Determination
20The Court's power to award costs arises pursuant to section 98 of the Civil Procedure Act 2005. In appeals commenced pursuant to section 37(1) of the Valuation of Land Act, that power must be exercised in accordance with rule 3.7 of the Land and Environment Court Rules 2007. Rule 3.7(2) provides:
"(2) The Court is not to make an order for the payment of costs unless the Court considers that the making of an order as to the whole or any part of the costs is fair and reasonable in the circumstances."
21The result of this rule is a preposition that there is no order as to costs in proceedings to which rule 3.7 applies. This is often referred to as the non-discouragement principle. That is, a person ought not to be discouraged from commencing proceedings for a merits review by the prospect of an adverse costs order: Port Stephens Council v Jeffrey Sansom [2007] NSWCA 299.
22However, the non-discouragement principle does not allow a party free reign to conduct proceedings however it chooses. Rather rule 3.7 makes it clear that there is an exception to the non-discouragement principle if a party acts unreasonably. A number of examples of circumstances in which the Court may consider it fair and reasonable to award costs, including where there has been unreasonable conduct, are set out in rule 3.7(3). I accept that a party's failure to attend a section 34 conference in good faith is another circumstance in which it is appropriate for there to be an exception to the non-discouragement principle. That is, where a party incurs costs unnecessarily by virtue of another party's failure to attend a section 34 conference in good faith contrary to section 34(1A), then it is fair and reasonable for the offending party to reimburse those costs.
23This is consistent with the decision of Pain J in ROI Properties Pty Ltd v Council of City of Sydney [2010] NSWLEC 22 , which provides that one party ought not cause another party unnecessary costs at any stage of proceedings, including conciliation conferences.
24In my view, one particular aspect of the applicants' conduct clearly demonstrates that they did not attend the section 34 conference with the intention of participating in good faith. On the applicants' own evidence the solicitor who attended the conference on their behalf only had instructions to make an offer up to the value of an offer that had been previously rejected by the respondent. Page 5 of the affidavit of Mr Gilles, sworn 16 December 2010, sets out that he gave his solicitor instructions to accept "the offer previously put in writing to the Respondent". Such instructions clearly have no prospect of progressing negotiations, particularly in circumstances where that offer was refused by the respondent prior to the conciliation conference. This demonstrates that the applicants failed to approach the conference with a genuine intention of seeking to reach a resolution of the proceedings or of the issues in dispute. Accordingly, they did not participate in the conference in good faith, as required by section 34(1A).
25Further, the evidence contained in the affidavit Mr Gilles clearly shows that prior to the conciliation conference the applicants had formed the view that there was no utility in participating in negotiation at the conference. Paragraph 10 of the affidavit states that he was convinced "that the Section 34 conference would not resolve the matters in dispute" due to two events - firstly, receipt of the statement of basic facts, which he says "ignored the principles decided by this Honourable Court" and secondly, receipt of the respondent's counter offer of 17 November 2010 which also rejected what Mr Gilles refers to as "a very generous Offer of Compromise". At paragraph 11, Mr Gilles further states that "given the very strong position taken by Terry Glitsos at the Mediation on the 13 th October 2010 and the subsequent position he took in the Statement of Basic Facts served upon the Applicant indicated to me that the conference would not even resolve the issues in the Appeal to this Court." It is clear, therefore, that well before the conference itself the first applicant had formed the view that there was no utility in a section 34 conference.
26Notwithstanding that the applicants formed this view, they failed to take any steps to re-list the proceedings or seek a vacation of the section 34 conference by notice of motion. Such steps could have been taken following the mediation on 13 October 2010, following the receipt of the statement of basic facts on 5 November 2010, or following the receipt of the respondent's letter on 17 November 2010. Their failure to do so caused the respondent to unnecessarily incur the costs of attendance at the conciliation conference.
27Paragraphs 14-16 of the affidavit of Mr Gilles assert that there was insufficient time to seek a vacation of the section 34 conference following receipt of the respondent's letter of 17 November 2010. I do not accept those assertions. Applications of any kind, including the vacation of a conciliation conference, can be made on short notice either by re-listing the matter on an urgent basis or by seeking an abridgement of time for service of a notice of motion. Further, even if such an application on short notice could not be made, it was open to the applicants to take steps to notify the respondent of their position. However, the applicants failed to take any steps to notify the respondent of their belief that there would be no utility in a conciliation conference. Following receipt of the respondent's letter on Wednesday 17 November 2010, there were two clear working days prior to the conference on which the applicants', through their solicitor, ought to have taken steps to either notify the respondent, re-list the proceedings or seek short service of a notice of motion. I do not accept the applicants' submission that taking such a course would have been unreasonably costly. Any costs incurred in appearing on a notice of motion to vacate the conciliation conference could not be greater than the cost to the parties of having their representatives (and experts) appear at a conciliation conference.
28Even if it were not possible for the proceedings to have been re-listed or brought back by way of notice of motion seeking a vacation of the conciliation conference, the applicants were nonetheless obligated to participate in the conciliation conference in good faith. This obligation exists regardless of their opinion in relation to the utility of the same. The applicants were therefore required to come to the conciliation conference prepared to discuss the issues in the proceedings, including the methods of valuation and the quantum of the valuation itself, regardless of whether or not they had formed an opinion in relation to the utility of doing so.
29Their failure to give their solicitor instructions other than to give an offer that had been previously refused demonstrates that they were not prepared to discuss those issues in good faith. Further, there were a number of other factors about the applicants' conduct that demonstrated that the applicants were not adequately prepared to participate in the conciliation conference. The applicants' decision not to have their valuer present at the conference prevented the valuers from having a discussion in relation to the valuation of the land and the methods for valuation, particularly in circumstances where the conference was listed before an Acting Commissioner with valuation expertise. That the valuers had previously had those discussions at a mediation does not prevent them from having those same discussions with the assistance of a commissioner with valuation expertise. In the absence of the valuer, the failure of the solicitor to be adequately prepared to discuss methods of valuation also prevented such discussions from taking place. A conciliation conference is not simply an opportunity to negotiate on figures for the value of the property. Rather, it is an opportunity to discuss, with the assistance of a commissioner with appropriate expertise, the issues in dispute, including issues in relation to the method of valuation. The parties should come prepared not only to discuss the issues in dispute in the conciliation phase of the conference, but also to properly consider whether the commissioner conducting the conference can proceed to hearing the proceedings if there is no agreement reached in the conciliation phase. Finally, the failure of the applicants to make themselves available for the conference to give instructions to their solicitor was also demonstrative of their failure to participate in good faith. This meant that the solicitor was unable to obtain instructions as the conference progressed.
30The applicants were therefore unreasonable firstly in failing to take steps to vacate the conciliation conference in circumstances where they were not prepared to negotiate and had formed the view that there was no utility in the conference, and secondly in merely attending the conference through their solicitor without the genuine intention of participating in a negotiation or conciliation process.
31As a result of that unreasonable conduct, the respondent incurred the costs of attendance at the section 34 conference, including the attendance of their solicitor, their counsel and their expert. Those costs could have been avoided had the applicants taken steps to either communicate with the respondent through their solicitor, file a notice of motion, or have the matter re-listed to consider whether the section 34 conference ought to have proceeded. Alternatively, those costs may have been properly incurred and borne by the respondent if the applicants had attended the conciliation conference with the intention of participating in good faith. The applicants' failure to do so meant that those costs were, in effect, thrown away. Accordingly, the applicant ought to reimburse the respondent for those costs.
32The respondent also seeks the costs of the directions hearing on 17 September 2010. However, there is no evidence that demonstrates that the applicants had formed a view prior to the directions hearing that there was no utility in a section 34 conference. It was only after the directions hearing that the applicants formed the view that there was no prospect of a successful resolution at the conciliation conference. Accordingly, there was nothing unreasonable in the applicants' conduct in having the respondent's solicitor attend on 17 September 2010 to obtain a date for the conference. I will therefore exclude the directions hearing from the costs order. Excluding the costs of the directions hearing, the costs sought by the respondent are in the sum of $2,459.75. This comprises professional fees for counsel, for the solicitor, and for the expert valuer. In my view that sum is reasonable.
33Finally, given that the respondent has been largely successful on its notice of motion, it is appropriate that the applicant pay the respondent's costs of the notice of motion.
Therefore, the Court orders that:
- The applicants pay the respondent's costs of the section 34 conference on 22 November 2010, in the sum of $2,459.75.
- The applicants pay the respondent's costs of the notice of motion filed 6 December 2010, as agreed or assessed.
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Decision last updated: 19 May 2011