Murray Investments Pty Ltd v Chief Executive, Department of Main Roads
[2000] QLC 65
•27 October 2000
|
BRISBANE
27 October 2000
Re: Claim for Compensation
Resumption of land for transport or incidental purposes
Acquisition of Land Act 1967
(A99-56).
Murray Investments Pty Ltd
v.
Chief Executive, Department of Main Roads
DECISION ON APPLICATION FOR COSTS
Compensation in respect of the claimant's interest in a service station situated at 4071 Pacific Highway, Loganholme, which had been resumed under the Acquisition of Land Act 1967 (the Act), was determined by the Land Court at $616,427 for reasons which were published on 25 July 2000. The Court granted the parties leave to make written submissions on costs. Both parties made written submissions claiming to be entitled to an award of costs. However, only the party who is successful in terms of s.27(2) of the Act is entitled to be considered for an award of costs.
The relevant legislation in relation to this matter is contained in s.24 and s.27 of the Act. Section 24 deals with the reference of a claim for compensation to the Land Court. Sub-s.(3) provides:
"The claimant shall not amend the claim filed by the claimant in the office of the Registrar of the Land Court except upon leave granted by that Court (which leave the Court may grant upon such terms as it deems just, including terms with respect to the payment of costs)."
S.27 of the Act deals with costs and provides as follows:
"(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)."
In order to determine which party is entitled to costs, s.27(2) requires that regard must be had to the relevant sums as finally advanced by the parties at the hearing. That this is the correct approach to the construction of s.27(2) was made clear by the Court of Appeal in Commissioner for Railways v. Buckler [1996] 1 Qd.R.18 where McPherson JA stated at pp.23/24:
"Stated in general terms, what the Court is now required to do in fixing the incidence of costs under this rule is to look to the final positions taken up by the parties. In the case of the claimant, it is the quantum of compensation last claimed. Theoretically at least, its amount might not be known until the final address of counsel for the claimant. In practice, however, s.24(2A) furnishes a disincentive against conduct like that. It does so by restricting the right to amend a claim once it has been filed in accordance with s.24(2A) of the Act. Thereafter an amendment may be allowed; but on terms including payment of costs: see s.24(3).
On the other hand, there seems to be no comparable restriction preventing the constructing authority from deferring disclosure of its final position until a late stage of proceedings. It will be discoverable only from 'the amount of the valuation finally put in evidence by the constructing authority', which means that it cannot with confidence be known what the amount of it is until the constructing authority closes its case. "
That construction has been applied consistently by this Court and the Land Appeal Court since that time. That any other approach is open was denied by the Land Appeal Court in Chief Executive, Department of Transport v. Nadco Pty Ltd (1997-98) 18 QLCR 408, where the Land Appeal Court in discussing the passage from the judgment of McPherson JA in Buckler, reported above, said at p.417:
"That construction accords with the natural meaning of the words of the sub-section whereas that adopted in Arcpoint Pty Ltd v. Director-General, Department of Transport (1992) 14 QLCR 115 does not. In that case the learned member construed the word 'finally', where it appears in s.27(2), as referring to 'the point where the battle lines have been drawn', that is, after an exchange of valuations and all supporting data either before or on the first day of the hearing. In his opinion, following that whatever is done by a party during the hearing is done at his peril as to costs (p.119). "
Therefore, for the purposes of ascertaining which party would be entitled to be awarded costs under s.27(2) of the Act, the final position taken up by the claimant is the amount of compensation last claimed, be it the original claim, or a claim amended by leave under s.24(3). The final position taken up by the respondent is the amount of the valuation finally put in evidence by the respondent. As pointed out by McPherson JA, the former could be amended (with leave) at any time up to the completion of the final address by counsel for the claimant, but the respondent is limited to the close of its case in introducing evidence about the amount of the valuation.
In the present case, the land was taken by Proclamation on 6 March 1998. On 20 March 1998, the claimant lodged a claim for compensation for $967,000. An amended claim was lodged on 20 October 1999, for $984,698.50. Then on 5 May 2000 (the last day of the hearing), the claimant was granted leave to further amend the claim to $855,273. That became the final position adopted by the claimant. Mr Gallagher QC, senior counsel for the respondent, did not oppose the granting of leave to amend the claim, "subject to the reservation of costs".In the respondent's written submission in relation to costs, it was contended that the claim for compensation was based on an assessment by the claimant's expert witness, Mr Wright, in the sum of $938,550 as particularised at page 10 of the reasons for judgment. Certainly the claim for compensation appeared to be based upon Mr Wright's assessment. However, none of the claims, not the original claim for $967,000, or the amended claim for $984,698.50, or the final claim for $855,273 accorded exactly with Mr Wright's assessment of $938,550.
The respondent's submission goes on to state that the amount of $938,550 included an allowance for the "wind down" of the business (which was agreed between the parties in the sum of $17,765). However, according to the respondent, the additional allowances for the loss of the fuel rebate of $52,500 and for professional fees of $4,062 which were agreed by the parties should be added to what it sees was the claimant's claim for compensation. That amounted, in the respondent's submission, to $56,562, making a total claim of $1,005,062. However, the agreed amount for professional fees was actually $14,062 (Reasons for Judgment page 40), which would make the respondent's submission regarding the claimant's claim for compensation to be $1,015,062.
However, the respondent's approach to calculating the claimant's claim for compensation does not accord with the natural meaning of the words in s.27 (2) of the Act. The claimant had sought and was granted leave under s.24(2A) of the Act to amend its claim. The respondent did not oppose the granting of leave to amend the claim "subject to the reservation of costs". I understand that to mean that the respondent sought to protect the right to argue at some later stage for an award of costs in respect of such amendment. However, while leave to amend the claim was granted subject to that condition, no application for an award of costs under s.24(2A) was made.
In my opinion, it is not now open to the respondent to argue that it did not oppose the amending of the claim subject to that amended claim having no effect on costs under s.27(2) of the Act. That would amount to no more than opposing the amendment of the claim as such. There would be no point in the claimant seeking to amend the claim if it was not for the purpose of seeking to affect the outcome as regards costs under s.27(2). Once leave to amend the claim had been granted, it was for the respondent to argue for costs under s.24(2A) or, as in this case, to seek that the matter of costs under s.24(2A) be reserved for argument at a later stage. The respondent cannot now say that it did not oppose the granting of the leave to amend the claim subject to it having no effect on costs under s.27(2).
I must hasten to add that the respondent has not made such a submission. However, in view of the construction of s.27(2) by the Court of Appeal in Buckler, it is difficult to see how the respondent can now argue that the claimant's claim for compensation was anything other than the final position taken by the claimant, that is, $855,273.
I turn now to consider, in terms of s.27(2), "the valuation finally put in evidence by the constructing authority", or in terms of Buckler, the final position of the respondent. The respondent's final position was somewhat more complex than that adopted by the claimant. As was pointed out in the claimant's written submissions as to costs, there is some inconsistency between "the amount of the valuation finally put in evidence" by the respondent and the amount contended for in the respondent's written submissions.
The respondent's assessment of compensation was based on the valuation of chartered accountant, Mr Norbert Calabro. Mr Calabro initially valued the business on a "walk in-walk out" basis at $426,000, valuing plant and equipment at $20,000 and stock at $75,000. He reasoned that those items were retained by the claimant so were not part of his compensation assessment. That left the value of goodwill at $331,000 (Exhibit 29). However, after producing his report, Mr Calabro was instructed that part of the rental income of the business resulted from an unlawful use. In a later report (Exhibit 30), he adjusted the value of the business to $387,000 by excluding the annual rental income from HandiTrailers of about $12,000 from his calculations. He explained this in Exhibit 30 as follows:"3.9.1Included in Mr Wright's assessment of maintainable income from sub-tenants namely 'Handi Trailer' and 'Licence to Call'.
3.9.2I have included a similar amount in my assessment of maintainable earnings. Since the issue of my report I have been instructed that the business operated by Handi Trailer was an unlawful use.
3.9.3Accordingly if this source of income is not claimable then my assessment of value of the business and the goodwill will reduce as follows:
Value of Business 387,000
Less Net Tangible Assets
Plant & Equipment 20,000
Stock 75,000
Working capital -
95,000
Value of goodwill 292,000"
That this was the final position of the respondent is confirmed in paragraphs 70 and 71 of the respondent's written submissions, which stated:
"70. Accordingly, the market value of the business would be assessed in the sum of $312,000, made up as follows:
$387,000
Less$ 75,000 - stock in trade
71. The figure of $312,000 excludes any income from the Handihire business. Given the evidence in respect of the business relying on sub-leases (i.e. Handihire and Cellular One), it is submitted this is an appropriate assessment. "
However, that is not the correct value attributed by Mr Calabro to the goodwill. It is clear from paragraph 3.9.3 of Exhibit 30, that the value of plant and equipment assessed by Mr Calabro of $20,000 was also deducted from the value of the business of $387,000, which brings the value of goodwill to $292,000.
The respondent's written submissions (paragraphs 72 to 75), then proceeded to contend that various agreed disturbance items amounting to $83,000 must be added to the $312,000 to arrive at the assessment of compensation totalling $395,000. However, the actual amount of agreed disturbance items was $84,327 (professional fees $14,062 and independently agreed items $70,265). When that is added to the correct figure for goodwill of $292,000 in accordance with paragraph 3.9.3 of Mr Calabro's report Exhibit 30, the respondent's assessment of compensation would have been $376,327.
However, that was not what was put in evidence. The evidence is contained in Mr Calabro's report Exhibit 30 at paragraph 6.2, which shows that an additional amount of $21,663 was to be added to his assessment of goodwill, particularised as follows:
Loss of gross profit $17,790
Loss of sub-lease income $ 2,617
Disturbance costs $ 1,256
$21,663
Therefore the valuation finally put in evidence by the respondent was $313,663.
Having regard to my reasoning as to the "final positions" of the claimant and the respondent, the mid-point between the amount finally claimed by the claimant of $855,273 and the valuation finally put in evidence by the constructing authority of $313,663, is therefore $584,468. The amount of compensation determined at $616,427 is nearer the amount finally claimed by the claimant. Therefore, in view of my findings in this matter, it is only the claimant that is entitled to have its application for costs considered. But that does not mean that the claimant is automatically entitled to its costs. Where the claimant has crossed the threshold in that its final position is nearer to the half-way mark, s.27(2) prevents costs being awarded against it. However, in such a case the Court has the discretion whether to award costs to the claimant, or to make no order as to costs. The authorities set out the matters that the Court must consider in exercising its discretion.
In Yalgan Investments Pty Ltd v. Council of the Shire of Albert (1997-98) 17 QLCR 401, the Land Appeal Court considered the leading decisions on the scope and exercise of the Land Court's discretionary power to award costs under the provisions of s.27 of the Act. In doing so it identified a number of general principles which must be considered. Those authorities included Moyses and Others v. Townsville City Council (1979) 6 QLCR 271, Minister for the Environment v. Florence (1980-81) 45 LGRA 127, Banno and Another v. Commonwealth of Australia (1993) 81 LGERA 34, Commissioner for Railways v. Buckler [1996] 1Qd.R. 18 and Kabale Holdings Pty Ltd v. Director-General, Department of Transport (1997-98) 18 QLCR 166 in which the Land Appeal Court quoted passages from decisions of the Full Court of Queensland in Wyatt v. Albert Shire Council [1987] 1Qd.R. 486 and Assignment Pty Ltd v. Kirby [1981] 1Qd.R.129.
The principles extracted from those judgments were stated in summary form at pp.406 to 408 as follows:"(a)The power to award costs of proceedings is entirely the creation of statute (Wyatt at p.488 quoted in Kabale at p.29).
(b)The power of the Land Court to make an order for costs in relation to a claim for compensation is conferred by s 41(9) of the Land Act 1962 and s 27 of the Acquisition of Land Act 1967.
(c)Subject to s 27 of the Acquisition of Land Act 1967, the discretionary power of the Land Court is full or complete (cf. Wyatt at pp.488-9 and Assignment Pty Ltd at p.134, quoted in Kabale at p.29).
(d)The only statutory constraints on the exercise of the discretion are that:
(i)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; and
(ii)otherwise, costs (if any) shall be awarded to the constructing authority (see Buckler at pp.23-4 for history of and policy reasons for those constraints).
(e)Compulsory acquisition cases differ from ordinary claims in the significant respect that the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not. The mere acquisition by compulsory process gave the claimant a claim to compensation which he or she could hardly be expected to renounce (Florence at p.149, Banno at p.53).
(f)The discretion whether to award costs may not be exercised in an arbitrary manner but must be exercised on principled grounds (Banno at p.53) or judicially, that is, for reasons that can be considered and justified (Wyatt at p.489) by reference to relevant considerations (Moyses at p.273).
(g)In some cases the matter may be so obvious as not to require explanation in the form of stated reasons (Wyatt at p.489).
(h)In general, a party who is wholly successful in litigation can expect an order for costs in his favour. Where compensation is awarded to one who had already been given, by statute, the right to receive it, it is just to say that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due. But costs are discretionary and no hard and fast rules 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. In some cases, the Land Court may consider that there are sufficient reasons for departing from the general rule (Moyses at p.278, Florence at pp. 149-50).
Although the exercise of the power does not exclude resort to the "settled practice" of a court where such a practice has evolved, a purported exercise of discretion which fails because the mind is closed to relevant considerations through a rigid adherence to preconceptions involves an error of law that is open to correction on appeal (Wyatt at p.489).
(j)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. (Moyses at p.274).
(k)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)."
In the present case, the claimant has been partially successful and under the normal rule that costs follow the event, could expect at least a partial award of costs. However, as the authorities make clear, success or otherwise in monetary terms is not the only, or the most relevant, matter to be considered.
Both the claimant and the respondent have set out in their submissions a number of reasons why each of them consider they should be awarded costs. Having regard to the principles set out by the Land Appeal Court in Yalgan and in Nadco, I make the following comments with regard to those submissions:
The amendment of the claim for compensation came very late in the proceedings, and this is acknowledged by the claimant. If it had not been for that amendment, the claimant would not have been in the position of having its application for costs even considered, as its "final position" would not have been nearer to the amount of compensation determined than that of the respondent.
Although the claim by the claimant could not be characterised as a vexatious, dishonest or grossly exaggerated, the gross profit adopted by Mr Wright seemed to be "an unrealistic and unachievable figure" leading to "an over-optimistic assessment of … the future trading performance of the business". (Reasons p.13 and p.38).
The claimant argued that a considerable amount of time in the hearing was occupied by the respondent calling evidence in a failed attempt to establish that the change to the rebate agreement and the extent of foreign fuel purchases immediately prior to the resumption meant that part of the income stream could no longer be included in assessing the goodwill of the business. However, in my view, such an approach was justified because Mr Murray was not entirely forthcoming about those matters in his evidence and Mr Wright was unaware of their extent or significance. It was therefore necessary for the respondent to call that further evidence in order to ascertain the full facts. Although neither of those matters affected the final decision in this case because of my findings, they were matters which had to be pursued by the respondent as the outcome could have been crucial. In my opinion, the time spent on pursuing and resolving those matters was not the fault of the respondent.
I did not accept all of the evidence of the principal witness for the claimant nor did I accept all of the evidence of the principal witness for the respondent. However, I did derive assistance from parts of the evidence of each of them. I do not propose to formulate a list of those issues in which the claimant was successful and those in which the respondent was successful and make a weighted decision in respect of those matters. It is sufficient to say that neither the claimant nor the respondent was wholly successful in this case. However, each of them was partially successful.
In the result, I am not able to consider an award of costs in favour of the respondent because of the provisions of s.27(2). However, having regard to the principles which the Court must consider in matters of this kind, I have come to the conclusion that I should not make an award in favour of the claimant.
Accordingly, in the exercise of my discretion under s.27 of the Act, I make no order as to costs.
President of the Land Court
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