Secretary to the Department of Transport v Provan's Timber Pty Ltd (No 2)
[2020] VSCA 258
•30 September 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0094
| SECRETARY TO THE DEPARTMENT OF TRANSPORT | Appellant |
| v | |
| PROVAN’S TIMBER PTY LTD (ACN 004 654 746) & ORS (according to the attached Schedule) [No 2] | Respondents |
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| JUDGES: | TATE, KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | On the papers |
| DATE OF JUDGMENT: | 30 September 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 258 |
| JUDGMENT APPEALED FROM: | [2019] VSC 390 (Emerton J) |
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COSTS – Compulsory acquisition of land – Dispute about entitlement to compensation for relocation expenses – Leave to appeal granted and appeal allowed – Whether costs of proceedings below should be paid on an indemnity basis – Whether proceedings arose from or affected by unreasonable conduct – Whether letter of offer amounted to a Calderbank offer – Whether rejection of a Calderbank offer relevant to assessment of unreasonable conduct in a land acquisition matter – Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (2005) 13 VR 435, Roads Corporation v Love [No 2] (2010) 31 VR 551 applied – Land Acquisition and Compensation Act 1986 ss 51, 52, 53, 91.
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| WRITTEN SUBMISSIONS: | Counsel | Solicitors |
| For the Appellant | Mr S Goubran with Ms C Dermody | Russell Kennedy |
| For the Respondents | Ms C van Proctor | Aitken Partners |
TATE JA
KYROU JA
McLEISH JA:
The Court allowed the appeal in this matter on 21 August 2020 and has now had the benefit of the parties’ submissions as to costs. These reasons should be read with the principal reasons of the Court.[1]
[1]Secretary, Department of Transport v Provan’s Timber Pty Ltd [2020] VSCA 210 (‘Principal reasons’). The Secretary to the Department of Transport was defined in the Principal reasons as ‘the Authority’ (see [4] n 3), while the three respondents were referred to collectively as ‘Provans’ or ‘the Provans Group’ (see [10] n 6).
The parties are in agreement that Provans should pay the Authority’s costs of the application for leave to appeal, and the appeal, on the standard basis.[2]
[2]See the orders set out at [87(1)] below.
Where the parties differ is with respect to the costs order to be made in relation to the trial. The Authority seeks a costs order in its favour in each of the two proceedings before the trial judge calculated, in part, on an indemnity basis arising from the rejection of the Authority’s Calderbank offer.[3] Provans accepts that it should pay the Authority’s costs of the trial but submits that costs should be calculated on the standard basis.
[3]See [17]–[18] below.
The claims for compensation
On 16 October 2014, the Authority compulsorily acquired the Land, pursuant to the Land Acquisition and Compensation Act 1986 (‘the Act’), the registered proprietor of which was Timber. The Land was occupied by a retail hardware and timber business run by Hardware. Joinery employed the staff of Hardware’s business.
There were extensive negotiations between the parties about the amount of compensation to be paid for the Land and which companies within the Provans Group were entitled to compensation. Timber sought compensation on the basis of the highest and best use of the Land, assuming vacant possession for residential development. Hardware sought to recover its costs of relocation. Throughout these negotiations the Authority maintained a ‘core proposition’, namely, that the valuation that would inform the compensation payable would be assessed either on the basis of the highest and best use of the Land, in which case compensation for Hardware’s relocation costs would not be payable, or on the basis of the business as a going concern, an ‘in use’ assessment where additional compensation would be paid for relocation costs and loss of profits.[4] The Provans Group never accepted the core proposition.
[4]Principal reasons [16], [27], [64].
On 24 October 2014, the Authority made an initial offer of compensation in respect of market value of $5.675 million to Timber and $2.871 million to Hardware for relocation expenses.[5] On 17 December 2015, Timber responded by claiming $12.7 million for market value while Hardware purported to accept the sum of $2.871 million for relocation expenses.[6]
[5]Principal reasons [50].
[6]Principal reasons [57].
On 17 February 2016, agreement was reached by the four valuers engaged by the parties with respect to the valuation of the Land at the date of acquisition assessed on the basis of its highest and best use, namely, $12.2 million.[7]
[7]Principal reasons [61].
On 6 April 2016, the Authority provided a statutory reply to Provans that made two offers in the alternative. The primary offer included an allowance of compensation for market value of the Land at its highest and best use at the agreed valuation, $12.2 million. The primary offer also included an allowance of $100,000 for solatium, $20,000 for submission expenses and $170,000 for costs and expenses in the nature of legal, valuation and other professional expenses incurred by reason of the acquisition, pursuant to s 41(1)(f) of the Act. The total value of the primary offer was $12.49 million.[8]
[8]Principal reasons [63].
The alternative offer was for $5.675 million for the market value of the Land on the basis of its existing use together with compensation for relocation expenses of $2.871 million and the same incidental expenses reflected in the primary offer. The total value of the alternative offer was $8.836 million.[9]
[9]Principal reasons [65].
On 21 June 2016, Provans rejected the alternative offer as irrelevant and premised on a mistaken belief that there had been an agreement that Timber, Hardware and Joinery were jointly to be treated as a single claimant.[10] Rather, each of Timber, Hardware and Joinery was to be treated as an individual separate claimant. With respect to the primary offer, Provans agreed that the market value was $12.2 million and on 25 October 2016 Timber referred the ‘disputed claims’ to the Supreme Court for determination, pursuant to s 80 of the Act.[11] The judge said:
the only ‘disputed claims’ as between an individual claimant and the Authority were the claim by Timber for the market value of the Land ($12.7 million), solatium ($350,000), legal expenses (to be advised) and professional expenses pursuant to s 41(1)(f) of the LAC Act. The legal and professional expenses were claimed jointly with Hardware and Joinery.[12]
[10]Principal reasons [73].
[11]Provans Timber Pty Ltd v Secretary, Department of Economic Development, Jobs, Transport and Resources [2019] VSC 390, [144] (‘Judge’s reasons’).
[12]Judge’s reasons [141].
The judge described the referral of the disputed claims as the ‘principal proceeding’.[13]
[13]Judge’s reasons [9]. This is Proceeding S CI 2016 4339 as referred to in the orders set out at [87] below.
The second proceeding was brought by the Authority against Hardware and Joinery for a declaration that neither Hardware nor Joinery was entitled to any compensation arising from the acquisition of the Land. The judge described this as the ‘subsidiary proceeding’.[14] The two proceedings were heard together. The trial commenced on 20 August 2018.
[14]Judge’s reasons [10]. This is Proceeding S CI 2017 3392 as referred to in the orders set out at [87] below.
The principal proceeding was, as the judge stated, ‘a claim by Timber to be paid the balance of compensation for the market value of the Land that it allege[d] remain[ed] unpaid by the Authority’.[15] The reference to ‘the balance of compensation’ must be read in the context of the payment of several advances the Authority had made pursuant to s 51 of the Act. On 19 December 2014, after making the initial offer, the Authority made an advance of $8,693,310. On 10 May 2016, after agreement had been reached between the valuers on the highest and best use of the Land, it made a further advance of $3.784 million. The result was that, as at 10 May 2016, the totality of the advances made by the Authority to Provans was $12,477,310.[16]
[15]Judge’s reasons [9].
[16]Judge’s reasons [12].
At trial the Authority claimed that these payments were made to Timber as the registered proprietor of the Land and, being based on the highest and best use of the Land, there were no further amounts payable. However, Provans alleged that $2.871 million of the advance of $8,693,310 made on 19 December 2014 was paid to Hardware to discharge the Authority’s obligation to it by reason of Hardware’s acceptance of the Authority’s initial offer with respect to its relocation costs.[17] On that understanding, the advances paid to Provans left $2.871 million outstanding to Timber for unpaid compensation.[18]
[17]Judge’s reasons [132].
[18]Principal reasons [74].
As the judge put it, referring to the disputed claims referred to the Supreme Court:
The ‘disputed claims’ include the amount that Timber says remains outstanding on the agreed compensation for the market value of the Land. As discussed, that amount corresponds with the amount that Hardware and Timber say was offered to them and accepted by them for relocation expenses.[19]
[19]Judge’s reasons [144].
The balance of compensation sought by Timber in the principal proceeding was thus $2.871 million. This was exactly equivalent to the amount that Hardware claimed it had accepted from the Authority as compensation for its relocation costs.
The Authority’s Calderbank offer
On 22 December 2017, the Authority made a Calderbank offer[20] by letter to Timber, Hardware and Joinery.[21] The offer referred to a mediation that had been held on 6 December 2017 and a settlement offer Provans had made on 8 December 2017, which the Authority rejected. The Authority’s Calderbank offer was made by way of counter-offer. The letter alleged that by this stage of the proceeding Provans must have had a detailed understanding of the Authority’s position, including its strengths and weaknesses, that position having been outlined at the mediation in addition to detailed particulars of offer filed on 10 February 2017 and further clarified in the particulars of offer filed in each proceeding on 24 October 2017. The Authority made an offer of $1.83 million (inclusive of costs and interest) in addition to the retention of the advance of $12.49 million.[22]
[20] Calderbank v Calderbank [1976] Fam 93. We reject the submission by Provans, considered below, that the Authority’s letter of 22 December 2017 is not a Calderbank offer. See [83]–[84] below.
[21]Previous offers to compromise had been made between the parties including a Calderbank offer made by Timber to the Authority on 17 March 2017. See Provans Timber Pty Ltd v Secretary, Department of Transport (Costs Judgment) [2019] VSC 537, [8] (‘Judge’s costs reasons’). Her Honour ordered that the Authority pay Provans’ costs on an indemnity basis on the grounds that the Provans’ Calderbank offer had been unreasonably rejected: Judge’s costs reasons [20].
[22]This figure differs slightly from that recorded in the judge’s reasons at [12]. See [13] above. The difference is not material.
The letter was addressed in the subject-line to all three relevant Provans companies as follows: ‘Your clients: Provan’s Timber Pty Ltd, Provans Timber and Hardware Pty Ltd & Provan’s Timber (Joinery) Pty Ltd’. The letter went on to say:
Your clients’ settlement offer asserts that ... Hardware ... and Joinery are entitled to recover relocation costs ...
...
our client’s primary position is that your clients are not permitted to make inconsistent market value and disturbance loss claims. Our client relies on s 41(2) of the Land Acquisition and Compensation Act 1986 (the LACA) and the general law in that regard, including Bignold J’s judgment in Peter Croke v Roads and Traffic Authority of New South Wales (1988) 101 LGERA 30. ...
Our client is prepared to offer your clients (as defined in the subject line above) the all-inclusive sum of $1,830,000 (the Counter Offer). This sum is in addition to the sums which have already been advanced to your clients totalling $12,490,000 and is inclusive of your clients’ costs of the proceedings [[23]] ... and interest pursuant to s 53(1) of the LACA.
The Counter-Offer is made in full and final settlement of the claims made in the proceedings by Provan’s Timber Pty Ltd, Hardware and Joinery and each of your clients’ entitlements under the LACA arising from or relating to the Notice of Acquisition published in the Victoria Government Gazette on 16 October 2014. The Counter-Offer is subject to each of your clients executing a deed of release to be prepared by our office. The deed will include a term whereby our respective clients consent to a dismissal of the proceedings with no order as to costs. For the avoidance of doubt, the Counter-Offer is a single ‘all-in’ offer made to all of your clients jointly in order to bring all claims and entitlements associated with the acquisition to an end and is not capable of disaggregation.
If the Counter-Offer is accepted, our client will pay your clients the sum of $1,830,000 within 30 days of your clients’ joint acceptance of the Counter-Offer.
The Counter-Offer remains open for a period of 28 days from the date of this letter. For the avoidance of doubt, the Counter-Offer remains open for acceptance until 4:00 pm on Friday, 19 January 2018, after which time it is expressly withdrawn.
Our client makes the Counter-Offer in a genuine attempt to resolve all issues in the proceedings. The Counter-Offer is formulated taking into account the risks of litigation and has regard to the costs that both parties will incur in the future if the proceedings are not settled. In our view, rejection of the Counter-Offer by your clients will be unreasonable.
In the event that the Court delivers … judgments in the proceedings which are less favourable overall than the terms of the Counter-Offer, our client reserves his right to produce this letter in support of an application that your clients pay the Secretary’s costs on an indemnity basis from the date of the Counter-Offer in accordance with the principles set out in Calderbank v Calderbank [[1976] Fam 93], Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) (2005) 13 VR 435, Roads Corporation v Thomas James Love [2010] VSC 154 and Roads Corporation v Thomas James Love [2010] VSC 581.
Please accept receipt of the Counter-Offer on behalf of your clients and advise us whether they accept this Counter-Offer.
[23]This specifically included a costs order made by Emerton J on 11 August 2017 in favour of Provans when she refused the Authority’s application to join Hardware and Joinery to the principal proceeding and refused leave to the Authority for it to amend its particulars of offer.
The Calderbank offer made reference to the interest to which Provans would be entitled on any compensation it was awarded by the Court, pursuant to s 53(1) of the Act. Section 53(1) relevantly provides:
If an amount of compensation is awarded by the Court ... under this Act, the amount that represents the difference between the amount of compensation awarded and the amount of compensation offered by the Authority immediately before the claimant’s claim became a disputed claim bears interest at the rate for the time being determined under section 52 from —
(a) the date of acquisition of the claimant’s interest; or
(b)the date on which the Authority entered into possession of the land in which that interest subsists —
whichever is the earlier, until the date that the compensation is paid by the Authority.
Pursuant to s 52 of the Act, the rate of interest for unpaid compensation is determined by the Governor in Council and published in the Government Gazette.[24] The applicable rate is the penalty interest rate under s 2 of the Penalty Interest Rates Act 1983.[25] As at the date of the acquisition, 16 October 2014, the penalty interest rate was 10.5 per cent per annum[26] and on and from 1 June 2015 the penalty rate was 9.5 per cent per annum.[27] On and from 1 February 2017 the penalty interest rate has been fixed at 10 per cent per annum.[28]
[24]The rate must not exceed the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983: the Act, s 52(2).
[25]Attorney-General, ‘Land Acquisition and Compensation Act 1986 Section 52 —Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G 44, 11 November 1987, 3007, 3036; corrected by Secretary to the Attorney-General’s Department, ‘Land Acquisition and Compensation Act 1986 Section 52 – Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G 6, 17 February 1988, 297, 315. Section 52(2) of the Act provides that the rate must not exceed the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983. It appears that ‘since 1987, the Governor in Council has fixed the rate of interest payable under s 52 of the ... Act at the highest possible level — namely, at the rate fixed by the Attorney General under s 2 of the [Penalty Interest Rates] Act’: Minister for Energy, Environment and Climate Change v Morton [2017] VSC 774, [112] (Garde J).
[26]Attorney-General, ‘Penalty Interest Rates Act 1983’ in Victoria, Victoria Government Gazette, No G 32, 7 August 2014, 1680, 1716. This rate applied on and from 11 August 2014.
[27]Attorney-General, ‘Penalty Interest Rates Act 1983’ in Victoria, Victoria Government Gazette, No G 18, 7 May 2015, 907, 931.
[28]Attorney-General, ‘Penalty Interest Rates Act 1983’ in Victoria, Victoria Government Gazette, No G 1, 5 January 2017, 1, 9.
Section 51 is also relevant to the question of interest. Subsection (4) of s 51 confers an entitlement to interest in respect of unpaid portions of an advance. Section 51 relevantly provides:
(1)Upon the service on a claimant of an offer ... the claimant may, by notice in writing, require the Authority to advance an amount equal to the amount of compensation offered in respect of the claimant’s interest ...
(2)Subject to section 106(1), if the Authority is required to make an advance under this section, it must make the advance within one month—
(a) after receipt of the notice requiring it to make the advance; or
(b) after the claimant has satisfied the Authority as to the claimant’s entitlement to an interest in the land—
whichever last occurs.
...
(4)If an advance has not been paid at the expiration of the period referred to in subsection (2), the Authority is liable to pay interest on the unpaid amount of the advance from the expiration of that period until the date of payment of the advance.
(5)Interest is payable under subsection (4) at the rate for the time being fixed under section 55.
...
Section 55 imposes an additional penalty rate of five per cent per annum higher than the rate of interest determined under s 52 if the Authority fails to pay any amount of compensation which it has agreed to pay, or which has been awarded under the Act, within 30 days of the date of that agreement or award.
The interest ultimately awarded by Emerton J was $1,517,136.41. Her orders are set out below.[29]
[29]See [30] below.
The Authority’s Calderbank offer was not accepted by Provans.
The Calderbank offer made reference to Hazeldene’s Chicken Farm Pty Ltd v Victorian WorkCover Authority [No 2] (‘Hazeldene’)[30] which affirmed that where the refusal of a Calderbank offer is, in all of the circumstances, ‘unreasonable’, this will constitute proper grounds for an indemnity costs order. While there is no need to show that the rejection of a Calderbank offer was ‘highly’ or ‘grossly’ unreasonable,[31] it is not presumed that a refusal is unreasonable simply because the offered sum is higher than the ultimate award.[32] Instead, the onus rests on the offeror to show that the offeree acted unreasonably.[33] This is ultimately a matter of judgment and impression,[34] and must be assessed at the time the offer is made, without the advantages of hindsight.[35]
[30](2005) 13 VR 435; [2005] VSCA 298 (Warren CJ, Maxwell P and Harper AJA).
[31]Love v Victoria [No 2] [2009] VSC 531, [22] (Cavanough J).
[32]Hazeldene (2005) 13 VR 435, 440 [19]; [2005] VSCA 298; Wilson v Melbourne Water Corporation [No 2] [2018] VSC 776, [73] (Ginnane J) (‘Wilson’).
[33]Foster v Galea [No 2] [2008] VSC 331, [9] (Byrne J); Defteros v Google Inc LLC (Costs) [2017] VSC 189, [8] (John Dixon J); Evans Shire Council v Richardson [No 2] [2006] NSWCA 61, [26] (Giles, Ipp and Tobias JJA).
[34]Hazeldene (2005) 13 VR 435, 441 [24]; [2005] VSCA 298.
[35]Oversea-Chinese Banking Corporation Ltd v Richfield Investments Pty Ltd [2004] VSC 351, [36]–[37] (Redlich J).
Hazeldene set out the familiar factors that ought ordinarily be taken into account to assess whether a refusal to accept a Calderbank offer is, in all the circumstances, unreasonable:
(1) the stage of the proceeding at which the offer is received;
(2) the time allowed to the offeree to consider the offer;
(3) the extent of the compromise offered;
(4) the offeree’s prospects of success, assessed as at the date of the offer;
(5) the clarity with which terms of the offer were expressed; and
(6) whether the offer foreshadowed an application for indemnity costs in the event of its rejection.[36]
[36]Hazeldene (2005) 13 VR 435, 442 [25]; [2005] VSCA 298.
The judgment at first instance
The judge held that Timber was entitled to an award of compensation for market value assessed on the basis of highest and best use. She also held that Hardware was entitled to compensation for its relocation costs, by way of ‘disturbance loss’ in the amount of $2.871 million. The judge accepted that Hardware had been entitled to accept $2.871 million from the advance made by the Authority of $8,693,310 made on 19 December 2014[37] and this left Timber in a position where the sum of $2.871 million remained outstanding as unpaid compensation.
[37]See [14] above.
The judge delivered her judgment on 14 June 2019.
On 25 June 2019, after judgment was delivered, the Authority made the payment of $2.871 million to Timber as the balance of the compensation to which her Honour held Timber was entitled.
On 14 August 2019, the judge made orders in both proceedings. In the principal proceeding she ordered that there be an award of compensation to Timber of $12.49 million (made up of market value of $12.2 million, solatium of $100,000, submission expenses of $20,000 and professional expenses of $170,000). She also ordered that the Authority pay Timber $1,517,136.41 as interest. She ordered that the Authority pay Timber’s costs together with costs including indemnity costs from 8 April 2017. The orders her Honour made were in these terms:
THE COURT ORDERS THAT:
1.There be an award of compensation for the Applicant in the sum of $12,490,000 comprising:
| (a) Market Value | $12,200,000 |
| (b) Solatium | $100,000 |
| (c) Submission Expenses | $20,000 |
| (d) Professional Expenses | $170,000 |
| $12,490,000 |
2.The interest payable on the balance of the compensation payable pursuant to paragraph 1 of this order ($2,871,000) is:
(a)$190,110.85 calculated from 16 October 2014 to 16 May 2016 (excluding 17 January 2015 to 16 December 2015) in accordance with ss 52 and 53(1) of the Land Acquisition and Compensation Act 1986 (the Act); and
(b)$1,327,025.56 calculated from 17 May 2016 to 24 June 2019 in accordance with s 51(4) of the Act.
3.The Respondent pay the Applicant the sum of $1,517,136.41 within 14 days of this order, being the sums payable under paragraphs 1 and 2 of this order ($14,007,136.41) less the amount of compensation previously paid to the Applicant by the Respondent by way of advances of compensation pursuant to s 51 of the Act and the payment made to the Respondent on 25 June 2019 ($12,490,000).
4.The Respondent pay the Applicant’s costs of this proceeding, calculated as follows:
(a)in respect of costs incurred up to and including 7 April 2017 on the standard basis;
(b) from 8 April 2017 on an indemnity basis; and
(c)with such costs to be agreed between the parties or failing such agreement, to be taxed.[38]
[38]The period of acceptance for Timber’s Calderbank offer was 7 April 2017: Judge’s costs reasons [25]. See n 21 above.
The judge dismissed the subsidiary proceeding. She ordered the Authority to pay Hardware’s costs, calculated on an indemnity basis. Joinery had conceded that it did not have an entitlement to compensation under the Act and it was not awarded its costs.
The appeal
On appeal, this Court held that Hardware was not entitled to compensation for its relocation costs in the amount of $2.871 million or at all. The primary judge had found that Hardware’s interest in the Land was as a tenant at will. This finding was not challenged. There was also an undisputed assessment of the valuation of Hardware’s occupancy interest as having ‘nil’ value.
In our view, the compensation awarded by the judge to Hardware for its relocation costs did not faithfully reflect the divestment or diminution of its insubstantial leasehold interest as a tenant at will. We considered that compensation afforded for disturbance loss cannot be divorced from the interest in land that is divested or diminished. We did not consider that the relocation costs incurred by Hardware could be viewed as the natural, direct and reasonable consequence of the divestment of its interest in the Land.
In allowing the appeal, this Court made orders setting aside paragraphs 2 to 4 of the orders made by the judge on 14 August 2019 in the principal proceeding and in their place declared that the award of compensation referred to in paragraph 1 of those orders had been paid and that no amount remained outstanding. This order was made in recognition that the whole of the advance of $8,693,310 paid by the Authority on 19 December 2014 to Provans was paid in respect of Timber’s entitlement to compensation and none of it was referable to the claim by Hardware for its relocation costs. A consequence of our order is that the Authority is entitled to recover from Timber the payment it made to Timber on 25 June 2019, after delivery of the judgment at first instance, of $2.871 million.[39] The parties are in agreement that this Court ought make an order to that effect.[40] The parties are in further agreement that the interest in the sum of $1,517,136.41 that the judge ordered in respect of the Authority’s failure to pay Timber the $2.871 million to which she held it was entitled should be repaid by Timber to the Authority.[41]
[39]See [29] above.
[40]See the orders set out at [87(2)] below.
[41]See the orders set out at [87(3)] below.
In respect of the appeal from the subsidiary proceeding, this Court also made declarations that neither Hardware nor Joinery was entitled to an award of compensation under the Act.
The Act s 91
An award of costs lies in the general discretion of the Court.[42] In the context of the compulsory acquisition of land for public purposes, s 91 of the Act confers a specific discretionary power on the Court to award such costs ‘as it considers proper’. Section 91 provides:
[42]Supreme Court Act 1986 s 24(1).
91 Costs
(1)In any proceedings under this Part, the Tribunal or the Court (as the case requires) may award such costs as it thinks proper but in making an order for costs must, if the Tribunal or Court considers it appropriate to do so, take into consideration—
(a)the amount of compensation awarded by the Tribunal or Court as compared with the amount (if any) offered by the Authority; and
(b)the extent to which, in the opinion of the Tribunal or Court, the proceedings have arisen from, or been affected by—
(i)unreasonable conduct on the part of the claimant or the Authority; or
(ii)the failure of the claimant to give adequate particulars of the claim or supply supporting material when required to do so; or
(iii)an excessive claim by the claimant; or
(iv)an unduly depressed offer by the Authority; and
(c)any other matters which under this Act are to be taken into account in determining the allocation of costs.
(2)The Court may make an order with respect to the assessment of costs in the same manner as it may in respect of any other matter before the Court.
…
(4)All costs payable to the Authority may be set off by it against any compensation awarded or costs payable to the claimant.
(5)All costs payable to the claimant may be recovered by the claimant from the Authority in the same manner as the compensation awarded.
The discretion conferred by s 91 is wide and, as is apparent from sub-s 1(c), the considerations to be taken into account are not limited by those identified in sub-ss (1)(a) or (b).[43] However, the Court is obliged to take those matters into consideration if it ‘considers it appropriate to do so’.
[43]Mario Piraino Pty Ltd v Roads Corporation [1991] 2 VR 534, 544 (Gobbo J).
There has been a long-standing recognition by the courts in Victoria, in their approach to s 91, of the difference between claimants under the Act and ordinary litigants.[44] In Roads Corporation v Love [No 2] (‘Roads Corp’)[45] Osborn J held that, absent special circumstances, a claimant for land compulsorily acquired ought to receive their general costs of obtaining the compensation, subject to the discretion of the court. He set out, and adopted, the general principles guiding the exercise of the broad discretion under s 91. He said:
In both Mario Piraino Pty Ltd v Roads Corporation and Coastal Estates Pty Ltd v Shire of Bass, Gobbo J referred with approval to the observations of Wells J in the case of Minister for the Environment v Florence, bearing on the underlying character of proceedings of this kind and issues of costs:
… His Honour said: ‘Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s 18 of the Act, a claim to compensation which he could hardly be expected to renounce.’ Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who has already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable 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. ...
I have taken a like view of this general statement of principle.[46]
[44]Challenger Property AssetManagement Pty Ltd v Stonnington City Council [No 2] [2012] VSC 67, [20] (Croft J); 15 Lorimer Street Pty Ltd v Secretary, Department of Infrastructure (Supreme Court of Victoria, Byrne J, 24 April 1998) 3; Coastal Estates Pty Ltd v Shire of Bass [1994] 1 VR 210 (Gobbo J); Mario Piraino Pty Ltd v Roads Corporation [1991] 2 VR 534 (Gobbo J).
[45](2010) 31 VR 551; [2010] VSC 154.
[46]Roads Corp (2010) 31 VR 551, 553 [13]–[14]; [2010] VSC 154 (citations omitted). In respect of his earlier adoption of the general principles, Osborn J referred to Murdesk Investments Pty Ltd v Roads Corporation [2007] VSC 175, [24]–[25].
The recognition of the special nature of the jurisdiction relating to the compulsory acquisition of land for public purposes has sometimes been described as giving rise to a presumption, or ‘tilt’,[47] in the exercise of discretion of an award of costs in favour of a claimant.[48]
[47]Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27, [34] (Biscoe J); Love v Roads Corporation [2011] VSCA 434 [173].
[48]Taylor v Port Macquarie-Hastings Council [2010] NSWLEC 153, [19]–[20] (Biscoe J).
As Biscoe J said in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority:[49]
The discretion to award costs in compensation is one that has been ‘uniquely applied to tilt the discretion in favour of the dispossessed owner’: Nasser v Roads and Traffic Authority (NSW). As Jagot J said in Simpson v Bagnall:
... compulsory acquisition of land is a serious matter where a dispossessed owner has no option other than to come to court if they dispute the amount of compensation offered. The consequence is that, in the ordinary course, a dispossessed owner can expect to obtain the usual order for costs in their favour, particularly when the amount of compensation determined is greater than that offered by the resuming authority.[50]
[49][2010] NSWLEC 27.
[50][2010] NSWLEC 27, [34] (citations omitted). See also North Albury Shopping Centre Pty Ltd v Albury Municipal Council (1983) 49 LGRA 215, 221 (Cripps J).
To similar effect Wilcox J observed in Banno v Commonwealth:
[T]his is not ordinary litigation. The relationship between the parties giving rise to the litigation did not arise out of their mutual desire; it arose because of a unilateral decision of the Commonwealth to acquire the applicants’ land in order to satisfy a perceived public need. 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.[51]
[51](1993) 45 FCR 32, 51. In Barilla v Roads Corporation (Supreme Court of Victoria, Emerton J, 30 August 2017) Emerton J considered s 91 of the Act in circumstances where there was no compulsory acquisition and no dispossessed owner but rather an owner whose land was adversely affected by a reservation, and chose to sell, rather than to await a compulsory acquisition. Her Honour did not accept that there was any presumption in favour of the owner in the circumstances before her.
However, recognising the difference between compulsory acquisition cases and ordinary claims in general jurisdiction does not serve to fetter the discretion under s 91, which remains broad. As observed by Wells J in Minister for the Environment v Florence,[52] in the passage extracted by Osborn J in Roads Corp, there is no hard and fast rule governing the exercise of the discretion.
[52](1979) 21 SASR 108, 134–5.
In Roads Corp, Osborn J went on to endorse, within the overall framework of the distinctive nature of compulsory acquisition claims, the observations of Gobbo J in Coastal Estates Pty Ltd v Shire of Bass (‘Coastal Estates’)[53] that s 91 of the Act is inconsistent with r 26.08, which provides for costs consequences arising from the rejection of an offer of compromise made under the Supreme Court Rules.[54] Osborn J observed:
I agree that s 91 provides not only the relevant head of power with respect to the award of costs in cases of this kind but also provides guidance as to the exercise of the relevant discretion. Rule 26 is inconsistent with s 91.[55]
[53][1994] 1 VR 210.
[54]Rule 26.08 of the Supreme Court (General Civil Procedure) Rules 2005. This is substantially equivalent to r 26.08 of the Supreme Court (General Civil Procedure) Rules 2015.
[55]Roads Corp (2010) 31 VR 551, 555 [18]; [2010] VSC 154.
He went on to explain:
It followed in his Honour’s view that in so far as s 91(1) requires the court, where it considers appropriate to do so, to take into consideration the amount ‘offered’ by the corporation and whether the ‘claim’ is excessive, it is to be understood to refer to open offers and claims of the kind contemplated by the ... Act itself or made pursuant to directions of the court.
...
In my view, the decision in Coastal Estates should be regarded as correctly stating the meaning of ‘claim’ and ‘offer’ where those terms are used in s 91 of the ... Act. Accordingly, the terms should be understood as meaning ‘open claim’ and ‘open offer’.[56]
[56]Roads Corp (2010) 31 VR 551, 555 [20], 556 [23]; [2010] VSC 154.
However, he considered that there remained scope for the consideration of Calderbank offers under s 91. He said:
Nevertheless, I do not accept the contention made on behalf of Mr Love that the decision in Coastal Estates should be treated as authority for the proposition that no regard can be had to a Calderbank offer. A Calderbank offer is an offer of settlement made on a ‘without prejudice save as to costs’ basis. Ordinarily where the court awards costs, it does so on a party–party basis. If costs are to be awarded on a solicitor–client or indemnity basis, something special or unusual must be demonstrated to justify this course. The unreasonable refusal of a Calderbank offer of settlement may be regarded as a special circumstance and may thus justify an award on one of those higher bases.[57]
[57]Roads Corp (2010) 31 VR 551, 556 [24]; [2010] VSC 154 (citations omitted).
He went on to explain why he considered that regard could be had to Calderbank offers when the court makes an order under s 91:
The judgment in Coastal Estates does not address Calderbank offers. I have come to the conclusion that it is open to have regard to a Calderbank offer made either on behalf of a claimant or the authority when a court exercises its discretion under s 91.
Section 91 governs factors relevant both to liability for costs and the standard on which they are assessed.
Section 91 provides that the factors a court may take into consideration include ‘unreasonable conduct on the part of a claimant or the authority’.
Whether a party has acted unreasonably in respect of the conduct of litigation falls to be decided by reference to all the circumstances of the particular case.
In my view, there is no satisfactory reason why a without prejudice offer of settlement should be excluded as potentially relevant to a judgment of the circumstances of the case as a whole.
A key feature of a Calderbank offer is that it is not an offer to which offer of compromise provisions — whether imposed by statute or rules of court — apply.[58]
[58]Roads Corp (2010) 31 VR 551, 558 [28]–[33]; [2010] VSC 154 (citations omitted).
He observed that the consideration of whether the rejection of a Calderbank offer was unreasonable reflected the factor identified in s 91(1)(b)(i) of the Act, namely, the extent to which, in the opinion of the Court, the proceedings had arisen from, or been affected by, unreasonable conduct on the part of the claimant or the Authority. He also observed that the exchange of statutory offers remained relevant to the exercise of discretion on costs:
The question which is ordinarily raised by a Calderbank offer made in other forms of litigation is ultimately whether the rejection of the offer was unreasonable in all the circumstances of the case.
This issue reflects the factor identified by s 91(1)(b)(i) of the ... Act.
In other forms of litigation in this court a Calderbank letter is not necessarily determinative of costs issues, but is a potentially relevant factor to be taken into account. Other circumstances including those bearing generally on the issue of unreasonable conduct are likewise relevant under s 91.
If regard is had to a Calderbank offer, the open claims and offers made in a proceeding would still themselves remain relevant. The open claims and offers made will ordinarily have determined, to a significant degree, the procedural steps taken in a proceeding, the forensic framework of a hearing and the evidentiary content of that hearing. A Calderbank offer may nevertheless comprise an additional potentially relevant factor.
It may be entirely reasonable for a claimant to offer to settle a claim pursuant to the ... Act, which is attended by significant potential cost and uncertainty, for somewhat less than the claimant’s assessment of the proper compensation payable. Conversely, it may be unreasonable to refuse such an offer of settlement.
It would be a harsh thing to preclude a claimant in such circumstances from reliance upon a without prejudice offer to settle made on a Calderbank basis, if the claimant was thereafter successful in obtaining an award of compensation exceeding the offer and the refusal of the offer was unreasonable.
Like reasoning applies to an authority which is prepared to offer more than its assessment of the compensation payable, in order to avoid substantial risks of costs and uncertainty. This is particularly so in cases where there is a real risk that costs may very substantially exceed the compensation awarded .... [59]
[59]Roads Corp (2010) 31 VR 551, 558 [34]–[40]; [2010] VSC 154 (citation omitted).
He emphasised that, particularly in the context of claims for disturbance loss (as relied upon here by Hardware) there is no reason why, where the court considers it appropriate to do so, a Calderbank offer should not be relevant to the reasonableness of a claimant or authority’s conduct. He said:
While the statutory offer system provided for in the ... Act will generally facilitate the ascertainment of land value, in many cases it may not do so with respect to the quantum of disturbance claims. Such claims are essentially claims for damages and may turn upon facts which are essentially within the knowledge of the claimant. They are analogous to claims for common law or equitable damages in a commercial context, in respect of which the process of trial is commonly attended by risks as to quantum. It is difficult to see why Calderbank principles should be applied in other areas of litigation, where plaintiffs may be entirely free from fault in terms of the underlying cause of action, but such principles should not be applied to ... Act proceedings.
Once it is accepted that there may be a real risk of substantial costs in litigation involving the assessment of compensation for the compulsory acquisition of land, it follows from the considerations I have set out above that it is just to allow parties to take reasonable steps to minimise their risk. The use of Calderbank letters provides such a step. The ultimate effect of the application of Calderbank letter principles is not to penalise one party by way of exemplary costs, but simply to indemnify the other party in respect of costs which would not have been incurred if the opposing party had acted reasonably.
There is also a public interest in encouraging the reasonable settlement of proceedings of the type here in issue. ... [P]roceedings of this type have the capacity to take up very substantial court resources and time. The time of the court is a publicly funded resource. Inefficiencies in the use of that resource should be taken into account in the management of litigation.
For the above reasons, this court should, where it considers it appropriate to do so, take into account Calderbank offers made in the course of proceedings under the ... Act as a potentially relevant circumstance bearing on the reasonableness of the conduct of either the claimant or an authority.[60]
[60]Roads Corp (2010) 31 VR 551, 559 [41]–[44]; [2010] VSC 154 (citations omitted).
Osborn J considered each of the factors expressly referred to in s 91 as well as the Hazeldene factors and concluded, in the circumstances of the case, that the refusal to accept the Calderbank offer was unreasonable and that the claimant, Mr Love, should pay the costs of the Roads Corporation on a solicitor–client basis from the date of the Calderbank offer.[61]
[61]Roads Corp (2010) 31 VR 551, 564 [55], [57]; [2010] VSC 154.
His Honour’s approach to the discretion to be exercised under s 91, especially the capacity of the Court, if it considers it appropriate, to take account of the unreasonable refusal of a Calderbank offer under s 91(1)(b)(i), was affirmed by this Court in Love v Roads Corporation.[62]
[62][2011] VSCA 434, [2], [139]–[177] (Warren CJ, Tate JA and Emerton AJA).
Analysis
The Authority submits that Timber ought pay the Authority’s costs of the principal proceeding up to and including 21 December 2017 on the standard basis, and from 22 December 2017 on an indemnity basis. Similarly, the Authority submits that Hardware and Joinery should pay the Authority’s costs of the subsidiary proceeding up to and including 21 December 2017 on the standard basis and from 22 December 2017 on an indemnity basis.
Provans submits that the appropriate order is for Timber, Hardware and Joinery to pay the Authority’s costs of the trial and the appeal on the standard basis.
Reflecting the analysis adopted by Osborn J in Roads Corp,[63] it is appropriate to consider the parties’ submissions by reference to each of the factors expressly identified by s 91.
(a) The amount of compensation awarded by the Court as compared with the amount (if any) offered by the Authority.
[63]Roads Corp (2010) 31 VR 551, 560–1 [51]; [2010] VSC 154.
The Authority submits that it offered Timber compensation in the amount of $12.49 million on 6 April 2016[64] and made advances to Timber of that amount.[65] As mentioned, on appeal it was held that, as a consequence, there is no payment of compensation outstanding from the Authority to Timber. [66] This factor favours the Authority.
(b) (i) The extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by, unreasonable conduct on the part of the claimant or the Authority.
[64]See [8] above.
[65]See [13] above.
[66]See [34] above.
The Authority submits, in reliance on Roads Corp, that the rejection of a Calderbank offer may be relevant to the application of s 91(1)(b) and the Court’s consideration of the extent to which proceedings have arisen from, or been affected by, unreasonable conduct to which the Hazeldene factors may be relevant.
For the reasons set out below, we consider that, taking into account each of the Hazeldene factors, Provans’ rejection of the Authority’s Calderbank offer, in the circumstances, was not unreasonable.[67]
[67]See [69]–[86] below.
More generally, Provans submits that its conduct during the trial was not unreasonable. It submits that it is significant that the Authority did not succeed on every ground of appeal, and, in particular it did not succeed on the ground that the offer made to Provans was based on ‘incorrect information’ within the meaning of s 31(8) of the Act[68] yet much of the evidence at trial was directed to that issue.[69] The claim made by Timber, in respect of which much evidence was led at trial, was not disturbed on appeal and Joinery accepted before the trial that it had no entitlement to compensation.
[68]Ground 2(b). See Principal reasons [181]–[185].
[69]Judge’s reasons [190]–[213].
The Authority submits that there has been no unreasonable conduct on its behalf.
Provans submits that it is relevant that a substantial portion of the trial before Emerton J centred around the issue of market value and whether the market value assessment of $12.2 million was agreed between the respective valuers, this valuation being upheld on appeal. The Authority submits that it is wrong to assert that the issue of whether the market value was agreed took up any significant time of the trial. It observes that the number of pages dealing with that issue consisted of only 36 pages, out of a total transcript of some 684 pages. It further submits that there was an issue relating to market value that did take up considerable time at trial but this was the market evidence of Hardware and Timber based on their novel submission as to ‘enterprise value’ that Emerton J described as ‘artificial and confusing ... [and] also unnecessary’.[70]
[70]Judge’s reasons [298]. See Principal reasons [113]–[114].
We do not consider that there was any unreasonable conduct on behalf of either Provans or the Authority that gave rise to the proceeding or affected the trial. With respect to the market value of the Land, the parties agreed to have their respective valuers attend a joint valuation conference on 17 February 2016 at which the market value of the Land at the acquisition date was agreed as $12.2 million based on its highest and best use for residential development.[71] This did not change[72] and it considerably assisted the Court in its assessment at trial.[73] There was also no dispute about the quantum of the recoverable relocation costs if Hardware’s entitlement was established.[74]
(ii) The extent to which, in the opinion of the Court, the proceedings have arisen from, or been affected by, the failure of the claimant to give adequate particulars of the claim or supply supporting material when required to do so.
[71]Judge’s reasons [127], [148]–[149]
[72]Judge’s reasons [11].
[73]Judge’s reasons [149].
[74]Judge’s reasons [150].
The Authority did not submit that Provans failed to give adequate particulars of the claims. We note that it took some considerable time for Provans to clarify that there was no formal lease between Hardware and Timber but the Authority well understood this before the disputed claims were referred to the Supreme Court and, indeed, before it made its initial offer.[75]
(iii) The extent to which, in the opinion of the Court, the proceedings have arisen from, or been affected by, an excessive claim by the claimant.
[75]Principal reasons [17], [21], [27], [28], and [30].
Provans submits that the claims it made were not excessive. The claims were not ‘in a fundamental sense speculative’[76] nor were they ‘far higher than the valuations and estimations that it had received at around the time of the acquisition’,[77] either with respect to market value or to relocation costs. Provans submits that it was not the case that there were very real difficulties in establishing the causal basis of its claims. Rather, the claims raised several complex questions about which reasonable minds could differ.[78]
[76]Roads Corp (2010) 31 VR 551, 562 [54(a)]; [2010] VSC 154; Wilson [2018] VSC 776, [72].
[77]Secretary, Department of Business and Innovation v Murdesk Investments Pty Ltd [No 2] [2012] VSC 586, [70]; Wilson [2018] VSC 776, [72].
[78]Wilson [2018] VSC 776, [73].
We agree that the claims made by Provans were not excessive. The history of the proceeding demonstrates that the claim by Hardware for its relocation costs arose out of Hardware’s preference to continue its business and the Authority’s willingness to try to accommodate that preference.[79] The difficulties arose when Provans proved unwilling to accept the Authority’s core proposition that Hardware’s relocation costs would not be compensated if Timber was to receive compensation assessed on the basis of the highest and best use of the Land.
[79]Judge’s reasons [52].
Hardware’s persistence in seeking its relocation costs despite the Authority agreeing to award Timber highest and best use compensation raised difficult and complex legal issues, and it is apparent from the differences in conclusion between the reasons of the judge and those delivered on the appeal that ‘the claimants’ claims raised a number of complex questions about which different minds could vary’.[80] Although the complexity of the issues might support the view that it was unreasonable to reject the Calderbank offer, because the complexity meant that the prospects of success were uncertain,[81] it also meant that the claims made by Provans were not groundless. Ultimately, Provans did face insuperable difficulties in establishing the causal basis of Hardware’s claim for its relocation costs but its claim for those costs was not speculative or excessive.
(iv) The extent to which, in the opinion of the Court, the proceedings have arisen from, or been affected by, an unduly depressed offer by the Authority.
[80]Wilson [2018] VSC 776, [73].
[81]See [79]–[80] below.
Provans did not contend that the Authority had made an unduly depressed offer.
However, the initial offer by the Authority in respect of the market value of the Land was unusual in that it was not based on the highest and best use of the Land but on existing use.[82] The judge noted that the Valuer-General queried the basis of the valuation that was sought and an explanation was given that this reflected the intention of Hardware to relocate its business and the inappropriateness of awarding compensation based on highest and best use of the Land and also the costs of relocation.[83] The revised offer included, as its primary offer, compensation to the total value of $12.49 million reflecting an assessment based on highest and best use.[84]
(c) Any other matters which under this Act are to be taken into account in determining the allocation of costs.
[82]Principal reasons [51]–[52].
[83]Judge’s reasons [102].
[84]Principal reasons [63].
There are no other matters under the Act that are required to be taken into account in determining the allocation of costs.
As foreshadowed, we consider that, in the circumstances of the case, it is also appropriate to address the factors identified as relevant in Hazeldene.[85]
(b) The stage of the proceeding at which the offer was received
[85]Roads Corp (2010) 31 VR 551, 562 [54]; [2010] VSC 154.
The Authority submits that the Calderbank offer was made at a point in time when the parties were well informed about the scope of the dispute as the offer was made following a mediation held on 6 December 2017.
Provans points to the fact that the offer of 22 December 2017 was made well before the trial which commenced on 20 August 2018. It submits that it could not be said that it was clear at that time that Provans would fail in its claims. Indeed, Provans succeeded at trial.
We consider that at the stage at which the Calderbank offer was received the issues in dispute had been narrowed, the ‘disputed claims’ having been referred to the Supreme Court on 25 October 2016 and they were confined in scope.[86] However, as discussed, the disputed claims were complex and not speculative.
(b) The time allowed to the offeree to consider the offer
[86]See [10] and [15] above.
The Calderbank offer was open for acceptance for 28 days. Provans does not dispute that this was a reasonable period (but rather relies on the contention, which we reject, that the letter of 22 February 2017 did not amount to a Calderbank offer).[87]
(c) The extent of the compromise offered
[87]See [83]–[84] below.
On 22 December 2017, the Authority offered Provans collectively $1.83 million to settle the proceeding, which was in addition to the amount of $12.49 million that had already been advanced to Timber. The Authority submits that it is significant that the Calderbank offer was higher than the amount the Court has awarded to the claimants collectively and that it represented a significant compromise in circumstances where the claimants have been held not to be entitled to any additional compensation.
At first sight the offer of $1.83 million may appear generous, especially given that it was made in addition to compensation based on the agreed market value of the Land. However, it is to be remembered that the only significant issue in dispute between the parties at trial was whether Provans was entitled to $2.871 million compensation in addition to the advances it had already received.[88] To this extent, the retention of the sum of $12.49 million was irrelevant to the scope of the dispute between the parties at the time the Calderbank offer was made.
[88]Judge’s reasons [20]–[23].
Furthermore, to determine the extent of the compromise offered, given that the Calderbank offer was an ‘all in’ offer, the comparison to be made is between the offer of $1.83 million and the claim that Provans made in the proceeding, namely $2.871 million plus interest plus costs. It obtained interest of $1,517,136.41 (in accordance with ss 52, 53(1) and 51(4) of the Act)[89] (a total of $4,388,136.41 including the $2.871 million for relocation expenses) plus costs (no doubt a significant sum). Viewed in this light, we consider that while the Calderbank offer was a genuine attempt to compromise, the extent of the compromise offered was not so substantial as to render the rejection of the offer unreasonable, in the context of all the other relevant considerations.
(d) The offeree’s prospects of success, assessed as at the date of the offer
[89]See [20]–[22] and [30] above.
The Authority submits that its prospects of success, assessed as at 22 December 2017, were good. It submits that the reliance it placed in the Calderbank offer on s 41(2), which ultimately did not need to be determined on the appeal,[90] is irrelevant and is not a disentitling factor. It submits that it was plain from the pleadings, and the communications exchanged between the parties prior to 22 December 2017, that it was the nature of Hardware’s interest that was central to the Authority’s position that Hardware was not entitled to compensation under the Act, pursuant to s 41(1). The proceedings have ultimately been determined in its favour on the basis of the proper application of s 41(1).
[90]Principal reasons [192].
Provans submits that it is relevant that the Calderbank offer was conditional on all of the Provans’ companies accepting it;[91] the offer was described as a ‘single “all-in” offer made to all of [the claimants] jointly in order to bring all claims and entitlements associated with the acquisition to an end and is not capable of disaggregation’[92] and inclusive of costs and interest. The offer did not distinguish between the claims made by or against Timber, Hardware or Joinery. The basis on which the Authority succeeded on the appeal differed in respect of Hardware and Joinery, and the Authority did not succeed at all in respect of Timber at trial or on appeal.
[91]Cunningham v Guardian Royal Financial Services Pty Ltd [2017] NSWSC 1057, [51] (Ward CJ in Eq).
[92]See [18] above.
We repeat our observations that Timber’s claim was never truly in dispute; it was not in doubt that it was entitled to compensation for market value based on the highest and best use of the Land. The critical question was whether, in addition, Hardware was entitled to be compensated for its relocation costs. It was only if Hardware succeeded in demonstrating that it was so entitled that it could show that $2.871 million of the advance of $8,693,310 made on 19 December 2014 was properly referable to that entitlement.
However, we have already observed that the claim made by Provans in respect of Hardware’s relocation costs was not speculative or excessive. We have noted that the issues were complex. In particular, the construction of the initial offer was difficult. The judge described the initial offer as ‘a mongrel of an offer’;[93] and while this description was not endorsed on the appeal, we considered that the initial offer was not free of ambiguity and contained a variety of ‘signposts’ supporting alternative and inconsistent constructions of what it meant.[94] It was Provans’ contention that the initial offer consisted of offers to each claimant that were separately open to acceptance or rejection. The complexity associated with the construction of the initial offer may have led Provans to attribute greater prospects of success to its interpretation than was properly warranted but this may not have been readily discernible at the time.
[93]Judge’s reasons [179].
[94]Principal reasons [171].
In that context, Provans submits that in the Calderbank offer the Authority did not contend that its initial offer was an offer to each claimant where the offers were interdependent and incapable of separate acceptance or rejection. The interdependence of the three separate offers was one of the primary bases on which the Authority succeeded on the appeal. However, the position of the Authority at trial, as summarised by the judge, was that the initial offer was ‘a single offer made to all three claimants and that it was only capable of acceptance by all three claimants jointly and only as to all of its parts. It was a single indivisible offer made to all claimants’.[95] The position of the Authority on the construction of the initial offer appears to have crystallised over time. In our view, it would be wrong to make an assessment of the merits of Provans’ position on how the initial offer should be interpreted with the benefit of hindsight when Provans could not have been expected to anticipate how the Authority’s position would be refined.
[95]Judge’s reasons [160].
We consider that Provans’ prospects of success assessed as at the date of the Calderbank offer is a factor that supports the proposition that Provans’ rejection of the Authority’s Calderbank offer was not unreasonable.
(e) The clarity with which the terms of the offer were expressed
The Authority submits that the Calderbank offer was clearly expressed.
Provans submits that there was no Calderbank offer made by the Authority because the offer made in the letter of 22 December 2017 was made subject to execution of a deed of release by each of Timber, Hardware and Joinery in respect of all of their claims and entitlements associated with the acquisition but the offer did not specify any of the terms of the deed of release. It claims that, at most, the offer ‘was no more than an invitation to treat and ... did not satisfy the requirements of a Calderbank offer which must be one readily capable of acceptance’.[96]
[96]See Austin, Nichols & Co Inc v Lodestar Anstalt [No 2] [2011] FCA 450, [42] (Cowdroy J).
We reject Provans’ submission. This was not a case where the offeree would have ‘no way of knowing’ what terms the proposed deed of release would contain.[97] The conditions of the offer were plainly spelt out (including the condition that it was only open for acceptance by all three Provans companies (in respect of which Provans complains)[98] and was inclusive of interest and costs). Moreover, the core term of the proposed deed of release was identified, namely as one ‘whereby our respective clients consent to a dismissal of the proceedings with no order as to costs’. We consider that the Authority’s offer was readily capable of acceptance and amounted to a Calderbank offer.
(f) Whether the offer foreshadowed an application for indemnity costs in the event of the offeree’s rejecting it
[97]Sim Development Pty Ltd v Greenvale Property Group Pty Ltd [2018] VSCA 201, [77] (Kyrou, McLeish and Niall JJA).
[98]See [77] above.
The Calderbank offer foreshadowed an application for indemnity costs in the event of rejection.
Conclusion
Taking into account all of the Hazeldene factors, we consider that the refusal by Provans to accept the Authority’s Calderbank offer was not unreasonable in the context of the proceedings as they stood at the time. We do not consider that any of the factors under s 91 of the Act make it appropriate to make an award of indemnity costs in favour of the Authority.
Orders
We consider that the following orders ought be made:
(1) The respondents pay the appellant’s costs of the application for leave to appeal, and the appeal, on the standard basis.[99]
[99]The Supreme Court (General Civil Procedure) Rules 2015 provide, relevantly, that where the Court orders that costs are to be paid to a party, that party shall be entitled to taxed costs: r 63.07(1).
(2) The first respondent, Provan’s Timber Pty Ltd, repay to the appellant within 14 days of the date of this order, the sum of $2,871,000, being the balance of the compensation paid by the appellant on 25 June 2019 to the first respondent pursuant to paragraph 1 of the orders made by the Honourable Justice Emerton on 14 August 2019 in proceeding S CI 2016 4339.
(3) The first respondent, Provan’s Timber Pty Ltd, repay to the appellant within 14 days of the date of this order, the sum of $1,517,136.41, being the interest paid by the appellant on 23 August 2019 to the first respondent pursuant to paragraph 3 of the orders made by the Honourable Justice Emerton on 14 August 2019 in proceeding S CI 2016 4339.
(4) The first respondent, Provan’s Timber Pty Ltd, pay the appellant’s costs of proceeding S CI 2016 4339 on the standard basis.
(5) The second respondent, Provan’s Timber and Hardware Pty Ltd, and the third respondent, Provan’s Timber (Joinery) Pty Ltd, pay the appellant’s costs of proceeding S CI 2017 3392 on the standard basis.
The authenticated orders of the Court should record that paragraphs (1) to (3) are made by consent.
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SCHEDULE OF PARTIES
| SECRETARY TO THE DEPARTMENT OF TRANSPORT | Appellant |
| and | |
| PROVAN’S TIMBER PTY LTD (ACN 004 654 746) | First respondent |
| PROVANS TIMBER AND HARDWARE PTY LTD (ACN 005 257 705) | Second respondent |
| PROVAN’S TIMBER (JOINERY) PTY LTD (ACN 004 419 667) | Third respondent |
7
19
0