The Trustee for Whitcurt Unit Trust v Transport for NSW (No 2)

[2021] NSWLEC 134

Land and Environment Court

New South Wales

Medium Neutral Citation:

The Trustee for Whitcurt Unit Trust v Transport for NSW (No 2) [2021] NSWLEC 134

Hearing dates:

16 November 2021

Date of orders:

24 November 2021

Decision date:

24 November 2021

Jurisdiction:

Class 3

Before:

Pain J

Decision:

The Court orders:

(1) The Respondent is to pay the Applicant’s legal costs and disbursements from the proceedings as agreed or assessed.

(2) The Respondent is to pay the Applicant’s costs of the costs argument as agreed or assessed.

(3) The exhibits are returned.

Catchwords:

COSTS – appropriate costs order in compulsory acquisition case where applicant unsuccessful – whether applicant acted unreasonably in pursuing proceedings – effect of Calderbank letter considered

Legislation Cited:

Civil Procedure Act 2005 (NSW), s 98

Land Acquisition Just Terms Act 1991 (NSW), ss 55, 56, 57, 59, 66

Uniform Civil Procedure Rules 2005 (NSW), rr 1.5, 42.1, 42.13, 42.15, 42.18, Sch 1

Cases Cited:

Banno v Commonwealth (1993) 45 FCR 32

Brock v Roads and Maritime Services (No 3) (2012) 191 LGERA 267; [2012] NSWCA 404

Calderbank v Calderbank [1975] All ER 333

Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248

Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328

Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 3) (2004) 134 LGERA 30; [2004] NSWLEC 204

McDonald’s Australia Limited v Transport Infrastructure Development Corporation (No 2) [2007] NSWLEC 147

Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344

Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495; [1947] HCA 58

Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2) [2017] NSWLEC 179

Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 297; [2019] NSWCA 41

Tempe Recreation (D.500215 and D.1000502) Reserve Trust v Sydney Water Corporation (2014) 88 NSWLR 449; [2014] NSWCA 437

The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82

UTSG v Sydney Metro (No. 6) [2020] NSWLEC 63

Wollong Pty Limited v Shoalhaven City Council (2002) 122 LGERA 331; [2002] NSLWEC 164

Category:

Costs

Parties:

The Trustee for Whitcurt Unit Trust (Applicant)
Transport for NSW (Respondent)

Representation:

Counsel:
N Eastman (Applicant)
M Astill (Respondent)

Solicitors:
Simpson Partners (Applicant)
Norton Rose Fulbright (Respondent)

File Number(s):

2020/182615

Judgment

1. The Applicant commenced proceedings under s 66 of the Land Acquisition Just Terms Act 1991 (NSW) (Just Terms Act) in relation to the compulsory acquisition of land at Tempe on which it conducted a golf driving range under a leasehold interest arranged with the landowner the Inner West Council. In The Trustee for Whitcurt Unit Trust v Transport for NSW [2021] NSWLEC 82 (Whitcurt No 1) compensation of $118,380.98 was awarded. This amount was less than the Valuer-General’s (VG) determination and much less than the amount of approximately $4 million sought. The issue of costs now arises.

2. The Applicant seeks an order that the Respondent pay its costs of the proceedings.

3. The Respondent seeks orders as follows:

1. The Respondent is to pay the Applicant’s costs of the proceedings up to and including 7 April 2021 on a party-party basis as agreed or assessed.

2. No order as to costs from 8 April 2021, with the intention that each party bear their own costs.

4. Section 98 of the Civil Procedure Act 2005 (NSW) (CP Act) applies. The only other rule relevant to the parties’ arguments is r 42.15 of the Uniform Civil Procedure Rules 2005 (NSW) (UCPR) dealing with offers of compromise. Rule 1.5(1) of the UCPR states that the UCPR apply to each court referred to in Col 1 of Sch 1 (which includes the Court) in relation to civil proceedings of a kind referred to in Col 2 (which includes Class 3 proceedings). Rules 42.13-42.18 apply in compulsory acquisition cases. The operation of r 42.1 is specifically excluded (see Col 4 of Sch 1) therefore the rule that costs follow the event does not apply to proceedings of this kind. Rule 42.15 states:

Part 42 Costs

Division 3 Offers of compromise

42.15   Where offer not accepted and judgment no more favourable to plaintiff

(1)  This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer.

(2)  Unless the court orders otherwise—

(a)  the plaintiff is entitled to an order against the defendant for the plaintiff’s costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and

(b)  the defendant is entitled to an order against the plaintiff for the defendant’s costs in respect of the claim, assessed on an indemnity basis—

(i)  if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and

(ii)  if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made.

5. The Applicant commenced proceedings on 19 June 2020. The substantive hearing was held on 27-30 April 2021. A letter dated 7 April 2021 was sent by the solicitors for the Respondent described as a Calderbank v Calderbank [1975] All ER 333 (Calderbank) letter which stated:

1 We refer to recent correspondence in relation to the Proceedings.

2 Further to the Amended Points of Defence served on 29 March 2021, if this matter proceeds to a hearing, the Respondent will contend that your client is entitled to an amount of compensation well below the Valuer-General’s determination and the Respondent’s offer of compensation made on 4 June 2020 in accordance with section 42 of the Land Acquisition (Just Terms Compensation) Act 1991 (the Statutory Offer).

3 The key issues in dispute in the Proceedings involve the proper construction of certain provisions of the Land Acquisition (Just Terms Compensation) Act 1991.

4 For the Court’s determination of compensation to be above the Statutory Offer, all of those key issues will need to be decided in favour of your client. In our view, that outcome is highly unlikely given the decisions of the Court of Appeal in Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41 and Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165.

5 Having regard to the authority and the evidence that will be put before the Court, the Respondent is of the view that your client’s claim for compensation of $4,035,163 (ex GST) is both excessive and unreasonable.

6 In circumstances where there is a significant risk to your client of obtaining an outcome that is less favourable than the Statutory Offer, we are instructed that if your client accepts the Statutory Offer and files a notice of discontinuance before 4:00pm on Wednesday 21 April 2021, the Respondent will agree to pay your client’s reasonable party-party costs of the Proceedings as agreed or assessed.

7 If your client does not accept the Statutory Offer and file a notice of discontinuance before 4:00pm on Wednesday 21 April 2021 the above offer is withdrawn.

8 If the Proceedings continue to hearing, our client intends to rely upon this letter in relation the issue of costs.

9 The offer contained in this letter is made in accordance with the principles in Calderbank v Calderbank [1975] All ER 333 and Cutts v Head [1984] Ch 290.

6. The Applicant did not accept the above letter of offer.

7. The parties agreed that the “usual” approach in compulsory acquisition cases is that a claimant for compensation who does not succeed in their claim is generally entitled to recover costs of the proceedings if they have acted reasonably in the proceedings and have not conducted them so as to give rise to undue delay or expense: Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 (Dillon) at [70].

Summary of Whitcurt No 1

8. The following extracts from Whitcurt No 1 are relevant:

1. The Applicant, the Trustee for Whitcurt Unit Trust, conducted a golf driving range business at Tempe. The Inner West Council (IW Council) owned the land on which the Applicant’s business was conducted and the critical infrastructure necessary for that business such as nets, lights and buildings. The Applicant seeks compensation for the compulsory acquisition of its leasehold interest in the land, Lot 305 in DP 1136081, (Lot 305) on which the business was conducted. The land was acquired by the Respondent Transport for NSW on 20 March 2020. The basis of the claim is to enable the Applicant to relocate to or reinstate its business at a presently vacant site at Campbelltown owned by the Campbelltown City Council (CC Council).

…

7. The claim for compensation has three components: (i) fit-out of a new facility as a golf driving range at Campbelltown; (ii) ancillary relocation expenses (such as the costs of advertising and mail redirection); and (iii) loss incurred due to business interruption being loss of profits foregone in the ramp-up period of the new business.

…

Applicant’s submissions

Claim 1 relocation of business s 59(1)(c)

61. There are three components to the relocation costs sought under s 59(1)(c) of $4,035,165. Firstly, the fit-out costs of a new golf driving range at Campbelltown, secondly, ancillary costs such as mail redirection in setting up a new business (collectively $3,405,235) and thirdly, business hiatus costs from August 2020 to January 2022 (lost profit during ramp-up of new business for that period) of $498,384.

Applicant is relocating the business

62. In UP (CA) Basten JA identifies at [14] that “[t]here is no apparent reason for limiting ‘the relocation of those persons’ [in s 59(1)(c)] to the relocation of the individuals concerned, or their immediate belongings; the phrase is apt to include the relocation of business operations conducted on the acquired land”. The focus of the claim must be the business operations conducted on the land. That the critical infrastructure such as netting and lights in this case is owned by the landlord is irrelevant. At issue is what is the reasonableness of the Applicant incurring these necessary costs in order for it to re-establish the business. Reasonableness does not relate to the quantum incurred. The definition of “loss attributable to disturbance” focusses on the business operations. Critical infrastructure is required for the business to operate. The statutory language is “relocation of those persons” not relocation of the things that the person actually had on the land that were the tenant’s property and could be removed or put elsewhere. Moving business operations must obviously include more than chattels where fixtures are required to be removed and put at a new operation. Disturbance loss places a displaced owner in the position they would have been in but for the acquisition, with the ability to continue their business operations elsewhere.

63. Such an approach was taken in Hua v Hurstville City Council [2010] NSWLEC 61 (Hua) at [42]-[45], [59] and Konduru T/as Warringah Road Family Medical Centre v Roads and Maritime Services; Konduru v Roads and Maritime Services; Konduru v Roads and Maritime Services [2017] NSWLEC 36 (Konduru) and should be applied in this case. In order for the Applicant’s business to be reinstated, essential new equipment must be installed at the Campbelltown site and incurring that cost is reasonable. In Hua the installation of a bakery oven at new premises was allowed. In Konduru a claim for relocation of a doctor’s surgery being conversion and fit-out costs for a nearby residential premises was successful. Financial costs reasonably incurred extends to work where strict like-for-like premises are not available. In Konduru it did not matter whether Dr Konduru’s new asset was improved. It did not matter that the 25 year old fit-out which had depreciated to zero dollars was now being paid for as new. Moore J found that it fitted within the statutory language as being necessary to carry out the operations as a doctor’s surgery in new premises which required alteration.

Incurring the costs is reasonable

64. The Applicant wishes to continue its business and has found a new site to do so at Campbelltown. There are very few suitable sites given the scarcity of golf driving ranges in Sydney. The Applicant genuinely intends to move there and has demonstrated a long-term commitment to stay at the Campbelltown site negotiating a lease of up to 30 years, being the 15+15 licence. Mr Whittle attested to his efforts to secure the use of Lot 305 under a long-term lease and subsequently the Campbelltown site.

…

Claim 2 reinstatement under s 56(3) market value

73. Section 56(3) commenced on 1 March 2017 following David Russell’s Review of the NSW Land Acquisition (Just Terms) Compensation Act 1991 (February 2014) (Russell Review). An alternative claim is available under that section. It is clear from the Russell Review and the NSW Government’s response in NSW Government response – Review of the NSW Land Acquisition (Just Terms) Compensation Act 1991 (18 December 2014) at 18, that s 56(3) is intended to create a provision that allows for the payment of fair compensation to interest holders whose interest relates to land that is used for a specific, “particular purpose”. A golf course is used as an example of such a land use in the NSW Government’s response at 42-43. The subsection supports the reinstatement of the Applicant’s business so that it is put back in its former position before acquisition.

74. The second and equally important part of subs (3) is that there is “no general market for land used for that purpose”. Lot 305 is used for a particular purpose, as a golf driving range and associated business. It has a narrower focus than a recreational facility or something of that type which might be defined in the local environmental plan. There is a dearth of transactions in metropolitan Sydney concerning golf driving ranges. There might be a very limited market for them over an extended period of time, as the land valuers discuss in their evidence above in [46]-[47]. This is far from a general market. The best evidence of this is that there is nowhere else for the Applicant to actually go and relocate to.

…

Respondent’s submissions

Threshold issue; relocation of business s 59(1)(c)/reinstatement under s 56(3)

Leasehold interest

90. The costs of building a new golf driving range facility at Campbelltown to enable the relocation of the Applicant’s business at Tempe, when at the date of acquisition the Applicant did not own the fixed assets on the acquired land or the land, are not recoverable under s 59(1)(c) of the Just Terms Act. Nor are they recoverable under s 56(3) as market value.

91. The primary answer to the claims under ss 59(1)(c) and 56(3) is that the move to Campbelltown is neither a relocation nor a reinstatement within the meaning of ss 59(1)(c) or 56(3). Before the costs of the Campbelltown proposal qualify for consideration under those provisions at all, those costs (in the case of s 59(1)(c)) or the claimed market value (in the case of s 56(3)) must reflect, respectively, a relocation or reinstatement of that which the Applicant had at Lot 305. The correct approach entails examining the nature and extent of the Applicant’s occupation of Lot 305, including assets owned by it. The result of that examination circumscribes that which would be reinstated or relocated.

…

Consideration

126. The three alternative bases for compensation claimed are under ss 59(1)(c), 56(3) and 57. As the Respondent identifies in its submissions, the threshold issue of what interest should be compensated fundamentally affects the claims under all three sections.

Disturbance (s 55(d), s 59(1)(c))

…

Compensable interest

149. The onus is on a claimant to establish their case for compensation: RMS v Perry at [67]. The manner in which the Applicant has approached its claim makes it very difficult to assess its entitlement on the correct basis. The claim is formulated with reference to the Campbelltown proposal but compensation properly payable bears no relation to the costs proposed to be incurred in that context. My finding that the Applicant’s interest must be considered in relation to its actual leasehold interest at the date of acquisition and consideration of what equipment it owned at the date of acquisition means that the claim for fit-out costs and business relocation costs at Campbelltown for $3,405,235 cannot succeed as that is not compensating the Applicant for its disturbance loss.

…

Section 56(3) market value

154. In the alternative, the Applicant seeks the same amount as market value under s 56(3) being the equivalent reinstatement of its interest in the acquired land. The land valuers have assessed market value under s 59(1)(a) as nil or nominal. Given the limited nature of the Applicant’s interest in land as found above in [131]-[134], no basis for a claim under s 56(3) exists because the claim being made does not reflect reinstatement of the interest for which compensation is claimable. The Applicant’s submissions above in [73] referred to sections of the NSW Government’s response to the Russell Review at 18, 42-43. These passages simply do not assist the Applicant given the limited interest acquired. The terms of the compensation provided in s 56(3) do not provide a basis for the “but for the acquisition” approach, referred to in [132] above, to apply.

…

Special value ss 55(b), 57 – alternative claim

…

166. Once again given the limited leasehold interest of the Applicant acquired, it is difficult to conceive in this case how such an interest can give rise to a special value claim considering the matters identified in Monti at [142]. No special interest has been established.

Applicant’s submissions

9. The relevant principles applicable to costs in compulsory acquisition cases are stated in Dillon and Croghan v Blacktown City Council (2019) 100 NSWLR 757; [2019] NSWCA 248 (Croghan) cited in UTSG v Sydney Metro (No. 6) [2020] NSWLEC 63 (UTSG) extracting Dillon at [70]-[72] and Croghan at [15]-[18]. That the Applicant obtained less than the VG’s determination is not determinative of the costs outcome. Costs are only not awarded if an applicant has acted unreasonably in pursuing proceedings. Acting unreasonably means pursuing a claim that is “vexatious, dishonest or grossly exaggerated”: Brock v Roads and Maritime Services (No 3) (2012) 191 LGERA 267; [2012] NSWCA 404 (Brock) at [97] per Tobias AJA (Beazley and Meagher JAA agreeing) cited in UTSG at [408].

10. The Applicant’s case is correctly summarised in Whitcurt No 1 at [61]-[63]. There is no basis at all for a conclusion of vexatiousness or dishonesty unlike in UTSG. There is no basis to conclude that any claim was grossly exaggerated. The case turned principally on key facts relating to the entitlement to compensation given changes in the law in Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 297; [2019] NSWCA 41 (UP (CA)) and under s 56(3) of the Just Terms Act, a provision that had not previously been the subject of any judicial consideration. There were very large measures of agreement between the quantity surveyors (QS) as to what the quantum of the reinstatement costs would be (see Whitcurt No 1 at [40]-[43]) and the land and business valuers. Any issue in relation to quantum cannot be said to be grossly exaggerated.

11. The Applicant acted reasonably in relying on legal advice, a relevant consideration identified in Croghan at [40]. The Applicant’s case tested legal principles that had not been determined before in light of new caselaw in UP (CA) and the introduction of s 56(3) of the Just Terms Act which arose for consideration for the first time. The argument was reasonable to pursue, was arguable and not doomed to fail. The claim required consideration of issues not previously considered under the Just Terms Act and it was not unreasonable to pursue those. No application was made to strike out the proceedings nor was any contention made that the Applicant’s case was unarguable or hopeless.

9. Having a case that is unpersuasive does not prevent the usual costs order being made: Banno v Commonwealth (1993) 45 FCR 32 (Banno) at 51 (Wilcox J). In Brock Tobias AJA identifies (Beazley and Meagher JAA agreeing) that even if an applicant acts with unrealistic expectations this does not prevent an award of costs, at [92]-[94].

10. The Calderbank letter should be given very little weight. Croghan as well as Tempe Recreation (D.500215 and D.1000502) Reserve Trust v Sydney Water Corporation (2014) 88 NSWLR 449; [2014] NSWCA 437 (Tempe Recreation) (Leeming JA) considered the effect of a formal offer of compromise made under the UPCR. These cases are not applicable. The Applicant did not act unreasonably in not accepting the offer in the Calderbank letter for the reasons already stated in relation to the substantive proceedings.

Respondent’s submissions

14. The correct approach to costs is identified by the Court of Appeal in Dillon (Basten JA, Macfarlan and Handley JJA agreeing) at [70]-[72], Brock (Tobias AJA, Beazley and Meagher JJA agreeing) at [95]-[99], UP(CA) at [67]. The Respondent does not allege that the Applicant pursued a vexatious or dishonest claim but argues the Applicant behaved so unreasonably the usual costs order is not warranted. The Applicant pursued a case that was contrary to established authority in seeking compensation well beyond the interest it had lost which was outside the well settled understanding of compensation law and authority: Qasabian Family Investments Pty Ltd v Roads and Maritime Services (No 2) [2017] NSWLEC 179 at [54].

15. Whitcurt No 1 identified that the threshold issue affecting all the claims was the interest that could be compensated, at [144], [149]. The manner in which the Applicant’s claim was formulated bore no relationship to the compensation properly payable based on what it actually lost. No process of evaluation was required to assess that loss, the Applicant’s loss was known from the moment of compulsory acquisition. Expert evidence to assess the loss of the golf driving range business at Tempe and the chattels owned by the Applicant was not necessary. The claim was unreasonable for costs purposes. An acquiring authority should not have to pay costs of unsuccessful claims which fall entirely outside the fundamental scope and purpose of the Just Terms Act.

16. In relation to offers of compromise made under the UCPR and informal Calderbank letters of offer, in Miwa Pty Ltd v Siantan Properties Pte Ltd (No 2) [2011] NSWCA 344 (Miwa) Basten JA (McColl and Campbell JJA agreeing) identified the similarities between them and the factors that should be considered in determining if non-acceptance was unreasonable, at [3],[6]-[12] relevantly here timing of the offer in the course of proceedings, the time allowed to the offeree to consider the offer, the extent of compromise offered, the offeree’s prospects of success assessed as at the date of the offer and the clarity of the terms of the offer inter alia. The offer was made on 7 April 2021 when the final hearing commenced on 27 April 2021 at which time the Applicant’s lawyers and experts were well briefed about the issues and able to consider the offer of compromise. The offer was genuine and clearly a compromise and the prospects of success were poor.

17. The Court of Appeal reasoning in Croghan at [19] and Tempe Recreation at [98], [103] which considered formal offers of compromise in compulsory acquisition cases should be applied by analogy to the Calderbank letter.

Consideration

18. Concerning the approach to costs for unsuccessful applicants in compulsory acquisition cases in Dillon the Court of Appeal (Basten JA, Macfarlan JA and Handley AJA agreeing) observed at [71]-[72]:

71. … the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered.

72. Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case. These may include a comparison between the positions adopted by the parties at the commencement of proceedings and the final outcome. To the extent that a claimant obtains less than the valuation provided by the Valuer-General, the claimant has been unsuccessful in the litigation. That will be a factor to be taken into account, but the weight given to that factor may depend upon the extent of the failure. The Court may also take into account the time and expense incurred in relation to specific items. Beyond such general statements, it is unhelpful to go, lest the very generality of the discretion be thought to be fettered in some way. In short, the purpose of an award of costs must be taken into account, namely to compensate the party for expenditure incurred in the course of litigation; the nature of the litigation and the reasonableness of the conduct of the litigation are central considerations.

19. In Croghan the Court of Appeal (Meagher JA, McCallum JA and Simpson AJA agreeing) observed at [18], [40]:

18. Accordingly, as was observed in Dillon (at [70], [71] per Basten JA), the relevant principles provide that the “owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered”; and, consistent with there being no general presumption that costs should follow the event, that owner is usually entitled to recover the costs of the proceedings “having acted reasonably in pursuing [them] and not having conducted them in a manner which gives rise to unnecessary delay or expense”. Applying these principles, in Brock v Roads and Maritime Services [2012] NSWCA 404; (2012) 191 LGERA 267 this Court held at [95] – [99] (Tobias AJA) that the claimant was entitled to her costs of the proceedings at first instance, she having acted reasonably in seeking the judgment of the Court in respect of the adequacy of the respondent’s offer based on the Valuer-General’s determination, and notwithstanding that she had obtained less than the amount of that statutory offer.

…

40. As part of an arguable case brought in proceedings of this kind, a claimant will usually put on expert evidence. Acting reasonably, parties are entitled to rely on that evidence and the advice of their legal representatives concerning it: Brock at [93]. Speaking generally, the more that advice involves a matter of specialist expertise the more difficult it will be to establish that a party acted unreasonably in relying upon it when it is given by an appropriately qualified expert: White Industries (Qld) Pty Ltd v Flower & Hart (a firm) (1998) 156 ALR 169 at 242-243; [1998] FCA 806 (Goldberg J); Ridehalgh v Horsefield [1994] Ch 205 at 237 (Sir Thomas Bingham MR); Purfleet Farms Limited v Secretary of State for Transport, Local Government and the Regions [2003] 1 P & CR 324 at [37] (Potter LJ). Furthermore, detailed re-examination of the reasonableness of reliance on expert valuation or legal advice should be avoided in determining costs - it is sufficient to note that the issue involved “some legal complexity”: Miwa at [11], [19] (Basten JA, McColl and Campbell JJA agreeing): Elite Protective Personnel Pty Ltd v Salmon [2007] NSWCA 322 at [148] (Basten JA); Perisher Blue at [16] (the Court).   

20. As stated in Croghan at [40] parties are entitled use lawyers and experts. Applicants are entitled to rely on the advice of their legal representatives, Brock at [93] (Tobias AJA, Beazley and Meagher JJA agreeing).

21. At issue is whether the Applicant acted reasonably in pursuing its claim, no suggestion being made that the claim was vexatious, dishonest or grossly exaggerated. As is clear from the extracts of Whitcurt No 1 above in [8] the key issue underpinning each of the three alternative bases of claim under ss 55(d)/59(1)(c) (disturbance), s 56(3) (market value) and ss 55(b)/57 (special value) was what was the interest the loss of which was able to be claimed, as stated at [126]. The Applicant’s claim failed at this threshold issue, my finding at [131]-[132] identifying that the Applicant’s claim did not reflect the interest lost for which compensation would be payable, citing Nelungaloo Pty Ltd v Commonwealth (1947) 75 CLR 495; [1947] HCA 58 at 571. As the Respondent submitted the factual basis for the Applicant’s lost interest in land at Tempe was well able to be understood by the Applicant. Whether the Applicant acted reasonably is answered by whether it was reasonable for it to rely on legal advice that it had a claim under the Just Terms Act. While the Respondent submitted there was no evidence that the Applicant did act on legal advice in commencing the appeal, given its representation by competent lawyers from the outset of proceedings and throughout the hearing I am happy to infer this was the case. The Applicant’s counsel accepted that the claim depended on the threshold issue of interest able to be claimed.

22. For an act with relatively few words in ss 55, 56, 57 and 59 which have existed for many years the Just Terms Act generates much litigation including in the Court of Appeal where construction of provisions has at times substantially changed what can be recovered, such as in UP(CA) concerning extinguishment of business loss not being compensable. I consider it was reasonable for an alternative basis for compensation to be pursued by the Applicant. The argument was certainly novel, arguable and not hopeless. The Applicant would have had to be guided by legal advice in pursuing the claim, as I consider it would have been very difficult for a person to argue the case without legal representation. It follows that I do not consider the Applicant acted unreasonably in pursuing its view of how it could be compensated by relocation or reinstatement of its business and its costs should be paid by the Respondent subject to consideration of the Calderbank letter of offer of 7 April 2021.

23. The effect of Calderbank letters in compulsory acquisition cases has apparently received no attention in the Court of Appeal. Croghan and Tempe Recreation were both considering formal offers of compromise made under the UCPR. I note that an informal offer of compromise in a Calderbank letter is not a formal offer of compromise made under r 42.15 of the UCPR.

24. A feature of formal offers of compromise (and under Calderbank v Calderbank) is that such an offer gives rise to the potential for an indemnity costs order. The Respondent is not submitting such an order should arise here. It otherwise submitted that Croghan and Tempe Recreation should be applied by analogy to this case citing Miwa in the Court of Appeal at [3], [6]-[12] that the approach to formal offers of compromise under the UCPR informs offers in Calderbank letters. Miwa was not a compulsory acquisition case.

25. In determining the application and effect of offers of compromise on costs in compulsory acquisition proceedings, the Court of Appeal in Croghan observed at [19]:

19. Thus, in relation to the application of the offer of compromise provisions, Class 3 compensation proceedings are not “the ordinary” case. Nevertheless they are subject to the provisions concerning the costs consequences of offers of compromise (rr 42.13-42.18) and effect must be given to their purpose, being to encourage the compromise of such proceedings, by obliging the offeree to give serious consideration to the risk involved in non-acceptance of the offer, thereby providing the acquiring authority with an opportunity to bring about the early resolution of the proceedings and their attendant risk of an adverse costs order.

26. In Tempe Recreation Leeming JA noted at [98]:

98. … Further, it is to be borne in mind that the provisions of the rules as to offers of compromise are specifically made applicable to compensation proceedings in Class 3 of the court's jurisdiction, and are intended to encourage the compromise of contests which, notoriously, can be long and expensive. His Honour's construction does not promote that purpose. Indeed, it undermines that purpose.

27. Leeming JA, in ordering the claimant in Tempe Recreation to bear its own costs from the date on which an offer of compromise under the UCPR was made, observed further at [103]-[104]:

103. There is a difficulty in applying offers of compromise to compensation proceedings in Class 3 of the jurisdiction of the Land and Environment Court. The ordinary rule that costs follow the event, which underlies the making and acceptance of offers of compromise in most proceedings, does not apply. Instead, an applicant will have been dispossessed of an interest in land, and ordinarily, if he, she or it acts reasonably, is entitled to a favourable costs order. Because the starting point is different, it is necessary to consider whether a different approach ought to be taken to effectuate the purpose of an offer of compromise. For it would distort the ordinary operation of offers of compromise to permit the acquiring authority to make a low offer of compromise and cause the applicant to have to run the risk of a large adverse costs order, especially where as here there was essentially a binary issue as to construction.

104. In my view, the appropriate way to give force to the evident purpose of an offer of compromise, in a jurisdiction where the dispossessed plaintiff who litigates reasonably is ordinarily entitled to costs, is in the present case for the Trust to obtain its costs of the proceedings up to and including 13 February 2013, but that there be no order thereafter, with the intention that the parties bear their own costs.

28. The approach in Tempe Recreation is adopted by the Respondent in the orders it seeks.

29. In the course of quick searches made during the hearing for cases in this Court where a Calderbank letter had been sent and referred to, the cases identified were Wollong Pty Limited v Shoalhaven City Council (2002) 122 LGERA 331; [2002] NSLWEC 164 at [34]-[42], Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 3) (2004) 134 LGERA 30; [2004] NSWLEC 204 and McDonald’s Australia Limited v Transport Infrastructure Development Corporation (No 2) [2007] NSWLEC 147.

30. No particular approach to the application of Calderbank letters is identified in those cases immediately above. The existence of a Calderbank letter in compulsory acquisition proceedings is a factor to consider but beyond observing that, no particular approach is apparent. It is part of the various matters that may be considered on costs.

31. Given the unusual nature of the claim and the necessity for the Applicant to rely on legal advice in pressing it, on balance I will exercise my discretion to order the Respondent to pay the Applicant’s legal costs and disbursements.

32. The Applicant should also have its costs of this costs argument paid by the Respondent.

Orders

33. The Court orders:

1. The Respondent is to pay the Applicant’s legal costs and disbursements from the proceedings as agreed or assessed.

2. The Respondent is to pay the Applicant’s costs of the costs argument as agreed or assessed.

3. The exhibits are returned.

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Decision last updated: 25 November 2021