Applicant v Respondent

2 The claimant, Caradi Pty Ltd (formerly known as Scared Bear Pty Ltd) (the 'Claimant'), seeks an order for its cost on a standard basis for the duration of the proceeding.

3 The respondent, the Secretary to the Department of Economic Development, Jobs, Transport and Resources (the 'Authority'), seeks a partial order in respect of its costs, namely that:

(a) the Authority pay the Claimant's costs on a standard basis from the date of referral of the proceeding to Court to 13 March 2017 (three months after the date of the joint report prepared by all four valuers in the proceeding (the 'Joint Valuers' Report')); and

(b) the Claimant pay the Authority's costs on a standard basis from 14 March 2017 to the date of judgment.

4 The Authority submits that, by reason of ss 91(1)(a) and 91(1)(b)(i)-(iii) of the Land Acquisition and Compensation Act 1986 (the 'LAC Act'), the form of order it seeks is justified.

5 The Claimant maintains that an order in its favour is justified based on the long-recognised tendency to make an order for costs in favour of a claimant who has received an award of compensation greater than that offered by an authority. The Claimant also says that the Authority made an unduly depressed offer.[2]

6 The proceeding involved a claim for compensation pursuant to the provisions of the LAC Act for the compulsory acquisition of land situated at 11-31 Montague Street, Southbank (the 'Land').

7 In summary, the key issues in dispute arising from the claim were:

(a) the market value of the Land at the date of acquisition;

(b) whether the Claimant was entitled to compensation for replacement land costs in circumstances where replacement land had not been purchased;

(c) a claimed financial loss alleged to have been incurred as a result of the Claimant's inability to invest the sum of the initial offer into a higher return asset due to the inadequate amount of the Authority's offer;

(d) whether the professional expenses incurred by the Claimant fell within the scope of s 41(1)(f) of the LAC Act; and

(e) a claim for solatium under s 44 of the LAC Act.

8 It was in relation to the market value of the Land that the parties were the greatest distance apart. The formal offer made by the Authority on 28 March 2014 pursuant to pt 3 of the LAC Act was $16.15 million. The position put by the Authority in its opening submissions at trial was that an award of compensation for market value should be made consistent with the expert valuation evidence called on behalf of the Authority in the amount of either $24.61 million (Mr Dudakov's valuation) or $25.3 million (Mr Brown's valuation).

9 In the Particulars of Claim filed 27 October 2014, the Claimant had claimed $60 million for market value. In light of the amended valuations of the Claimant's valuers, Mr Murray and Mr Torr, this item of claim was revised to $56 million prior to the commencement of the hearing.

10 Much of the trial time was taken up with the determination of market value. This issue raised a number of sub-issues, including the question of what properly ought to be taken into account by way of comparable sales and the weight to be given to the sales relied upon, and the relevance of other transactions. Notwithstanding that the parties agreed that the appropriate valuation methodology was comparable sales assessed at a dollar per square metre rate, some time was taken debating alternative methods, in particular the rate per apartment method which was particularly relied upon by Mr Torr on behalf of the Claimant.

11 The other matters which were in dispute took a more modest period of time. These included the replacement property costs claim of $3,350,000, and a claim for financial loss based on an inability to invest the initial sum offered in a higher return asset. In both matters, the Claimant was wholly unsuccessful.

12 The claim for professional expenses was substantially proven though in a significantly reduced amount as compared to the initial quantum of the claim. The initial claim for $541,477.38 was substantially reduced to $290,378.12 in the Claimant's opening submissions and was revised to $284,754.94 by the Claimant at trial. This was reduced further by the award to $242,689.49.

13 A claim for solatium was successfully made out by the Claimant, but the actual amount awarded was consistent with the submissions made on behalf of the Authority, being an amount of $50,000, as opposed to the very significant sum of $1.5 million sought by the Claimant. Whilst this amount itself was consistent with the submissions made by the Authority at trial, no amount had been offered by the Authority for this part of the claim.

14 The Claimant made a disturbance claim for loss of use of money caused by delay in payment of compensation, in the amount of $89,767.45, and for architect's fees in the amount of $31,053. These items of claim were accepted by the Authority in its written submissions served 2 February 2018.

15 In the Further Revised Particulars of Claim, an agent's commission was claimed in the amount of $177,650. However, this claim was not pursued by the Claimant at trial.

16 At the commencement of the hearing, the Claimant's total claim amounted to $62,985,548 plus interest and costs. The position put to the Court by the Authority was that the amount that should be awarded was $25,690,820. However, again, no formal offer had been made for this amount. The amount actually awarded by the Court after a heavily contested two-week trial was $25,713,509.94.

17 Section 91 of the LAC Act governs the Court's power to award costs in this proceeding. Section 91 provides:

(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; or

(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; or

(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.

...

(4) All costs payable to the Authority may be set off by it against any compensation awarded or costs payable to the claimant.

(5) All costs payable to the claimant may be recovered by the claimant from the Authority in the same manner as the compensation awarded.

18 In construing and applying s 91(1) of the LAC Act, the Court is assisted by the discussion of the principles set out by the Court of Appeal in Love v Roads Corporation ('Love'):

Section 91(1) confers on the court a general discretion as to costs. However, it then provides that the court is required to take certain matters into account, if it considers it appropriate to do so. The relevant matters are described in paragraphs (a) and (b).

Section 91(1)(a) requires the court, if it considers it appropriate to do so, to take into account in exercising its discretion as to costs any difference between the amount of compensation awarded and the amount offered by the Corporation. Section 91(1)(b) requires the court to consider the extent to which proceedings under Pt 10 of the Act have arisen from or been affected by the matters referred to in subparagraphs (i) to (iv). Subparagraph (i) draws attention to "unreasonable conduct" on the part of the claimant or the Corporation.

...

In our view, the court is required to consider different questions under paras (a) and (b). Under paragraph (a), the court is called upon to compare the amount awarded with the amount or amounts offered by the Corporation, whereas para (b) requires the court to consider the effect on the proceedings of certain matters, including unreasonable conduct on the part of one or other of the parties. This would include a response by the Corporation to an offer made by the claimant, which is clearly not covered by para (a). As a result, insofar as para (b) captures conduct in the form of responses to offers and counter offers, it will not necessarily cover the same ground as para (a) so as to give rise to a conflict between those provisions or otherwise detract from the consideration required by para (a).

In Minister for the Environment v Florence, Wells J gave detailed consideration to s 36 of the Land Acquisition Act 1969 (SA) upon which s 91 of the Act is based. Like s 91(1) of the Act, para (a) of the South Australian provision refers to the amount of compensation awarded by the court compared with the amount offered by the Corporation. Paragraph (b) of the South Australian provision refers to the extent to which the proceedings have arisen from, or been affected by, unreasonable conduct of the claimant or the Corporation, or an excessive claim by the claimant or unduly depressed offer by the Corporation. Justice Wells observed that the direction to take into consideration one or more of the facts and circumstances in paras (a) and (b) was not unconditional: the court was only to give effect to the direction where it considered it to be appropriate to do so. As a result, it was his Honour's view that before applying the substance of paras (a) and (b), there had to be some identifiable facts or circumstances signifying the appropriateness of considering those matters. This means, not that there is a discretion to be exercised having regard to the facts and circumstances in paras (a) and (b), but that the discretion is to be exercised generally and, when the facts and circumstances seem to call for it, the court is to consider the implications of those paragraphs.

In this context, his Honour also observed that there was a clear difference in emphasis between para (a) and sub-para (b)(ii), which refers to an excessive claim by the claimant or an unduly depressed offer by the Corporation. By para (a), the court is called upon to consider a comparison of the two amounts; by para (b)(ii), the court is called on to consider amounts said to be excessive or unduly depressed in se.

We respectfully agree with the analysis of Wells J. In our view, para (b) invites a different inquiry from the inquiry mandated by para (a). Section 91(1) permits the court, if it considers it appropriate to do so, to consider the open offers made by the Corporation relative to the eventual award of compensation as one important factor in the exercise of its costs discretion, and to take into account the claimant's or the Corporation's conduct in response to an offer to settle the proceedings, having regard to the effect of that conduct on the proceedings. The latter consideration would not involve the exercise of comparing the offer to the award, but would require consideration of the effect on the proceedings of an unreasonable refusal to accept the offer.

...

Mr Love relied on a series of cases that emphasised the special costs position in litigation of this kind and the need to ensure that the compensation to which the claimant is entitled is not eroded by the costs of making the claim. In Florence, Wells J observed that compulsory acquisition cases differed from ordinary claims in a significant respect: the claimant, unlike the ordinary plaintiff, has no choice whether to make a claim, as the acquisition by compulsory process gives him a claim. His Honour described the rationale for costs orders in the compulsory acquisition jurisdiction being made on a different basis from costs orders in the general jurisdiction as follows:

Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who has already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won.

However, Wells J went on to say that costs are, as always, discretionary, and no hard and fast rule would ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise might be in certain sorts of cases.

...

We accept that the position of a claimant in proceedings 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 recognised, and orders made in that jurisdiction that are just and expedient. [3]

19 Section 91(1) of the LAC Act provides the relevant power in respect of an award of costs in compulsory acquisition claims. Under this section, the Court may award such costs 'as it thinks proper'. However, in the exercise of its discretion, the Court must take into consideration (if the Court considers it appropriate to do so) the factors set out in s 91(1) of the LAC Act.

20 As quoted above in Love, the position of a claimant in proceedings under the LAC Act is not that of an ordinary litigant. A claimant, unlike an ordinary plaintiff, has no choice as to whether to make a claim. In this sense, 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 a claim. To this extent, the discretion as to costs in compensation hearings is said to be 'tilted' in favour of the claimant.[4]

21 However, in pursuing a claim through litigation in the Court as provided for by the LAC Act, a claimant (and a respondent) is exposed to the discretion of the Court, exercised in accordance with s 91 of the LAC Act, to award costs.

22 The Authority relies on both sub-ss (a) and (b) of s 91(1) of the LAC Act to argue that the tendency to award costs to the Claimant ought to be modified in its favour in this case. In relation to s 91(1)(a), the Authority relies on the minimal difference between the award made by this Court and the position put by the Authority in its opening submissions, which it argues should be considered an amount 'offered' for the purpose of s 91(1)(a) of the LAC Act. The Authority also relies on s 91(1)(b)(i), unreasonable conduct on the part of the Claimant, s 91(1)(b)(ii), failure to give adequate particulars or supporting material and s 91(1)(b)(iii), excessive claim.

23 The Claimant maintains that an order for costs should remain tilted in its favour. The Claimant says that it was awarded a sum well in excess of the offer of $16.15 million and as a consequence the usual order for costs ought to be made. It also says that the Authority made an unduly depressed offer.

24 The Authority argues that a simple comparison of the amounts awarded by the Court compared to the amounts offered by the Authority demonstrates that in respect of market value, disturbance and solatium the amounts suggested in the opening submissions of the Authority were the amounts consistent with the amounts determined by the Court.

25 The Authority submitted that if what had been 'offered' by it in the Authority's written submissions served 2 February 2018 prior to the start of the trial on 12 February 2018 had been accepted, the costs of a two-week trial could have been avoided. The Authority accepts that it should pay the Claimant's costs on a standard basis until a reasonable time after the Joint Valuers' Report. It argued that until the Joint Valuers' Report on 14 December 2016, the two valuers retained on behalf of the Authority, acting on expert advice as to contamination clean-up costs, assessed the value of the Land at a value materially below the market value assessment which is in the Joint Valuers' Report. The Authority accepts it was reasonable for the Claimant to pursue a claim for compensation up to that time. It suggests a period of three months from the date of the Joint Valuers' Report is more than a reasonable time for the Claimant to consider the Joint Valuers' Report contents and to act accordingly.

26 However, against this, no formal change to the offer made was forthcoming from the Authority. No evidence was put before me of any further offer after the formal offer for market value made pursuant to the provisions of the LAC Act on 28 March 2014 of $16.15 million.[5] There was no evidence of any further offer being made after this time. For the Authority's argument to succeed, I would need to accept that the figures referred to in the Authority's opening submission just prior to the commencement of the hearing is an 'offer' for the purpose of s 91(1)(a) of the LAC Act.

27 Paragraph 24 of the opening submissions of the Authority provides:

Based upon the expert opinion referred to above, the Authority will contend at trial that the appropriate award for compensation for loss of the market value of the land acquired should be in accordance with the valuation assessments of Mr Dudakov (the delegate of the Valuer General) [$24.61 m] or, in the alternative, the valuation assessments of Mr Brown [$23.5 m].[6]

28 I have difficulty accepting that a position put in opening submissions, as was done in this case, amounts to an 'offer' for the purposes of s 91(1)(a) of the LAC Act.

29 The terms of s 91(1)(a) refers to the amount of compensation awarded by the Court as compared to the amount, if any, 'offered' by the Authority. The terms 'offer' and 'offered' are not defined by the LAC Act. Section 91 of the LAC Act provides the relevant power in respect of costs in compulsory acquisition claims, as well as guidance as to the exercise of the discretion in relation to costs. It is in this context that the term 'offer' must be construed.[7]

30 I have not been referred to any authority on whether a position stated in opening submissions amounts to an 'offer' or something that is 'offered' for the purposes of s 91 of the LAC Act. However, in approaching this question, I have considered the term 'offered' to be one intended to be consistent with the statutory regime set out in pt 3 of the LAC Act. The reported cases, insofar as they deal with costs and offers, are confined to discussions of offers of compromise pursuant to the rules of Court or Calderbank offers and the exercise of the Courts discretion.[8]

31 The statutory regime set out in pt 3 of the LAC Act provides that after a notice of intention to acquire is served, 'the Authority must make an offer in writing' within a certain time period and in accordance with the formal requirements in s 31 of the LAC Act. Section 33 provides for a response by a claimant. Section 34 provides for notice of acceptance in a prescribed form. Section 35 provides for the form of the notice of claim including the identification of the amount accepted and the amount in dispute. These provisions set out the formal process under the LAC Act and provide that an offer must be in a certain form to trigger the process of a disputed claim which is then referred to the Court for adjudication. Service of an offer under pt 3 or pt 5 of the LAC Act permits a claimant to seek an advance of compensation.

32 Section 53(1) of the LAC Act provides for interest on the amount of compensation awarded based on the amount of the offer immediately made before the claim became a disputed claim.

33 In my view, consideration of the phrase 'amount (if any) offered' in s 91(1)(a) must mean an amount formally offered in the context of the regime for compensation set out in the LAC Act. It may include a clear statement proffered in terms of an offer to settle the proceedings after an initial offer, but it does not include a position statement such as that set out in the opening submissions of the Authority in this matter. In my view, the term 'offered' used in the context of the LAC Act must mean something more formal than a position statement in submissions. There is no evidence of a formal offer being made (other than the initial formal offer of $16.15 million made on 28 March 2014). In my view, the opening submissions are no more than a statement of position as to the case to be presented on behalf of the Authority.

34 Further, the 'offer' said to be made in the opening submissions is not one of a particular sum but alternatives based on the respective valuations provided by Mr Dudakov and Mr Brown.

35 The Authority had Mr Dudakov's revised valuation in February 2016 at $21.7 million. At the Joint Valuers' Conference, Mr Dudakov revised his valuation to $24.61 million. Mr Brown's valuation at 30 March 2016 was $21.4 million and he revised his valuation at the Joint Valuers' Conference to $25.3 million. The submissions purported to advance the Authority's case on the basis of the Authority's latest valuation evidence. No offer was made notwithstanding that the Authority had evidence of a valuation of the Land well in excess of $16.15 million, being the amount of the Authority's formal offer.

36 Once I accept that the opening submission of the Authority is not an amount offered for the purpose of s 91(1)(a) of the LAC Act, consideration of the amount that was (formally) offered by the Authority for market value, at $16.15 million, compared with the amount of compensation awarded by the Court, at $25.3 million, is a strong factor in support of a costs award in favour of the Claimant.

37 This is not to say that the position advanced by the Authority at trial is not a relevant consideration when the matters identified in s 91(1)(b) of the LAC Act are considered. As stated in the extract from the Court of Appeal in Love as referred to above, s 91(1)(a) of the LAC Act is a separate consideration from the factors identified in s 91(1)(b) of the LAC Act.

38 The Authority relies on the factors in s 91(1)(b) of the LAC Act, in particular, excessive claim by the claimant,[9] failure to adequately particularise the claim[10] and unreasonable conduct.[11]

39 The Authority suggests a simple comparison between the amount awarded by the Court and the amount claimed by the Claimant demonstrates that the claim was excessive.

40 The meaning of 'excessive' was considered by Emerton J in Secretary to the Department of Business and Innovation v (No 2)[12] ('Murdesk'). Her Honour referred to Byrne J in 15 Lorimer Street Pty Ltd v Secretary to the Department of Infrastructure,[13] who held that the word 'excessive' in s 91(1)(b)(iii) of the LAC Act has a pejorative connotation in the sense that the sum claimed exceeds the sum awarded to a degree which is unreasonable or worthy of criticism. This is not only a function of the difference between two sums, but also the reason for any difference.

41 In Murdesk, her Honour found that the claims for market value were excessive in the sense that they were unreasonable and worthy of criticism. The claims for special value and/or disturbance were both ill-conceived and unsupported by any evidence and were also held to be excessive on the facts before her Honour.

42 Each case will be different and dependent on its own facts.[14]

43 There are four items of the claim which the Authority says demonstrates that the Claimant's claim is an excessive claim, and that in its submission explains the reason for the difference between the sum claimed and the sum awarded:

(a) the market value claim of $56 million compared to the award of $23.5 million, which is less than 50% of the amount claimed by the Claimant;

(b) the replacement land costs claim of $3.35 million compared to a nil award;

(c) the investment of funds financial loss claim of $1.546 million compared to a nil award; and

(d) the solatium claim of $1.5 million compared to an award of $50,000.

44 It was submitted by the Authority that each one of the four specific items were excessive, as was the Claimant's claim as a whole. The Authority argued that the key issue which gave rise to the proceeding, which caused costs to be continued to be incurred by both parties, and which impacted on the other three major excessive claims, was the making and persistence of an excessive claim for loss of market value.

45 For the purposes of s 91(b) of the LAC Act, the Court does not simply take into account that a claim was excessive. What the Court is obliged to take into account is the extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by the factors set out in s 91(b) of the LAC Act, in this instance, 'an excessive claim'.

46 There is a superficial attraction to the submission made by the Authority that the amount awarded by the Court is substantially less than that which was claimed by the Claimant for market value at $56 million, and the Claimant's overall claim in excess of $62 million. However, consideration of whether a claim is 'excessive' requires consideration of not only the difference between the two sums, but the reason for this difference.

47 The Court observed in its judgment that the primary reason for the difference in the respective positions between the Claimant and the Authority's valuers is the comparable sales commencement point.[15] Mr Brown and Mr Dudakov appropriately placed the greatest weight on the 85-93 Lorimer Street sale in February 2014. Mr Torr and Mr Murray relied on the $55.5 million 60-82 Johnson Street transaction in May 2014 and their 'low sale' theory.

48 It is accepted by the Authority that there was no increase of its initial formal offer of $16.15 million in 2014, notwithstanding the expert evidence and the Joint Valuers Report in December 2016, until its trial outline was filed on 2 February 2018. It argued that there was a penalty imposed on the Authority for not making a further offer to reflect the changed opinions of its valuers, being the significant interest penalty incurred.

49 The interest penalty is a straight forward consequence of the provisions of the LAC Act.

50 On one view, looking at the difference between the amount awarded by the Court and the amount sought by the Claimant, the difference might be said to be demonstrative of an excessive claim. The assessment by the Court, on a proper analysis of all the evidence before it, was that the market value was $23.5 million. This amounts to an award of less than 50% of the value claimed by the Claimant. However, the Claimant's position was based on evidence from two reputable and competent valuers. They maintained their opinion as to the assessment of market value at the trial, albeit that their opinions did not stand up to scrutiny and their view of the comparable sales and relevant adjustments to be made were not accepted by the Court, based on all of the evidence, as the appropriate and correct assessment.

51 Whilst a mathematical comparison of the Claimant's claim (at approximately $62 million) with the award made by the Court (at less than half of that amount) may make it superficially attractive to find that the Claimant's claim was excessive, the market value aspect of the claim was strongly contested up to and through the trial by both parties relying upon competent experts. Whilst from the time of the Joint Valuers' Report the rationale for the difference between the parties' experts was identified, it was not until further work was undertaken by both parties and additional evidence subpoenaed that it became clear that reliance by the Claimant's valuers on the 60-82 Johnson Street transaction was untenable. Consequently, in my opinion, the claim for market value was not excessive in the pejorative sense.

52 In respect of certain other heads of claim, the Court found the amounts claimed to be unsubstantiated. Insofar as the quantum of each relied on a high market value, these claims are inflated, and to that extent, somewhat speculative.

53 I consider that the replacement land claim was excessive. There was insufficient evidence to satisfy the Court that the Authority had a liability to pay any amount, let alone the inflated amount based on the high market value claimed.

54 The investment of funds financial loss claimed at $1.54 million (and continuing) was described by the Court as 'speculative'.[16] This claim had no merit and was excessive.

55 In respect of the claim for solatium, in awarding a nominal sum of $50,000, the Court described the Claimant's claim as 'manifestly excessive'.[17] There was also little to no probative evidence to support such a significant claim in the amount sought by the Claimant.

56 In respect of the professional expenses claim under s 41(1)(f) of the LAC Act, the opening submission of the Authority accepted that expenses had been incurred but that the quantum was to be resolved. The amount awarded of $242,689 was significantly less than the $541,477 sought by the Claimant in its last version of its Particulars of Claim. Although, this figure was revised by the Claimant to $290,378.12 prior to the commencement of the hearing, and further revised at trial to $284,754.94.

Inadequate particulars or supporting material

57 Reviewing the particulars of claim, I agree that the claim for solatium, replacement land and the investment of funds financial loss claim are scant. It was not until the trial that further material was provided to explain the basis for these claims. It was not until the filing of the affidavit of Mr Hubay in December 2017 that more particulars were provided, some 18 months after the Further Revised Particulars of Claim had been filed.

58 The Court described the evidence in support of the replacement land claim as 'scant and superficial'.[18]

59 The Court described the investment of funds financial loss claim as 'creative'.[19] Whilst the calculations on which this claim was arithmetically based were explained by counsel for the Claimant, this did not assist in justifying the fundamental basis of the claim.

60 In relation to the claim for solatium, the evidence relied upon was that of Mr Hubay. As set out in the judgment, this evidence was insufficient to satisfy a claim beyond a nominal amount. The particulars provided were scant and the evidence given did little to assist.

61 In relation to the claim for professional expenses, this aspect took some time to examine and was contested by the Authority. It is an obligation on the part of the Claimant to establish these costs and set out the claim with some accuracy. The evidence to support the Claimant's claim for these costs was unclear.[20]

62 There is a valid argument that the absence of particulars is a deficiency in the manner in which the Claimant prepared its claim.

63 Section 91(1)(b) of the LAC Act allows the Court to take into consideration the extent to which the proceedings have arisen from or been affected by unreasonable conduct on the part of a claimant or an authority, as the case may be.

64 Each case sits within its own factual matrix. There is nothing that can be deduced from the evidence that leads to the conclusion that the behaviour of the Claimant was unreasonable insofar as the pursuit of the market value claim is concerned. The Claimant relied on the evidence of its expert valuer witnesses. The expert valuers maintained their position notwithstanding credible and cogent evidence undermining the 60-82 Johnson Street transaction, the key transaction they had relied upon, and the legitimacy of the 85-93 Lorimer Street sale, which led to their 'low sale' theory being discredited. The Claimant's position was undone at the hearing upon the testing of the evidence, and not prior to it.

65 The Claimant's reliance on expert evidence is not unreasonable conduct. The Claimant was entitled to test the evidence of the Authority. It did so, and its own evidence was tested. However, the Claimant's evidence ultimately fell short of being able to convince the Court that the market value of the Land was at the amount it contended.

66 Whilst the difference in the positions adopted by the parties' valuers was significant, I cannot conclude that in respect of the market value claim the conduct of the Claimant was unreasonable.

67 I have not formed the same view in respect of the claim for replacement land costs, the investment of funds financial loss claim or the claim for solatium at the amount claimed by the Claimant, which I find to be unreasonable. As I have discussed,[21] these claims were excessive and, in my view, pursuing these claims in the way the Claimant did was unreasonable.

68 The claim for professional expenses pursuant to s 41(1)(f) of the LAC Act was also unreasonable to the extent it lacked the particularity required to convince the Court that all of the items claimed properly fell within that section. The Authority accepted that the Claimant necessarily incurred legal, valuation, and other expenses by reason of the acquisition of the Land. However, the Authority had submitted that the Claimant had not demonstrated that the expenses claimed by it under s 41(1)(f) of the LAC Act were costs 'incurred by the claimant' as required under s 41(1)(f). The claim for professional expenses was reduced a number of times from an initial claim of $541,477.38 to a final claim at trial of $284,754.94. The Court accepted that an amount of compensation was payable pursuant to s 41(1)(f) of the LAC Act of $242,689.49, but it was not prepared to accept that an 'inference' should be drawn that $42,065.45 in expenses were incurred by the Claimant when those invoices were addressed to Ballah Nominees Pty Ltd.

69 The agent's commission claim was not pursued at trial. There was little detail provided in relation to this claim. If this claim was without basis, it should not have continued to be included in the Particulars of Claim and should have been abandoned at an earlier stage than the trial itself. In this regard, the Claimant's conduct was unreasonable.

70 The Claimant argues that the Authority provided an unduly depressed offer. The question of market value was one which was strongly contested. In my view, the valuations were based upon matters in which experts could differ. Evidence was challenged but it was not until it was examined at trial that the Authority was able to demonstrate the strength of its argument. This is particularly so with respect to the 60-82 Johnson Street transaction.

71 I do not agree that the offer made was unduly depressed given the Court's finding that the proper award of compensation was $24.5 million and not $59 million. I make this finding notwithstanding the formal offer made by the Authority was $16.5 million. In the context of the respective parties' evidence at the time the offer was made, and the further examination of the evidence at trial, the offer made by the Authority was not an unduly depressed offer.

Extent to which proceeding 'affected' by these factors

72 The extent to which, in the opinion of the Court, the proceeding was affected by any of these factors must be considered.[22]

73 In relation to market value, there was a significant difference of opinion between the valuers at and after the Joint Valuers' Report. Both parties did further work in an attempt to supplement their respective valuers' opinions. Supplementary reports were prepared on behalf of the Claimant in respect of both valuation and town planning. Similarly, additional evidence was sought on behalf of the Authority in respect of town planning and on the state of the market.

74 There is little doubt that the refusal by the Claimant to reduce its claim for market value to something substantially less than $56 million has 'affected' the proceedings insofar as legal costs are concerned. A very substantial portion of the conduct of the proceeding both at the trial and leading up to the trial was devoted to the determination of the claim for market value. As the Authority notes, pressing the Claimant's position on the high market claim compelled the Authority to obtain evidence from Mr Biasci and Mr Dawson with respect to the 'embryonic' state of the Fisherman's Bend market. Additionally, the Claimant's expert valuers' pursuit of the 'low sale' theory concerning the 85-93 Lorimer Street sale led to evidence being sought from Mr Fox.

75 However, the work undertaken by the experts by both sides was, in my view, legitimate. The forensic value of the additional work was rewarded by the evidence supporting the opinion of Mr Dudakov and Mr Brown. This position was not put beyond doubt until the trial when further information was subpoenaed, witnesses were cross-examined and the analysis of the respective sales relied upon by the valuers tested. It was with the benefit of the examination of all of the evidence that the Authority was able to demonstrate its superior position.

76 I accept that the replacement land costs claim, investment of funds financial loss claim and the solatium claim (at $1.5 million) were excessive and, in my view, would never have been made out, notwithstanding that the ambit of these claims to some part was influenced by the $60 million market value claim.

77 In relation to the professional expenses pursuant to s 41(1)(f) of the LAC Act, I consider that the Claimant failed to supply supporting material when required to do so and the Claimant's conduct was unreasonable in relation to this part of the proceeding.

78 In relation to the extent the proceedings have been affected by these claims, when compared with the claim for market value, relatively little time was spent on these aspects of the claim. However, these claims did require preparation and attendance by the Authority. Where the claims were 'excessive', there were costs unnecessarily incurred by the Authority as they had a significant element of speculation or 'ambit claim' in them. Where the Claimant provided insufficient supporting evidence when required to do so, or provided unclear supporting evidence, this made it difficult for the Authority to understand, assess and respond to these claims.

79 The extent to which these matters affected the proceeding is notable and is worthy of an adjustment in relation to the costs between the parties. Costs were incurred by the Authority as a result of these claims which in my view should have been avoided.

80 There are legitimate arguments on both sides as to the awarding of costs in this matter. However, what has swayed the exercise of discretion substantially in favour of the Claimant for most of the costs of the proceeding is my acceptance that in making the appropriate order, a Claimant in a compulsory acquisition claim is in a different position to a usual litigant and my acceptance that there is a 'tilt' towards a claimant when determining costs in compensation proceedings.

81 That said, s 91 of the LAC Act provides not only the power but relevant guidance in the exercise of the discretion to award costs.

82 In relation to s 91(1)(a) of the LAC Act, I am of the view that the position in the Authority's opening submissions should not be considered an amount 'offered' for the purposes of that section. In my view, the only amount offered for market value by the Authority was the formal offer that was made pursuant to the provisions of the LAC Act on 28 March 2014 of $16.15 million. When comparing the amount of compensation awarded by the Court with the amount (formally) offered by the Authority, it is evident that the Claimant had no choice but to make and pursue a claim for market value at trial. On this basis, an award of costs for market value should favour the Claimant.

83 As I have discussed above, in my opinion, the claim for market value was not excessive and the Claimant's actions in relation to market value were not unreasonable. [23]

84 I consider that an award of costs on a standard basis in relation to market value should be made in favour of the Claimant.

85 I also consider that an award of costs in favour of the Claimant on a standard basis should be made in relation to the disturbance claim for loss of use of money caused by delay in payment of compensation and the architects' fees.

86 I have taken a different view in relation to the other heads of claim.

87 Consideration of all of the factors identified in s 91(b) of the LAC Act applied to the facts of this matter has led me to the conclusion that:

(a) the claims for replacement land costs and investment of funds financial loss were excessive and unreasonable as detailed above, and an award of costs in favour of the Authority on a standard basis should be made;

(b) in relation to the solatium and professional expenses claims, whilst they both lacked particularisation and the solatium claim was excessive, the extent to which these factors should alter the presumption in favour of the Claimant is not to the same degree as the replacement land costs and investment of funds financial loss claims. Accordingly, the parties should bear their own costs in relation to the solatium and professional expenses claims; and

(c) to the extent that costs have been incurred in relation to the agent's commission claim, an award of costs in favour of the Authority on a standard basis should be made.

88 The Claimant seeks the costs of preparing and making submissions in respect of the costs application.

89 In relation to the claim for the costs of the making of the costs application, I am of the view that each party ought to bear their own costs. The arguments put by the parties were such that they required careful consideration and each party has been successful to some degree. I am not of the view that this is an aspect of the claim that warrants an award of costs other than each party bearing their own.

(a) the Authority pay the Claimant's costs on a standard basis in respect of the following items of claim:

(i) the claim for market value of interest of land acquired;

(ii) the disturbance claim for loss of use of money caused by delay in payment of compensation; and

(iii) the disturbance claim for architect's fees;

(b) the Claimant pay the Authority's costs on a standard basis in respect of the following items of claim:

(i) the disturbance claim for costs of purchase of replacement land;

(ii) the disturbance claim for loss incurred as a result of the inability of the Claimant to invest the initial offer in a higher return asset; and

(iii) the disturbance claim for agent's commission;

(c) the parties bear their own costs in respect of the following items of claim:

(i) the claim for solatium; and

(ii) the claim for s 41(1)(f) of the LAC Act expenses; and

(d) the parties bear their own costs in respect of the costs application.

I certify that this and the 22 preceding pages are a true copy of the reasons for Judgment of the Honourable Justice Quigley of the Supreme Court of Victoria delivered on 15 February 2019.

[1] Secretary to the Department of Economic Development, Jobs, Transport and Resources v Caradi [2018] VSC 696.

[2] Land Acquisition and Compensation Act 1986 (Vic) (the 'LAC Act') s 91(1)(b)(iv).

[3] [2011] VSCA 434 (footnotes omitted).

[4] Love v Roads Corporation [2011] VCSA 434, 64 [173]; Secretary to the Department of Business and Innovation v Murdesk [2012] VSC 586, 2 [6] (Emerton J) referring also to Walker Corporation Pty Ltd v Sydney Cup Harbour Foreshore Authority [2010] NSWLEC 27, [34].

[5] Two items of disturbance had been agreed being amounts of $89,767.45 for loss of use of money and $31,053 for architect's fees.

[6] Secretary to the Department of Economic Development, Jobs, Transport and Resources, 'Applicant's outline of Submissions', Submission in Secretary to the Department of Economic Development, Jobs, Transport and Resources v Caradi, S CI 2015 02923, 2 February 2018, 7 [24].

[7] Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27, 46 [47].

[8] See Roads Corporation v Love (2010) 31 VR 551 (Osborn J); Secretary to the Department of Business and Innovation v Murdesk Investments (No 2) [2012] VSC 586 (Emerton J); Wilson v Melbourne Water (No 2) [2018] VSC 776 (Ginnane J); Coastal Estates Pty Ltd v Shire of Bass [1994] VicRp 13; [1994] 1 VR 210 (Gobbo J).

[12] [2012] VSC 586, 15 [56].

[13] (Supreme Court of Victoria, Byrne J, 24 April 2008).

[14] See Wilson v Melbourne Water [2018] VSC 776, 20 [72] (Ginnane J).

[15] Secretary to the Department of Economic Development, Jobs, Transport and Resources v Caradi [2018] VSC 696, 45 [166].

[21] See above [53] (replacement land claim), [54] (investment of funds financial loss claim), [55] (solatium claim).

[23] See above [46]-[51],[64]-[66].