Filip Yakas v Roads and Traffic Authority of New South Wales

5 On 24 September 2004 I determined that, for the reasons stated in my judgment in Filip Yakas v Roads and Traffic Authority of New South Wales [2004] NSWLEC 525, the appropriate amount of compensation for the market value of the land was $1,500,000, being the amount contended for by the RTA in its Further Amended Points of Defence.

6 There were three primary issues argued by the parties at the hearing before me. The most substantive of these related to the underlying zoning which the land would have had under the Fairfield Local Environmental Plan 1994 ("the LEP") at 10 October 2003, being the date on which the land was acquired by the RTA, if the land had not been reserved for the purpose for which it was ultimately acquired. The Applicant contended that the underlying zoning of the land was "Zone 2 (a) Residential A" (hereafter referred to as "residential") whereas the RTA argued it was "Zone 1 (a) Non Urban-Residential" (hereafter referred to as "rural-residential"). If the underlying zoning was residential then the parties had agreed that the appropriate compensation for the market value of the land was $4,127,462. However I held that the underlying zoning was in fact rural-residential.

7 The next issue arose because the parties disagreed as to what use formed the highest and best use of the land if I found that its underlying zoning was rural-residential. The Applicant argued that the highest and best use of the land was as a single lot used for rural pursuits and that the market value of the land for this use was approximately $2 million. The Respondent argued that the highest and best use of the land was as a three lot rural-residential subdivision with an agreed value of $1,500,000.

8 The third issue raised by the Applicant was that, in the alternative, the land could be valued, regardless of its underlying zoning, on the basis of its value in light of the acquisition clause contained in cl 19 of the Sydney Regional Environmental Plan No 31 - Regional Parklands which enabled the owner of the land to require the Department of Infrastructure Planning and Natural Resources to acquire the land. 9 I did not accept the Applicant's arguments in relation to these two issues and held, for the reasons set out in my judgment, that the highest and best use of the land was as a three lot rural-residential subdivision with an agreed value of $1,500,000 and that the alternative valuation method argued for by the Applicant was not one which it was open to him to make.

The Applicant's Submissions 10 The Applicant relied on a long line of authority, commencing with North Albury Shopping Centre Pty Ltd v Albury Municipal Council (1983) 49 LGRA 215 ("North Albury"), Banno and Another v The Commonwealth of Australia and Another (1993) 81 LGERA 34 ("Banno"), Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223 ("Pastrello"), Wollong Pty Ltd v Shoalhaven City Council (2002) 122 LGERA 331 ("Wollong"), which he argued supported the proposition that where an applicant in a compulsory acquisition matter is successful in obtaining a larger award of compensation than that initially awarded by the authority acquiring the land under the compensation process giving rise to the litigation and: (a) the case run by the applicant was arguable or not unarguable and consisted of cogent arguments; (b) the applicant has not pursued frivolous, vexatious, dishonest or grossly exaggerated claims; and (c) the proceedings were not extended due to any procrastination or wasting of time by the applicant; the Court's discretion to grant an award of costs under s 69 of the Land and Environment Court Act 1979 ought to be exercised in favour of the applicant.

11 The Applicant argued that the rationale behind the different approach taken by this Court in exercising its discretion in relation to costs in compulsory acquisition matters compared to that relating to other matters is that set out by Cripps J in North Albury and Talbot J in Pastrello. In North Albury Cripps J held at p 221 that: The resumption of land is a serious matter. It is not apparent to me why a person who has had his land taken by a government of some other statutory authority should, in addition to losing his land, bear his own costs of seeking what in fact turns out to be just compensation. 12 In Pastrello Talbot J held at par 17 to 20 that: It has been said many times that the compulsory acquisition of land from an unwilling owner is a serious interference with that person's entitlement to quiet enjoyment and generally wide discretion to do with their own land as they see fit. It is a power of the State which is exercised for the public benefit. Very seldom does the resumption work to the benefit of the dispossessed owner. There needs to be a strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation recovered as a consequence of the Court's determination. It is only in special cases that the Court will deprive the owner of the full benefit of the compensation which is determined as fair and just in the circumstances of the case. An order for costs against the interests of the applicants in this case would clearly have a significant impact on the ultimate amount to be recovered by the applicants. I agree with Mr Webster that the applicants were entitled to investigate the impact that the acquisition had on the market value of the land and to put forward cogent arguments for compensation. The arguments presented by the applicants' experts and by the applicants themselves were not frivolous and fell within the contemplation of the relevant legislation.

This is not a case where there should be a special order for costs.

13 Counsel for the Applicant argued that, as: (a) all of the submissions made on behalf of the Applicant at the hearing were arguable, not vexatious or frivolous and did not unduly extend the time of the hearing; and (b) the Applicant was successful in obtaining an amount in compensation for the market value of the land which was some 35 per cent more than the amount offered in the original compensation notice; the Applicant was entitled to obtain his costs from the RTA.

The RTA's Submissions 14 The RTA relied on the decision of the Court of Appeal in Overton Investments Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439 ("Overton") to argue that the approach taken in the authorities relied on by the Applicant should no longer be followed.

15 The RTA argued that as the Applicant: (a) had commenced proceedings on the basis of an exaggerated claim of approximately $8,000,000 and had maintained this claim up until the commencement of the hearing; (b) had maintained throughout the hearing the claim that he was entitled to $5,085,000 in compensation for the market value of the land; and (c) was unsuccessful on all the substantive issues argued before the Court; it was clear that the court should exercise its discretion by requiring that each party pay its own costs in relation to the proceedings.

Finding 16 It appears this is the first time that the RTA has pursued its arguments in relation to costs in reliance on Overton since it was handed down in 2001. The decision of the Court of Appeal in Overton is not referred to in Wollong which was decided by Talbot J in 2002. Rather Wollong clearly follows the line of authority relied on by the Applicant.

17 In Overton the Court of Appeal was reviewing the exercise of the discretion to award costs by Sheahan J in this Court in Overton Investments Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 [1998] NSWLEC 321. Sheahan J had made an order that each party pay its own costs in circumstances where the applicant had obtained an order for compensation for a total of $105,000. This was substantially smaller than the compensation of $727,500 offered by the Valuer General in the compensation notice but slightly higher than the amount of $84,000 which the respondent had argued at the hearing was all that the applicant was entitled to. On appeal the applicant argued that, as it had succeeded in obtaining an award of compensation which was greater than that the respondent contended it was entitled to, it should therefore be considered the successful party and be awarded its costs in accordance with the usual rule that costs follow the event. The Respondent argued that it was entitled to its costs as the Applicant had been unsuccessful in that it had failed on the principal issue in the proceedings being that of the underlying zoning of the land.

18 Stein JA, with whom Powell JA and Ipp AJA agreed, stated at par 69 to 74 in Overton that: In the hearing of objections under the Act to the statutory amount of compensation determined by the Valuer-General to be offered to the landowner, I do not think that it should always follow, exceptional circumstances aside, that costs should follow the event of an award of compensation. The Act sets up a fairly precise regime for the assessment and determination of compensation. In the first instance this is to be determined by the Valuer-General. His determination of the amount to be offered to the landowner as compensation and the procedures to be followed in relation to such offer are all provided for by the Act. It is clear that if the landowner objects within 90 days to the amount of compensation offered it does so by instituting proceedings in the court. The court is then required to hear and dispose of the person's claim for compensation by fixing an amount that will `justly compensate' that person. The amount of compensation to be determined by the court is at large and the Valuer-General's determination may or may not play a part in the hearing. Like this trial, most compensation hearings take a considerable time to hear by reason of the valuation evidence regarding hypothetical developments, comparable sales and the like. This case was no exception.

This court heard argument as to the relevance to the issue of costs of the amount of the Valuer-General's determination and its relationship to the ultimate award by the court. I do not understand either party to suggest that it is an irrelevant factor to be taken into account on costs. In my view, it can be a relevant factor but one which rarely will be a determining one. Nevertheless, I do not see that his Honour placed any undue weight on the factor.

Nor do I see that it is a simple matter of ascertaining who won or lost the litigation. Compensation determinations are not like awards of damages for personal injury. Obtaining an award of compensation of $100 does not necessarily mean that a landowner `wins' the litigation. A judge is entitled to look realistically at the litigation, the issues, the way it was conducted and the result, in order to assess who really succeeded and to what extent. In my opinion, the exercise of the discretion by his Honour, although involving the error identified above, was otherwise a sound exercise of discretion. The result of the order that each party pay its and his own costs was a fair one and properly reflective of the litigation. I do not think that this court should intervene. In any event, if the court were to re-exercise the costs discretion, I would come to the same conclusion as his Honour.

On a final note, it was said that if a landowner was not entitled to his costs of a trial where an award of compensation is obtained, then he could be at the mercy of the Government in prolonging the litigation. I do not accept that this is so and indeed, the opposite could be claimed. That is, if a landowner is always to get its costs so long as it obtains an award of compensation, however small, the resuming authority may be at the mercy of the landowner in prolonging a trial. 19 I agree with the submissions of the Applicant's counsel that Overton is authority for the proposition that a mere award of compensation does not mean that an applicant in a compulsory acquisition matter is to be regarded as being successful, and therefore entitled to their costs, merely because they have obtained an award of compensation. However, I do not consider, as the RTA argued, that Stein JA was intending to overturn or take a different approach to that set out in the decisions of this Court relied on by the Applicant's counsel when he stated that the success or otherwise of an applicant in compulsory acquisition proceedings must be determined by looking "realistically at the litigation, the issues, the way it was conducted and the result, in order to assess who really succeeded and to what extent". The applicant in Overton was clearly unsuccessful and Stein JA's comments are directed at that circumstance. I consider that had, as the RTA argued, Stein JA been intending to depart from the longstanding practice followed by this Court in relation to these matters, he would have done so explicitly and he did not do so.

20 I therefore intend to apply the approach contended for by the Applicant. I agree with the Applicant's submission that it was appropriate that the primary issue concerning underlying zoning be argued. Further, I consider that while the Applicant was ultimately unsuccessful in relation to the underlying zoning issue, the Applicant clearly had an arguable case and that there was no frivolous aspect to the case as argued on this point. The other two issues in relation to which the Applicant was unsuccessful did not occupy a substantial amount of the Court's time. I do not consider that, in these circumstances, it is appropriate to award costs on the basis of the outcome of the particular issues. The Applicant was otherwise clearly successful in the proceedings in that he succeeded in obtaining an amount of compensation for the market value of the land, on the basis of an underlying rural-residential zoning, which was substantially greater than that originally determined by the Valuer-General and offered in the compensation notice.

21 While I do not consider that the Applicant's claim was ultimately frivolous, I consider it is appropriate for me to indicate that applicants and their advisers who lodge large ambit claims at the outset of proceedings, which claims then drop substantially at the hearing to a more realistic claim, should exercise care. In different circumstances to those currently before me, such conduct may well result in the Court declining to exercise its discretion in relation to costs in favour of the Applicant in part or whole because a claim appears to have been pursued on a frivolous basis.

Orders 22 The Court orders: The Respondent is to pay the Applicant's costs.

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