The State of Queensland v George Quaid Holdings Pty Ltd (No 2)

[2001] QLC 84

LAND COURT

BRISBANE

16 AUGUST 2001

Re: A97-29

Determination of Compensation -
Resumption by The State of Queensland

Starcke Pastoral Holdings Acquisition Act 1994

The State of Queensland

Respondent

George Quaid Holdings Pty Ltd

Claimant

APPLICATION FOR COSTS

D E C I S I O N

Compensation flowing from the resumption of the lands owned by the claimant was determined in reasons published on 8 June 2001. The resumption was effected pursuant to the provisions of the Starcke Pastoral Holdings Acquisition Act 1994 (the Starcke Act). That Act provided for the acquisition by the State of certain freehold lands as well as a Pastoral Development Holding (PDH) and Occupation Licences granted under the Land Act 1962. Collectively, those land interests may be described as the "Starcke" aggregation. Section 5 of the Starcke Act provides:
"5.(1)     The State must pay to each person who held an interest in the acquired land immediately before the commencement of the regulation the reasonable compensation agreed between the state and the person.
(2)     If the State and the person cannot agree on compensation, any compensation payable to the person is to be decided under -
(a)in the case of freehold land - the Acquisition of Land Act 1967; or
(b)     in the case of other land - the Land Act 1994."
In the reasons of 8 June 2001 it was held that the words "decided under" in s.5(2) are sufficiently broad to enliven the jurisdiction of this Court under s.26 of the Acquisition of Land Act which should be read together with other provisions of that Act relevant to the exercise of that jurisdiction. One such provision is s.27 which provides:
" 27. (1) Subject to this section, the costs of and incidental to the hearing and determination by the Land Court of a claim for compensation under this Act shall be in the discretion of that court.
(2) If the amount of compensation as determined is the amount finally claimed by the claimant in the proceedings or is nearer to that amount than to the amount of the valuation finally put in evidence by the constructing authority, costs, (if any) shall be awarded to the claimant, otherwise costs (if any) shall be awarded to the constructing authority."
This provision places a limitation on the discretion to award costs granted to the Court by s.34(1) of the Land Court Act 2000:
" 34.(1) Subject to the provisions of this or another Act to the contrary, the Land Court may order costs for a proceeding in the court as it considers appropriate."

Pursuant to the statutory provisions set out above, the respondent has applied for an order for costs in its favour in respect of the matter of the claim for compensation by the claimant. The claimant does not contest the right of the respondent to make the application but resists the making of the order sought.
           It may be useful if I repeat here a relevant part of my reasons of 8 June 2001:
"34.   The claimant, by a letter dated 26 May 1994 to the Director-General of the then Department of Lands sought compensation for the resumption in these terms:
'Prior to acquisition date, my company was offering the subject property for sale both Nationally and Internationally at a set price of $US18,000,000.
Please accept this letter as a formal request for payment of the Australian dollar equivalent of the marketing price, plus interest calculated at the rate of 12.5% per annum from the date of acquisition.
In the event this compulsory acquisition has created a circumstance in which capital gains tax not applicable to free market sale proceeds becomes applicable, my Company reserves the right to seek from the Queensland Government, full reimbursement of the tax assessment in addition to the market price.'
35.    That claim was confirmed in a letter dated 5 December 1994 from the claimant's solicitor. On the third day of the hearing of the matter a document (Exhibit 22A) was tendered and was described by Senior Counsel for the claimant as providing the 'details of our claim':
' (Brett)             Market Valuation of Freehold Land         $15,000,000
(Gould)          Market Valuation of Leasehold Land           $1,285,000   +
Disturbance
(i)        Tax advantage of Land  $6,840,000*
(ii)       Plus:             Acquisition Costs of new property        $600,000*
(iii)      Plus:             Legal and Valuation for Claim
  with Land Court            (To be supplied or agreed)
(iv)      Plus:             Negotiation Costs pre
  Land Court Claim         (To be supplied or agreed)'
+ This figure includes $10,000 not pursued by the claimant.
36.      On the twelfth day of the hearing Mr Quaid provided a supplementary statement (Exhibit 55B) which included reference to a figure of $25,000,000, that figure apparently being the Australian dollar equivalent at the relevant date of the originally claimed $US18,000,000. In due course that figure was included in a further document (Exhibit 22B) and the claim for compensation was amended, with leave, to the following:
'
(       Freehold Land  [$]25,000,000
(       Leasehold Land
(calculation in accordance with Ex. 55B)
And Legal & Valuation fees on negotiations
        (details supplied to Crown and negotiations proceeding)
And Legal & Valuation fees on claim
     (details supplied to Crown and negotiations proceeding)'
  (Note: dollar sign [$] supplied by me)
37. It will be noticed that the claim as amended makes no reference to the items of 'tax advantage of land' nor 'acquisition costs of new property', both of which were included in the 'details of our claim' document (Exhibit 22A). Senior Counsel for the claimant confirmed that these items were not part of the amended claim."

For its part the State's figure for compensation was $4,150,000, as well as legal and valuation fees and "other items of disturbance" not particularised.
During the process of trial the parties settled the disturbance items described above as legal and valuation fees "on negotiation" and "on claim". They had previously settled compensation with respect to the Occupation Licences resumed with the freehold and the PDH land included in the "Starcke" aggregation. The State had also acquired by agreement with the claimant the cattle located on the resumed lands at the date of the resumption.
Adopting the language of s.27(2) of the Acquisition of Land Act the "amount finally claimed" in the proceedings was $25,000,000, whilst the "amount of the valuation finally put in evidence" by the respondent was $4,150,000. The "amount of compensation as determined" was $5,686,700. That included the values of the PDH at $1,130,000, the freehold at $3,750,000 and improvements at $806,700. It follows that the "midway point" was $14,575,000. This figure is substantially closer to the figure proposed by the respondent than that contended for by the claimant. It was $19,313,300 less than the amount finally claimed and $1,536,700 more than the respondent's final valuation.
Cases which have exposed the principles relating to the exercise of the discretion under s.27 of the Acquisition of Land Act are:

Moyses & Ors v. Townsville City Council (1979) 6 QLCR 271 (Moyses);
Minister for the Environment v. Florence (1980-81) 45 LGRA 127 (Florence);
Banno and Another v. Commonwealth of Australia (1993) 81 LGERA 34
(Banno)
Commissioner for Railways v. Buckler [1996] 1 QdR 18 (Buckler); and
Wyatt v. Albert Shire Council [1987] 1 QdR 486 (Wyatt).

A useful summary of the principles that are applicable is to be found in Yalgan Investments Pty Ltd v. Council of the Shire of Albert (1997-98) 17 QLCR 401. The following quotation is taken from pp.407-408 of the Land Appeal Court judgment:
"(h)      In general, a party who is wholly successful in litigation can expect an order for costs in his favour. Where compensation is awarded to one who had already been given, by statute, the right to receive it, it is just to say that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due. But costs are discretionary and no hard and fast rules will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sorts of cases. In some cases, the Land Court may consider that there are sufficient reasons for departing from the general rule (Moyses at p. 278, Florence at pp. 149-50).
(i)        Although the exercise of the power does not exclude resort to the 'settled practice' of a court where such a practice has evolved, a purported exercise of discretion which fails because the mind is closed to relevant considerations through a rigid adherence to preconceptions involves an error of law that is open to correction on appeal (Wyatt at p. 489).
(j) Section 27(2) of the Acquisition of Land Act 1967 should not be regarded as a legislative suggestion that, where the claim is substantially more than the amount awarded, and the amount put in evidence by the constructing authority is not substantially less than the amount awarded, the Court should not merely refrain from awarding any costs to the claimant but should award costs to the authority (Moyses at p. 274).
(k)       Where the Land Court is considering whether it should award costs to a constructing authority, it could be wrong to have regard merely to the amounts of the claim and of the award and of the value put in evidence by the authority. Usually it would be more relevant to enquire whether the conduct of the claimant (such as, for example, making an exorbitant claim) has been such as to force the authority, unreasonably and unnecessarily, into litigation (Moyses at p. 274) or whether the claimant has pursued a vexatious, dishonest or grossly exaggerated claim or presented his case in such a way as to impose unnecessary burdens on the constructing authority or the Court (Banno at p. 53)."

The respondent submitted that the conduct of the claimant in this case has been such as to force the respondent unreasonably and unnecessarily into litigation, that conduct being the pursuit of a claim for compensation which should properly be characterised as being "grossly exaggerated". The claimant submitted that the respondent's central submission should be assessed not only against the claim for compensation for the freehold land which occupied the bulk of trial time, but also with respect to that for the PDH. That is a submission I accept. In its submission the claimant drew attention to the difference between Mr Gould's valuation for the claimant at $1,275,000 and that of Mr Blomfield for the respondent at $830,000. My determination of a figure of $1,130,000 clearly favours the claimant. If there were two separate resumptions, one of the freehold under the Acquisition of Land Act and the other of the PDH under the provisions of the Land Act then, given my conclusion as to the compensation payable with respect to the PDH, it would be the claimant only who could apply for costs in respect of the loss of that interest. That is because resumptions under the Land Act are, with respect to the matter of costs, to be dealt with in accordance with s.27 of the Acquisition of Land Act.
Such a conclusion is somewhat complicated by the nature of the final claim. In an exercise provided by Mr Quaid he included a value of the PDH at $3,000,000 after the freehold had been developed and sold but did not say what its value was at the date of resumption. In his view the main value at that date lay in the in globo value of the freehold which he assessed at $25,000,000 to which would be added some undetermined figure for the value of the PDH. I think it best to put this confusing evidence aside and to concentrate on the figures put forward by Mr Gould and Mr Blomfield.
In the context of the present discussion it will be convenient for me to raise a submission of the claimant that the fact that the resumption of the "Starcke" aggregation was effected by special legislation and the circumstances of the resumption (which I take to be a history of the process towards the resumption outlined in paras. 61 and 62 of my reasons of 8 June) are relevant to consider with respect to the issue of costs. I cannot understand how that may be so except to the extent that the claimant ought not to be disadvantaged in respect to the matters of compensation and costs simply because the State elected for administrative and procedural purposes to use special legislation rather than to employ the existing statutory machinery.
If I applied the principle in Florence to the PDH compensation element as a standalone case, there is little in the submissions of the respondent that suggests that costs would not be awarded to the claimant. The respondent drew my attention to the fact that I had determined the value of improvements on the PDH at the figures proposed by Mr Bloomfield for the respondent and not those proposed by Mr Gould for the claimant. That is so, however little trial time was spent on this issue and Mr Gould readily conceded that he was at a disadvantage in valuing the PDH improvements.
Both parties provided affidavit evidence intended to show the pre-trial conduct of the parties. As I understand that material, there was little focus between the parties during that pre-trial period as to the question of compensation arising out of the resumption of the PDH. The parties appeared to concentrate on the question of the value of the freehold land, though did at a meeting on or about 18 February 1999 agree to seek to reach agreement on the value of the PDH. Whilst I do not suggest that settlement of compensation for the PDH might have disposed of the matter overall, it seems to me that had the State adopted a more flexible view of the quite mixed evidence of PDH value available than was displayed during the trial; paid regard to the east coast location of the "Starcke" PDH; and leaned in favour of the claimant - settlement of PDH compensation would have been a likelihood.
[14] Including time for submissions, but excluding time for interlocutory matters, the total trial occupied 26 days. Time spent on the PDH compensation issue was about 3½ days taking into account time spent on inspection and submissions. That calculates to about 12.5%. If I proceed on the assumption that the claimant would have been likely to have received its costs had the PDH resumption proceeded independently, then not only should the prospect of such an award be taken into account, but also that consequently the respondent would have been denied its costs.
One item of claim - "loss of tax advantage" - was touched on in the evidence of both Mr Brett and Mr Quaid, but was not the subject of submissions by the claimant. Indeed, shortly after the evidence was given on the twelfth day in respect of this issue amongst others, the claim was amended to $25,000,000 with that claim not intended to cover the tax issue nor, I might say, the issue of "acquisition costs". In these circumstances it was suggested by the claimant that it would be open for me to find that the tax advantage claim was not "finally contended for".
Certainly this item was not part of the final claim, but the abandonment of the item was not apparent until addresses. In its submissions the claimant addressed the item "acquisition costs" even though, as I have said, this was not included in the final claim of $25,000,000. The claimant did not, however, make submissions with respect to the claim for "loss of tax advantage". The respondent, who addressed first, made submissions on both issues.
In the circumstances it is difficult not to conclude that whilst the tax advantage item was not formally part of the final claim of the claimant, that issue, as well as the issue of acquisition costs, appeared to the respondent, and reasonably so, to remain a live issue. Indeed, as I understand the claimant's case, these two disturbance items remained relevant if the approach to the assessment of compensation was to deal with the question of land value in the manner proposed by Mr Brett and Mr Gould.
Whilst the initial claim for compensation was in the amount of $25,000,000 plus possible compensation relating to Capital Gains Tax, the pre-trial exchange of expert reports would have revealed to the respondent that the combined figure of the valuations of Messrs Brett and Gould totalled a little over $16,000,000. On the third day of trial, as I have set out earlier, the respondent became aware that in addition to the Brett/Gould valuation figures disturbance in the amount of $7,440,000 was claimed together with legal and valuation fees. On the twelfth day the claim was formally amended to $25,000,000 plus legal and valuation fees. The parties subsequently settled the claim for legal and valuation fees without any evidence being led. It was on that twelfth day that the respondent became aware of the basis of the claim for $25,000,000. If I put aside disturbance items for the moment, it is clear that the respondent was proceeding up until that day on the basis that the case it had to meet was based on the valuations provided by Mr Brett and Mr Gould.
Mr Brett's valuation, which is of present interest, relied on proposed lot prices and a selling rate suggested by Mr Beattie; planning advice of Mrs Campbell and construction costs supplied by Mr Dodds. These were the same sources used by Mr Quaid in calculating his $25,000,000 figure. In short, the success of any attack on the evidence of Mr Beattie, Mr Dodds or Mrs Campbell, would have been relevant to both Mr Brett's valuation and the evidence of value provided in Mr Quaid's figures. The brief time employed in otherwise challenging Mr Quaid's figures in cross-examination indicates that the respondent recognised the point that I have made in the previous paragraph and the proposition that Mr Quaid's Exhibit 55A did not overall represent acceptable valuation methodology.
The claimant submitted that in view of the brief history I have just set out, my consideration of the costs question ought to focus on the valuations of Mr Brett and Mr Gould as it was with respect to those valuations that the parties joined issue. Mr Quaid's evidence cannot be said to have unduly extended trial time, nor to have raised issues which called for challenge independently of the evidence of Mr Beattie, Mr Dodds or Mrs Campbell, whose advices Mr Brett relied on. The respondent submitted that on the authority of Chief Executive, Department of Transport v. Nadco Pty Ltd (1997-98) 18 QLCR 408 I ought not take into account the submission of the claimant that the real contest was between the competing valuations of around $16,000,000 combining the Brett/Gould valuations and $4,150,000 in the Blomfield valuation. My response to that proposition is twofold.
First, I understand Nadco to authorise a Court to take into account the lateness of an amendment of a claim to a reduced figure and therefore take into account that the real contest between the parties was the contest that had been undertaken before that late amendment. On that analysis there are two steps involved in a consideration of a costs application under s.27 of the Acquisition of Land Act. The first step is to apply the statutory provision to ascertain which party may apply for costs and in that regard the amended claim, whenever that amendment takes place, is to be taken into account. The second step is to consider those matters that are relevant to the exercise of the discretion granted under s.27(1). Those matters include the contest between the parties up until the late amendment.
Second, whilst I recognise that the real valuation contest was between Mr Blomfield on the one hand and Messrs Brett and Gould on the other, the evidence of Mr Quaid in support of the claimant's $25,000,000 claim was not a benign sideshow. The fact that Mr Quaid was willing to entrench the $25,000,000 claim and to lead evidence in support of that, notwithstanding the sworn evidence of his experts Mr Gould and Mr Brett which was already before the Court - indicated to me that settlement of compensation may have been a matter of some difficulty. I also draw a conclusion that, given the advice as to value implicit in the valuations of Mr Brett and Mr Gould, the claimant would or ought to have been aware that a claim for $25,000,000 was not sustainable. It was excessive.

Mr Brett's valuation of the freehold was carried out using acceptable valuation methodology. Critical elements of that valuation, however, relied on the evidence of Mr Beattie whose evidence of selling prices and rate of sale I found to be without a cogent factual foundation. I also found that there would have been greater risks, delays and costs associated with gaining subdivisional approval from the local authority than were recognised by the claimant's town planning expert and, therefore, by Mr Brett.
My conclusion on the matters raised in the foregoing paragraph were sufficient to determine the question of the highest and best use of the "Starcke" freehold without having to make findings on the various items of construction costs which separated the parties. I found that the highest and best use was not for the subdivision into 240 x 100 ha lots.
Now whilst the topic of town planning, which included a number of sub-issues, was a matter upon which it could arguably be expected that a range of qualified opinions could reasonably be expressed, those matters which were the subject of Mr Beattie's evidence could not be so described. In my view it ought to have been obvious to a properly advised claimant that the evidence as to selling prices and rate of sale suffered both a lack of tangible and intellectual support. Having said this, I ought to include mention of my conclusion in favour of the claimant that some limited subdivision of the "Starcke" freehold would attract a price premium from a hypothetical prudent purchaser. That conclusion is attributable, however, more to my consideration of the evidence from the respondent's experts than to the claimant. Nevertheless, the claimant did achieve an increase in compensation on account of that.
In addition, the respondent's assessment of the value of the freehold was increased substantially following my consideration of the sales evidence relied upon by Mr Blomfield.
The legislative policy/strategy of s.27(2) was explained by McPherson JA in Buckler.:
"In ordinary legal proceedings in the courts the general rule is that costs follow the event. To apply that rule in an unqualified way in compensation cases would in practice enable the claimant to contest the amount of compensation with more or less complete impunity as to costs. It is rare for no compensation at all to be awarded in such cases.
Various devices have been tried with a view to encouraging early settlement and discouraging exorbitant claims in compensation cases. The method adopted in s.23(7) of the Public Works Resumption Act 1906 was to limit the general discretion of the Land Court as to costs by making it subject to a rule in effect that costs, if any, were to be awarded to the constructing authority unless the amount of compensation finally determined by the Court was the amount claimed by the claimant or was nearer to it than to the amount offered by the authority, in which case costs, if any, were to be awarded to the claimant.
Section 23(7) was introduced into the Act of 1906 by an amendment (15 Geo. 6 No. 11, s.36) to the Land Act in 1951. The formula was retained when a new s.23(7) was substituted in 1954 by 4 Eliz. 2 No. 48, s. 8(iii). At that time the legislation seems to have contemplated that an offer would ordinarily be made by the constructing authority within a stipulated time after receiving the claimant's claim and particulars, which themselves had to be furnished within a limited period. The only difference made by the amendment in 1954 was that the authority's offer could be used as evidence of the amount of that offer irrespective of when the offer had been made. The result no doubt was to give the constructing authority an advantage not shared by the claimant. Obstinately refusing until the last moment to agree on reasonable compensation is not something that is necessarily confined to claimants.
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 of 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." (at 23)
I draw particular attention to His Honour mentioning that the legislation has historically attempted to discourage "exorbitant claims", but is also concerned with "encouraging early settlement".
The claimant submitted that the claim is not exorbitant because it was based on the experience of the claimant at "Daintree" and was based on consultant's advices. It was also said that the claimant's view as to the highest and best use of the freehold was an honestly held view. The claimant had arrived at an asking price of $US18,000,000 well before resumption action was initiated and intended to subdivide the land if the overseas marketing had not been productive. I agree with the respondent's submission that the fact that the claimant may have honestly held a view as to the highest and best use of the land and its value for that use should not be sufficient to provide a complete defence to an application for costs. In the present case the opinion of the claimant was, in my view, based on very fragile evidence as to selling prices, rate of sale, as well as an over-optimistic assessment as to the time for the initiation and development of the project. I also found that a hypothetical prudent purchaser would not accept the "Daintree" experience as sufficiently comparable in important material respects to point, in the unsophisticated manner employed by the claimant to the success of a subdivision of the "Starcke" freehold into 240 x 100 ha lots. In such circumstances there is good reason why an order for costs is justified, whether one describes the claim as exorbitant or excessive.
It follows from what I have said thus far that an order for costs in favour of the respondent appears justified. The claimant, however, and the respondent in reply, provided affidavit evidence concerning pre-trial dealings between the parties. The evidence from the claimant was intended to point to the proposition that the behaviour of the respondent was such as to make litigation unavoidable. I have studied that material in detail but cannot conclude that it evidences anything other than parties indicating a desire for a settlement without the matter having to be referred to Court but, nevertheless, acting to protect their respective positions.
The affidavit evidence reveals numerous meetings between the parties, some involving negotiations. In the result the parties were able to settle the compensation with respect to the Occupation Licences and the purchase of cattle on the land at the relevant date. During the process of the trial they settled the disturbance claim with respect to legal and valuation fees associated with negotiations and with respect to the preparation of the claim. It is apparent, therefore, that lines of communication between the parties remained open, yet they were unable to agree on the appointment of a mediator to mediate the substantive issues which separated the parties - though each professed a desire for mediation.
I cannot, on the evidence that I have, conclude that the failure to settle the claim for compensation overall was attributable to the respondent. The parties appear to have been aware of the nature of each other's case well before the pre-trial exchange of expert reports, but certainly at that time which was about 14 days before the trial. It seems to me that it was the difference in approach to the value of the freehold and the final assessment of value which contributed to the failure to settle. Had the claimant approached the value of the freehold on the basis of a highest and best use as grazing, with an eco-tourism use, plus limited subdivision, as I have found, the prospect of settlement would have been greatly enhanced. I say this bearing in mind that before me the respondent did not concede any prospect of subdivision. I cannot conclude, however, that any concession by the respondent as to such limited subdivision potential might have led to a settlement.
I conclude that the respondent must receive an order for costs, but that such order should take into account both the success of the claimant in gaining an increase in value for the freehold land and with respect to the compensation payable for the resumption of the PDH.
I order that:
1. The claimant pay 75% of the respondent's costs in the matter.
2.The costs are to be decided by the appropriate assessing officer of the Supreme Court under the scale of costs prescribed by law for proceedings in the Supreme Court.

RP SCOTT
MEMBER OF THE LAND COURT

[2001] QLC 84

16 August 2001