Vicgrain Pty Ltd v Hindmarsh Shire Council (No 2)
[1999] VSC 89
•29 March 1999
SUPREME COURT OF VICTORIA
VALUATION COMPENSATION & PLANNING LIST
Do Not Send for Reporting Not Restricted
No.7823 of 1997
| VICGRAIN ASSETS PTY LTD (ACN 068 777 524) | Objector |
| v | |
| YARRIAMBIACK SHIRE COUNCIL | Rating Authority |
| No. 7824 of 1997 | |
| VICGRAIN ASSETS PTY LTD | Objector |
| v | |
| YARRIAMBIACK SHIRE COUNCIL | Rating Authority |
| No. 7825 of 1997 | |
| VICGRAIN ASSETS PTY LTD | Objector |
| v | |
| BULOKE SHIRE COUNCIL | Rating Authority |
| No. 7826 of 1997 | |
| VICGRAIN ASSETS PTY LTD | Objector |
| v | |
| BULOKE SHIRE COUNCIL | Rating Authority |
| No. 7829 of 1997 | |
| VICGRAIN ASSETS PTY LTD | Objector |
| v | |
| HINDMARSH SHIRE COUNCIL | Rating Authority |
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JUDGE: | Balmford, J. | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 19 March 1999 | |
DATE OF JUDGMENT: | 29 March 1999 | |
CASE MAY BE CITED AS: | Vicgrain Pty Ltd v Hindmarsh Shire Council (No. 2) | |
MEDIA NEUTRAL CITATION: | [1999] VSC 89 | |
| COSTS - objection to valuation of land treated as an appeal to the Court under section 40 Valuation of Land Act 1960 - valuation of rating authority confirmed in each appeal - whether rating authorities are entitled to their costs on a solicitor and client basis. Supreme Court Act 1986 Esso Exploration & Production Australia Inc v Shire of Morwell [1986] VR 289 |
APPEARANCES: | Counsel | Solicitors |
For the Objector | Mr CJ Delany | Garland Hawthorn Brahe |
| For the Rating Authorities | Mr CW Porter | Russell Kennedy |
HER HONOUR:
On 5 March 1999 I published my reasons for deciding that in each of these appeals the valuation of the rating authority should be confirmed. Mr Porter, for the successful rating authorities, now asks that his clients have their costs, to be taxed on a solicitor and client basis. The application for costs is opposed as to part, and the application for solicitor-client costs is also opposed.
Section 24(1) of the Supreme Court Act 1986 provides:
(1) Unless otherwise expressly provided by this or any other Act or by the Rules, the costs of and incidental to all matters in the Court, including the administration of estates and trusts, is in the discretion of the Court and the Court has full power to determine by whom and to what extent the costs are to be paid.
However, as Kaye and O’Bryan JJ, with whom Tadgell J agreed, found in Esso Exploration & Production Australia Inc v Shire of Morwell [1986] VR 289 at 297, the power of the Court in relation to matters of costs on an appeal against an assessment of a valuation of land by a rating authority is governed by the relevant provisions of the Valuation of Land Act 1960 (“the Act”). At the time of the decision in Esso those provisions appeared in section 43(3) and (4) of the Act. After some amendment they now appear in section 26(2) of the Act, which since 1 July 1998 has read:
(2) The Court may in its discretion by order award the costs of an appeal under this Division—
(a)to the party in whose favour the appeal is determined; or
(b)if the appeal was lodged in respect of the matter under section 22(1), but was not proceeded with by the objector, to the rating authority.
At 298 of Esso their Honours said:
By the terms of section 43(3) the Court is not denied discretion in relation to costs. The sub-section invests the Court with discretion to award costs to the parties in whose favour the appeal is determined. Thus the discretion, if exercised by the Court, may only be exercised in favour of the successful party. By sub-section (4) the costs so awarded by the Court are in its discretion, meaning that the amount or items of costs awarded are within the Court’s discretion.
And at 301:
It follows from examination of the several provisions and comparisons to which we have referred that, in our opinion, upon the hearing of an appeal, the Court has discretion as to costs, but that discretion may be exercised only in favour of the successful party.
I am satisfied that the effect of section 26(2) of the Act, as of the former section 43(3) and (4), is that the Court has the same discretion as to costs as it would have in making an order under section 24 of the Supreme Court Act 1986 and Order 63 of the Rules of Civil Procedure, fettered only by the limitation, not relevant to these proceedings, that the discretion may be exercised only in favour of the parties referred to in paragraphs (a) and (b) of the section.
As to that discretion, Winneke P said in Bass Coast Shire Council v King [1997] 2 VR 5 at 29:
Although, as a general rule, the court will order costs to be taxed and paid on a party and party basis (see rule 63.31 of the Rules of Civil Procedure) it none the less is invested with the discretion to order costs to be taxed and paid on a solicitor and client basis (see rule 63.32 of the Rules). That discretion is not limited to the particular circumstances described in the rule: see per Batt J Regal Life Insurance Ltd v Pacific Financial Resources Pty Ltd (unreported, 16 November 1994). The discretion to award costs on a solicitor and client basis is, thus, an unlimited one although it must be exercised judicially and not unreasonably.
In Colgate Palmolive Co v Cussons Pty Ltd (1993) 118 ALR 248, Sheppard J in the Federal Court considered at some length the authorities as to the principles relating to the award of indemnity costs. Section 43(2) of the Federal Court of Australia Act 1976 provides that, in that court:
(2)Except as provided by any other Act, the award of costs is in the discretion of the Court or Judge.
Sheppard J set out at 254 the following passage from the judgment of Woodward J in Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 397 at 400-1:
I believe that it is appropriate to consider awarding “solicitor and client” or “indemnity” costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, properly advised, should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive, or because of some wilful disregard of the known facts or the clearly established law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.
At 255, Sheppard J cited the comment of Gummow J in Council of the Municipality of Botany v Secretary Department of the Arts, Sport, The Environment, Tourism and Territories (1992) 34 FCR 412 at 415 (after referring to what Woodward J had said in Fountain Selected Meats) to the effect that the discretion was not so circumscribed that an order might be made only against an ethically or morally delinquent party. And he cited the similar view of French J expressed in J-Corp Pty Ltd v Australian Builders Labourers Federation Union of Workers - Western Australian Branch (1993) 46 IR 301 at 303 as follows:
Although there is said to be a presumption in such cases that the action was commenced or continued for some ulterior motive or in wilful disregard of known facts or clearly established law, it is not a necessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. It is sufficient, in my opinion, to enliven the discretion to award such costs that, for whatever reason, a party persists in what should on proper consideration be seen to be a hopeless case.
He referred at 255 and 256 to the judgment of Davies J in Ragata Developments Pty Ltd v Westpac Banking Corporation (unreported, Federal Court of Australia, decided on 5 March 1993) characterising a number of cases where an order had been made for indemnity costs as falling “within the category of litigation instituted or prolonged to an extent which ought to have been unnecessary”.
Before summarising some of the circumstances which the cases show had been thought to warrant the exercise of the discretion, His Honour noted at 257 that:
Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at 8) in Tetijo [Holdings Pty Ltd v Keeprite Australia Pty Ltd (unreported, Federal Court of Australia, decided on 3 May 1991)]: “the categories in which the discretion may be exercised are not closed”.
The approach of Sheppard J in Colgate Palmolive was adopted by the Full Court of the Federal Court in Re Wilcox; Ex parte Venture Industries Pty Ltd (1996) 141 ALR 727, and in this Court by Hansen J in Yakutzoloto Bank v Jordan Manor Pty Ltd (unreported, decided on 28 April 1997) and by Chernov J in UTSA Pty Ltd v Ultra Tune Australia Pty Ltd (unreported, decided on 20 May 1998).
The principal issue in the substantive proceedings in this matter was whether each of certain grain handling facilities acquired by the objector on the sale of the Grain Elevators Board should be valued, for rating purposes, as a separate stand-alone facility (as the rating authorities maintained) or as part of a state-wide undertaking to be valued as a whole. The principal ground on which the objector relied was the existence of certain statutory controls (and chiefly section 20 of the Grain Handling and Storage Act 1995 (“the Grain Act”)) on the operation of the facilities which, it was submitted, rendered it inappropriate to value each site separately.
Paragraphs 14, 16 and 46 to 51 of my reasons read as follows:
14. . . . section 20 of the Grain Act provided:
20. (1) The owner of a declared grain storage facility must not within the period of 2 years after the completion date [1 July 1995] permanently close the facility unless the owner has complied with this section.
(2) The owner of a declared grain storage facility must give the Office [of the Regulator-General] at least 60 days notice in writing of intention to permanently close the facility.
Sub-sections (3) and (4) provided machinery for information to be given to the Office of the Regulator-General by the owner of the facility and a determination to be made by the Office specifying that:
(a) the facility can be closed; or
(b) the closure of the facility would cause undue hardship to grain growers as a whole and therefore the facility must be maintained.
All save twelve of the 280 grain storage sites of Vicgrain were “declared grain storage facilities” by virtue of an Order in Council made on 4 July 1995. They included all of the five sites. It appears (see the unchallenged evidence of Mr Cleary and Mr Thompson) to have been generally accepted that no notice of intention to close a declared grain storage facility was given to the Office in the two year period, which expired on 30 June 1997.
. . .
16. Much of what follows in this section as to the business of the GEB and Vicgrain derives from the evidence of Mr Barbour, Manager, Treasury and Assets of Vicgrain Assets, who was for a number of years in the employment of the GEB. Mr Barbour’s qualifications and experience are in the accounting and audit fields. He is employed by Vicgrain Assets, not by Vicgrain Limited, the operating company. His name does not appear among the list of senior management in the prospectuses of Victorian Grain Services Limited (described in paragraph 46 below) or in the recent Annual Reports of the Vicgrain Group which were before the Court. No explanation was given as to why there was no witness from the operating company, or why there was not a more senior witness from Vicgrain. In cross-examination Mr Barbour demonstrated at times a reluctance to agree to anything put to him, or to admit to knowing anything.
. . .
46. However, in this context I would refer to the three prospectuses which were before the Court relating to the issue of shares in Victorian Grain Services Limited, which, as set out in paragraph 2 above, is the company which controls both Vicgrain Assets and Vicgrain Limited. In each of those three prospectuses, the directors have set out at some length the various statutory controls on the operations of Vicgrain Limited, including those imposed by sections 15 and 20 of the Grain Act and have stated formally:
The Board of Vicgrain [Limited] has advised the Board of [Victorian Grain Services Limited] that it considers that these regulatory provisions do not impose any greater restriction on the conduct of the Business than already exists owing to market forces and other state and federal regulatory regimes, such as the Trade Practices Act 1974 (Cwth).
While some of the witnesses, notably Mr Barbour, did not accept the meaning of this passage, it is clear and requires no gloss. It is difficult to maintain in the face of that expressed view of the Board of Vicgrain Limited, the company which operates the business, that the statutory controls significantly differentiate the assets of Vicgrain from the assets of any other business which operates from a number of different sites.
47. Further, it should be noted that there seemed to be among the valuers a misapprehension as to the effect of section 20, the operative parts of which are set out in paragraph 14 above. What that provision does, in respect of each “declared grain storage facility” (that is, almost all of the Vicgrain sites) is to restrict (not prohibit), for a period of two years from 1 July 1995 (not for ever), the permanent closure (not the sale) of that facility. Sale does not necessarily involve closure. Further, the only ground on which closure can be refused, set out in section 20(4)(b), is very limited: “that the closure of the facility would cause undue hardship to grain growers as a whole” (not even “to grain growers in the relevant district”).
48. Although Mr Dudakov appeared at one point to be aware that section 20 related to closure, and not sale, he referred to it consistently as a prohibition on sale of the facilities. Mr Brown referred to the section as containing a prohibition, rather than a restriction, on closure. These misapprehensions clearly affected their attitude to the effect of section 20 on the value of the facilities. Mr McKinnon, the other valuer instructed by Vicgrain, also regarded section 20 as a restriction on sale rather than on closure.
49. The three valuers called by Vicgrain, Mr Brown, Mr Dudakov and Mr McKinnon, indicated that they had taken their instructions on the Vicgrain business from Mr Barbour (as to whom see paragraph 16 above), and it may be that he was the source of the misapprehensions. In paragraph 12 of his affidavit he deposes that “The [Grain] Act imposes a restriction upon the sale or closure of sites purchased by Vicgrain”. That statement is manifestly incorrect.
50. There was no evidence before the Court as to the actual effect of the statutory restrictions on the operation of the Vicgrain business. Given the statement of the Board of Vicgrain Limited which is cited in paragraph 46 above, that is hardly surprising. The fact that no notice of intention to close a facility was given by Vicgrain to the [Office of the Regulator General] during the two-year period (or since) is not relevant to the issue. I note that there is no evidence that Vicgrain has complained to the ORG that any prices set by it pursuant to section 15 of the Grain Act have been unfair.
51. It will be apparent from the foregoing that I do not consider the effects of the statutory controls as sufficiently significant to justify the valuation of the separate sites as part of the undertaking as a whole.
The three prospectuses referred to were dated 28 May 1996, 5 March 1997 and 27 February 1998. These proceedings were instituted on 18 November 1997. The affidavit of Mr Barbour was sworn on 13 March 1998. Mr Brown’s affidavit was sworn on 13 March, Mr Dudakov’s on 17 March and Mr McKinnon’s on 17 July. The hearing commenced on 7 September 1998 and occupied nineteen days.
Considering this matter in the light of the authorities to which I have referred, I find that the circumstances of the conduct of the objector’s case justify a departure from the usual rule and the award to the rating authorities of solicitor and client costs. I should make clear my acceptance of the statement of French J in J-Corp, cited in paragraph 9 above, that such a finding requires no ulterior motive, collateral purpose or fraud to be established. I have not directed my mind to the existence of any of those circumstances and I make no finding thereon.
The circumstances on which my decision is founded are, firstly, that Mr Barbour’s affidavit, giving a false account of the effect of section 20 of the Grain Act, was never corrected. The meaning of section 20, as appears from paragraph 14 of my reasons for judgment, is simple, straightforward, and involves no relevant issue of law. It is difficult to imagine that that meaning could not have been apparent to those advising the objector. Secondly, the three valuers called by the objector were all highly qualified and experienced members of their profession, and I have no reason to suppose that the incorrect understanding of the effect of section 20, demonstrated by each of them, derived from any misunderstanding of their instructions. Mr Dudakov and Mr Brown were clearly allowed to proceed with their task on the basis of incorrect instructions, on a matter which was fundamental to the objector’s case. (The evidence of Mr McKinnon was directed to another issue, and was not significant in the present context.) And thirdly, no evidence was called, and the prospectuses would indicate that none could have been called, to substantiate the contentions as to the effect of section 20 on the issue before the Court.
Mr Delany submitted that there was evidence from the valuers that in their opinion the statutory controls did have an impact on the conduct of the business. However, in view of their incorrect understanding of section 20, which Mr Dudakov and Mr Brown regarded as the significant control in relation to the principal issue described in paragraph 13 above, any opinion which they held on that matter could not have been well founded.
Much of the time at the lengthy hearing of this matter was devoted to that principal issue and much of the time to other matters not relevant here. It is apparent from the documentation which was before the Court that the same could be said of the preparation for the hearing. Having considered the question, I find that it is appropriate that the costs of this matter be assessed on a solicitor and client basis from the date of execution of the affidavit of Mr Barbour.
Mr Delany submitted that any order for costs in favour of the rating authorities should exclude the costs related to the question of the bona fides of the sale of the Grain Elevators Board to Vicgrain. That was a discrete issue which took up time, including the application for discovery against the relevant Government department, which resulted in the production of two folders of documents, and on which the rating authorities did not succeed.
In reply, Mr Porter referred to the judgment of Heerey J in Henderson v Amadio Pty Ltd (unreported, delivered 22 March 1996) where His Honour quoted with approval a passage from the judgment of Burchett J in Australian Conservation Foundation v Forestry Commission (1988) 81 ALR 166 where His Honour, considering the case of a successful defendant who had failed in respect of some issues, said at 169:
It does not necessarily follow that the costs orders otherwise appropriate should be affected. A party against whom an unsustainable claim is prosecuted is not to be forced, at his peril in respect of costs, to abandon every defence he is not sure of maintaining, and oppose to his adversary only the barrier of one hopeful argument: he is entitled to raise his earthworks at every reasonable point along the path of assault. At the same time, if he multiplies issues unreasonably, he may suffer in costs. Ultimately, the question is one of discretion and judgment.
He submitted that the question as to the bona fides of the sale was an issue which had to be decided; the genuineness of the sale was fundamental to Vicgrain’s case, and it was unfair to try to disentangle one thread of the evidence relating to the sale. I accept the first two of those submissions, and would, with respect, adopt the passage from Australian Conservation Foundation which is cited in the preceding paragraph.
For the reasons given, there will be an order in favour of the rating authorities for the whole of the costs of these proceedings, those costs to be assessed on a party and party basis until 12 March 1998, the day before the swearing of Mr Barbour’s affidavit, and thereafter on a solicitor-client basis.
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