answering the question:
"Who, on the whole, has been the most successful?"
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30 Wells J said he was attracted to the argument but was unpersuaded that it was safe to treat it as the main question for all cases. His Honour said:
"I am of the opinion, however, that it should generally be asked and answered, at all events in the preliminary stages of reasoning." (at 137)
31 Wells J then referred to the fact that the Authority had come to trial having made an open offer of $270,000. This was, of course, less than the amount of compensation awarded to the claimant. However, it had emerged at trial that the claimant's valuation contained an error. Wells J considered that when the open offer and the Authority's valuation were received by the claimant and his advisers, they should have been put on enquiry about the validity of the claim. This process would have been likely to lead to further negotiations which could have led to a settlement at a figure close to the award. Although such a settlement would have required further interlocutory proceedings and negotiations, the costs would have been lower than those incurred through the trial process.
32 His Honour also had regard to the fact that the conduct of the Authority had not been such "as would have instilled complete confidence into those having the carriage of the claimant's case". In particular, there were "the strange discrepancies between the statutory offer and the open offer, on the one hand, and the value supported by the testimony of the Authority's valuer, on the other."
33 In all those circumstances, the Authority was ordered to pay three-quarters of the claimant's costs of and incidental to the reference on "the First scale". As I understand it, this is a scale appropriate to the trial process.
34 Mount Lawley then refers to the judgment of Talbot J in the Land and Environment Court of New South Wales in Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223. In that case, the applicants sought compensation following compulsory acquisition of part of their land. The Authority had offered $230,000 by way of compensation. This was made up of $53,400 for the value of the land and $176,253 being the applicants' costs and expenses and the value of work which they had carried out on the land.
35 The Court ultimately accepted that the value of the land was $53,400. However, the applicants were awarded a greater amount than they had been offered in negotiations to compensate them for the
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- disturbance to their business resulting from the acquisition and works associated with it. Talbot J said:
"In one sense the applicants were totally unsuccessful on one aspect of this issue because the Court rejected the evidence of their expert witnesses and preferred the opinion of the respondent's experts who contended there would be no impact upon the viability of the existing business.
Nevertheless, it must be noted immediately that the applicants would not have been successful in recovering $53,400, representing the market value of the land if they had not persisted with the referral to the Court.
Furthermore, the applicants were successful in recovering disturbance items totalling $131,135.50 over and above those items in respect of which agreement had been reached either before the commencement of the proceedings or during the course of the proceedings." (at 224)
"For the respondent to now turn around and say that the applicants should not have any order for costs in relation to the market value issue on the basis that they could have accepted the pre-acquisition offer is fatuous in circumstances where the offer was not maintained after acquisition and never raised by the respondent as a basis for compensation during the course of the hearing.
The issue of the value of the land taken and the effect on adjoining land was clearly one upon which the parties differed. In the result, the applicants were successful in recovering compensation under this heading which they would not have otherwise recovered. The Court's task is to assess the amount of compensation payable in a lump sum." (at 225)
- His Honour went on to refer to instances in which the Court had been prepared to make special costs orders in the exercise of its discretion. His Honour said that in Maloney v Cowra Shire Council [2000] NSWLEC 107 and Nevitoro Investments Pty Ltd v Hawkesbury City Council [2000] NSWLEC 151, there had been clearly defined and separate issues upon which the respective applicants had failed totally. His Honour said that this was not such a case. His Honour continued:
- "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."
- His Honour went on to note that an order for costs against the applicants would have had a significant impact on the ultimate amount they recovered. Further, his Honour held that the applicants were entitled to investigate the impact that the acquisition had on the market value of their land and to put forward "cogent arguments for compensation". The arguments presented by the applicants' experts and by the applicants themselves were not frivolous "and fell within the contemplation of the relevant legislation". His Honour therefore concluded that there should not be a special order for costs. The Authority was ordered to pay the applicants' costs of the proceedings, including the application for costs.
37 The passage set out above from the judgment of Talbot J was adopted by Hill AJ in Downie v Sorell Council [2005] 141 LGERA 304 at [112], a decision of the Full Court of the Supreme Court of Tasmania in a compensation case. Talbot J accepted submissions that generally, the approach to the question of costs in such matters should include a consideration by the Court of the following matters:
"(1) Costs should be awarded to the claimant if the award of compensation is significantly higher than the amount offered by the authority.
(2) The determination of compensation is not ordinary litigation and arises out of a unilateral decision by the acquiring authority to compulsorily acquire the claimant's land.
(3) Costs are compensatory, not punitive.
(4) The extent to which an award of costs to the acquiring authority will erode the full benefit of the compensation
- awarded. (His Honour then referred to the passage from the judgment of Talbot J in Pastrello (supra) at [17].)
- (5) The extent to which the claim was frivolous or excessive as compared to the amount awarded."
38 His Honour went on to note that the trial Judge in the case under appeal had found that the claim was not frivolous.
39 A similar approach was taken by Blow J in State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32. His Honour had been a member of the Court in Downie v Sorell Council (supra).
40 As appears from the judgment of Blow J, s 60 of the Land Acquisition Act 1993 (Tas) is a provision in almost identical terms to s 36 of the Land Acquisition Act 1969 (SA) to which Wells J referred in Brewarrana (supra) and which I have set out above.
41 In exercising his discretion in Effingham's case (supra), Blow J noted that the compensation awarded to the respondent was only $3500 more than had been offered by the Crown. However, it was "tens of thousands of dollars less than the respondent was seeking". His Honour was therefore of the view that the Crown should be regarded as having had a greater victory than the respondent. However, his Honour regarded it as very significant that it had been necessary for the respondent to take the case to a hearing in order to obtain the amount of compensation determined to be appropriate.
42 Blow J also took into account that the respondent's compensation would be eroded significantly if it was ordered to pay costs or if it did not recover its costs in full. His Honour referred to Pastrello's case (supra) and Downie v Sorell Council (supra).
43 Blow J noted that the respondent had relied on an expert whose opinions he had rejected. His Honour said:
"I concluded that they were unrealistic, and inconsistent with common sense. He made absolutely ridiculous assertions …" (at [13]).
44 Further, the respondent had failed on an important issue in the case. His Honour said that but for the respondent's reliance on the discredited experts and its failure on the particular issue, he would have ordered the applicant to pay all the respondent's costs. However, in the
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- circumstances, his Honour ordered that the applicant pay 85 per cent of the respondent's costs.
45 In my view, two points emerge clearly from the authorities on which Mount Lawley relies. First, is the fact that they are all compensation cases. Mount Lawley contends that the present case should be approached in a similar way, because although its land has not been acquired compulsorily, it has been effectively sterilised by the reservation.
46 In the Mount Lawley appeal, the Full Court gave detailed consideration to Mount Lawley's contention that the WAPC's election to acquire the reserved land under s 36(2)(a) of the Scheme Act should be regarded as a compulsory acquisition. Had that contention been accepted, Mount Lawley would have been entitled to be compensated for the kind of expenditure, including rates, land tax, metropolitan region improvement tax, and the cost of insurance, fire prevention and maintenance to which it would have recovered on a compulsory acquisition.
47 The Full Court did not accept Mount Lawley's contention. The Court held that the election to acquire is not equivalent to a compulsory acquisition and the election is not binding on Mount Lawley ((2004) 29 WAR 273 at [263]).
48 In my view, it does not follow from this conclusion that in exercising the costs discretion in a valuation case, the Court should ignore that the proceedings have arisen out of a reservation. In some cases, a reservation might not have a great impact on the landowner. An owner who resides on the land affected by the reservation or who derives his income from it, may continue to do so. The owner has the comfort of knowing that in due course, when convenient to him, he can sell the land to the State at a fair price, to be determined in the market at that time, without regard to the reservation. However, when the reserved land is owned by a developer, the situation might be different. Once the reservation is in place, the developer's plans, whether they be short or long term, are inevitably frustrated. In those circumstances, there might be no point in the developer retaining the land: he might want to sell and move on.
49 In Cerini v The Minister for Transport [2001] WASC 309, Parker J at [21] said:
"I do accept that there is a public interest in enabling those who have been the subject of compulsory acquisition to secure their due entitlement to compensation. In a proper case it would be
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- appropriate, no doubt, to reflect this as the circumstances justified in awarding costs in the action. I accept it to be a relevant consideration …"
50 Again, this observation was made in the context of a compensation case. However, I accept it to be a relevant consideration when considering the costs in a valuation case, that the litigation has arisen from the imposition of a reservation on the subject land. I accept further, for the reasons given above, that this is a consideration which might carry more weight in the exercise of the discretion, if the landowner is a developer.
51 The second point to emerge from the authorities referred to above, is that there is no overriding principle in a compensation case (or in a valuation case) that the amount of compensation (or value) determined by the Court should not be eroded by denying the applicant his costs or requiring him to pay the costs of the relevant authority. In the end, whether or not there are statutory provisions relating to the exercise of the costs discretion in such cases, it is always necessary to have regard to the particular circumstances. It cannot be said that only in an exceptional case should an applicant be deprived of his costs, or required to pay the costs of the relevant authority.
Mount Lawley's second argument
52 Mount Lawley contends that further, and in any event, there are particular circumstances in the present case which support orders for costs in its favour.
53 Mount Lawley contends that it should have the costs of the trial because the position it took there, was vindicated by the determination in the re-trial that the reserved land had some development potential. This was disputed by the WAPC at the trial.
54 Further, Mount Lawley points to the fact that the value of $4 million determined at the re-trial was greater than the highest valuation put forward by the WAPC at the trial, namely $2.3 million.
55 In saying that the highest value put forward by the WAPC was $2.3 million, Mount Lawley does not overlook the fact that the WAPC put valuations of $5.25 million to $5.77 million based on a special rural subdivision known as the Burrell Plan. However, although Mount Lawley attacked the Burrell Plan, the plan was rejected by the WAPC itself at the conclusion of the trial.
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56 Mount Lawley then refers to the fact that although the WAPC had argued that no interest was payable on the value of the reserved land to be determined by the Court, the trial Judge did award interest (and was upheld by the Full Court in so doing): and the interest amounted to some $1.6 million by the time the trial Judge delivered his judgment.
57 Finally, in relation to the trial, Mount Lawley relies on the fact that the Full Court held that it was not possible to do justice between the parties "without a proper trial of the complex issues relating to the suitability of the Mount Lawley land for urbanisation and its environmental significance" (29 WAR 273 at [232]).
58 Mount Lawley contends that if it is not awarded the very significant costs involved in litigating those complex issues at the trial, the result will be a material erosion of "the compensation recovered", when those costs were thrown away through no fault of Mount Lawley.
59 Mount Lawley relies on similar arguments in relation to the costs of the re-trial. Although Mount Lawley acknowledges that it succeeded on the basis of a $4 million valuation proffered by the WAPC, it submits that the valuation reflects an acceptance of an alternative submission made in closing, that the Court could determine the value "by assessing the risk which the parties to a hypothetical transaction would attach to the prospects of the land being rezoned at some date after 7 May 1996".
60 Mount Lawley observes that such an approach is apparently reflected at [641] of my reasons. That is so: the Full Court directed that the valuation be carried out on this basis.
The award of costs in the present case
61 In exercising the costs discretion in this case, the starting point must be O 66 r 1(1) of the Rules of the Supreme Court, to which I have referred above. This requires me to consider whether it can be said that there is a "successful party" in the proceedings. That was the approach of Wells J in Minister for the Environment v Florence (supra) on which Mount Lawley relies. It will be recalled that Wells J was of the opinion that at least in the preliminary stages of reasoning, it would be appropriate to ask:
"Who, on the whole, has been the most successful?"
62 The principle contained in O 66 r 1(1) is encapsulated in the proposition that costs usually follow the event. However, in applications made pursuant to s 36(2b) of the Scheme Act, the Court is required only
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- to determine a value. The concept of the "event" does not involve any consideration of liability.
63 An owner will apply to the Court to determine the value of his land under s 36(2b) only if he is unable to reach agreement as to the price to be paid, under s 36(2a).
64 Valuation is not an exact science. Therefore, if the price sought by the owner is not significantly greater than that offered by the WAPC, it is likely that a compromise will be reached. Generally speaking, therefore, litigation under s 36(2b) is necessary only when the views of the opposing valuers are widely divergent.
65 It is well settled that the Court does not itself carry out valuations. Again, speaking generally, the Court decides the value on the basis of the expert valuation evidence adduced by one of the parties, in preference to that adduced by the other.
66 It follows, that the outcome of the litigation will be the determination of a value which is, or is close to, that advanced by one of the parties. It will therefore be clear whether the owner or the WAPC has been the successful party.
67 Adopting that approach in the present case, there can be no doubt that the WAPC has succeeded. That is because I accepted the evidence of one of its valuers at $4 million and did not accept the evidence of Mount Lawley's valuers at between $11 million and $15.5 million.
68 That, of course, was the outcome of the re-trial. However, I consider that costs should be awarded on the basis that the trial and the re-trial were part of a single valuation exercise. Indeed, much of the evidence given at the trial was adopted or repeated for the purposes of the re-trial.
69 I can see no basis for regarding either party as having been successful at the trial, given that the decision of the trial Judge was set aside by the Full Court. Nor do I accept that Mount Lawley should be regarded as the successful party at the re-trial, on the basis that it demonstrated that the reserved land had some urban potential, when that had been denied consistently by the WAPC.
70 The overriding issue in the litigation was (and could only be) the value of the reserved Mount Lawley land. A finding that the land had some development potential is, therefore, a factor to be taken into account in the valuation process. In other words, that finding is reflected in the
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- value. It cannot form a basis for gauging overall success in the proceedings.
71 In fact, the valuation which I accepted and which included a premium for development potential, was that put forward by the WAPC. Had it not done so, there would have been no evidence on which Mount Lawley could have discharged the onus of proving that the development potential of the reserved land had any value. Although the Court is required to determine value, it can only do so on the basis of the evidence adduced by the parties: the Court does not conduct an enquiry.
72 I therefore see no reason to depart from the usual principle that costs should follow the event. Not only was the WAPC the successful party (on the basis of the approach outlined above) but Mount Lawley's approach to the litigation was, in my view, fatally flawed.
73 That is because Mount Lawley did not follow the direction given by the Full Court. This required a determination of the premium (if any) a hypothetical purchaser, perfectly acquainted with the reserved land and all of its characteristics, would have been prepared to pay, over and above the rural value, in order to reflect any development potential the land would have had, but for the reservation.
74 However, Mount Lawley persisted in advancing a case that, but for the reservation, the reserved land would have been re-zoned urban or urban deferred, and should be valued on that basis. For that reason, I considered the valuation reports prepared by Mount Lawley's valuers, to be inadmissible: see [2006] WASC 82 at [656].
75 In my view, it follows that even if a developer, such as Mount Lawley, should be regarded, in a valuation case, as effectively seeking compensation, and even if there is a principle that his "compensation" should not be eroded by an award of costs, the circumstances of this case are such as to justify a departure from that principle. To paraphrase Wells J in Brewarrana, Mount Lawley was awarded a great deal less than it was claiming, and it prolonged the hearing by seeking to prove that the land would have been re-zoned, but for the reservation. I accept that Mount Lawley relied on the evidence of highly qualified experts, who expressed bona fide opinions. However, the evidence did not justify Mount Lawley's extreme position.
76 I therefore conclude that Mount Lawley should pay the WAPC's costs of the trial and the re-trial.
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The WAPC's Calderbank offer of June 2005
77 On the view I have taken, it is not necessary to consider the significance of a Calderbank offer made by the WAPC in June 2005, which Mount Lawley did not accept. However, in case I am wrong in my primary view, I will set out briefly, my opinion about that offer.
78 On 29 June 2005, an Assistant State Counsel wrote on behalf of the WAPC to Mount Lawley's solicitors. The letter, which was expressed to be "without prejudice save as to costs", contained an offer to Mount Lawley to settle the action on the following terms:
"1. The Respondent pay the Applicant the sum of $6.8 million for the land reserved for parks and recreation.
2. The Respondent pay the Applicant interest on the sum of $6.8 million at prevailing Supreme Court rates to the date of settlement (approximately $3.9 million to date).
3. The Respondent pay 80% of the Applicant's costs of the original trial to be taxed, if not agreed."
79 A letter containing an offer to settle proceedings and written without prejudice except as to costs, is admissible for the purpose of exercising the costs discretion. This is so, even though the offeror could have protected his position by making an offer pursuant to O 24A of the Rules of the Supreme Court, but did not do so: Dobb v Hacket (1993) 10 WAR 532 at 539 - 540; Den Hoedt v Barwick [2006] WASCA 196 at [112].
80 I was informed by leading counsel for the WAPC that his client usually prefers to protect its position by Calderbank offers, rather than by offers under O 24A.
81 O 24Ar 10(5) provides:
"Where an offer is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains judgment on the claim to which the offer relates not more favourable to him than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled to an order against the defendant for his costs in respect of the claim up to and including the day the offer was made, taxed on a party and party basis, and the defendant shall be entitled to an order against the plaintiff for
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- his costs in respect of the claim thereafter, taxed on a party and party basis."
82 Where this rule applies, an owner who has been unsuccessful will be required to pay the WAPC's costs incurred after the date of the offer he refused, on a party and party basis. However, the WAPC will be required to pay the costs incurred by the owner down to the date of the offer. This might include costs incurred unreasonably by the owner, which it would be inappropriate for the WAPC to pay: for example, if the owner's expert evidence has been wholly discredited in the proceedings.
83 The disadvantage from the offeror's perspective of using a Calderbank offer rather than an offer under O 24A, is that the Court's discretion as to costs cannot be fettered by the fact that a favourable Calderbank offer has been rejected. Although the circumstances in which the offer was made and rejected will be relevant to the exercise of the costs discretion, the principle that costs follow the event will be applied, unless the plaintiff acted unreasonably in rejecting the offer: NMFM Property Pty Ltd v Citibank Ltd (No 11) (2001) 109 FCR 77 at 98.
84 Where a Calderbank offer is rejected, but proves to have been more favourable to the offeree than the result of the trial, the offeror will usually seek his costs on an indemnity (or solicitor and client) basis from the date on which the offer was made. That is not the case here: the WAPC does not seek indemnity costs: TS 8561.
85 Although the effect of the rule may be ameliorated by an order of the Court, its effect, presumptively at least, is to remove the discretion as to costs.
86 In the present case, the explanation for Mount Lawley's non-acceptance of the WAPC's Calderbank offer of 29 June 2005 was given by Martin Copley, a director and the principal of Mount Lawley, in an affidavit sworn on 10 July 2006.
87 Mr Copley's reasons may be summarised as follows:
1. The offer was silent as to the costs of the re-trial incurred at the date of the offer.
2. The amount of the offer did not reflect valuations obtained by Mount Lawley, which had been disclosed to the WAPC before the date of the offer. These were valuations which ranged from some $11 million to $15.5 million.
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- 3. Mr Copley had available to him valuations obtained by the WAPC giving values of $14.6 - $15.6 million.
4. Mr Copley believed, on the advice provided by Senior Counsel and Mount Lawley's solicitors, that the valuations were reasonable and achievable.
5. The amendment to the town planning scheme as advertised originally, proposed reservation of only 90 hectares of the subject land for parks and recreation. On this basis, Mr Copley believed that a significant part of the land could be seen as capable of development.
6. There was a lack of certainty about the legal costs. That lack of certainty had two components. The first was the difficulty in estimating costs incurred by Mount Lawley to that date. Secondly, Mr Copley was unsure of the basis for the suggestion that 80 per cent of Mount Lawley's taxed costs were to be paid by the WAPC.
- In relation to the last point, Mr Copley said:
"I did not know what would happen when the costs were taxed. I was concerned that the Respondent would allege at the taxation that various items on the bill of costs should be reduced on the basis that it was unreasonable to have incurred that expense, either in part or in full. If that occurred, and then there was a further discount of 20% on the total bill (being the discount proposed in the purported Calderbank) then effectively the costs would be subject to a 'double discount'. I also did not think that scale costs would adequately cover the Applicant's costs, particularly in the absence of any special costs orders."
89 The judgment whether a Calderbank offeree acted reasonably in rejecting the offer must be made in hindsight. In making that judgment, it is not to the point that the offeree believed, when the offer was made, that he would better it at trial. It is irrelevant whether the offeree reaches his decision unaided or on the basis of legal or other expert advice.
90 Thus, the fact that Mount Lawley had the valuations referred to above has no bearing on the question of reasonableness. This is so, in my view, even though two of the valuations had been produced by the
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- WAPC: those valuations were clearly based on an acceptance of Mount Lawley's position.
91 In short, although Mr Copley believed on reasonable grounds that Mount Lawley's contention as to value would be upheld at trial, in hindsight, Mount Lawley's position has been shown to have been unreasonable.
92 There is a principle that an offeree does not unreasonably reject a Calderbank offer if there is some reasonable doubt about its value: Duncan & Weller Pty Ltd v Mendelson [1989] VR 386 at 401; Grbavac v Hart [1997] 1 VR 154 at 155.
93 In this context, I do not think Mount Lawley can rely on the fact that it had difficulty in estimating its costs of the trial and the preparation of the re-trial down to that date. The Calderbank offer was expressed to be open for acceptance for a period of 28 days. I should have thought that that would have been a more than sufficient period in which to obtain the relevant information. In any event, the information is entirely within Mount Lawley's knowledge.
94 Mr Copley was not cross-examined on his affidavit. His statement that he was unsure of the basis for the suggestion that 80 per cent of the taxed costs of the trial were offered may therefore be accepted. However, I do not think it necessary for a Calderbank offeror to explain the basis on which his offer is made. The offeree needs only to know what the offer is worth. In making that assessment, the offeree must do the best he can to estimate the likely outcome of the taxation of costs.
95 The fact that the WAPC's offer was silent as to the costs of the re-trial, needed no explanation. Clearly, the WAPC was not offering to pay those costs.
96 I therefore conclude that Mount Lawley acted unreasonably in declining to accept the WAPC's Calderbank offer of 29 June 2005. The result is, that if (contrary to my view) Mount Lawley should be regarded as the successful party at trial, I would have ordered it to pay the WAPC's costs incurred after the date of the offer.
A without prejudice offer made in 1996
97 The WAPC seeks to rely on an offer it made in December 1996, to purchase the reserved Mount Lawley land (and the additional land
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- reserved for a Controlled Access Highway) for $5.47 million. The offer was set out in a letter written without prejudice.
98 The WAPC submits that the offer should be taken into account in relation to the question of costs because it demonstrates that Mount Lawley acted unreasonably in seeking to have the value of its land determined by the Court and demonstrates that Mount Lawley was not obliged to litigate in order to obtain a fair price for its land.
99 Mount Lawley contends that the offer having been made "without prejudice" it is privileged. Against that, the WAPC contends that the privilege was waived.
100 I accept that negotiations properly characterised as "without prejudice" are inadmissible on questions of costs: see generally, "Cross on Evidence", 7th Australian ed, [25360]. Only Calderbank offers - offers made without prejudice except as to costs - can be used in that context.
101 In the trial leading counsel for Mount Lawley adduced evidence about the offer from an officer of the WAPC in the course of cross-examination. The evidence was given without objection by leading counsel for the WAPC.
102 Leading counsel for Mount Lawley used the evidence as the basis for the submission that:
"If [the offer] constitutes a responsible decision by a minister and a department of government entrusted with the administration of public funds as fiduciaries for the community as a whole, then in our respectful submission it is an unequivocal concession that the highest and best use of the land was always more than rural and that being the case, the gateway is open to an urban assessment." (TS 6422)
103 In this case, it cannot be said, I think, that leading counsel for the WAPC failed to object to the admission of the evidence through inadvertence. Counsel said of that evidence:
"I'm not suggesting that it's not irrelevant in the sense that it is a factor that can be taken into account in assessing the evidence in this hearing, but it is the evidence in this hearing that your Honour relies upon in order to determine the market value, whether or not the respondent has made an error or whatever or
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- decided for whatever commercial reason to offer more." (TS 6082)
104 However, having regard to the purpose for which the evidence was adduced, and the basis on which leading counsel for the WAPC submitted it should be used, I consider that privilege was waived only for that limited purpose: see Allison Pty Ltd v Lumley General Insurance Ltd [2005] WASC 37 at [47], and the authorities there cited.
105 However, I consider that the WAPC would be entitled to rely on the evidence to rebut an assertion by Mount Lawley that it had been obliged to litigate in order to achieve a fair price for the reserved land: Mann v Carnell (1999) 201 CLR 1 at [100] to [109]. The privilege would be waived because it would be unfair to the WAPC to permit Mount Lawley to assert that it was compelled to litigate, when material which would otherwise be privileged contained a complete answer to that proposition.
106 That is not the end of the matter. In my view, accepting that the privilege was waived, it does not follow that the offer made in December 1996 should have the same consequences as if it were a Calderbank offer. Plainly, it was not an offer in this category: it was not expressed to have been written "without prejudice as to costs". In other words, there was nothing in the offer which alerted Mount Lawley to the risk that it might be used in this context, even if privilege was waived.
107 Further, as noted above, the offer was made in respect not only of the reserved Mount Lawley land, the value of which was in issue in the proceedings. The offer was made in respect of an additional 7.9 hectares of land reserved for the Controlled Access Highway. This parcel has never been valued.
108 Finally, it could not be said that Mount Lawley acted unreasonably in refusing the offer. That is because it was made before the WAPC's valuations had been provided to Mount Lawley. Mount Lawley was therefore in no position to assess the value of the offer: GEC Marconi Systems Pty Ltd v BHP Information Technology Pty Ltd (2003) 201 ALR 55, at [34] and Rolls Royce Industrial Power (Pacific) Ltd v James Hardie and Coy Pty Ltd (2001) 53 NSWLR 626 at [95].
109 In these circumstances, if I am wrong in my primary view, I am not persuaded that the offer made by the WAPC in December 1996 should be taken into account in determining the question of costs.
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