Al Amanah College Inc v Minister for Education and Training

Land and Environment Court (NSW)|2012-02-21|Before: Biscoe J

Judgment 1The only matter still outstanding in these proceedings for compensation for the compulsory acquisition of land under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) is a claim by the applicant for indemnity costs from 5 December 2011 based on its unaccepted Calderbank offer of that date. The main issues are the timing of the offer and the very short time it was open for acceptance.

BACKGROUND 2Between 17 October and 3 November 2011 I heard the substantive proceedings. On 21 October 2011, during the hearing, the respondent handed up a document entitled "Notes on disputed disturbance items" which for the first time identified a variety of defences to the applicant's disturbance loss claim. Thereafter, I granted leave to the applicant to adduce additional evidence to meet some of the points made in that document and to amend disturbance loss items to re - plead them as special value claim items if they were not recoverable as disturbance loss under s 55 of the Just Terms Act. By consent and in exceptional circumstances, I appointed a referee to report to the Court on the disturbance loss and special value claims by 16 December 2011. I proceeded with the hearing of the market value compensation claim. 3On 25 November 2011 I delivered judgment in which I determined that the applicant was entitled to compensation for the market value of the land in the sum of $10,885,000: Al Amanah College Incorporated v Minister for Education and Training [2011] NSWLEC 189. 4On or about 18 November 2011 the applicant completed service of ten further affidavits in relation to the hearing before the referee. 5On 30 November 2011 the respondent served its evidence in response, comprising a detailed report from an accountant. 6On 5 December 2011 at 3.16 pm the applicant made a Calderbank offer to settle the disturbance loss/special value claims for $1 million. The offer was expressed to expire at noon the next day, 6 December 2011. 7At 9.33 am on 6 December 2011 the hearing before the referee commenced. At that time the parties exchanged written opening submissions. The oral opening address of senior counsel for the applicant concluded at 12.49 pm that day, by which time the offer had expired. 8The applicant's solicitor has deposed that the offer was not made until 5 December 2011 for two main reasons: (a)The applicant was awaiting receipt of evidence from the respondent. As earlier noted, the applicant received that evidence on 30 November 2011. On that day the applicant's solicitor sent a copy of that evidence to the applicant's officers Mr Mohammed Mehio and Mr Mohamad El Dana for instructions and an extract to the applicant's accountant who had sworn an affidavit. (b)There was a delay in obtaining instructions from the applicant because the person from whom she received instructions, Mr Mehio, was overseas. On 3 December she spoke to Mr Mehio when he was overseas about the offer and he requested her to obtain advice from senior counsel. Having obtained that advice she spoke to Mr El Dana on the morning of 5 December, who, along with the chair of the applicant's board, gave her instructions to make the offer. Mr Mehio returned to Sydney on the morning of 6 December 2011. 9On 23 December 2011: (a)Following a hearing concerning adoption of the referee's report, I delivered a judgment in which I adopted the referee's report and determined disturbance loss in the total sum of $1,303,963.32, determined total compensation in the sum of $12,189,000, and ordered the respondent to pay the applicant's costs: Al Amanah College Inc v Minister for Education and Training (No 2) [2011] NSWLEC 254. (b)The applicant applied to vary the costs order to claim indemnity costs from the date on which its Calderbank offer was made. The hearing of that residual matter was fixed for 21 February 2012. (c)I delivered a separate judgment in which I ordered that the compensation be paid within 21 days: Al Amanah College Inc v Minister for Education and Training (No 3) [2011] NSWLEC 258.

COSTS PRINCIPLES IN PROCEEDINGS FOR COMPENSATION FOR COMPULSORY ACQUISITION OF LAND 10The power of the Court to order costs in claims for compensation for the compulsory acquisition of land under the Just Terms Act is found in s 98(1) of the Civil Procedure Act 2005, which provides: 98 Courts powers as to costs (1) Subject to rules of court and to this or any other Act: (a) costs are in the discretion of the court, and (b) the court has full power to determine by whom, to whom and to what extent costs are to be paid, and (c) the court may order that costs are to be awarded on the ordinary basis or on an indemnity basis. 11Section 98(1) is expressed to be subject to the rules of court. There are no rules of court applicable to proceedings for compensation for compulsory acquisition of land, other than rules relating to Offers of Compromise under the Uniform Civil Procedure Rules 2005 ( UCPR ). Neither r 3.7(2) of the Land and Environment Court Rules 2007 ( LECR ) nor r 42.1 UCPR apply to such proceedings. The LECR prevail over the UCPR: UCPR r 1.7 and Schedule 2. More particularly: (a)Rule 3.7(2) LECR provides that the Court is not to make any order for costs unless the Court considers that the making of a costs order is "fair and reasonable in the circumstances". Rule 3.7 applies to all proceedings in Classes 1 and 2 and specified proceedings in Class 3 of the Court's jurisdiction: r 3.7(1). However, r 3.7 is inapplicable to claims for compensation for compulsory acquisition of land because it is not one of the Class 3 proceedings specified in r 3.7(1)(c). (b)Rule 42.1 of the UCPR provides that (subject to Part 42) if the Court makes a costs order, the Court is to order that costs follow the event unless it appears to the Court that some other order should be made as to the whole or any part of the costs. Rule 42.1 is excluded in proceedings in Classes 1, 2 and 3 of the Court's jurisdiction: UCPR r 1.5 and Schedule 1. Accordingly, the discretion remains unfettered, in the sense that there is no presumption that costs should follow the event: Dillon v Gosford City Council [2011] NSWCA 328 at [60]. (c)The Offer of Compromise rules in Part 20 Division 4 and Part 42 Division 3 of the UCPR apply to Class 3 Just Terms Act claims for compensation: UCPR rr 1.5, 20.26(1) and Schedule 1; Land and Environment Court Act 1979 s 19(e); Taylor v Port Macquarie - Hastings Council [2010] NSWLEC 153, 175 LGERA 189 (Biscoe J). Those rules provide for the offeree to pay indemnity costs where an Offer of Compromise is made and not accepted, and the offeror obtains a judgment that is no less favourable to the offeror than the terms of the offer, unless the court orders otherwise: UCPR rr 42.14 - 42.15A. Where an Offer of Compromise is limited as to the time it is open for acceptance, the offer must be left open "for such time as is reasonable in the circumstances" in the case of an offer made less than two months before the date set down for commencement of the trial: UCPR r 20.26(7)(b). 12Principles for the exercise of a costs discretion may be developed in order to promote consistency of decision - making: Oshlack v Richmond River Council [1998] HCA 11, 193 CLR 72 at [35], [65] - [66]; Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300, 156 LGERA 150 at [33] - [35]. Principles for the exercise of the costs discretion in resumption compensation cases have been developed by the courts. They were stated as follows by the Court of Appeal in Dillon at [70] - [71], following authorities in this Court and other jurisdictions: 70. ...a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense. 71 That approach is also consistent with the absence of any general presumption that costs should follow the event: 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. 13These costs principles are underpinned by several considerations. First, they are consistent with the common law's protection of property rights (including its presumption, in the interpretation of statutes, against an intention to interfere with vested property rights) and with the international recognition of the right to property as a human right: R & R Fazzolari Pty Ltd v Parramatta City Council [2009] HCA 12, 237 CLR 603 at [40] - [44] per French CJ. Secondly, a compulsorily dispossessed owner has no entitlement to put its case for compensation and have it determined other than, respectively, to and by this Court (s 66 Just Terms Act). Thirdly, the experience of this Court is that generally the Valuer - General's statutory determination of compensation, which dictates the statutory offer of compensation (s 42 Just Terms Act), is relatively cursory compared with the intense investigation by both sides when the matter reaches the Court on objection to the offer. Commonly, both parties on the appeal, and their experts, contend for compensation in amounts which differ greatly both from the Valuer General's determination and from each other's contention.

CALDERBANK OFFERS 14Calderbank offers (named after the seminal case) live outside the rules of court. In the present case the Calderbank offer did not comply with the requirements of an Offer of Compromise under the UCPR. Calderbank offers are a creation of the common law developed in the context of ordinary civil litigation where costs ordinarily follow the event. In Jones v Bradley (No 2) [2003] NSWCA 258 at [8] the Court of Appeal unanimously approved the following statement of principle in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 at [37] per Giles JA: The making of an offer of compromise in the form of a Calderbank letter...where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure. 15The Court of Appeal in Jones held at [13], "when considering whether the time in which a Calderbank offer must be accepted is reasonable, it is necessary to look at all the circumstances surrounding the making of the offer". 16The purpose of the Calderbank offer principles is to promote settlement, not to permit parties to raise the stakes by making offers in circumstances where it is not realistically possible for the opponent to respond, then claim additional costs. 17Given that the statutory regime for Offers of Compromise are specifically applicable to proceedings such as these (see [11(c)] above), it is questionable whether there is also room for the application of common law Calderbank principles in the absence of a statutory provision which says that they apply. The question is fuelled by the tension between Calderbank offer principles, formulated in the context of ordinary civil litigation, which pressure the offeree to settle, on the one hand, and the special costs principle identified in Dillon that the compulsorily dispossessed owner, having acted reasonably in the pursuit and conduct of the proceedings, is entitled to his day in Court without risk of an adverse costs order: [12] above. However, assuming that Calderbank principles do apply to proceedings such as these, I consider that they are not satisfied in this case for the reasons discussed below.

SUBMISSIONS 18In summary, the applicant submits that it should be awarded indemnity costs for the following reasons: (a)It was unreasonable for the Calderbank offer of $1 million to be rejected in light of the extent of the compromise. The applicant's disturbance claim was for about $1.43 million (excluding GST). (b)The respondent called no evidence to contradict any of the applicant's witnesses but argued that for legal reasons the amounts were not compensable, and there was little challenge to the reasonableness of the amounts claimed. (c)The cases of both parties did not change after the service of evidence and the parties exchanged opening submissions at about 9.30 am on 6 December 2011, giving both paries the opportunity to read and digest each other's refined cases before the expiry of the offer. (d)There is no suggestion that the respondent was unable to obtain instructions in the time available. (e)The role of offers of settlement should be understood in the context of ss 98 and 56 of the Civil Procedure Act and s 68 of the Just Terms Act. 19The respondent's submissions may be summarised as follows: (a)While an offer made close to a hearing date will often carry a shorter response time than one made well in advance, it is a rare case in which a period of significantly less than 24 hours would be considered reasonable. (b)The applicant's position on important issues did not become apparent until senior counsel opened its case before the referee at 9.40 am on 6 December 2011. The opening address did not conclude until 12.49 pm, by which time the offer had expired. Counsel and instructing solicitor for the respondent were both engaged in the hearing. (c)The respondent's costs submissions were a genuine challenge to substantial parts of the disturbance claim, and the respondent succeeded in excluding more than $200,000 in items that were claimed at the time the offer was made. (d)The lateness of the offer has not been fully explained.

DECISION 20The main issue is the timing of the Calderbank offer and the short time it was left open for acceptance: see [6] - [8] above. 21In Kooee Communications Pty Ltd v Primus Telecommunications Pty Ltd (No 2) [2008] NSWCA 85, a commercial case, Kooee served an Offer of Compromise under the UCPR on Primus on the day before the trial was due to commence. It was expressed to remain open for less than 23 hours. The offer was not accepted and was more favourable to Primus than the judgment Primus ultimately obtained. The Court of Appeal held that the offer was not left open for such time as was reasonable in the circumstances and so could not bring an entitlement to indemnity costs under the rules. Basten JA delivered the leading judgment. Giles and Tobias JJA, agreeing with Basten JA's balancing of the relevant factors, added at [2]: ...the many observations to the effect that service of an offer of compromise under rules of court obliges the offeree to give serious thought to the risks of the proceedings and their outcome...mean that the court should not be ungenerous to an offeree in determining whether a time is reasonable. 22Basten JA balanced the relevant factors as follows: 15 Viewed in the abstract, an offer which is made less than 23 hours before the commencement of a hearing and requiring acceptance within that period, would not appear to have been left open for a reasonable time. Against that, there are practical considerations which might support a different conclusion. The first is that each of the parties had made prior offers, that of Kooee having been the subject of explanation as to the method of calculation of the component parts. Secondly, less than two weeks earlier Primus had made an assessment of its own position which led it to make an offer to settle for an amount of $2.5 million, an amount $1.25 million above the first Kooee offer. The second offer by Kooee reduced that gap by $300,000. Both the figures and the timing suggest that Primus could have been expected to assess the second offer with reasonable expedition. 16 The practical circumstances which must have existed at the time the offer was made may be said to tend in either direction. Thus, it appears to be common ground, as the Court might have assumed, that the legal representatives of Primus were conferring in preparation for the forthcoming trial, throughout the period that the offer was open. While that may have facilitated an immediate consideration of the offer by advisers who were focused on the relevant issues, it may also be said that the provision of an offer the day before trial provided an inconvenient distraction from preparation of the case for hearing. ... 20 In considering whether the time allowed for acceptance is 'reasonable in all the circumstances' once a trial commences, or indeed final preparation commences, three factors come into play. The first is that both parties may reasonably be expected to have a clear perception of the strengths and weaknesses of their positions, so that the reasonableness of a particular offer may be speedily assessed. Secondly, because significant costs will be accruing on a daily, even an hourly basis, there is a heightened incentive to respond within the time permitted. Thirdly, and counterbalancing the first factor, the need to address the terms of an offer, provide advice and obtain instructions will often be a significant distraction from final preparation. 21 In relation to the first factor, it should be accepted that by the day before the hearing, in commercial litigation involving experienced counsel and solicitors, the legal representatives would have been able to give the client an immediate assessment of: (a) the approximate costs incurred to date; (b) the likely length of the trial; (c) the approximate amount of costs assessed on an indemnity basis if the matter proceeded to trial, and (d) the most likely outcome, which may involve a range as to quantum. It should also be accepted that someone with authority to bind the client would have been available to give instructions based on legal advice as to the preferable response. 22 In seeking to demonstrate that the offer had not been left open for a reasonable time in all the circumstances, Primus sought to put before the Court evidence of how the offer was made and the circumstances of its own legal representatives at the time. However, that material was not relevant for this purpose. The question of reasonableness must be judged objectively, in the circumstances known, or which should reasonably have been anticipated, by both parties. In setting the time during which the offer is to remain open, the offeror must necessarily rely upon the circumstances as known to it, or which should reasonably be anticipated by it. The actual circumstances of the recipient, unknown to the offeror, may be relevant to an application that the Court otherwise order in relation to costs of a valid unaccepted offer, but so might evidence as to whether the recipient took any steps to bring such matters to the notice of the offeror. 23 In the present case, the time allowed was, on any view, a short period for the consideration of a global assessment of a reasonably complex dispute. It is Kooee which seeks to establish an entitlement to indemnity costs. To do that it must demonstrate that its offer was left open for a period which was reasonable in all the circumstances. Because the present case is truly borderline, it should be concluded that Kooee has failed to establish that its offer was left open for a reasonable time. Accordingly, the offer did not fall within UCPR r 20.26 and its non - acceptance did not engage the costs consequences in r 42.15. 23This analysis, which applied to UCPR Offers of Compromise, also applies with minor adaptation to Calderbank offers. 24In the present case, the offer was made quite late on the afternoon before the hearing, less than 19 hours before the commencement of the hearing, and expired less than 21 hours after it was made. 25Viewed in the abstract, it would not appear to have been left open for a reasonable time. The legal representatives of the respondent may be assumed to have been conferring in preparation for the forthcoming hearing until close to 9.33 am the following day. They were then at the hearing listening to the applicant's opening address until after 12 noon, when the offer expired. While the time of the offer might have sparked its immediate consideration by the respondent's legal advisers, there was little prospect of obtaining instructions before the hearing from the relevant bureaucrats whose office would have closed within two hours after receipt of the offer. The disturbance loss claim had some complexity. The offer also provided an inconvenient distraction from preparation of the case for hearing. 26The relevant circumstances include the nature of the proceedings. On the one hand, a compulsorily dispossessed owner cannot be expected to make a rushed decision whether to accept an offer by a resuming authority. On the other side of the coin, where large amounts are involved, a resuming authority's decision whether to accept an offer may reasonably be expected to be a little (albeit not much) slower than in commercial litigation. The resuming authority is dealing with public money for which it has to account to the taxpayer. In the present case, it had to be able to justify expenditure in the sum of $1 million. 27In the commercial case of Kooee an offer made less than 23 hours before the commencement of the hearing and requiring acceptance within that period was held not to have been left open for a reasonable time. In the present case an offer made less than 19 hours before the commencement of the hearing and requiring acceptance in less than 21 hours should be viewed in the same way. 28I do not think that there are any practical considerations which support a different view. The applicant received the respondent's notes on disputed disturbance items on 21 October 2011 and had all the respondent's evidence by 30 November 2011 but delayed making an offer for almost five days. Yet it contends that it was unreasonable for the respondent not to have accepted its offer, made late on the eve of the hearing, within less than 21 hours. If relevant, the applicant's claimed reasons for delay in the making of the offer do not carry much weight, in particular that the officer of the client giving instructions was abroad: see [8] above. This is an era of instantaneous electronic and telephonic communications. If, with the hearing looming, the respondent's instructing officers should have made themselves promptly available to decide whether to accept an offer, the applicant's instructing officers should have made themselves promptly available to give instructions to make the offer. 29In my opinion, the applicant has failed to demonstrate that its offer was left open for a period which was reasonable in the circumstances. I do not think it was unreasonable in the particular circumstances for the respondent not to have accepted the offer.

ORDER 30The applicant's application for indemnity costs is dismissed. The exhibits may be returned. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 27 February 2012

At a glance

Court

Decision date

Before

Source

Judgment (7 paragraphs)

Parties

Cases Cited (11)

Cited By (9)