Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2); Fishing Station Pty Ltd v Roads and Maritime Services (No 2)

[2017] NSWLEC 179

Land and Environment Court

New South Wales

• Amendment notes

Medium Neutral Citation:	Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2); Fishing Station Pty Ltd v Roads and Maritime Services (No 2) [2017] NSWLEC 179
Hearing dates:	11 October 2017
Date of orders:	15 December 2017
Decision date:	15 December 2017
Jurisdiction:	Class 3
Before:	Moore J
Decision:	See directions at [62]
Catchwords:	Qasabian Family Investments Pty Ltd - 2016/151503 COSTS – compensation for compulsory acquisition – applicant unsuccessful on contested issues at trial – outcome should have been obvious from date of joint expert report of land valuers disclosing agreement on one contested issue – no basis to challenge expert agreement – other two issues pressed contrary to settled authority – applicant entitled to costs only up to receipt of joint expert report of land valuers – each party to bear their own costs after that date   Fishing Station Pty Ltd - 2016/158775 COMPENSATION – calculation of compensable rental differential - joint expert report of land valuers disclosed agreement on basis to calculate present value of compensation for rental differential – compensation awarded in accordance with agreement SLIP RULE – an offered amount was omitted from decision – was omission deliberate or inadvertent – omission inadvertent – offered amount to be included in compensation payable COSTS – compensation for compulsory acquisition – applicant failed in claim on one aspect as argued – applicant succeeded in obtaining increased compensation on basis argued by respondent – overall outcome for applicant significantly improved – applicant’s case (although not accepted on contested point) not hopelessly unarguable – applicant entitled to costs of the proceedings
Legislation Cited:	Civil Procedure Act 2005, s 56 Interpretation Act 1987, s 34(2)(f) Land Acquisition (Just Terms Compensation) Act 1991 Land Acquisition (Just Terms Compensation) Bill 1991 Uniform Civil Procedure Rules 2005, r 36.15
Cases Cited:	Brock v Roads and Maritime Services (formerly Roads and Traffic Authority of NSW) (2012) 191 LGERA 267; [2012] NSWCA 404 Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73
Category:	Costs
Parties:	Qasabian Family Investments Pty Ltd (Applicant - 2016/151503) Fishing Station Pty Ltd (Applicant - 2016/158775) Roads and Maritime Services (Respondent in both matters)
Representation:	Counsel: Mr I Hemmings SC/Mr T To, barrister (Applicant in each matter) Ms S Duggan SC/Mr M Astill, barrister (Respondent in both matters)   Solicitors: Beatty Legal (Applicant in each matter) Corrs Chambers Westgarth (Respondent in both matters)
File Number(s):	151503 and 158775 of 2016
Publication restriction:	No

Judgment

1. HIS HONOUR: Qasabian Family Investments Pty Ltd (Qasabian Investments) and Fishing Station Pty Ltd (Fishing Station) both made claims against Roads and Maritime Services (the RMS) as a consequence of their differing interests in a site at Frenchs Forest that had been resumed by the RMS. The site was resumed for the purposes of widening Warringah Road, a road widening made necessary as a consequence of the construction of the new Northern Beaches Hospital.

2. As a further consequence, both Qasabian Investments and Fishing Station became entitled to compensation for their interests in the acquired site. In each instance, their entitlement to compensation is to be calculated in the fashion provided for by the Land Acquisition (Just Terms Compensation) Act 1991 (the Land Acquisition Act).

3. Qasabian Investments and Fishing Station were unable to reach agreement with the RMS as to the amount of compensation that each was entitled to as a consequence of the resumption. Exercising their rights under the Land Acquisition Act, Qasabian Investments and Fishing Station both commenced proceedings in this Court to have their claims determined.

4. Because Qasabian Investments and Fishing Station are both entities associated with the Qasabian family, the two claims were heard together between 6 and 9 March 2017. On 21 June 2017, I handed down my decision arising from that hearing (Qasabian Family Investments Pty Ltd v Roads and Maritime Services; Fishing Station Pty Ltd v Roads and Maritime Services [2017] NSWLEC 73) (my earlier decision). It is unnecessary to repeat, in detail, the matters dealt with in my earlier decision. It is, however, appropriate to note that:

1. one element of the Fishing Station claim (compensation for increased rental at the premises to which it had relocated) remained to be determined; and

2. costs of the proceedings, in each instance, were not dealt with in my earlier decision.

5. As a consequence, a further hearing was held on 11 October to deal with these two outstanding issues.

6. The terms of final orders to dispose of both the Qasabian Investments compensation claim and the Fishing Station compensation claim were to be discussed (and, if possible, settled) between the parties, in light of my earlier decision. As no agreement was reached on the terms of the necessary dispositive orders, this matter was also dealt with on 11 October.

Qasabian Investments’ claims

7. Qasabian Investments had made three primary claims that had required my determination in my earlier decision. Those claims and their outcomes can be summarised as follows:

1. Qasabian Investments submitted that the quantum of compensation for the acquisition of Qasabian Investments’ freehold interest in the site at Frenchs Forest should be increased above the amount agreed to by the expert land valuers retained by Qasabian Investments and the RMS. This claim was rejected;

2. Qasabian Investments claimed it was entitled to stamp duty and other costs associated with purchase of a replacement, property as a substitute for the site. This claim was rejected on the basis that Qasabian Investments was a passive investor and, as a consequence, is not entitled to claim such expenses; and

3. The final element of the Qasabian Investments’ claim related to a number of expenses (legal expenses concerning a property at Beacon Hill acquired but not used for relocation of Fishing Station and with a currently undetermined proposed future use by Qasabian Investments) and some elements of the Bates Cosgrave Chartered Accountants’ work (being the work undertaken for Qasabian Investments rather than for Fishing Station) which I determined was not to be reimbursed (see [166] to [170]) of my earlier decision relating to accounting costs.

8. The overall outcome of the Qasabian Investments proceedings was, therefore, that the claims in those proceedings were entirely unsuccessful with the compensation to be paid to Qasabian Investments being the amount contended for by the RMS in its closing submissions of $4,804,028.25 (as noted in the RMS submissions in this phase, this figure includes a minor arithmetical correction).

Fishing Station’s claims

9. Because Fishing Station had held an unregistered sublease from Qasabian Investments’ head tenant of the site at Frenchs Forest and conducted its business as a fishing tackle supplier from premises conducted on the site, Fishing Station’s claims against the RMS were more complex. Those claims and their determined outcomes were as follows:

1. Fishing Station’s claim, as at the commencement of the first phase hearings, was $1 million for the market value of the unregistered sublease held by Fishing Station at the Frenchs Forest site. I accepted the evidence for the RMS and determined this compensation element as being $391,934 (at [70] of my earlier judgment); and

2. although Fishing Station had established a new (similar, but expanded) retail enterprise at Mona Vale at premises acquired by Qasabian Investments, Fishing Station claimed that this was not a relocation of the French's Forest Fishing Station business. On Fishing Station’s case, Frenchs Forest Fishing Station remained to be relocated at some time in the future. As a consequence, Fishing Station claimed it was entitled to be compensated for future relocation costs. I rejected this claim (for reasons set out in detail in my earlier decision) and determined that Fishing Station Frenchs Forest had relocated to Mona Vale and that, although Fishing Station was entitled to compensation for the costs of that relocation, its claim for future relocation costs was rejected.

10. As a consequence, although Fishing Station contended for $2,597,701.50, its outcome – including Fishing Station’s rental compensation entitlement dealt with in the next section of this judgment and adding my slip rule correction dealt with in the section after that – is, on my calculation, to be $1,100,092.10.

11. On the other hand, the amount of compensation for Fishing Station for which the RMS contended in its opening submissions was $223,002.99 – although the final position of the RMS at the conclusion of the first phase hearing was one which no longer adhered to this number. However, even on the highest basis of calculation for Fishing Station on the RMS case, the amount that was submitted by the RMS as being appropriate was some $400,000 less than that which will actually be achieved by Fishing Station in the dispositive orders to be made in the Fishing Station claim proceedings.

Fishing Station’s rental compensation entitlement

Introduction

12. As I discussed in my earlier decision (at [141] to [151]), Fishing Station was also entitled to compensation for the fact that its rent at Mona Vale, on a proportionate floor area basis (the Mona Vale business being an expanded version of the Frenchs Forest business), was increased when compared to the “grace and favour”, non-commercial rental basis upon which Fishing Station had occupied its portion of the Frenchs Forest site pursuant to the unregistered sublease from Qasabian Investments’ head tenant.

13. Although I made a determination that the relevant rental differential, on a properly comparable basis, was $2,700 per month and that Fishing Station would have been entitled to enjoy the non-commercial rental until 2041, I had no evidence as to what would be the appropriate capitalisation rate to be applied to the rental differential in order to derive an appropriate compensation amount for Fishing Station for the forgone rental benefit. Although I speculated (at [151]) that such a capitalisation rate might be between 4% and 5 %, I made no determination on this point.

14. I did determine that the valuation was to be the subject of further evidence by the land valuers, Mr Dyson for Fishing Station and Mr Lunney for the RMS, (rather than by the expert business valuers who had given evidence in the first phase of the Fishing Station proceedings).

The land valuers’ evidence

The agreed position

15. Mr Dyson and Mr Lunney conducted a further joint conference by telephone on a number of occasions. This joint conference was for the purposes of exploring (and, as an outcome, reaching agreement about) the net present value of the appropriate compensation for the increased rental (on a like premises area by like premises area as determined in my earlier decision) at the relocated premises at Mona Vale.

16. At [24] of this new joint report, they wrote:

We agree that the Net Present Value of the increased rental (being $2700/month payable from January 2016 to 29 November 2041) discounted at the above determined discount (capitalisation) rate would be calculated as follows:

Discount Rate	Present value of future disadvantage
7.11% per annum	$391,392

Mr Lunney’s attempted deferral to Dr Ferrier

17. Second, however, despite my indication in my earlier decision that the quantum of the rental compensation to which Fishing Station was to be entitled was a matter for consideration and, if agreed, determination by the land valuers, Mr Lunney indicated that he did not consider that this was the appropriate basis upon which such a calculation should be undertaken.

18. He considered that this should be the subject of further examination by the RMS’ expert business valuer Dr Ferrier, on a business valuation basis. Mr Lunney summarised his disagreement on this point, saying:

15.   Whilst Mr Lunney appreciates Mr Dyson's position in relation to this issue, he considers that it is necessary to consider the appropriateness of applying a capitalisation rate for a disturbance claim of this nature and not just to simply assess the quantum of a capitalisation rate.

16.   Mr Lunney considers that the assessment of an appropriate discount rate for a cost or loss of this nature falls more squarely within the domain of the business valuation experts as opposed to the real estate valuation experts.

19. Subsequently, Mr Lunney also commented, under the heading “DISAGREEMENT”:

22.   Mr Lunney considers that the factors influencing the capitalisation rate for the Mona Vale premises are different from the factors which would influence the appropriate discount rate to calculate the present value of the rental disadvantage which may be suffered by Fishing Station by reason of it relocating to the Mona Vale premises.

20. For this reason, the joint report of Mr Dyson and Mr Lunney had appended to it a further expert report by Dr Ferrier expressing business valuation opinions on this topic.

21. As I had determined, in my earlier decision, that this matter was appropriate to be dealt with by the land valuation experts, I rejected the comments by Mr Lunney proposing an alternative approach and rejected the material prepared by Dr Ferrier which had been appended to the joint report of Mr Dyson and Mr Lunney.

An uncanny similarity of outcomes

22. In the written submissions on behalf of the RMS for this phase of the proceedings, Ms Duggan SC for the RMS observed at (29):

29.   However, if the court determines that the value of the rental differential is to be calculated as if it were a freehold real estate asset, then applying a real estate capitalisation rate of 7.11%, the parties real estate valuers have agreed that the value is $391,392 (at [ 24) of the Further Joint Report). This appears to correspond almost exactly to the market value of the extinguished Sublease determined by the Court at [70] of the judgement at $391,934.

23. First, Ms Duggan did not suggest that anything should follow from this.

24. Second, it is to be observed that this similarity of outcomes is purely serendipitous and is solely a product of the land valuers’ agreement that the appropriate discount factor to be applied for the purposes of their forgone rental valuation calculation was 7.11%. Any significant variation from 7.11% as an agreed relevant discount factor would have led to a calculation result that did not bring about such an uncanny similarity.

25. However, third, it is appropriate to observe that, as explained at [142] in my earlier decision, this compensation entitlement for Fishing Station is entirely independent of and unrelated to any quantum of compensation to which Fishing Station would otherwise be entitled under any other basis pursuant to the Land Acquisition Act.

Conclusion on Fishing Station’s rental compensation entitlement

26. The appropriate discount factor to be applied to calculate a net present value for the forgone rent for which compensation is to be paid is 7.11% as agreed to by the land valuers in their new joint expert report. They agreed that this resulted in a present value of $391,392. This, therefore, on the basis of the land valuation calculations, is the rental compensation to which Fishing Station is entitled.

Fishing Station – a matter for correction pursuant to the slip rule?

27. Fishing Station seeks that I correct my earlier decision by allowing it a further $15,000 being for fitout costs at Mona Vale. Mr Hemmings SC for Fishing Station submitted that I should treat the non-inclusion of this amount as a “slip” and thus amenable to correct pursuant to r 36.15 of the Uniform Civil Procedure Rules 2005. He said (Transcript 11 October 2017, page 10 lines 8 to 16):

The simple point that we note is that your Honour has not addressed that $15,000 concession or the $15,000 amount for fit out in the judgment. That's for one of two reasons potentially. One, because your Honour decided not to allow it or two, because there was an accidental slip or omission in your Honour's judgment and your Honour simply with respect and otherwise in a very detailed matter missed the $15,000 concession. If the correct approach to that is the second, it was an accidental slip or omission we make the application under the slip rule and your Honour would add the $15,000.

28. In her written closing submissions the first phase hearing, Ms Duggan wrote, at [18], the following:

18.   On the respondent's case compensation under s.59(1)(c) is payable for –

(a) …;

(b) $15,000 being the fit out costs at Mona Vale.

29. The footnote to this amount in the written submissions identifies that it was taken from Fishing Station’s development application for the Mona Vale premises.

30. In her closing submissions, Ms Duggan had said (Transcript 9 March 2017, page 186 lines 5 to 7):

I should add to that an extra $15,000, which we refer to at paragraph 18 of our written submissions, being the costs of the fit out of the totality of the premises at Mona Vale, when not reducing that to the smaller area.

31. In this phase of the proceedings, Ms Duggan submitted (Transcript 11 October 2017, page 16 lines 11 to 24):

That then brings me to the issue of what my friends call the slip rule. If your Honour was being asked or had done that which Mr Hemmings suggest you did do, then perhaps there may be some latitude for the application of the slip rule. But as you see from the document that was handed up by Mr Hemmings which is p 6 of our submissions in reply, in fact 186 of the transcript on 9 March 2017, the exercise which is suggested contains a concession is an exercise separate from and different from the exercise that your Honour undertook. So what the applicant has done is sought to find something that they didn't get and because we had indicated that if you adopted our method of calculation you would get it, that somehow they are entitled to it and we say that that is not the case. It is a different calculation. The concession isn't one that is at large and if the applicant wished to take advantage of the alternative case, they could have done so and made their claim. At the time they chose not to do so.

32. It is clear that the RMS approach to compensation in the first phase was endorsed by me and that proposed by Fishing Station rejected.

33. This matter is easily determined. The non-inclusion of the $15,000 in the compensation for Fishing Station was an inadvertent omission by me. Its availability arises from the case run by the RMS and not that advanced by Fishing Station. To the extent that this comprised an offer by the RMS at the closing submissions stage, it has not been withdrawn nor has any proposition been advanced that it was an inappropriate offer or made in error. The sum proposed is to be included in the compensation to which Fishing Station is entitled.

Costs

Introduction

34. Although the Qasabian Investments and Fishing Station proceedings were heard together and were subject to my earlier decision given on a composite basis, there were, in fact, two separate proceedings relating to distinctly different claims. They were only heard together because both Qasabian Investments and Fishing Station are entities associated with the Qasabian family and reasons of efficiency and the objective in s 56 of the Civil Procedure Act 2005 (the just, quick and cheap resolution of the issues genuinely in dispute between the parties), made it appropriate to deal with both claims in a single hearing.

35. This process resulted in an intermingling, in an imprecise fashion, of the amount of time involved in my earlier hearings that could be attributed to the Qasabian Investments claim or to the Fishing Station claim.

34. At the commencement of the hearing on 11 October, I raised with Mr Hemmings and Ms Duggan the question of whether it might be appropriate for me to make some apportionment order for costs if I concluded, because there were two separate proceedings, that there might be different outcomes for costs in each of them. I indicated that, at that time, and only tentatively, if I were to reach such a conclusion, the split between the investments and the fishing station proceedings might be 30/70.

35. Ms Duggan indicated that such an approach was acceptable to the RMS and tentatively indicated that a split on the basis I had postulated might be appropriate might be acceptable in the RMS’ view.

36. On the other hand, Mr Hemmings submitted that, if I were to reach different costs conclusions in the two proceedings, the appropriate path was to have the division of costs dealt with through the assessment process.

37. As I have come to the conclusion that there should be different costs outcomes between the two proceedings, and because I have insufficient understanding of the extent to which preparation costs might have fallen between the two proceedings (including the costs of the experts), I have concluded that the appropriate course is to leave resolution of how costs should fall and in what amount to the assessment process as proposed by Mr Hemmings.

38. The approach taken on behalf of Qasabian Investments and Fishing Station is one based entirely on the outcomes in each of the proceedings. Put simply, in each of the proceedings, as the relevant applicant obtained a financial outcome that was greater than that which was the position of the RMS at the conclusion of the hearing, the applicant in each of the proceedings should have its costs awarded in those proceedings.

39. The position put by the RMS, in each instance, was a common, issues based one. Although advanced in slightly differing fashions concerning Qasabian Investments or Fishing Station, the RMS suggests that I should select the appropriate overall costs outcome from a cascading range set out in Ms Duggan’s written submissions. The RMS does not envisage that Qasabian Investments and Fishing Station should, under any circumstances, be regarded as being entitled to having a complete and unalloyed entitlement to costs in the relevant proceedings.

40. It is not necessary to repeat the range of options posited by the RMS as I am satisfied that the question of costs in each matter can be settled from first principles.

The terms of the Land Acquisition Act

43. On 11 April 1991, the Land Acquisition (Just Terms Compensation) Bill 1991 (the Bill) was introduced into the Parliament by the then Deputy Premier and Minister for Public Works, the Hon W J T Murray MP. An examination of the Minister’s Second Reading Speech, on that date, does not disclose any reference to costs (the issue engaged for my present consideration). This also applies to the Minister’s Second Reading Speech in Reply, on 17 April 1991.

44. After the completion of the passage of the Bill through the Legislative Assembly, it was not able to be dealt with prior to the intervention of the 1991 state election.

45. However, the legislation was reintroduced as an early Bill in the following Parliament. Similarly, an examination of the Hansard record for the Bill when reintroduced discloses no reference to costs in the second reading or committee stage debates in either the Legislative Assembly or the Legislative Council. The reintroduced legislation was passed and came into effect as the Land Acquisition Act. As a consequence, there is nothing in the Hansard that would engage s 34(2)(f) of the Interpretation Act 1987 for present purposes.

46. There is nothing in the terms of the Land Acquisition Act itself which provides any assistance in my consideration of the costs issues here involved.

Legal foundations

47. The Land Acquisition Act creates a statutory regime to ensure that a holder of an interest in land is provided with just compensation when that interest is compulsorily acquired by some State or local government entity for the carrying out of a public purpose.

48. The Court of Appeal has considered the question of costs entitlements arising from proceedings where the interest holder and the acquiring entity were unable to agree on all aspects of compensation, leaving it to the Court, in contested proceedings, to make such a determination.

49. It is appropriate to refer to two Court of Appeal decisions to reflect the appropriate approach to be taken in these two proceedings.

50. The relevant applicable broad statement of principle was set out by, in Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328, where Basten JA wrote, at [70] to [72]:

In other respects, however, the appellants' propositions may be accepted. They support the proposition that a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.

That approach is also consistent with the absence of any general presumption that costs should follow the event: the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered.

Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case. …

51. This approach was subsequently endorsed by a differently constituted Court of Appeal in Brock v Roads and Maritime Services (formerly Roads and Traffic Authority of NSW) (2012) LGERA 267; [2012] NSWCA 404 where Tobias AJA observed, at [95]:

As was noted by Basten JA in Dillon at [71], an owner of land who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the court in respect of the adequacy of any compensation offered. …

52. His Honour also observed, at [96]:

As Basten JA concluded at [72] in Dillon, the purpose of an award of costs, being to compensate the party for expenditure incurred in the course of litigation, must be taken into account although the nature of the litigation and the reasonableness of the conduct of the litigation by the claimant are central considerations.

53. I now turn to consider each of these proceedings in light of that which is to be taken from the above extracts.

Qasabian Investments proceedings

54. There were three contested matters. Two of them were claims made that, I determined, went against settled authority and were rejected on that basis. The third, the claim for the value of Qasabian Investments’ interest in the acquired site, was effectively determined by the agreement of the land valuers – an agreement which, in their joint expert report, settled the amount of compensation due under this head of claim.

55. After the terms of the joint expert report of the land valuers was made available to Qasabian Investments’ legal advisors, there was no reasonable basis upon which the Qasabian Investments’ proceedings could continue to be pursued.

56. However, until that agreement was made known to Qasabian Investments’ legal advisors, it was reasonable to continue to pursue that aspect of the claim. As a consequence, Qasabian Investments is entitled to its costs up to that time but not thereafter.

Fishing Station proceedings

57. Despite Fishing Station having been entirely unsuccessful on the fundamental “no relocation” point, Fishing Station had succeeded in obtaining an outcome that was more beneficial to it than that advanced by the RMS.

58. Although Fishing Station’s outcome was achieved solely on the basis of the expert evidence advanced by the RMS and accepted by me that Frenchs Forest Fishing Station had actually relocated to Mona Vale, its “no relocation” case had not been so entirely devoid of merit to be regarded as unarguable.

59. To deny Fishing Station its costs of the proceedings when it obtained a better outcome and had not advanced an entirely hopeless case would be contrary to the principle of permitting a disposed owner of an interest in land to mount a reasonable challenge to the basis upon which compensation was assessed to be paid for that dispossession.

60. The RMS is to pay Fishing Station’s costs of the proceedings.

Summary of findings

61. The conclusions I have reached can be summarised as:

1. Qasabian Investments is to have its costs of the proceedings paid up to the time the joint expert report of the land valuers disclosing agreement on the value of Qasabian Investments’ interest in the acquired land was provided to Qasabian Investments’ legal advisors;

2. Fishing Station is entitled to compensation for the future rental difference on the basis of the agreement of the land valuers;

3. Fishing Station is entitled to have me correct an inadvertent slip in my earlier judgment to ensure it receives an additional $15,000 compensation for fitout at Mona Vale; and

4. Fishing Station is entitled to have the RMS pay its costs of the proceedings.

Directions

62. I therefore give the following directions:

1. The parties are to email my Associate with a settled set of Short Minutes, as a Word document, in each of these matters to give effect to my determinations in that matter;

2. Both matters are set down before me as the Duty Judge at 0930 on Friday 19 January 2018; and

3. If the two sets of Short Minutes required by (1) are emailed my Associate by the close of business on 17 January 2018, the mention set by (2) in each matter will be vacated.

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Amendments

15 December 2017 - At [39] change "full" to "fall" to read "...how costs should fall and in what amount...."

Decision last updated: 15 December 2017