Nguyen v Chief Executive, Department of Main Roads

[1999] QLC 80

[1999] QLC 80

 

 

LAND COURT

BRISBANE

29 JULY 1999

Re:     A98-35

Resumption of Land for Transport Purposes –
Acquisition of Land Act 1967

(1)Application by Respondent Constructing Authority for costs of applications for directions/adjournment.

(2)Application by Respondent Constructing Authority for costs thrown away as a result of applications for amendments to claim for compensation and for further adjournments.

(3)Application by Claimants for costs of and incidental to the hearing of the amended claim for compensation.

BETWEEN:

Xuan Thu Nguyen and Thi Thu Hang Le

Claimants

AND

Chief Executive, Department of Main Roads

Respondent

D E C I S I O N

Consequent upon the taking of land by the respondent and an order to enter an appearance, a claim for compensation in the amount of $3,000,000 was filed in the Court.

Following a Callover held on 1 December 1998, a Court Notice advised the parties that the matter would be brought before the Court, for hearing or otherwise, on 22 March 1999, a date in the time frame as sought on behalf of the claimants at the Callover.  With the consent of the parties at the Callover, the Court ordered that all witness statements be exchanged, not later than 21 days prior to the hearing (ie, as it happened, 1 March 1999).  An application was made by the respondent on 10 March 1999 for directions and orders including the exchange of witness reports and the return of subpoenas by 15 March 1999.  The claimants, through their solicitor, countered that application with an application for adjournment of the hearing of the substantive matter set down for 22 March 1999, the claimants not having received all expert witness reports, but in particular a report in relation to a claim for disturbance to a business conducted from the land taken.

The claimants' application for adjournment, which the respondent opposed, was denied, with costs of the relevant applications reserved. 

When the matter was called on for hearing on 22 March 1999, exchanges of valuations and town planning reports were effected.  However, the expert engaged by the claimants to provide an assessment of loss associated with the business had been unable to complete his task.  The claimants' counsel sought leave to amend the claim for loss of land and professional fees associated with the claim, to $550,000, but was unable to advise the final total claim until the outstanding report was available.  The respondent through counsel, did not object to that partial amendment subject to an order as to any costs thrown away as a result of the amendment and the further necessary adjournment.  Leave was granted accordingly and the matter adjourned to 25 March 1999 on which day the primary valuation evidence of both valuers was heard.  Because the expert report in relation to the business component of the claim remained incomplete, the parties requested that the hearing of the matter be stood down until 29 March 1999 but for an inspection by the Court, of the land and sales evidence to be conducted on 26 March. 

As had been foreshadowed, counsel for the claimants sought leave on 29 March to further amend the claim, to the total amount of $626,000, to include, under the heading of "Disturbance", an amount of $75,000 for the loss as had eventually been assessed relative to the business loss. 

The respondent's final valuation put in evidence in the proceedings was in the amount of $453,000 which included an agreed amount of $8,000 for professional fees, that amount having also been included in the claim of $626,000.

Compensation was determined in the amount of $550,000, together with interest to be calculated.  The determination was dissected as follows:

Land , Injurious Affection and Improvements  $524,000

Disturbance
           Professional Fees  $8,000
           Special Value to Owner –
                  Acquisition costs of
                   replacement property  $18,000     $26,000

Total Compensation  $550,000

An appeal to the Land Appeal Court from that judgment was duly filed by the respondent..
           The Land Court determination is nearer to the amount finally claimed by the claimants in the proceedings than to the amount of the valuation finally put in evidence by the constructing authority.
           The power of the Land Court to order costs is found in s.41(9) of the Land Act 1962 (preserved by s.521 of the Land Act 1994) which provides as follows:

"The Court may make such order as it thinks fit as to the costs of or incidental to any matter that it has jurisdiction to hear and determine including, without limiting the generality of this subsection, the costs of an adjournment or application made in a pending matter, allowances to witnesses attending for the purpose of giving evidence at the hearing and the costs of any survey of boundaries."

Section 27 of the Acquisition of Land Act 1967 (the Act) provides:

"(1)      Subject to this section, the costs of and incidental to the hearing and determination of 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)."

Submissions
           Claimants

(1)       The claimants submit that, as a result of the directions/adjournment applications on 10 March 1999, additional costs were incurred by both parties and the claimants do not seek their costs.  Each party should, in the claimants' opinion, bear its own costs of the hearing on that day.

(2)       Again, in response to the respondent's application and submissions for costs associated with the application to amend the claim and associated adjournments, the claimants submit that the matter was still heard within the time period allotted and it was always the case that the respondent had to deal with a claim for loss of business.  That claim had never been abandoned and it was submitted that no costs, resulting from the applications to amend and for the necessary adjournment, or incurred prior to the adjournment, would have been thrown away by the respondent.

(3)       With regard to the costs of and incidental to the hearing, it is the claimants' submission that the respondent's erroneous approach to the valuation of the land forced the claimants into the litigation which resulted in recovery of $125,000 more than the advance which had been paid (on 9 March 1999) and $97,000 more than the amount of the valuation finally put in evidence by the respondent.  While the claim for loss of profits was unsuccessful, the allowance made in the determination under the heading of "Special Value to the Owner", recognised the highest and best use contended for by the claimants.
           Respondent

(1)       The application for directions, it was submitted by the respondent, was entirely reasonable, given the behaviour of the claimants in respect of the failure to exchange reports and to provide particulars of its "loss of business" claim.  Further, the claimants' application for an adjournment was refused.

(2)        Costs thrown away.

It is submitted that the respondent "incurred significant costs thrown away as a direct result of the claimants' lack of readiness, particularly in respect of the loss of business claim.  These costs were said to include:

·    "costs associated with the adjournment of the matter (approx. 3 - 3½ days);

·    additional costs associated with an expert (Mr Cooper) retained by the respondent to deal with the changing nature of the claimants' claim including changes to and the late delivery of the claimants' expert report.  This issue was acknowledged, at least in part, at p.16.3 of the Decision;"

(3)Costs of and incidental to the hearing.

It was submitted that when regard is had to the relevant facts and circumstances surrounding the matter, it would not be appropriate to order the respondent to pay costs.  The relevant facts and circumstances were identified as including:

·    "The original claim of $3M was not amended until the first day of the hearing and was clearly exorbitant.  The size of the claim together with the fact that it contained a large component for loss of business profits made litigation unavoidable.  No sensible negotiations were possible in the light of such a claim.

·    The inevitability of litigation was heightened by the refusal of the claimant to exchange reports in accordance with the Court's directions and by its refusal to provide any meaningful particulars of its case including the claim for loss of business profits (which was rejected).

·    The hearing occupied 8 days of which at least 3 - 3½ days were lost awaiting the 'loss of business' report of Mr Wright (Ex. 13) tendered 29 March 1999 and of which at least 2 days were occupied by the evidence of Messrs Wright and Cooper and partly that of Mr Nguyen dealing with the issue of loss of business.  Only one day was occupied with the evidence of the valuers.

· The late amendment of the claim on 29 March 1999 gave to the claimant an unfair tactical advantage in respect of costs having regard to the operation of S.27(2) of the ALA.

· The amount finally awarded only just exceeded the 'halfway' line for the purposes of S.27(2).

·    The amount determined for land and improvements was not based entirely on an acceptance of one valuer in preference to the other.  It was based on the evidence of both valuers (e.g. pp.12-15.5 of Decision).

·    The claim for loss of business was rejected.

·    The finding of $18,000 under the heading 'special value' was not a matter contended for by the claimant.

·    The continual changing of the claimant's claim for loss of business, not only wasted hearing time, but also placed the respondent in an embarrassing position in respect to the preparation of its case and caused the respondent to incur additional costs (p.16.3 of Decision).

·    There is no behaviour on the part of the respondent which can be pointed to which would justify a costs order against it.  That is:

(a)The respondent's case was clearly arguable particularly in respect of the 'loss of business' claim;

(b)The respondent's case was presented in such a manner as to ensure there was no waste of the Court's time;

(c)The respondent agreed to the claimant's claim for disturbance (professional fees);

(d)The respondent was ready to comply with the Court's directions on exchange of reports."

Claimants' Response
           The claimants submitted that none of those reasons outlined above justified depriving the claimants of the costs of successfully prosecuting the claim and recovering compensation substantially in excess of that contended for by the respondent.
           More particularly, in response to the points raised by the respondent:

·    "Litigation was unavoidable and inevitable in any event after amendments of the claim i.e. the claim was always for more than the amount contended for by the respondent, and in those circumstances the amount of the original claim is not of any significance.  The claimed impossibility of sensible negotiations in the light of a claim for $3 million ignores the fact that an advance was paid on 9 March 1999, that being the usual means by which a constructing authority can seek to avoid litigation or protect itself against a costs order.

·    The claimants' failure to exchange reports on the due date and their late particularisation of their case did not 'heighten' the inevitability of the litigation.  The  litigation was inevitable because the amount of compensation contended for by the respondent was inadequate and less than the claimants were entitled to.

·    The hearing did not occupy eight days but four days only (25, 29, 30 and 31 March 1999), which was less than the originally allocated six hearing days.

·    The amendment on 29 March 1999 involved no more than the particularisation of the loss of profits claim and did not give the claimants any unfair tactical advantage.

·    The amount finally awarded was $10,500 more than the halfway point.  That fact is most relevant as the trigger for the power to award costs to the claimants.  What is more relevant to the exercise of that power in favour of the claimants is the substantial difference ($97,000) between the award and the amount contended for by the respondent.

·    The amount determined for land and improvements was based on an acceptance of Mr Olive's pro-rata value approach and a rejection of Mr Horrigan's site value approach.  It was the difference in approaches which accounted for the substantial difference in their valuations.

·    The claim for loss of profits of $75,000 was rejected, but an award of $18,000 was made under the head of special value to the owner which was a head of claim advanced in submissions (see p.17.1 of judgment).  In his report (Ex. 13 p.3 last para. under heading 'General Background') Mr Wright described his report as being for the purpose of a claim for compensation based on disturbance, and compensation was awarded for disturbance consisting of the costs of acquisition of a replacement property.

·    There was no continual changing of the claim for loss of profits which caused the respondent to incur additional costs.  The claim always included a component for business losses (see Ex. 3) which was quantified by Mr Wright in his report.  In short, there was always going to be an argument about business losses.

·    The respondent's behaviour, as a basis for not awarding costs against it, is not particularly relevant.  The object of an award of costs is to compensate a party in whose favour costs are awarded, not to punish the party ordered to pay costs.  The claimants should be compensated for the costs incurred in prosecuting the claim and recovering substantially more than the respondent contended for as adequate compensation."

Considerations

In Yalgan Investments Pty Ltd v. Council of the Shire of Albert (an unreported judgment delivered on 11 December 1997) the Land Appeal Court set out the leading decisions on the scope and exercise of the Land Court's discretionary powers, and stated, in summary form as paras. (a) to (k) inclusive, "the propositions for which the judgments and section 27 of the Acquisition of Land Act 1967 stand." The principles enumerated will not be repeated here but para. (f) stated as follows:

"The discretion whether to award costs may not be exercised in an arbitrary manner but must be exercised on principled grounds (Banno & Anor v. Commonwealth of Australia (1993) 81 L.G.E.R.A. 34 at p.53) or judicially, that is, for reasons that can be considered and justified (Wyatt v. Albert Shire Council [1987] 1 Qd.R. 486 at p.489) by reference to relevant considerations (Moyses & Ors v. Townsville City Council (1979) 6 QLCR 271 at p.273)."

In Yalgan (supra), the Land Appeal Court confirmed, in its fourth consideration of the submissions before it, that "the conduct of the parties is relevant to a discretionary decision about costs".
           Also in Yalgan, at p.14, the Court referred to the need for sufficient weight to be given to the principle that, in circumstances where the discretion is exercisable only in favour of the claimant, and in the absence of special circumstances, the claimant should obtain the costs of achieving fair compensation.  However, in that matter, the Court concluded that "given the complexity of the case and the fact that the claimant was not wholly successful, either in gaining the amount claimed or in convincing the Court to adopt the claimant's methodology for calculating compensation, it is appropriate to make a partial award of costs".  In support of that decision, reference was made to passages from two decisions of the Federal Court which set out the factors which a Court ought to take into account when deciding whether to make such an award (Hughes v. Western Australian Cricket Association (Inc) (1986) 8 ATPR 40-748 and Dodds Family Investments Pty Ltd v. Lane Industries Pty Ltd (1993) 26 IPR 261 at pp.271-271).
           In exercising the Court's discretion as to costs, the question of the relevance of an exorbitant claim was considered by the Land Appeal Court in Chief Executive, Department of Transport v. Nadco Pty Ltd (unreported judgment delivered 23 February 1998). In that matter a claim of $1,193,593 was amended, with the leave of the Court and without opposition from the constructing authority, to a lower amount (which had been said to be $892,000), on the final day of a five-day hearing. The constructing authority's final valuation was said to have been $483,500. Compensation, including disturbance items of $8,575 was determined in the amount of $718,611. The constructing authority was ordered to pay the claimant's costs of and incidental to the hearing. An appeal by the constructing authority against the determination of compensation failed. The constructing authority also appealed from the costs order, relying chiefly upon "the claimant's eleventh-hour amendment of its claim, the effect of which was, by operation of s.27(2) of the Acquisition of Land Act, to turn the tables on the constructing authority on the matter of costs."
           The Land Appeal Court observed in that matter that the Member had not ignored the lateness of the amendment of the claim.  However, the complaint was that she failed to give it sufficient weight in deciding how far her discretion should be exercised.  At p.9 of the judgment is the following passage:

"     A number of considerations support the proposition that no error was made on costs.  The amendment was not opposed, and no order for costs was sought or made under s.24(2A) (sic).  There is no reason to doubt the member's conclusion that the claimant would not have obtained full compensation had it not proceeded with the claim.   The terms of the Act, particularly the word 'finally', indicate after all that late amendments will be permitted – by leave in the case of a claimant – in the course of proceedings.  It would be strange if the Land Court's discretion to award costs were to be regarded as automatically circumscribed once a turn of events obviously contemplated by the subsection has occurred."

However, at p.10:

" Giving all of those matters their full weight we nonetheless conclude that the member's discretion on costs miscarried. A clear intention evident in s.27(2) is to discourage exorbitant claims in compensation cases. It would not be unreasonable to describe the claim to $1,193,593.63 as exorbitant since it exceeded the sum arrived at by the member by such a large amount. It remained the claim until nearly all of the costs of the hearing had been incurred. With hindsight it can be seen that the claimant was permitted the substantial advantage of avoiding any possibility of an order for costs against it by its late amendment; to add to that an order for costs in its favour went far too far we think. In the result we conclude that the member's discretion on the matter of costs miscarried and that she should have made no order as to costs."

The claimant appealed from that decision to the Court of Appeal.  The appeal was dismissed but for reasons not associated with the reasons given in the Land Appeal Court's judgment.
           It can be seen that if the initial claim in Nadco could reasonably be described as exorbitant, then in this matter the initial claim of $3,000,000, when considered in light of the determination of $550,000 was grossly exorbitant.
           Clearly, in Nadco, it was only with the benefit of hindsight that the claimant "was permitted the substantial advantage of avoiding any possibility of an order for costs".

As the Land Appeal Court observed, a clear intention evident in s.27(2) of the Act, is to discourage exorbitant claims. However, as was also observed, one remedy for exorbitant claims seems apparent in s.24(3) which states:

"     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)."

It is not difficult to accept that, after investigation, consideration and even litigation of a claim by a claimant, part of that claim may be found to be exorbitant – triggering an application for amendment.  If the respondent, in those circumstances, has incurred costs in rebutting that part or those parts of the claim sought to be amended, then the terms upon which leave might be granted could embrace the costs thrown away as a result of the amendment.  However, once leave is granted, unopposed and in the absence of terms, it seems that it would be strange, as the Land Appeal Court observed in Nadco, "if the Land Court's discretion to award costs were to be regarded as automatically circumscribed once a turn of events obviously contemplated by the subsection, has occurred".
           In this matter, dealing first with the claimants' application "(3)", leave for amendment to the claim was sought on the first day of the hearing.  The claim under the heading of "Loss of Land" was particularised as being in accordance with the valuation of the claimants' valuer.  However, the claimants were unable to particularise that part of the claim which referred to business losses, because the expert engaged had not been given sufficient time to prepare his assessment.  That part of the amendment sought was not opposed by the respondent subject to costs, if leave was granted.  Leave was granted, subject to costs.  An adjournment was granted, again unopposed by the respondent subject to costs, to allow the claimants the time sought to fully particularise the claim.  That particularisation did not occur until the third day of the hearing.  Again, leave to fully amend the claim was sought, unopposed by the respondent again subject to costs, being the term upon which leave was granted.
           Although there were delays involved, and inconvenience to the respondent and his advisors, I am not persuaded that the claimants set out to obtain any cost related "tactical advantage" over the respondent because of the amendments sought and granted.  The amendments were in accordance with the professional advice received subsequent to lodgment of the original claim.  As the claimants submitted, the respondent, both before and after the amendments to the claim, needed to retain both a valuer and an expert in business matters. 
The actual amount by which the determination of compensation exceeds the "halfway" line is considered to have relevance only in identifying the party to whom costs (if any) may be awarded in terms of s.27(2) of the Act. The claimants are entitled to seek their costs if the amount of compensation as determined is nearer to the amount finally claimed than to the amount of the valuation finally put in evidence by the constructing authority.
           The Land Appeal Court, in Nadco, did not disagree with the observation of Wells J in  Minister for the Environment v. Florence (1980-81) 45 LGRA 127 at pp.149, 150:

"     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 had 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 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 sort of cases."

There are circumstances in this case, which require consideration in respect to the weight which should be given them, before deciding whether they are "special" in the sense that they should deny the claimants their reasonable costs of obtaining the award of compensation.
           First, the original claim was grossly exorbitant.  Leave was sought and granted subject to costs, for amendment of the claim as early as the claimants were able to particularise the amendment, in the circumstances, and before evidence was given in regard to that particularisation.  As already indicated, I do not accept the submission of the respondent that the claimants received an unfair tactical advantage as to costs of and incidental to the hearing and determination.  Had he chosen to do so, the respondent had an unfettered opportunity to amend his final valuation, had he seen the question of costs being an issue, before the hearing closed.  I do not see the amendment procedure which evolved in this matter as being a "special" circumstance in terms of the costs issue.
           Second, the conduct of the claimants in not adhering to the agreed preliminary procedures and exchange of witness reports, caused the respondent obvious difficulties in efficiently  meeting the claimants' case, particularly with regard to the claim for business loss.  Those difficulties and the adjournments involved, might reasonably have resulted in the respondent incurring costs over and above the preparation of a defence to a claim which would have been made transparent by an early exchange of the relevant witness report.  Any such additional costs to the respondent are seen to be identified as costs associated with the amendment to the claim and the associated adjournments, which are subject of the separate application.  I am not persuaded that the "inevitability of litigation" was heightened by the claimants' conduct or reduced by the respondent's conduct.  Subject to what has already been said in respect to the amended claim, the conduct of either of the parties is not seen to provide a "special" circumstance which should result in a denial of the claimants' application for costs of and incidental to the actual hearing and determination of the amended claim for compensation.
           A matter considered relevant in a decision relative to the manner in which the Court's discretion might be exercised, is the rejection of the claim for "loss of business" as an element of disturbance.  The highest and best use of the land was found to be for the business of the growing of small crops, which in turn involved the storage and distribution of those crops.  The highest and best use of the land was particularly relevant to the valuation methodology adopted by the Court.  The basis upon which the claim was eventually formulated involved an assessment of loss of profits from the resumed land.  That basis of calculation was rejected and instead an allowance made based on the costs which would have been associated with the purchase of replacement land and buildings – which involved a relatively simple calculation.  Had the claim been litigated on the basis as determined, which was directly associated with the valuation of the land for its highest and best use, the hearing time, even with evidence from Mr Nguyen, should not, in my opinion, have extended longer than two (2) full days.  The claimants were entitled to litigate the claim for loss of profits on the basis of the expert advice received.  However it is seen as unreasonable that the respondent should be ordered to meet the claimants' costs in litigating that aspect of the claim, when the basis on which it was founded was found to be flawed, in principle. 
Conclusions
           Having given consideration to the submissions of the parties, I have concluded as follows:

(1)In the matter of the respondent's first application, the need for neither a directions application nor adjournment application, would have been necessary had the claimants diligently set about obtaining the witness reports necessary to litigate their claim, which had been set down for hearing in the time frame requested and with very early notice.  The respondent in my opinion is entitled to receive his costs associated with those applications.

(2)In the matter first of the amendments to the claim, leave was granted for those amendments on terms as to costs.  Any of the respondent's costs which are in excess of the actual hearing time of the substantive matter (which then did not commence until 25 March, 1999), should be reimbursed to the respondent by the claimants.  The respondent would have been ready to proceed had the exchanges been effected in accordance with the relevant consent order.  Costs thrown away by the respondent as a result of the adjournments of the hearing directly as a result of the unavailability of the final relevant witness report should be reimbursed to the respondent by the claimants.

(3)It is my considered opinion that the claimants are entitled to the benefit of an order which would meet part of their costs in having the amended claim for compensation heard and determined.  Those costs should reasonably, in my opinion, be limited to those of a hearing involving two full days.

Orders
           In the exercise of the Court's powers pursuant to s.41(9) of the Land Act 1962 (preserved by s.521 of the Land Act 1994), the following orders are made on the basis that the amount of such costs shall be assessed by the Registrar of the Supreme Court at Brisbane according to the scale of costs prescribed by law for the time being in respect of proceedings in the Supreme Court and in accordance with the provisions of s.41(9) of the Land Act 1962:

(1)The claimants shall pay the respondent's costs of and incidental to the applications for directions and adjournment heard and decided on 10 March 1999.  

(2)The claimants shall pay the respondent's costs, if any, thrown away consequent upon the applications for amendments to the claim for compensation, pursuant to s.24(3) of the Acquisition of Land Act, together with costs incurred in excess of the actual hearing time of the substantive matter and thrown away as a result of the adjournments associated with the amendments to the claim for compensation.

(3)The respondent shall pay so much of the costs of the claimants of and incidental to the hearing and determination of the amended claim for compensation as are the costs of and incidental to a hearing for two days.  This order "(3)" is made subject to the outcome of the appeal by the respondent from the Land Court determination of the amended claim for compensation.

RE WENCK
MEMBER OF THE LAND COURT