Robertsons Furniture and Design (Qld) Pty Ltd v Department of Main Roads
[2005] QLC 25
•9 May 2005
LAND COURT OF QUEENSLAND
CITATION: Robertsons Furniture and Design (Qld) Pty Ltd v Department of Main Roads [2005] QLC 0025 PARTIES: Chief Executive, Department of Main Roads
(applicant)v. Robertsons Furniture and Design (Qld) Pty Ltd
(respondent)FILE NO: A2003/0717 DIVISION: Land Court of Queensland PROCEEDING: An application for costs of and incidental to the hearing and determination of a claim for compensation under the Acquisition of Land Act 1967 DELIVERED ON: 9 May 2005 DELIVERED AT: Brisbane HEARD BY: Written Submissions MEMBER: Mr JJ Trickett, President ORDER: The application is dismissed. CATCHWORDS: Costs - Acquisition of Land Act 1967 Section 27 - Departure from the general rule - Discretion to award costs to respondent - Respondent substantially successful in amount of compensation - Claimant successful in most issues - Guidelines to be considered. SOLICITORS: Crown Solicitor, Crown Law, for the applicant
Phillips Fox Lawyers for the respondent
This is an application for costs by the Chief Executive, Department of Main Roads, arising from the hearing and determination by the Land Court of a claim for compensation by Robertsons Furniture and Design (Qld) Pty Ltd following the taking of land in which that company had an interest as lessee, by the Chief Executive, Department of Main Roads, under the provisions of the Acquisition of Land Act 1967 (the Act), for road widening purposes. In keeping with the terminology used in my decision on the claim for compensation, I will continue to refer to Robertsons Furniture and Design (Qld) Pty Ltd as "the claimant" and to the Chief Executive, Department of Main Roads as "the respondent".
Background
From 1 July 1997, the claimant leased the premises at 86 Bundall Road on the Gold Coast, where it conducted a high quality furnishings business. On 13 October 2000, the respondent resumed 62 m² of that land for the widening of Bundall Road. The claimant claimed compensation for disturbance for loss of business profits during the period of road construction, which commenced in September 2000 and was completed in November 2001.
The claimant contended that the business was adversely affected during virtually the whole of the roadworks period, because traffic congestion, dust, construction noise and general inconvenience caused clients to avoid the business, or not find the urgency to return. It was alleged that the type of clientele which would visit the upmarket furniture showroom had been deterred by construction work in the vicinity. The claimant maintained that over the period of roadworks there was considerable damage done to the company's retail business. However, it conceded that other components of the business, principally its project work, were not so affected.
The Positions of the Parties
The claimant's claim for compensation for $849,462 was filed in the Land Court registry on 29 September 2003. However, on the last day of hearing, the claimant was granted leave to amend the claim to $790,443, without objection.
The claimant's case for loss of profits was based on the company's internal sales reports which had been classified into various categories of "Retail", "Projects", etc, for performance monitoring purposes, rather than ON the company's profit and loss accounts. Based on those reports, the accuracy of the categorisation of which was strongly challenged by the respondent, the claimant contended that the shortfall in retail sales revenue from the previous year should be adjusted by a natural growth factor of 30%.
The final position of the respondent was that no compensation was payable for two reasons; first, that the claim for loss of profits was not a valid claim, and second, even if that type of claim was compensable, no loss was suffered by the claimant because of the roadworks.
However, an advance against compensation of $146,247.20 was paid by the respondent to the claimant on 26 February 2004. That was explained by the respondent as being part of the pre-trial negotiations.
Compensation was determined by the Land Court at $239,605, which included an agreed amount for disturbance items of $19,089.94.
The Power of the Land Court to award Costs
The general power of the Land Court to award costs is contained in s.34(1) of the Land Court Act 2000 which provides:
"(1) Subject to the provisions of this or another Act to the contrary, the Land Court may order costs of a proceeding in the court as it considers appropriate."
However, in cases such as the present involving the determination of compensation under the Acquisition of Land Act, that general discretionary power is restricted. Section 27 of that Act provides:
"(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 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."
These provisions and similar provisions in land acquisition statutes in other States and in the Commonwealth, have been considered by courts on a number of occasions. In Yalgan Investments Pty Ltd v Council of the Shire of Albert (1997) 17 QLCR 401, the Land Appeal Court of Queensland had regard to the leading cases on the scope and exercise of the Land Court's discretionary power to award costs and identified a number of general principles which must be considered. In addition to the Commissioner for Railways v Buckler (1994) 15 QLCR 262 (Queensland Court of Appeal), those authorities included Moyses & Ors v Townsville City Council (1979) 6 QLCR 271 (Land Appeal Court), Minister for the Environment v Florence (1980-81) 45 LGRA 127 (Supreme Court of South Australia), Banno & Anor v Commonwealth of Australia (1993) 81 LGERA 34 (Federal Court) and Kabale Holdings Pty Ltd v Director-General, Department of Transport (1997) 18 QLCR 166, in which the Land Appeal Court referred to the decisions of the Full Court of the Supreme Court of Queensland in Wyatt v Albert Shire Council [1987] 1 QdR 486 and Assignment Pty Ltd v Kirby [1981] 1 QdR 129.
The Land Appeal Court in Yalgan stated the principles derived from those authorities at pp.406-408, those relevant to this matter being:
· 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 for compensation which he or she could hardly be expected to renounce (Florence at p.149, Banno at p.53).
· 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).
· 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.149-150).
· 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).
· 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 constructing authority (Moyses at p.274).
· 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 inquire 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).
The General Rule
The general rule in civil litigation is that costs follow the event and that the successful party will be awarded costs, unless there are circumstances which require departure from the general rule. But in Buckler at pp.268-269, McPherson JA pointed out that compensation cases are different and to apply the general rule in an unqualified way would enable the claimant to contest the amount of compensation with more or less complete impunity as to costs, as it is rare for no compensation to be awarded. His Honour then traced the history of the various legislative devices enacted "with a view to encouraging early settlement and discouraging exorbitant claims in compensation cases". Those provisions limited the general discretion of the Land Court as to costs by making it subject to a rule that costs, if any, were to be awarded to the constructing authority, unless the amount of compensation determined by the Court was the amount claimed by the claimant, or was nearer to it than the amount offered by the authority, in which case costs, if any, were to be awarded to the claimant.
His Honour went on to say at pp.269-270:
"Section 27(2) of the Acquisition of Land Act 1967 is thus the third in this line of attempts to resolve the question by means of a statutory provision governing costs. It preserves the device used in the earlier two provisions by treating nearness to the amount awarded as decisive, but does so with two changes. One is that, in deciding the question, it is not the first amount but the 'final' amount claimed by the claimant that is relevant; the other is that it is not the amount of any offer made by the constructing authority but 'the amount of the valuation finally put in evidence by the constructing authority' that matters.
Stated in general terms, what the Court is now required to do in fixing the instance of costs under this rule is to look at 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 in the 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."
In the present case, the claimant has been partially successful. However, the amount of compensation determined by the Court is much nearer to the final position of the respondent (that is, nil) than to the final amount claimed by the claimant of $790,443. Therefore, by virtue of s.27(2) of the Act, the Court cannot award costs to the claimant, but has the discretion to award costs to the respondent.
However, in accordance with the principle established in Moyses, that does not mean that the Court should simply award costs to the respondent, as it would be wrong to merely have regard to the amounts of the claim and of the award and of the valuation finally put in evidence by the respondent. Rather, the authorities indicate that other criteria must be considered in deciding whether or not costs should be awarded to the respondent. For example:
· whether the conduct of the claimant (eg making an exorbitant claim) has been such as to force the authority, unreasonably and unnecessarily into litigation; or
· whether the claimant has pursued a vexatious, dishonest, or grossly exaggerated claim; or
· whether the claimant has presented his case in such a way as to impose unnecessary burdens on the constructing authority or the Court.
I turn now to consider the written submissions by the parties.
The Respondent's Submission
The respondent claimed to be entitled to an award of costs because the claimant had been unsuccessful in its claim for compensation, compared with the amount awarded by the Court. The respondent referred to the late amendment of the claim on the last day of hearing, following challenges by the respondent throughout the hearing, arguing that this should not be allowed to place the claimant at a tactical advantage with respect to costs under s.27 of the Act.
The respondent explains the purpose of the payment of the advance of $146,247.20 was to give the claimant the benefit of the doubt with regard to the claim and to substantially defray the claimant's out-of-pocket costs. However, once the claimant referred the matter to the Land Court for determination, that benefit of doubt was revoked, putting the claimant to proof. The respondent contends that it is open to the Court to accept that the respondent's final position is the amount of the advance of $146,247.20, as this was the amount the claimant would have received had it not referred the matter to the Court.
The respondent went on to submit that the claim was excessive, forcing the respondent into litigation, because of the lack of explanation distinguishing "retail" sales from "project" sales. In this regard the respondent referred to the observation by McPherson JA in Buckler that s.27 of the Act was designed to discourage exorbitant claims.
The respondent submitted that it should not be penalised for allowing the matter to be litigated instead of resolving it out of Court, because of:
· the late amendment of the claim based only on those items in the sales reports that were challenged, without knowing whether there were other discrepancies;
· the Court's finding that there was no indication of a downturn in the company's overall trading results which could be attributed to the roadworks;
· no satisfactory evidence was provided of a meaningful distinction between "retail" sales and "project" sales; this was not assisted by the claimant's description of "projects" in disclosure prior to the trial.
The respondent submitted that it was not unreasonable to have the matter litigated because:
· there was no basis for a 30% growth factor in respect of retail sales;
· the authorities seemed to prohibit claims for pure economic loss/business loss; and
· there were doubts about the discrepancy between the claimant's profit and loss statements and its internal classification system; and
· there were doubts about the accuracy of that system.
While acknowledging that it is not always appropriate to look at who "won" or "lost" compulsory acquisition cases, having regard to the claimant's total claim and the amount subsequently determined, an order for costs in favour of the respondent is appropriate. However, if full costs were not appropriate, then it was submitted that the claimant should be ordered to pay 75% of the respondent's costs.
The Claimant's Submissions
As the provisions of s.27(2) of the Act prevent the claimant from being awarded costs, the claimant submitted that the Court should exercise its discretion and make no order as to costs.
As to the respondent's final position, the claimant argued that despite paying an advance against compensation, at the hearing the respondent contended that no compensation was payable.
However, the Court found that the business was adversely affected by the respondent's roadworks as both potential customers and former customers were deterred from visiting the premises and that the resulting losses were not offset by any enhancement. The Court found that the claimant suffered loss of profits and upheld the validity of the claim, awarding compensation to the claimant of $239,605 plus interest.
The claimant acknowledged that Yalgan is the principal authority on the question of costs under s.27 of the Act referring to the finding of the Land Appeal Court that in considering whether it should award costs to a constructing authority, it would 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, it being more relevant to inquire whether the conduct of the claimant, for example, making an exorbitant claim, had been such as to force the authority, unreasonably and unnecessarily into litigation, or whether the claimant had pursued a vexatious, dishonest or grossly exaggerated claim or presented the case in such a way as to impose unnecessary burdens on the constructing authority or the Court.
The claimant submitted that the respondent was unsuccessful with regard to the two principal issues of the validity of the claim for loss of profits and that no loss had been suffered by the claimant. In addition, despite the respondent's challenge, the Court had accepted the methodology of the claimant's witness with regard to the shortfall in retail sales, the gross margin that would have been achieved on that shortfall and the adjustment to be made for variable costs. Furthermore, the Court had discounted the claimant's potential loss of profits in a way not contemplated by either party at the hearing, taking account of the uncertainty of correctly assessing the loss. That, together with the rejection of the natural growth factor of 30%, which formed a part of that methodology, was the biggest single factor causing the difference between the amended claim of $790,443 and the amount awarded of $239,605. While the amount of compensation was closer to the amount contended for by the respondent, the Court found in favour of the claimant on a number of key issues.
The claimant contends that it was forced into litigation, arguing that it had no choice whether or not to make a claim and that the amount of compensation awarded represents substantial business losses incurred by the claimant which it could hardly be expected to renounce. It had sought to resolve the matter early by providing details of its losses in its accountant's report, well before the claim was ultimately delivered. The advance that was paid was well below the amount of the claim, so that it was necessary and reasonable to proceed to trial.
The claimant argued that at the hearing, the respondent revised its position, contending that the claimant had no entitlement to compensation or, if it did have, it could establish no loss. As a result of this position, the claimant was potentially liable to repay the earlier advance. In those circumstances, the claimant had little option but to seek a determination from the Court.
The claimant acknowledges that it was only under cross-examination that the discrepancies in the sales reports were revealed. However, the claimant argued that it had at all times answered any requests for information by the respondent and offered to answer any further questions, or make any explanation in relation to other material provided. However, the respondent's expert witnesses had not taken up the claimant's offer. In those circumstances, litigation was inevitable.
Conclusion
Having regard to the final positions taken up by the parties with regard to compensation, the claimant has been partially successful to the extent of $239,605. I do not think that regard should be had to the amount of the advance, because the respondent made its final position quite clear. If the respondent had been successful in its contention that no compensation should be paid, then the claimant faced the prospect of having to refund the advance.
Putting aside for the moment the matter of quantum, as pointed out in its submission, the claimant was successful in most of the critical issues. Most importantly, the claimant persuaded the Court that it had lost business profits as a direct result of the respondent's roadworks. That this did not translate into a higher award, was due to the difficulty confronting the claimant in establishing the quantum of that loss, because of the ambiguity of its imperfect internal classification of sales. It did succeed in establishing that it had lost the opportunity to receive those profits. However, those potential profits were discounted by the Court by 50%, because of the uncertainty of correctly assessing that loss. Furthermore, the claimant was not able to prove its 30% growth factor.
In those circumstances, pursuant to the principles in Yalgan, while the claim might be characterised as excessive, it was certainly not vexatious or dishonest. In any case, the claimant succeeded in obtaining $239,605 in compensation, whereas the respondent contended that no compensation should be awarded.
The respondent argued that in the matter of costs, the late amendment of the claim should not be such as to place the claimant at a technical advantage in respect to costs. It has not done so. The determination of compensation was much nearer to the final position of the respondent than to that of the claimant, thus depriving the claimant of any right to costs.
I agree with the submissions of the claimant that by its very nature, a claim for business loss raises complex and challenging matters of an evidential nature for the claimant, who bears the onus. In addition, the legal aspects of this matter were complex, as illustrated by the arguments of the parties. The claimant argued that the business losses were compensable as a matter of disturbance. The respondent argued that such losses were not compensable, relying on a number of authorities to that effect. In the event, the Court found that because of the interpretation placed on s.20(1)(b) of the Act by the Land Appeal Court in Barns v Department of Transport (1997) 16 QLCR 22, in this case such losses were compensable.
Although in this case the claimant has been partially successful, the provisions of s.27(2) of the Act prevent it from being entitled to be considered for an award of costs. Here it is the respondent who is entitled to be considered in that regard. The power of the Court to award costs is restricted to that extent by s.27(2). However, having determined which of the parties is entitled to be considered for an award of costs, the discretion of the Court in s.27(1) is absolute and unfettered. It is then that the guidelines established by the authorities collected in Yalgan should be considered. However, as was pointed out in Wyatt, those guidelines must not lead the Court to a rigid adherence to preconceptions which would not be a proper exercise of discretion if it led the Court to overlook relevant considerations.
In exercising that discretion, I recognise that claims for compensation under land acquisition statutes are different from other claims. That difference was expressed by Wells J of the Supreme Court of South Australia when discussing costs provisions in the Land Acquisition Act 1969 (SA) in Florence at pp.149-150:
"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 sorts of cases."
Somewhat similar sentiments were expressed by Wilcox J of the Federal Court in Banno at p.53:
"The acquisition left the applicants in the position of either accepting the Commonwealth's assessment of the proper compensation or of having the Court rule on its adequacy. Perhaps people in that position should be allowed access to the Court, to present an arguable and well organised case, without being deterred by the prospect of being ordered to pay the Commonwealth's costs if their case proves unpersuasive. I distinguish the situation of resumees who pursue a vexatious, dishonest or grossly exaggerated claim or present their case in such a way as to impose unnecessary burdens on the Commonwealth or the Court."
In Barns at p.136, the Land Appeal Court found that compensation cases justify some flexibility in the application of the general rule against the dispossessed owner.
Similar reasoning has been adopted in the New South Wales Land and Environment Court. In Pastrello v Roads and Traffic Authority (NSW) (2000) 110 LGERA 223, Talbot J said at 225:
"It has been said many times that the compulsory acquisition of land from an unwilling owner is a serious interference with that persons 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."
In the present case, the claimant presented an arguable and well organised case. The principal legal issue was whether there was a valid claim for compensation at all. However, the case proceeded on the basis that even if there was a valid claim, the claimant had not proved that there was any loss to its business as a result of the respondent's roadworks. In the result, the claimant was successful on both the legal and the factual issues, but for reasons which have been explained in the judgment, the quantum of compensation was considerably less than the claim. The claimant also successfully challenged the respondent's contention that there was enhancement to the claimant's business as a result of the roadworks.
Therefore, I have come to the conclusion that although the respondent is the only party entitled to be considered for an award of costs, in the circumstances of this case I should exercise my discretion and make no order as to costs. The respondent's application for costs is therefore dismissed
Order
The application by the respondent for costs of and incidental to the hearing and determination of the claim for compensation in this matter is dismissed.
JJ TRICKETT
PRESIDENT OF THE LAND COURT
0