Wilson v Melbourne Water (No 2)
[2018] VSC 776
•12 December 2018
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION AND PLANNING LIST
S CI 2016 01575
| ANN HAWTHORNE WILSON and JENNIFER GREAVES THOMAS | Applicants |
| v | |
| MELBOURNE WATER CORPORATION | Respondent |
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JUDGE: | Ginnane J |
WHERE HELD: | Melbourne |
DATES OF HEARING: | 29 October, 19 November 2018 |
DATE OF JUDGMENT: | 12 December 2018 |
CASE MAY BE CITED AS: | Wilson v Melbourne Water (No 2) |
MEDIUM NEUTRAL CITATION: | [2018] VSC 776 |
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LAND ACQUISITION — Applicants obtaining award of compensation — Purchase cost of replacement property — Net Present Value of purchase costs — Costs of proceeding — Calderbank offers — Whether indemnity costs should be awarded — Interest on compensation sum — Interest on expenses — Land and Acquisition Act 1986 ss 31, 33, 57, 91, 107.
EVIDENCE — Legal professional privilege — Whether waived — Subpoena requiring production of privileged expert report — No objection made due to inadvertence — Privilege not waived — Evidence Act 2008 s 122; Supreme Court (General Civil Procedure) Rules 2015 rr 42A.02, 42A.08.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicants | Mr S Morris QC and Mr I Munt | Rennick and Gaynor |
| For the Respondent | Mr S Goubran | Russell Kennedy |
HIS HONOUR:
I gave judgment in this proceeding on 21 September 2018,[1] concerning the applicants’ (‘the claimants’’) claim for compensation under the Land Acquisition and Compensation Act 1986 (‘LAC Act’) for acquisition of their land at Lyndhurst by Melbourne Water (‘the Authority’).
[1]Wilson v Melbourne Water [2018] VSC 555 (‘Wilson’).
This supplementary judgment deals with issues, including questions of interest and costs, arising from that judgment and a further day and a half was required to hear submissions about them.
Issue 1: Net present value of replacement property costs
The first remaining issue was the net present value (‘NPV’) of the sum of $245,736 which was required to pay stamp duty and transfer costs of the Labertouche property to Mrs Wilson, which she purchased as a replacement property under a terms contract with settlement in 2026.
Mr Allen Truslove made an affidavit on behalf of the claimants. He is an experienced actuary and statistician. He was asked to calculate the NPV as at 5 October 2018 of the amount of $245,736 comprising $234,095 stamp duty and $11,641 transfer registration fees payable on 30 June 2026. The NPV was to allow for income tax payable by Mrs Wilson ‘on the increase in value during the deferment period’.
Mr Truslove expressed the opinion that, as at 5 October 2018, an amount of $215,372 accumulated with investment income at the rate of 2.553% pa, subject to income tax at the rate of 34.5%, would give a net tax amount of $245,736. He considered that to be the appropriate NPV. The interest rate of 2.553% was the indicative mid-rate of selected Commonwealth Government securities.
In his opinion, the 4% pa reinvestment rate proposed by the Authority and described below was inappropriate given the mismatch between investment risk and the risk-free nature of the liabilities which were stamp duty and transfer fees. He applied the principle ’that the value of a liability equals the value of the exactly matching asset that meets the liability without risk when the liability falls due’. He said that there was no risk-free asset with a maturity date of 30 June 2026 and the closest was the bond rate maturing on 21 April 2026, which he said was probably the best asset to invest in to meet the liability. He said that if an alternative investment was purchased to meet the debt then a capital buffer would be needed to cover the risk. Corporate bonds with higher yields have a higher risk of default. To obtain a yield of 4%pa entails a substantial risk.
The Authority relied on the opinion of Mr Nicholas Haines, who is a valuer and director of Matheson Stephen Valuations Pty Ltd, with considerable experience in land valuation, although he is not a qualified statistician or an investment advisor. His opinion was that it was reasonable to adopt a reinvestment rate of 4% pa in order to measure the NPV calculation. He said that was a commercially available rate representing a low-risk investment such as a term deposit with recognised financial institutions or a managed fund with a deliberately low-risk profile. He considered it reasonable to assume that in a ‘real-world’ scenario, the recipient of funds would seek a better return than the considerably lower Commonwealth bond rate of 2.553%. He stated that in a ‘real world’ methodology as distinct from one ‘solely rooted in academia’:
Normal practice is that a prudent person in receipt of funds to meet a future debt…would reinvest in a commercially-available investment vehicle. For a low-risk venture, I consider 4% reasonable. If this exceeds the Future Value of the liability, the benefit accrues to the possessor of the interest, which is [a]justifiable incentive.
Mr Haines considered that a normal person would reinvest in a commercially available investment vehicle, otherwise there was the potential for them to make a windfall gain. The Authority accepted that the assessment of the NPV should factor in the liability for tax, but said that 4% was more than enough to cover any potential tax liabilities. He considered that a 4% yield was a reasonable annual expectation, and that there were numerous commercially available investment vehicles which would offer such a return without a high element of risk. But Mr Haines did not name the investment institutions that he had in mind. His calculation of the NVP of the required sum of $245,736 produced a figure of $185,861.13.
The question was whether the Government bond rate as opposed to the commercial rate was an appropriate measure to use in calculating the NPV of $245,736. The Authority noted that Mrs Wilson may not in fact invest in Commonwealth Bonds.
Both parties accepted that Mrs Wilson would be entitled to act in a prudent manner. The calculation was being made to identify a loss attributable to disturbance[2] which must be the natural, direct and reasonable consequence of the acquisition.
[2]Land and Acquisition Act 1986 s 40 (definition of loss attributable to disturbance).
Mr Truslove’s figure of $215,732 included a component for Mrs Wilson’s future tax liability, but excluded the $8,000 legal fees.
The claimants pointed out that Mr Haines had made no allowance for tax in proposing the adoption of a 4% pa investment return. A payment of taxation on investment gains would reduce the real value of any capital, thereby requiring the investor to seek a higher rate of return in order to offset such investment gains. That was another reason why Mr Haines’ figure of 4%was unsound.
Conclusion
I consider that it is appropriate to adopt Mr Truslove’s figure of $215,732, based on a prudent approach to investment, appropriate for Mrs Wilson. Mr Haines did not specify the possible investment sources for the return of 4% pa. Nor did he make any allowance for tax. Obtaining a return rate of 4% pa would carry risks that I do not consider Mrs Wilson should have to bear.
Mrs Wilson will be required to pay future stamp duty and transfer fees in 2026 but would have to invest the sum in the meantime. She has had many years association with the acquired land and is in her seventies and has worked as a farmer and is not an investment expert. For her to achieve a 4% pa yield over many years would require considerable attention and skill. A commercial rate of return would only be achievable if she were willing to bear commercial risks and avoided the losses than can come from bearing such risks.
I consider that I should adopt a NPV of $215,732, which is a pecuniary loss suffered by Mrs Wilson as the natural, direct and reasonable consequence of the acquisition.[3]
[3]Ibid.
Issue 2: Costs
The next issue is the costs of the proceeding, with the question of the Authority’s Calderbank offers left for separate consideration, although the two issues overlap somewhat.
The claimants sought an order for costs on a standard basis saying that they had obtained a result that was greater than any open offer made to them.
The Authority, on the other hand, sought an order that there be no order as to costs or an issues based costs order. It argued that there was no default position whereby the claimants were entitled to costs. It sought an order that it pay on a standard basis the claimants’ costs for compensation based on the market value of the property and Mrs Wilson’s claim for replacement property costs. In addition, it sought an order that the claimants pay its costs of the remainder of the claimants’ heads of claim from 29 April 2016 to 31 August 2017, being the period between the commencement of the proceeding and the service of its first Calderbank offer.
The Authority submitted that the Court could award such costs as it thought proper and must take into consideration the matters set out in s 91 of the LAC Act, which provides:
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:
(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;
(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.
The Authority submitted that the proceeding had been affected by unreasonable conduct by the claimants, including their excessive claims. The Authority referred to what it described as the claimants’ estoppel claim, their attempt to lead evidence from Mr Underwood and that they had not called on a Notice to Produce for particular documents. It also relied on the fact that some of the claimants’ claims did not succeed, including a lost opportunity claim, loss of profits claim, an executive time claim and that its claim for solatium had been made at a particularly excessive level.
The Authority referred to the ruling in Barilla v The Roads Corporation[4], where Emerton J accepted that in the circumstances of that case, there was no presumption in favour of the claimants receiving their costs.
[4]Barilla v The Roads Corporation (Unreported Ruling, Supreme Court of Victoria, Emerton J, 30 August 2017).
The claimants emphasised that the issue concerned the extent to which the proceedings had been affected by excessive claims. They submitted that they had not engaged in any unreasonable conduct within the meaning of s 91(1)(b). They contended that some of the evidence on which they relied had not successfully established particular claims, for instance, in respect of executive time, but was relevant to other matters upon which they had succeeded, for instance the solatium claim. The evidence overlapped. They explained that they had not called on the notice to produce as the documents had been provided by the Valuer-General.
Conclusion
Costs usually follow the event, including in compensation cases, although where there has been mixed success by the parties, the Court can take a ‘pragmatic’ approach to the allocation of costs, if it considers that to be an appropriate exercise of its discretion.[5]
[5]Chen v Chan [2009] VSCA 233.
In effect, the Authority was seeking to reduce the costs the claimants would otherwise receive by applying an issues based approach and then having those costs awarded to the Authority. That is an uncommon outcome. That might occur in respect of abandoned claims, but it is not often the case in respect of claims that are not abandoned but are not successful.
I do not consider that there was any separate estoppel claim which was abandoned, but instead a claim based on representations which were part of an element of the disturbance claim which was not abandoned. The rejection of Mr Underwood’s evidence and the failure to call on the Notice to Produce because the documents had been otherwise produced do not call for a separate issues based costs order.
I consider that there is no basis for making separate costs orders and that the claimants are entitled to their costs on a standard basis, subject to considering the effect of Calderbank offers on such an order, which I now consider.
Issue 3: the Authority’s Calderbank offers
The Authority sought an order that the claimants pay its costs calculated on an indemnity basis from either 31 August 2017 or 17 October 2017. These were the dates of the two Calderbank offers. The first offer was for $8.5 million, including sums already advanced, and the second was for $8.8 million. The Court judgment including market value, disturbance loss, professional expenses and solatium was calculated by the Authority as $8.223 million to which interest will be added. The Calderbank offers were about $1.4 million greater than the Authority’s own valuation from Mr Stephens of $6,820,000 for the acquired land.
Three earlier open offers were between $6,885,000 and $7,523,262.77.
The claimants sought $10.220 million for the land’s market value, disturbance costs in the amount of $876,000 and solatium of over $1 million.
The Court of Appeal decision in Hazeldene Chicken Farm Pty Ltd v Victorian Workcover Authority (No 2)[6] establishes that there is no presumption that the party rejecting a Caldebank offer should pay the offeror’s costs on an indemnity basis if the offeree receives a less favourable result.
[6](2005) 13 VR 435 (‘Hazeldene’).
Rather the Caldebank offer is a matter to which the Court should have regard when considering whether to award indemnity costs. The Court continues to exercise a discretion with the critical question being whether it is satisfied that the rejection of the offer was unreasonable in the circumstances.
The decision in Hazeldene identified some relevant matters that might guide the exercise of the costs discretion upon the rejection of a Calderbank offer: the stage of the proceeding at which the offer was received, the time allowed to the offeree to consider the offer, the extent of the compromise offered, the offeree’s prospects of success assessed at the date of the offer, the clarity with which the terms of the offer were expressed and whether the offer foreshadowed an application for an indemnity costs order in the event of the offeree’s rejection.
The Authority relied on the following statement of the New South Wales Court of Appeal in Maitland Hospital v Fisher (No 2)[7] concerning the policy objectives of the costs discretion where offers of compromise were rejected, which were said to be equally relevant when Calderbank offers were rejected, and which was applied in Hazeldene[8]:
1. To encourage the saving of private costs and the avoidance of the inherent risks, delays and uncertainties of litigation by promoting early offers of compromise by defendants which amount to a realistic assessment of the plaintiff’s real claim which can be placed before its opponent without risk that its ‘bottom line’ will be revealed to the court;
2. To save the public costs which are necessarily incurred in litigation which events demonstrate to have been unnecessary, having regard to an earlier (and, as found, reasonable) offer of compromise made by the plaintiff to a defendant; and
3. To indemnify the plaintiff who has made the offer of compromise, later found to have been reasonable, against the costs thereafter incurred. This is deemed appropriate because, from the time of rejection or deemed rejection of the compromise offer, notionally the real cause and occasion of the litigation is the attitude adopted by the defendant which has rejected the compromise. In such circumstances that party should ordinarily bear the costs of litigation.[9]
[7](1992) 27 NSWLR 721.
[8]Grbavac v Hart [1997] 1 VR 154 at 164-5.
[9](1992) 27 NSWLR 721 at 724.
After quoting that passage, the Court of Appeal in Hazeldene[10] also stated:
At the same time, as Redlich J said in OCBC, there are other competing objectives of equal importance.
…Potential litigants should not be discouraged from bringing their dispute to the courts. It is such considerations which underlie the general rule that an order for special costs should only be made in special circumstances.
[10]Hazeldene at 441 [22].
The Court had earlier quoted another passage from Redlich J’s judgment in Overseas-Chinese Banking Corporation v Richfield Investments Pty Ltd[11] concerning whether there was any presumption about the payment of costs upon the rejection of a Calderbank offer, which was more favourable than the judgment obtained:
In OCBC, however, Redlich J rejected the notion of any such presumption, holding that the weight of authority:
…strongly points to an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to the making of a special costs order. It will do so where it is concluded that the rejection of the offer was unreasonable.
[11][2004] VSC 351.
A rejection of a Calderbank offer can be relevant to the application of s 91(1)(b) of the LAC Act and the Court’s consideration of the extent to which the proceedings have arisen from, or been affected by, unreasonable conduct on the part of the claimants. The Authority submitted that the claimants’ rejection of the Calderbank offers constituted unreasonable conduct within the meaning of that term in s 91(1)(b)(i). The other matters that were in issue were that the claimants had claimed for an excessive amount and that conduct came within the provision of s 91(1)(b)(iii) of the LAC Act. The disturbance loss claims took up a lot of time in preparation, even if not in Court hearing time. As mentioned, the Authority also relied on the rejection of Mr Underwood’s evidence and his report, which the Court had not admitted. But Courts often reject evidence without it resulting in particular costs orders.
The Authority referred to the judgment of Osborn J in Roads Corporation v Love (No 2)[12] as an instance of the rejection of a Caldebank offer leading to an indemnity costs order. An appeal from His Honour’s judgment was dismissed.[13] Another such instance was the judgment of Emerton J in Secretary for the Department of Business and Innovation v Murdesk Investments Pty Ltd (No 2).[14]
[12](2010) 31 VR 551.
[13]Love v Roads Corporation [2011] VSCA 434.
[14][2012] VSC 586.
The Authority submitted that the claimants could not justify their rejection of the Calderbank offers by arguing that they relied on expert valuation evidence from Mr L Brown without first applying any forensic thought about risk, consideration of their legal advice or consideration of any further expert evidence. Reliance on expert evidence is not a reason for refusing indemnity costs.
The Authority’s principal submissions about the Hazledene factors were as follows. First that all major steps in the litigation had been completed at the time at which the Authority made both offers. Secondly, the Authority offered a compromise which was significant in the conduct of this proceeding. By accepting it, the claimants would have retained approximately a quarter of a million dollars over their entitlement to compensation had they accepted the first Calderbank offer and $550,000 more if they had accepted the second Calderbank offer. Thirdly, the offer was clear in its terms and contemplated indemnity costs flowing from its rejection.
The Authority also advanced arguments as to why the claimants’ submissions in respect of the Calderbank offers should be rejected by the Court. The claimants’ particular submission addressed by the Authority was that they were entitled to rely on Mr Brown’s valuations. The Authority submitted that there was nothing peculiar or unusual about the valuation contest in this case. The Court had broadly adopted Mr Stephen’s valuation. Reliance on an expert opinion is not a ground for not applying Calderbank offers. All valuation compensation claims are in some form or another based on expert evidence and if that were a reason not to apply Calderbank offers, they would have no utility. The claimants were seeking to visit the misjudgement of their valuation witness on the Authority. Even if it is relevant that they relied on Mr Brown’s opinion, that was not a particularly significant matter when taken with the other considerations mentioned in Hazeldene. In any event, if the claimants were entitled to rely on their expert valuation evidence, so was the Authority. If it was reasonable for the Authority to rely on its valuation there should be no order as to costs.
In resisting an indemnity costs order following their rejection of the Calderbank offers, the claimants emphasised that a less favourable result being achieved did not give rise to a presumption of a special costs order.[15] They submitted that if their claim was to be regarded as an excessive claim, that fact had no relevance unless the proceedings had been affected by it. That had not occurred in this case.
[15]Levy v Watt (No 2) [2012] VSC 580.
Mrs Thomas in her affidavit, after referring to the Calderbank offers, gave the following explanation as to why she and her sister felt that it was not unreasonable for them to proceed to trial rather than accept the Calderbank offers:
After careful consideration, Ann and I rejected each of the offers for the following reasons:
we did not choose to have our land acquired by the Respondent. We are not land valuers, and have relied on Les Brown’s valuation advice;
the bulk of the difference between us and the Respondent comprised a dispute as to the value of the land the subject of this proceeding;
we understood that the task of valuing the land was made especially difficult by the unpredictable nature of the market for land in the South East Green Wedge and the limited number of comparable sales. We have seen how land prices have increased over the years, yet at the same time the results of a particular sale have surprised us. It is never clear how much any particular property would sell for, yet the trajectory of the market was, in the long term, always upward;
the parties were advised by two well regarded valuers in Mr Brown and Rod Stephen;
nonetheless, Mr Brown was always of the view that Mr Stephen’s valuation was too low, especially because he either failed to have regard to, or failed to attach enough weight to, sales of the properties next door at 550 Taylors Road and 785 Thompsons Road;
we understood, therefore, that a wide range of market value outcomes was reasonably open on the evidence but we had reasonable prospects of achieving more than the sums offered.
Mrs Thomas was not cross-examined on her affidavit.
The claimants submitted that it was undesirable in compulsory acquisition cases to discourage potential litigants, whose land had been acquired by or on behalf of the State, from bringing their claim to court. In addition the question of land value is one about which reasonable mind might reasonably differ. There were a number of separate factors that led to the Court’s valuation decision, including whether the headline rate should be reduced for the unencumbered portion of Lot 2. In addition, the Court awarded a higher valuation assessment than the Authority’s valuer had adopted.
The cases cited by the Authority, where indemnity costs orders had been made when Calderbank offers had been rejected, involved markedly different circumstances. In Roads Corporation v Love (No 2)[16], the claimant failed in the very substantial claims which were described as ‘in a fundamental sense speculative’, while in Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd (No 2)[17] the claimant was seeking compensation well above any comparable sale.
[16](2010) 31 VR 551 [54].
[17][2012] VSC 586.
The admissibility of Mr Dudakov’s report
The Authority submitted that any weight given to the claimants’ contention that they had and were entitled to rely on Mr Brown’s evidence was removed by the claimants also having a valuation report by Mr A Dudakov. He had provided the claimants with an expert opinion valuing the property at $7.585 million which was less than the Calderbank offers and close to the value that the Court reached. Mr Dudakov prepared his report on Mr McDougall’s instructions for the purpose of these proceedings.
But Mr Dudakov’s report was the subject of a dispute about whether it was subject to legal privilege or whether, as the Authority contended, that privilege had been lost. The report had been provided to the Authority, so it was said, by mistake, but it was never recalled. These matters were set out in exhibits to Mr McDougall’s affidavit.
Mr McDougall is the solicitor having the conduct of this proceeding on behalf of the claimants. On 15 November 2017, in the middle of the trial, he received from the Authority’s solicitor a copy of a subpoena dated 9 November 2017 addressed to Brian Dudakov of Urbis Valuations Pty Ltd requiring him to produce to the Prothonotary on 20 November 2017 his valuation report and related documents including instructions. He stated that:
Given the late notice of the subpoena, and the pressing work needs leading up to and including the hearing, my office inadvertently did not object to inspection of any documents produced by Mr Dudakov in response to the subpoena.
On Friday 24 November 2017, when Mr McDougall was on leave, the Authority’s solicitor sent him a letter enclosing a copy of Mr Dudakov’s report that he had produced in response to the subpoena. The letter stated that:
The purpose of this letter is to advise you that we intend to tender this report when the hearing resumes on Tuesday, 28 November 2017.
Please let us know whether you have any objection.
Mr McDougall first sighted the letter on the following Monday 27 November 2017. On that day he emailed a letter to the Prothonotary giving notice of objection to further inspection of the documents produced by Mr Dudakov and to the Authority’s solicitors stating:
Our clients object to any application by Melbourne Water to adduce the report referred to in your letter and to any other document prepared upon instruction by our office or by our clients for the purpose of obtaining advice with respect to the current litigation on the basis that they are subject to a claim for legal professional privilege.
In a further affidavit of 3 October 2018, Mr McDougall stated that he swore the earlier affidavit in anticipation of the Authority seeking to adduce the Dudakov Report in evidence during the hearing on 28 November 2017. He stated:
As the Respondent did not seek to adduce the document in evidence the Applicants did not rely on my affidavit at that time.
The Authority submitted that this was in effect stating that ‘we don’t have any issue with the Authority having the report; what we have an issue with is if the Authority seeks to tender the report’. There had been no request for the return of the report and no objection to the production of the report to the Authority. The Authority submitted that for more than a year the claimants had not maintained confidentiality in the report.
The Authority submitted that by the proper application of s 122(2) and (3) of the Evidence Act 2008, the Court should conclude that the claimants’ legal privilege in the Dudakov report was lost on two grounds. The first was disclosure waiver. The second ground was issue waiver in that the claimants, in seeking to justify their rejection of the Calderbank offers, had relied upon expert valuation opinions provided to them and had acted inconsistently with the maintenance of privilege in the Dudakov report. The claimants could not rely on privilege when their response to Caldebank offers was to say they acted on the basis of expert advice.
Section 122 of the Evidence Act provides:
122 Loss of client legal privilege – consent and related matters
(1)This Division does not prevent the adducing of evidence given with the consent of the client or party concerned.
(2)Subject to subsection (5), this Division does not prevent the adducing of evidence if the client or party concerned has acted in a way that is inconsistent with the client or party objecting to the adducing of the evidence because it would result in a disclosure of a kind referred to in section 118, 119 or 120.
(3)Without limiting subsection (2), a client or party is taken to have so acted if—
(a)the client or party knowingly and voluntarily disclosed the substance of the evidence to another person; or
(b)the substance of the evidence has been disclosed with the express or implied consent of the client or party.
(4)The reference in subsection (3)(a) to a knowing and voluntary disclosure does not include a reference to a disclosure by a person who was, at the time of the disclosure, an employee or agent of the client or party or of a lawyer of the client or party unless the employee or agent was authorised by the client, party or lawyer to make the disclosure.
(5)A client or party is not taken to have acted in a manner inconsistent with the client or party objecting to the adducing of the evidence merely because—
(a)the substance of the evidence has been disclosed—
(i)in the course of making a confidential communication or preparing a confidential document; or
(ii)as a result of duress or deception; or
(iii)under compulsion of law; or
(iv)if the client or party is a body established by, or a person holding an office under, an Australian law—to the Minister, or the Minister of the Commonwealth, the State or Territory, administering the law, or part of the law, under which the body is established or the office is held; or
(b)of a disclosure by a client to another person if the disclosure concerns a matter in relation to which the same lawyer is providing, or is to provide, professional legal services to both the client and the other person; or
(c)of a disclosure to a person with whom the client or party had, at the time of the disclosure, a common interest relating to the proceeding or an anticipated or pending proceeding in an Australian court or a foreign court.
(6)This Division does not prevent the adducing of evidence of a document that a witness has used to try to revive the witness's memory about a fact or opinion or has used as mentioned in section 32 (Attempts to revive memory in court) or 33 (Evidence given by police officers).
The Authority relied on the decision in Tim Barr Pty Ltd v Narui Gold Coast Pty Ltd[18], where the Court concluded that legal privilege had been lost in the following circumstances. The Court found that NGC’s solicitor had not on behalf of his client taken any step to prevent the plaintiffs obtaining access to documents produced to the Court on subpoena and that he was content to let the plaintiffs’ solicitor think that no claim for privilege was going to be made in respect of those documents. He had taken no action and disclosure to the plaintiff company ‘followed in the wake of inaction on the part of NGC and its solicitors.’ Barrett J stated:
It has not been suggested that NGC or its solicitors made some mistake in this regard. It is not suggested that there was an intention or desire to take steps to prevent access and that, through inadvertence or otherwise, the plan miscarried. Rather, the evidence shows that no steps were taken because there was simply no intention or desire to prevent access. In these circumstances, the only inference available is that NGC, occupying a position where it knew (or must be taken to have known) that it could act in a way that would very likely produce an order or direction of the court precluding the disclosure to Tim Barr Pty Ltd that in due course occurred, consciously refrained from acting in that way. The situation can only have been one of considered and calculated inaction.[19]
[18][2008] NSWSC 1070 (Barrett J).
[19]Ibid [109].
Unlike the facts in the Tim Barr Pty Ltd case, Mr McDougall did make a written claim to privilege and objection as soon as he learned what had happened and the Authority did not attempt to tender Mr Dudakov’s report at trial. The High Court decision of Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd[20] dealing with mistaken discovery is relevant, in particular, the statement that:
Further, in reality, there was no question of waiver sufficient to be agitated before the Court. The documents disclosed during the discovery process were privileged, and Norton Rose’s claim that disclosure occurred by mistake was not disputed. Any allegation of waiver was going to turn on a legal, technical argument tangential to the main proceedings, and should not have been made.[21]
[20](2013) 250 CLR 303.
[21]Ibid 324.
The second point was the inconsistency argument, but Mrs Thomas had sworn in her affidavit that she and her sister relied on Mr Brown’s assessment. The claimants submitted that there was no inconsistency between them relying on Mr Brown’s opinion and maintaining confidentiality in relation to Mr Dudakov’s opinion. The claimants submitted that an inadvertent failure to object in time did not amount to conduct inconsistent with maintaining the privilege. The Authority might have had a second expert itself.
The Authority relied on the following passages from the Court of Appeal decision in Viterra Malt Pty Ltd v Cargill Australia Ltd:
In Expense Reduction Analysts Group Pty Ltd v Armstrong Strategic Management and Marketing Pty Ltd, French CJ, Kiefel, Bell, Gageler and Keane JJ stated that the court:
will impute an intention [to waive privilege] where the actions of a party are plainly inconsistent with the maintenance of the confidentiality which the privilege is intended to protect.
…
Viewed in this way, Thomason stands as an illustration of the inconsistency principle. Mrs Thomason could not maintain confidentiality in legal advice she was given about her rights in circumstances where her ability to bring the common law action depended on her not having been aware of her right to do so when she made her statutory claim. In a passage frequently cited since, Allsop J concluded:
It is sufficient to understand, I think, that in most undue influence cases (and in Thomason when its circumstances are appreciated) the party entitled to the privilege makes an assertion (express or implied), or brings a case, which is either about the contents of the confidential communication or which necessarily lays open the confidential communication to scrutiny and, by such conduct, an inconsistency arises between the act and the maintenance of the confidence, informed partly by the forensic unfairness of allowing the claim to proceed without disclosure of the communication.[22]
[22][2018] VSCA 118 [40], [50] (Whelan, Kyrou and McLeish JJA) (citations omitted) (‘Viterra Malt’).
Conclusion on the admissibility of Mr Dudakov’s report
I do not consider that the claimants’ privilege in the Dudakov report has been lost under the provisions of s 122 of the Evidence Act.
I do not consider that the claimants, by their solicitor or otherwise, knowingly and voluntarily disclosed the substance of the Dudakov report to the Authority or its solicitor. The claimants’ solicitor in the middle of a trial inadvertently failed to make an objection to the Authority’s solicitors being given access to it. The Authority’s solicitors’ letter asking Mr McDougall if he objected to the tender of the report hardly suggests that they thought he had intended to disclose it or that he had expressly or consented to the disclosure of the substance of the evidence. When Mr McDougall stated that the document was subject to a claim for legal professional privilege, the Authority did not seek to use the report at the trial. There was no suggestion that Mr McDougall was authorised to disclose the report.
In my opinion there was no knowing and voluntary disclosure of the report, rather there was an inadvertent failure to object to the Authority’s solicitor being given access to it, which was corrected soon after Mr McDougall became aware of it.
Nor have the claimants acted in a manner inconsistent with them objecting to the adducing of the evidence. The claimants ‘have not acted in a way that is inconsistent with …objecting’ to the production of the Dudakov report. To the contrary, they never relied on it and no use was made of it at trial. The claimants made no assertion that ‘necessarily [lay] open the confidential communication to scrutiny’.[23]
[23]Ibid [50].
In any event, the Dudakov report may have added little to the Authority’s case, or had little adverse effect on the claimants’ case. Mr Dudakov appears to have taken into account that a ‘future power station’ would be erected on 785 Thompsons Road , which abutted the acquired land, and which would have adversely affected values, when that was not the case. Mr Dudakov was not called to give evidence and his evidence could not be assessed as the other two valuers’ evidence could.
Conclusion on the Calderbank offers
The application of the factors mentioned in Hazeldene’s case to the facts in this case leads to the following conclusions. First the offers were made close to the trial when the parties had exchanged expert valuation opinions. A reasonable time was allowed to consider the offers, the extent of the compromise was considerable on the Authority’s valuation and between $250,000 and $550,000 more than the claimants ultimately received. The offers were clear and foreshadowed an application for an indemnity costs order if they were rejected.
That leaves the question of the offerees’ prospects of success assessed at the date of the offer, which is a particularly important factor in land valuation cases, about which reasonable minds may differ.[24]
[24]Roads Corporation v Love [2011] VSCA 434 [163] (Warren CJ, Tate JA and Emerton AJA) (‘Love’).
This question is also of importance in applying the considerations contained in s 91(1)(b) of the LAC Act, particularly under subparagraph (i), which requires consideration of unreasonable conduct on the part of the claimant or the Authority, under subparagraph (iii) which refers to an excessive claim by the claimant or under subparagraph (iv) which refers to an unduly depressed offer by the Authority.
In Roads Corporation v Love[25], the Court of Appeal stated that:
We accept that the position of a claimant in a proceeding under the Act is not that of an ordinary litigant and that the starting point for the exercise of the Court’s discretion as to costs is that the dispossessed owner should recover the costs of making the claim. The discretion as to costs in compensation proceedings is tilted in favour of the claimant. However, it does not follow that the Court’s discretion is limited so as to prohibit it from taking into account conduct responding to a ‘without prejudice offer’. As Wells J said in Florence, against the history of a wide ranging discretion given to the Court with respect to costs, the Court must construe the provision flexibly and not restrictively, to the intent that the special nature of the jurisdiction to which it relates be duly recognized, and orders made in that jurisdiction that are just and expedient.
[25]Ibid [173].
I consider the following features of the valuation evidence to be particularly significant. There was no exactly comparable properties on which to base a valuation. The valuers’ evidence occupied approximately three and a half days of a trial of seven days. Mr Brown relied on the properties at 550 Taylors Road and 785 Thompsons Road both of which supported his headline rate of approximately $160,000 per hectare. I said that:
There was no exact comparable sale. As mentioned, I see force in the claimants’ submission that the market for Green Wedge land in the Lyndhurst area was ‘unpredictable’. Although the evidence suggested that land prices had increased prior to November 2014, there was no consistent explanation for the prices achieved save for subjectivity and the particular purpose of the purchaser. I accept the claimants’ submissions that some of the sales were particularly influenced by one-off subjective needs of the purchaser. By that I mean they were not needs that could be attributed to the hypothetical willing but not anxious purchaser.[26]
[26]Wilson [94].
The claimants exceeded the Authority’s solatium offer, but failed on a number of disturbance loss claims, although some of the evidence concerning those claims overlapped with evidence relevant to the solatium claim.
There were a number of other issues on which there was no certain guide for the parties. These included the relevance of the size of the land, the effect of the easements on the before and after values, the appropriate valuation methodology for the ‘after’ and the valuation of land subject to a public acquisition overlay.
All of these matters support the reasonableness of the approach of the claimants described in the passages from Mrs Thomas’ affidavit set out above. She and her sister did not choose to have their land acquired by Melbourne Water, the valuation task was particularly difficult, although the trajectory of the market was upwards, they had advice from an experienced valuer and while they understood that a wide range of market value outcomes was reasonably open on the evidence, they considered that they had reasonable prospects of achieving more than the sums offered.
It might be said that the uncertainty of the market was a very good reason why they should have accepted the Authority’s offers, at least the second of which, with the benefit of hindsight, appears more than appropriate. But persons whose land has been compulsorily acquired should not be discouraged from coming to court when they are acting reasonably in an uncertain market to argue about the value of their land with which they have been associated all their lives.
I do not consider that the claimants’ conduct can be described as making excessive claims. While each case requiring the exercise of a costs discretion is different, this case is not one which can be described as ‘in a fundamental sense speculative’ and facing ‘very real difficulties in establishing its causal basis’[27], or one where a claimant knew that its claim for market value was well above the values achieved for comparable greenfield land …and far higher than the valuations and estimations that it had received at around the time of the acquisition’.[28]
[27]Roads Corporation v Love (No 2) (2010) 31 VR 551 at 562 [54] (Osborn J)
[28]Secretary to the Department of Business and Innovation v Murdesk Investments Pty Ltd (No 2) [2012] VSC 586.
I do not consider that the claimants acted unreasonably in refusing either offer of compensation in the Calderbank offers. There is no presumption that failing to exceed a rejected Calderbank offer leads to an adverse indemnity costs order. The claimants’ claims raised a number of complex questions about which different minds could vary. In exercising the discretion under s 91 of the LAC Act, I do not consider that any action by the claimants contributed unreasonably to the length of the proceedings.
I consider that the claimants should have their costs of the proceeding on a standard basis.
Issue 4: Interest
The remaining issues were related to questions of interest on the judgment sum awarded.
Section 53 interest
The parties agreed on the following matters:
(a) Melbourne Water made an initial offer of compensation pursuant to s 31 of the LAC Act on 19 November 2014 in the sum of $6,885,000.
(b) Pursuant to s 33(1) of the Act, the claimants were required to serve a notice of acceptance of that offer or a notice of claim within three months, that is by 19 February 2015.
(c) There was no agreement to extend the date by which the claimants were to respond to the Authority’s initial offer under s 106(1) of the Act.
(d) On 22 December 2015, the claimants served their ‘Response to Offer pursuant to ss 33 and 35 of the LC Act’ claiming $11,116,426.58.
(e) On 22 March 2016, the Authority made a revised offer in the sum of $7,397,052 pursuant to s 36 of the LAC Act, but the compensation based on market value remained at $6.75 million.
(f) On 29 April 2016, the claimants referred the dispute to the Court by a Notice of Referral stating that the claim in dispute was in respect of their land at Lyndhurst. The Notice of Referral attached copies of the notice of acquisition, the Authority’s offer of compensation made on 19 November 2014 and the claim made by the claimants on 22 December 2015.
(g) On 6 May 2016, the claimants’ solicitors replied to the Authority’s letter of 22 March 2016 stating that it rejected their market value claim and other claims including for loss of profits and for lost opportunity and ‘accordingly this claim became disputed to that extent on 22 March 2016’.
(h) On 20 May 2016, the claimants’ solicitors wrote to the Authority’s solicitors stating that they rejected the amounts offered in respect of claim items 1, 2B3, 2B6, 3 and 4 and maintained those claim items and claim items 2B1, 2B5 and 2B7 and maintained their claims in respect of those items.
The question is: when did the matter become a disputed claim? This question is relevant to the award of interest because of the following sections of the LAC Act:
33 Response by claimant
(1)Subject to section 106(1), before the expiration of three months after the date of service on a claimant of an offer under section 31, the claimant must—
(a)serve a notice of acceptance on the Authority stating that the claimant accepts the amount of compensation offered in respect of the acquisition; or
(b)serve a notice of claim upon the Authority.
(2)If the claimant fails to serve on the Authority a notice under subsection (1)(a) or (b), the matter becomes a disputed claim for the purposes of this Act.
…
36 Authority’s reply to claim
(1)Subject to section 106(1), the Authority must, before the expiration of three months after the date of service upon it of a notice of a claim under section 33, serve upon the claimant a statement in writing replying to the notice of claim.
(2)The Authority may in that statement—
(a)admit the claim as to whole or to part; or
(b)offer to vary the amount of the compensation previously proposed in relation to the claimant's interest; or
(c)reject the claim and repeat its offer under section 31.
(3)If the claimant has provided the Authority with a certificate of valuation and the information required in section 35(f), the Authority, if it has not already done so, must forward to the claimant with its statement of reply a statement setting out the method and basis of its valuation.
(4)The Authority is liable to satisfy the claim to the extent that it admits the claim.
(5)If the Authority fails to reply to the notice of claim within the time prescribed in subsection (1), it is to be taken to have rejected the claim and repeated its offer and the claim becomes a disputed claim for the purposes of this Act.
(6)Subject to section 106(1), if the Authority offers to increase or vary the compensation previously offered, the claimant must within two months after the date of service of this revised offer—
(a)accept the offer; or
(b)reject the offer.
(7)A revised offer under subsection (6) may leave specified matters to be determined by negotiation.
(8)If the claimant accepts a revised offer under subsection (6), the claimant may accept this in part leaving specified matters to be determined by negotiation.
(9)To the extent that the claimant rejects the revised offer of the Authority, or the Authority rejects the claim by the claimant, the claim becomes a disputed claim for the purposes of this Act.
53 Interest on compensation for acquisition
(1)If an amount of compensation is awarded by the Court or the Tribunal 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.
(2)If the Authority and the claimant or claimants have agreed on the amount of compensation, that amount bears interest at the rate for the time being determined under section 52 from the date of the agreement until the date that the compensation is paid by the Authority.
Other provisions of the LAC Act relevant to the question of interest are:
106 Extension or abridgement of time
(1)If it is provided in this Act that an act or thing may be or is required to be done within a specified time, or not before the expiration of a specified time, and that provision is stated to be subject to this subsection—
(a)the Governor in Council may abridge that time; or
(b)the Minister, after consultation with the Minister administering the special Act, may extend that time; or
(c)that time may be extended or abridged by agreement between the Authority and the other party concerned in the matter; or
(d)in the case of sections 37(2) and 47(2) the Court or the Tribunal may extend that time.
(2)The Court, Tribunal or Minister may extend time under subsection (1) despite the fact that the time prescribed by this Act for the doing of an act or thing has expired.
107 Time not to expire until notice given
(1)Notwithstanding anything in any other section of this Act, the time within which a person other than the Authority is required to do anything under this Act shall not expire until the expiration of seven days after the Authority has advised that person in writing of the effect of that expiration.
(2)Subsection (1) shall not apply in relation to the period within which a claim may be made under section 37, 46 or 47.
The Authority’s submissions
The Authority submitted that the matter became a disputed claim on 20 May 2016 pursuant to s 36(9) of the LAC Act.
The Authority pointed to the structure of the Act and submitted that Part 3 sought to identify areas of agreement and disagreement between the parties prior to a referral of the claim to a court or tribunal. For that purpose, the Authority was required to make an offer under s 31. The claimants were then required to serve a notice of acceptance or claim in response to the offer. If they did not, the matter became a ‘disputed claim’ under s 33(2), subject to s 107(1), which could then be referred under s 80 to the court or tribunal for determination.
On the other hand, if the claimants did serve a notice of claim, the Authority was required to serve a statement replying to it. If the Authority failed to reply to the notice of claim, it was taken to have rejected the claim and repeated its offer, making the claim a ‘disputed claim’. If the Authority offered to increase or vary the compensation previously offered, the claimants had to accept or reject the offer within two months under s 36(6). To the extent that the claimants rejected the Authority’s revised offer, or the Authority rejected the claim by the claimants, the claim became ‘a disputed claim’ under s 36(9). The word ‘disputed’ appears to be a synonym of the word rejected and first appears in s 31(8).
The Authority submitted that, in essence, the claimants’ case provided for multiple dates upon which a matter may become a disputed claim. They contended that the matter became ‘a disputed claim’ on 19 February 2015, being three months after the Authority’s offer. But they also relied on their subsequent claim made on 22 December 2015.
The Authority submitted that the LAC Act contemplated only one point which the matter became a disputed claim. Section 53 makes that clear by referring to a fixed point in time ‘immediately before the claimant’s claim became a disputed claim’. But if a matter could become a disputed claim on multiple dates, the LAC Act does not make clear what date should be accepted to calculate interest under s 53(1).
The Authority also relied on s 107, which requires it to provide advance written notice to claimants that the time in which they are required to do something under the Act will expire if it is not undertaken within seven days. It commences with the words ‘notwithstanding anything in any other section of this Act’. The interaction between ss 33 and 107 of the Act was considered by Batt J in Roads Corporation v Costa,[29] which decided preliminary questions, including whether s 107(1) operated to extend the time for acceptance of the offer of the Acquiring Authority fixed by s 33(1) of the LAC Act. His Honour decided that the giving of a notice under s 107(1) advising of the effect of the expiration of the three month limit in which to accept an offer of compensation as stipulated in s 33(1) could operate so as to extend the time for acceptance of an offer.[30]
[29][1998] 1 VR 708.
[30]Ibid 711.
The Authority submitted that the date on which a matter becomes a disputed claim under s 33 is to be determined by the application of s 107(1), which was a protective provision.[31] The purpose of the provision was to encourage the parties to resolve the issues before them before a matter is referred to a court or tribunal for determination.
[31]Ibid 712.
The Authority submitted that in circumstances where an s 107 notice had not been issued, the period in s 33 did not expire until 7 days after one had been issued. Therefore, the matter had not become a disputed claim, but later became a ‘disputed claim’ on 20 May 2016 under s 36(9). The Authority submitted that, like the situation in Longo v Roads Corporation,[32] the present matter became a disputed claim pursuant to s 36(9) of the Act on 20 May 2016, being the date on which the claimants formally rejected the Authority’s further offer of compensation dated 22 March 2016. Section 36(9) does not provide any time requirement for a claimant or authority to do anything. Rather it provides that a matter automatically becomes a disputed claim upon the rejection of that further offer of compensation.
[32][2013] VSC 636.
The Authority pointed out that the claimants sought to rely on s 57, which enables a claimant to seek an extension of time in order to support the proposition that a matter automatically becomes a disputed claim under s 33 of the Act upon a failure of the claimant to respond to the offer within three months. But the purpose of s 57 is to ensure that the claimant does not obtain the benefit of interest in circumstances where a claimant has sought additional time in order to comply with the statutory time frames under the Act.
The Authority pointed out that the claimants relied on subsequent steps, such as the rejection of their revised offer as being valid, but still contended that a disputed claim had arisen at an earlier date. The claimants’ interpretation would deprive them of the capacity to request advances under s 51.
The claimants’ submissions
The claimants contended that the claim became a disputed claim on 19 February 2015 upon the expiration of the three month period in s 33. A matter becomes a disputed claim if any part of it is disputed, as there can be no half disputed claim. Section 107 does not stop a matter from becoming a disputed claim. On 19 February 2015 the claimants were required to file a notice of acceptance or notice of claim. When they did not do so the matter became a disputed claim.
The Authority’s offer was made on 19 November 2014, which stated that within 3 months after service of the offer (unless the time was extended by agreement or by the Minister) [the claimants] must give Melbourne Water a notice of acceptance of claim and ‘if [the claimants] do not reply within time, Melbourne Water may assume that [they] reject the offer and dispute it’.
The Authority’s offer of 22 March 2016 under s 36(2) was a rejection of the claimants’ claim and a repetition of its offer under s 31.The Authority rejected the claim for market value loss made by the claimants and ‘to that extent’, the matter became a disputed claim for the purposes of s 36(9).[33] The words ‘to that extent’ allowed the possibility that there could be disputed claims at different times. But there cannot be only one part of a claim disputed – all of the claim must be referred under s 80.[34]
[33]Ibid [23].
[34]Ibid [50].
Batt J in Roads Corporation v Costa[35] was not asked to determine when a claim became a disputed claim. Even if the three months have expired, the claimants retain the right to make a claim until such time as the matter is referred for determination to either the Court or the tribunal, because a claim made out of time is still valid. Section 107 preserves the right of a claimant to make a claim before the matter goes to the court or tribunal, but it does not stop a matter from becoming a disputed claim. All it does is provide a different mechanism to stop rights elapsing.
[35][1998] 1 VR 708.
Once a claim becomes a disputed claim it remains a disputed claim on which interest accrues. Section 57 assists that argument. An application for an extension of time under s 106 is only necessary if the claimants have received an s 107 notice. The Act does not deny a claimant who wants to make a claim the opportunity to make it. It cannot stop being a disputed claim.
Conclusion on s 53
Part 3 of the LAC Act contemplates a disputed claim existing in at least four circumstances. One arises when the Authority serves on a claimant an offer under s 31 and the claimant fails within three months thereafter to serve on the Authority a notice of acceptance or a notice of claim as required by s 33(1)(a).
The second and third circumstances occur where the claimant serves a notice of claim and the Authority fails to reply before the expiration of three months. The Authority is then under s 36(5) taken to have rejected the claim and repeated its offer and the claim becomes a disputed claim. If, however, the Authority offers to increase or vary the compensation previously offered, the claimant must within two months after the date of service of the revised offer accept or reject the offer and to the extent that the claimant rejects the revised offer of the Authority, or the Authority rejects the claim by the claimant, the claim becomes a disputed claim.
The fourth circumstance is that provided for in s 37(8), where a claim for compensation is made and the Authority makes no offer or where it does make an offer to the extent that the claimant rejects it or the claimant does not respond: s 37 (12) and (13).
In my opinion, when the Authority has made a revised offer and the claimant rejects it wholly or to an extent, as happened in this case, the claim becomes a disputed claim at that point under s 36(9). Part 3 must be read as a whole and the most appropriate of the provisions dealing with the particular disputed claim applied to the facts. While s 33(2) may have applied if no more had happened before referral, the parties exchanged and pursued further offers and as a result s 36(9) was applicable instead. That appears to have been the approach adopted in Longo v Roads Corporation.[36]
[36][2013] VSC 636 [51], [62] (Emerton J).
Therefore the disputed claim for the purposes of s 53 existed on 20 May 2016.
Section 56 interest
There was then the question of allowance for interest under s 56, which provides:
56 Interest in respect of expenses
Despite anything to the contrary in section 53 or 54—
(a)if an amount has been claimed under this Act in respect of expenses and the amount of the expenses has been paid by the Authority, that amount does not bear interest under this Act;
(b)if the amount of any expenses claimed under this Act is disputed, the amount awarded in respect of those expenses bears interest from the date on which the claimant paid the expenses; and
(c) if—
(i)the amount of any expenses claimed under this Act is disputed; and
(ii)the Authority has made an advance of compensation to the claimant; and
(iii) the claimant has not paid the expenses—
any amount awarded in respect of those expenses in addition to the amount advanced bears interest from the date on which the claimant pays the expenses.
There were issues concerning the application of s 56. First, the claimants sought interest on expenses that the Authority has made an offer in respect of and paid them the amount of the expense and, second, the claimants sought interest on expenses which the Authority contends that they have not established that they have paid.
Section 56 relates only to expenses. Section 41(1)(g) gives some content to the term ‘expenses’, as it provides that amongst the factors to which regard must be had in assessing the amount of compensation are:
Any legal, valuation and other professional expenses necessarily incurred by the clamant by reason of the acquisition of the interest.
A claimant’s entitlement to interest under s 56 can be affected by three factual situations:
(a) whether such expenses have been paid by the Authority, in which case interest is not payable, although if the claimant pays the expenses interest is payable from the date of that payment;
(b) whether such expenses are disputed or have been agreed by the parties; and
(c) the extent to which the claimant was awarded compensation for those expenses which were in dispute.
The amount of expenses in dispute is $28,254.00, reached by commencing with the $138,917.94 claimed, less the $100,663.94 offered to the applicants and paid by the Authority. The Authority submitted that the claimants failed to provide any evidence of the date of payment.
In order to prove payment of expenses upon which interest might be claimed, the claimants relied on the affidavit of Mr McDougall, whose spreadsheet exhibited to the affidavit proved that all expenses had been paid. They were paid by the claimants’ then solicitors and that affidavit and spreadsheet were not challenged.
Conclusion regarding payment
I find on the basis of Mr McDougall’s affidavit and spreadsheet exhibit, which I consider is clear and which was not the subject of cross-examination, that all expenses have been paid. They are recorded under the heading ‘paid incurred’. The exhibit to the affidavit makes it clear that not only was the entire $138,917.94 paid, but that it was paid by the claimants.
Construction of s 56
The Authority argued that once it paid the expenses to the claimants or solicitors no interest for any earlier period could be claimed. The LAC Act does not provide for interest to be paid for the period before the Authority pays them. The consequence of that interpretation would be that if the Authority now paid the remaining $28,254.00 owing, that would retrospectively eliminate any interest entitlement. Section 56(b) operates only in respect of expenses that were paid by the claimants and the claimants have not led evidence of payment in respect of the $28,254.00.
The claimants argued that s 56 is meant to run from the time when a claimant is out of pocket. Once the expenses had been paid by the Authority interest ceases to run, but they bear interest until it is paid by the Authority. If the section is read as a whole, it is clear that interest runs from when an expense is paid until when the Authority has reimbursed the claimants for that expense.
Had Parliament intended for s 56(a) of the LAC Act to operate so as to wholly vitiate the operation of s 56(b) and (c) then it would have said so. Such a reading would cause claimants to seek to invoke s 60 of the Supreme Court Act 1986 or seek to narrow the word ‘expenses’ and seek to recover them as losses incurred as the natural, direct and reasonable consequence of the acquisition. Section 56(a) applies to an amount of expenses until the date of payment by the Authority. The claimants’ entitlement to interest ceased once the Authority had reimbursed them for expenses.
Conclusion on s 56
The right to interest is a creation of statute and s 56 must be read as a whole and in the context of the statute as a whole.[37] It requires a decision to be made in respect of particular expenses. Where the amount of them has been paid by the Authority, that amount does not bear interest at all. The text of the provision does not permit any other conclusion because any interest claimed must be created by the statute. The section does not permit the approach of awarding interest on out of pocket expenses save when they are disputed. Where the amount of any expenses claimed is disputed, those expenses bear interest from the date on which the claimant paid the expenses. Where the amount of any expenses claimed is disputed and the Authority has made an advance of compensation to the claimant and the claimant has not paid the expenses, any amount awarded in respect of those expenses in addition to the amount advanced bears interest from the date on which the claimant paid the expenses.
[37]CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384.
Thus, if the claimants have paid expenses which were disputed, they bear interest from the date that they were paid by them. I will hear the parties as to which expenses fall into that category.
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