COSTS - Appeal from the trial judge's award of costs - Discretion as to costs under s 91 of the Land Acquisition and Compensation Act 1986 (Vic) - Whether it was open to the trial judge to have regard to an offer made 'without prejudice save as to costs' - Whether conduct arising from the making of a 'without prejudice' offer is unreasonable conduct for the purposes of s 91(1)(b)(i) of the Land Acquisition and Compensation Act 1986 - Whether the letter was a Calderbank offer - Coastal Estates Pty Ltd v Bass Shire Council [1994] VicRp 13; [1994] 1 VR 210 considered - Land Acquisition and Compensation Act 1986, s 91 - Supreme Court (General Civil Procedure) Rules 2005, O 26 - Leave to appeal granted - Appeal dismissed.

1 This appeal is a challenge by Mr Love to an award of compensation made by the trial judge[1] in respect of land that the Roads Corporation ('the Corporation') compulsorily acquired from him, pursuant to the Land Acquisition and Compensation Act 1986 ('the Act'). Mr Love submits that, due to errors made by the trial judge, the awarded sum does not sufficiently compensate him for the acquisition. He seeks to have the award set aside and the matter remitted for rehearing and determination.

2 Mr Love also seeks leave to appeal from the trial judge's award of costs.[2]

3 We deal with the appeal to the principal judgment first and then address the application for leave to appeal from the costs orders.

4 Mr Love owned and, in large part, occupied a 210-hectare property at 410 and 460 Cooper Street, Epping ('the land').[3] It comprised part of a property known historically as 'Clonard'. On 15 November 2001, the Corporation acquired[4] a 3.34 hectare strip of land running along the southern boundary of the land in order to facilitate the provision of an extra carriageway in Cooper Street by widening the roadway reserve. The strip formed part of the frontage of the land along Cooper Street, the major arterial road in the area. Mr Love had a right to claim compensation for the acquisition, pursuant to s 30 of the Act.

5 At the relevant time, quarrying operations were being carried out on a portion of the land that had been zoned for extractive industry. The quarry operations were being conducted in accordance with Works Authority 149 ('WA149') and the land on which the quarry operations took place was known as the WA149 land. The quarry operations were carried on by a company controlled by Mr Ron Kerr, known as Conundrum Holdings Pty Ltd ('Conundrum'), which leased the WA149 land from Mr Love.

6 The principal issue at trial was not the value of the strip of land which was acquired by the Corporation but the consequential loss of value caused by the acquisition to the balance of the land, in particular any loss in potential that the WA149 land had as landfill. The WA149 landfill proposal (as envisaged by Mr Love) was one to divert a relatively large quantity of putrescible waste to an as yet non-existent landfill in the void created by the quarry operations.[5]

7 The issue of loss of landfill potential arose in part because on or about 26 July 2001, about four months before the acquisition, the WA149 land was included as a potential landfill site by the Northern Region Waste Management Group ('NRWMG')[6] in a draft Prospective Landfill Site Schedule ('the draft Schedule') to its proposed Regional Waste Management Plan ('RWMP') which was subsequently submitted to the Environment Protection Authority ('the EPA') for approval[7] as an amendment to an existing plan. This enlivened its potential for landfill subject to works approval under the Environment Protection Act 1970 (the 'EP Act') and the need to obtain a planning permit under the Planning and Environment Act 1987. The EP Act was subsequently amended in July 2002 (eight months after the acquisition) to require that any landfill site be included first in a regional plan approved by the EPA.[8] By the time of the trial, the WA149 land had not been included in any such regional plan. Mr Love asserted that the result of the amendment to the EP Act was effectively to exclude the WA149 land as a potential site for future landfill.

8 Mr Love submitted at trial that there was thus a 'window of opportunity'[9] between June 2001 and July 2002 to obtain the necessary approvals to convert the WA149 land into landfill and that he missed this opportunity because access from the realigned Cooper Street to the WA149 land was uncertain during this time. He contended that this uncertainty made an application for landfill unfeasible.

9 In late 2005, the Corporation, unwilling to agree to Mr Love's claim for compensation for the acquisition, referred the matter to the Supreme Court for determination, pursuant to s 80 of the Act. The trial commenced in April 2009 and concluded in September 2009, occupying about 47 sitting days. Mr Love made a total claim for compensation (net of interest) for $16,267,000[10] made up of a principal claim of $10,507,000[11] together with further lesser claims for loss of amenity and the like. In February 2010, the trial judge gave judgment awarding Mr Love compensation in the sum of $444,344.92. In April 2010, his Honour made orders in relation to costs, requiring Mr Love to pay the Corporation's costs on a solicitor-client basis (including the costs of three counsel) up until the completion of the trial and to pay the Corporation's costs of, and incidental to, the application for costs.[12]

10 Section 41 of the Act sets out the relevant considerations to be taken into account in assessing the amount of compensation payable to a claimant in respect of an interest in land acquired under the Act. These include:

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

11 Section 41(3) of the Act provides that if less than the whole of the claimant's proprietary interest is acquired (as was the case here) then market value is to be assessed using a 'before and after' test; that is, the value is calculated by reference to the difference between the market value of the land before the acquisition and the market value of the land after the acquisition.

12 'Market value' is defined, pursuant to 40 of the Act, as meaning,

in relation to any interest in land on a particular date ... the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

13 'Special value' is defined in s 40 of the Act as:

[T]he value of any pecuniary advantage, in addition to market value, to a claimant which is incidental to his ownership or occupation of that land.

14 'Loss attributable to severance' is defined in s 40 of the Act as:

[T]he amount of any reduction in the market value of any other interest of the claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land.

15 'Loss attributable to disturbance' is relevantly defined in s 40 of the Act as:

[A]ny pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of - ... (b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part.

16 As the trial judge observed, s 5A of the Valuation of Land Act 1960 (the 'VL Act') provides an underlying framework for the valuation of land compulsorily acquired:

5A Determining value of land

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

17 In Roads Corporation v Murdesk Investments Pty Ltd,[13] Chernov JA[14] discussed the general scheme for assessing compensation under the Act with particular reference to the acquisition of a portion of land (as here) and the notion of severance, one of the categories under which Mr Love claimed loss. He said:[15]

It is necessary to refer briefly to the statutory provisions that were relevant to the assessment of the respondent's entitlement to compensation. Section 30 of the Act essentially provides that a party in the position of the respondent 'has a claim for compensation' in respect of the acquired land. Part 4 of the Act then deals with the measure of such compensation. Thus, s 40 defines the 'market value' of the interest in the land that is to be acquired as 'the amount of money that would have been paid for that interest if it had been sold on [the relevant] date by a willing but not anxious seller to a willing but not anxious purchaser'. ... this provision reflects the test formulated by the High Court in Spencer v Commonwealth. Section 41(3) of the Act provides that, in the case of a partial acquisition of land, 'the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition'. Thus, the subsection requires the assessment of market value to be undertaken by way of a 'before and after' analysis and involves the determination not only of the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance of the land. Hence, loss attributable to severance, as that term is defined in the Act, is embraced by the 'before and after' analysis (at least in so far as the notion of severance applies to the balance of the land). The market value is to be assessed by reference to the potential highest and best use of the land as at the relevant date in order to reflect the full value of the land to the owner. Such an approach is recognised in Turner v Minister of Public Instruction and March v City of Frankston and in s 41(2) of the Act. Section 41(1) relevantly stipulates that 'in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to [factors that include] any loss attributable to severance ...'. 'Loss attributable to severance' is defined in s 40 as 'the amount of any reduction in the market value of any other interest of a claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land'. Hence, the Act recognises, generally, that [as stated in F W Hughes Pty Ltd v Minister for Conservation (1950) 17 LGR (NSW) 275, 281]:

...the taking of portion of an entire holding carried on as one property is not necessarily compensated by a mere reward of the value of the portion taken considered simply as if it were a separate and independent parcel of land. The taking of part may result in a diminution in value to the owner of what remains and, in particular, that may happen because of a disturbance in the previous proportions of different classes of land or of lands used for different purposes or in different ways.

18 Mr Love's claim at trial for the loss of landfill potential was expressed alternatively[16] as one for loss of (a) market value, (b) special value, (c) severance or (d) disturbance. Several further specific claims for disturbance, severance or special value were also made in relation to particular items, such as loss of amenity, loss of trees, power surge damage, reinstatement of water supply and fencing, as well as a claim for solatium. The compensation payable under s 41(f) (legal, valuation and professional expenses) was agreed between the parties.[17]

Three threshold difficulties - significant findings of fact by the trial judge

19 The trial judge identified the central question in the case as one relating to the loss of landfill potential of the WA149 Land. He said:[18]

The central question in this case ... concerns whether or not (and if so to what extent) the acquiring authority [the Corporation] is required to compensate Mr Love for any lost landfill potential inherent in the WA149 land component of the Cooper Street land, by reason of the proposal for and the implementation of the Cooper Street duplication project.

20 On appeal, Mr Love accepted that this was the central question.[19]

21 His Honour's approach to the central question was to identify three threshold difficulties in Mr Love's claim for compensation based upon findings of fact he made on the basis of direct evidence or inference.

22 The first threshold difficulty related to the claim for loss of market value[20] based upon uncertainty of access. The pre-existing access would have required alteration or replacement with new access if a landfill were to be permitted. The claim at trial was based in part upon the complaint by Mr Love that during the window of opportunity (June 2001 - July 2002) there was uncertainty about the effect of the duplication of Cooper Street upon access to the WA149 land which would have frustrated any application for landfill approval in the hypothetical purchaser's mind. The trial judge found that the hypothetical purchaser would not have regarded any uncertainty about access to the WA149 land in the 'after' situation as having affected any value the land had by reason of its landfill potential.[21] As a result, there was no difference in market value in the 'before' and 'after' situations on account of access uncertainty.

23 The second threshold difficulty also related to the claim for loss of market value; it consisted in the finding by his Honour that there was no realistic 'short-term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval'.[22]

24 The third threshold difficulty related to the question of causation. The trial judge found that no landfill approval could have been obtained in the time available during the window of opportunity.[23]

25 The findings of fact that comprised these three threshold difficulties created severe obstacles for Mr Love to overcome on the appeal.

26 Section 89(2) of the Act restricts an appeal to the Court of Appeal from a determination of the trial division of the Supreme Court only on a question of law. The notion of a question of law in this context is a particular and narrow one as discussed by Philips JA in S v Crimes Compensation Tribunal.[24] Phillips JA identified three propositions, the first of which was that a question of law clearly includes the construction of the relevant statutory provisions. It would also include the asking of the wrong question or the imposition of the wrong standard of proof.[25] The second proposition was that the application of the statutory provisions to the case at hand is primarily a question of fact not law, and entrusted to the trial judge. The third proposition was that a 'finding of fact will be overturned on an appeal on a question of law only if that finding was not open'.[26]

27 Each of the findings of fact that comprised the three threshold difficulties was unchallenged on the appeal. In his submissions, Mr Love did not argue that the findings comprising any of the threshold difficulties were not open to the trial judge.[27] He did not directly attack those findings but, rather, submitted that the trial judge, having made those findings, made inconsistent observations, failed to go on to consider other material issues that led him into error or erred in the conclusions he drew from the findings.

Grounds of appeal in the principal proceedings

28 The grounds of appeal in the principal proceedings were inter-related and many of the submissions made were relevant to more than one ground. The grounds were cast as follows:

(1) The learned trial judge erred in law in his assessment of the amount of compensation to be awarded for market value and severance in the 'before' scenario under ss 40 and 41 of the Act and s 5A of the VL Act when he declined to make any allowance for the potential use of that land for landfill purposes.

(2) The learned trial judge erred in law when he held that the prospects of works approval and planning approval of the WA149 landfill were low in the 'before' scenario by reason of the question of community need, when the finding was not open to him in circumstances where:

(a) the State Planning Policy Framework,[28] the State Environmental Protection Policies,[29] Best Practice Environmental Management Siting, Design, Operation and Rehabilitation of Landfills ('the BPEM'),[30] and the RWMP[31] were policy documents, not mandatory and did not contain a plain policy imperative against its approval;

(b) [there was] evidence that the relevant policies were open to its approval as an additional landfill in the northern region;

(c) the site [had the] highest ranking within the Draft RWMP as a potential landfill; and

(d) [there were] merits of the site as a potential landfill.

(3) The learned trial judge erred in law when he disregarded the existence of a large quarry hole on the subject land in determining the market value of the subject land because inter alia of his conclusion that the use of the subject land as a landfill was not presently a viable use.

(4) The learned trial judge erred in law in his assessment of the amount of compensation to be awarded for market value and severance under ss 40 and 41 of the Act and s 5A of the VL Act in relation to Mr Love's interest in the WA149 component of the subject land in having found that there was:

(e) a 10 per cent prospect of landfill approval at 15 November 2001; and

(f) no prospect of approval after the amendment to the EP Act which took effect on 1 July 2002;

he made no allowance for the prospect of landfill approval in his award of compensation.

(5) The learned trial judge erred in law in relation to the assessment of market value, special value and severance under ss 40 and 41 of the Act and s 5A of the VL Act when he held that a properly advised hypothetical purchaser acting prudently and reasonably would not have delayed making an application for approval of a landfill by reason of the access uncertainty, notwithstanding his conclusion that Mr Love had acted reasonably in delaying any application for land use approvals during the window of opportunity having regard to the uncertainty which then existed as to the resolution of access arrangements for the WA149 land.

(6) The learned trial judge erred in law in holding that Mr Love was required to demonstrate a necessary causal link as a component of establishing loss as a consequence of severance.

(7) The learned trial judge erred in law in holding that severance sounds in loss of market value at the date of the loss, instead of being the difference between:

(a) the market value in the 'before', assessed at the date of acquisition; and

(b) market value in the 'after', assessed upon the crystallisation of loss in market value upon the change to the EP Act in July 2002.

(8) The learned trial judge erred in law in holding in relation to the assessment of special value under s 40 of the Act and s 5A of the VL Act that the landfill potential of Mr Love's interest in the land in the 'before' scenario did not have special value to the owner, Mr Love.

(9) The learned trial judge erred in law when he failed to hold that the landfill potential of the land was a pecuniary advantage to Mr Love which was incidental to his ownership and occupation of the land.

29 The grounds of appeal did not include a challenge to his Honour's findings with respect to Mr Love's claim of loss from disturbance, nor raise a question of law on his Honour's approach to disturbance loss.[32]

30 The Corporation invited this Court to conclude that the grounds of appeal raised no question of law (with the possible exception of ground (5)) but were rather attempts to agitate for a different award of compensation based on Mr Love's view of how the trial judge should have analysed the factual matters, and thus that the appeal was incompetent. Rather than ruling at the outset on each ground as to whether it raised a question of law, within the meaning of s 89(2) of the Act, this Court permitted argument on all the grounds, many of which were inter-related, so as to allow for a considered assessment of the issues raised, mindful that the scope of the appeal was restricted to questions of law.

31 Mr Love's principal submission was that the trial judge, having found that landfill was not the highest and best use of the land, wrongly disregarded the potential of the WA149 land for landfill uses for which additional potential use Mr Love ought to have been compensated. In disregarding that potential he was said to have failed to complete the valuation analysis. He also argued that the consequence of access uncertainty involved the 'loss of a chance' of obtaining landfill approval, the trial judge making inconsistent findings in that regard. It was further submitted that his Honour had erred in the approach he took to severance and to special value.

32 Mr Love submitted that the trial judge erred in law in failing to make an allowance for the potential use of the land for landfill purposes in the 'before' situation when assessing the amount of compensation to be awarded for market value (and severance), under ss 40 and 41 of the Act and s 5A of the VL Act.

33 The trial judge found that the highest and best use of the land at the date of acquisition, 15 November 2001, was for future industrial use.[33] He rejected Mr Love's submission that the WA149 land had a higher value as a potential landfill than it had as future industrial land.[34] Indeed, Mr Love's view of the use of the land for potential landfill was part of a projected co-ordinated use of the land, involving also quarry operations and farming. As the judge described it:[35]

Mr Love's view was that the optimum future sustainable use of his land was that of a resource based business comprising the farming of the land, coupled with extraction of rock and the use of completed quarry holes for waste management purposes. He also regarded the land as suitable for uses complementary to extractive industry including a large livestock saleyard.

34 In applying the test for the highest and best use of the land, the trial judge compared, on the one hand, the integrated and co-ordinated use of the land for which Mr Love contended,[36] use for the extractive industry and consequent landfill potential,[37] with, on the other hand, future industrial use.

35 The finding that the highest and best use was for future industrial use, which was not itself under challenge in the appeal, was a conclusion inevitably drawn from the second threshold difficulty,[38] that there was no real short term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval,[39] and found alternative support in the valuation evidence.[40]

36 As extracted above, s 5A(3) of the VL Act relevantly provides that when determining the value of any land, there shall, where it is relevant, be taken into account,[41]

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use; ... and

(f) the actual and potential capacity of the land to yield a monetary return.

37 Mr Love relied upon the words emphasised above and submitted that the trial judge erred in failing to allow any amount for the land's inherent potential as landfill, notwithstanding that he had found the highest and best use to be future industrial use. He submitted that where there is land with more than one potential use, s 5A(3) of the VL Act requires that, in the 'before' scenario, any valuable potential use of the land, albeit a secondary use, should be added to the highest and best use when determining the value of the land.

38 Before considering Mr Love's submission we set out his Honour's reasons for arriving at his conclusion on highest and best use.

39 The trial judge found that, as at the date of acquisition, 15 November 2001, 'the prospect of obtaining land use approvals in the short term [was] no more than 10 per cent'.[42] This finding was based on his assessment of the lack of community need for a landfill.

40 At the date of acquisition, the WA149 land was zoned such that a landfill would have required both a planning permit and a works approval pursuant to the EP Act.

41 It was accepted by the expert witnesses on both sides that both the EPA, in considering granting works approval, and the council, in considering granting the planning permit, would have applied the BPEM policy document.[43] The BPEM considered 'community needs' as the first factor in the hierarchical list of aspects to consider when screening for potential landfill sites.[44] The BPEM stated that a landfill 'should not be located where it is not needed for the disposal of a community's waste'.[45]

42 The trial judge considered that the hypothetical purchaser would have regarded as extremely problematic the prospect of demonstrating community need as contemplated by the BPEM[46] and that the hypothetical purchaser would have apprehended that there was no real prospect of demonstrating need in the short to medium term.[47]

43 As we mentioned above,[48] in July 2001 the NRWMG included the WA149 land as a prospective landfill site in the draft Schedule to its RWMP and approval was sought for amendment to the relevant existing plan. However, such approval was never granted. In May 2002, the proposed amendment to the EP Act was introduced into Parliament. Section 30(1) of the Environment Protection (Resource Efficiency) Act 2002 subsequently took effect on 1 July 2002. From that date s 50RE(4) of the EP Act provided:

The [Environment Protection] Authority must refuse to issue a works approval for a new landfill within a waste management region if the landfill is not provided for in, or is inconsistent with, the relevant regional waste management plan.

44 As at the date of trial, the WA149 land had not been included in any approved RWMP and since 1 July 2002 the EPA has had no power to issue a works approval for a new landfill upon Mr Love's land.

45 The draft Schedule showed that a new landfill was not needed in July 2001 for disposal of the community's waste.[49] It contained conclusions that there was no need, from a capacity point of view, for new landfills as 'the airspace capacity available in existing landfills is sufficient for at least the next ten years and likely to be 25 years'.[50]

46 It was true that the WA149 land had been ranked in front of other new potential sites in the area for landfill purposes in the draft Schedule;[51] however, as the trial judge commented, this ranking was in the context of existing capacity being sufficient for at least 10 years and probably 25.[52]

47 Ultimately, the trial judge concluded that at the date of the acquisition the hypothetical purchaser would have apprehended that there was no real prospect of demonstrating 'need' in the short to medium term and that, consequently, the prospects of gaining a planning permit for landfill and a works approval under the EP Act would have been very low,[53] being no greater than 10 per cent at best.[54] Thus, any value to be placed on landfill potential had to be modified by the consideration that there was only a 10 per cent chance that that potential could be realised.

Valuation evidence of future industrial use much higher than landfill

48 At trial, there was valuation evidence given by witnesses called for the Corporation, Mr Brown and Mr Dudakov, both of whom were professional valuers. They gave evidence with respect to the use of the land for future industrial use, based on comparable sales. On that basis, the value of the land was $75,000 to $77,000 per hectare,[55] for at least 30 hectares.[56] Their evidence was effectively unchallenged at trial.[57] The valuers who advised Mr Love on the value of the land for future industrial use, Mr Hocking and Mr Kerr, were not called to give evidence.[58]

49 With respect to the value of the land for future landfill use, evidence was given by Mr Dudakov of comparable sales of land with extractive industry and consequential landfill potential as about $10,000 per hectare,[59] substantially below the $75,000 per hectare figure for future industrial use. This was accepted by the trial judge who commented that:[60]

There is no evidence of sales of land for quarry purposes with potential for landfill use at or about the relevant date for anything like $75,000 per hectare.

50 For the purposes of valuation for landfill, Mr Love relied at trial on the evidence of Mr Herdman, a valuer and chartered mineral surveyor. Mr Herdman accepted in cross-examination that if the level of value for future landfill came in below the value arrived at by the Corporation's valuers for future industrial use then, logically, the highest and best use was future industrial use.[61] His approach, and that adopted by Mr Love, was ultimately not to assert a credible alternative view of comparable sales but to adopt a different methodology that in effect sought to value the potential landfill business that Mr Love claimed was destroyed by the acquisition.[62] In other words, Mr Herdman sought to value a business that did not exist.[63] The trial judge did not accept this evidence partly on the basis that he did not accept a number of critical assumptions that Mr Herdman made in his calculations, as to, inter alia, waste stream, gate price, compaction rates and engineering costs, but more generally because he did not accept the reliability of his methodology.[64]

51 It followed, based on the evidence of comparable sales, that the value of the land for future industrial use was above that which the market demonstrated a buyer would generally pay for land with extractive industry and consequential landfill potential.[65] This conclusion was reinforced if one took into account the finding that there was only a 10 per cent prospect of obtaining approval for landfill which the hypothetical purchaser, properly advised, would have been aware of and which would have led him or her to in draw the same conclusion.

52 Furthermore, the trial judge was satisfied that the Discounted Cash Flow ('DCF') analysis, which was used by an accountant, Mr Lonergan, called by Mr Love, was not sufficiently reliable in respect of critical parameters to demonstrate a positive value for the proposed landfill.[66] Mr Lonergan accepted that the DCF calculations should be discounted to reflect the likelihood of land use approvals.[67] As the trial judge had found the prospect of obtaining landfill approval as being at best 10 per cent, the value arrived at for a hypothetical landfill development of Mr Love's land to be discounted using the 10 per cent probability.[68] So applied, the calculations did not generate a 'before' value higher than the future industrial value of land.[69] Importantly, the trial judge found that even if the risk as to land use approvals was disregarded, the DCF methodology upon which Mr Lonergan relied was not sufficiently reliable to demonstrate a positive value for the proposed landfill.[70] The Corporation argued that this was a critical finding, given the manner in which Mr Love presented his case on appeal, because it showed that even if a hypothetical purchaser considered that there was 100 per cent certainty of obtaining landfill approval (contrary to the actual findings made by the trial judge), nevertheless there was no positive value to be ascribed to the proposal to establish a landfill, taking into account the expert evidence on which Mr Love relied.[71]

53 Finally, the trial judge substantially accepted the Corporation's submissions that, based on the evidence as to operating costs and the expected waste stream to the landfill, the WA149 land was simply not viable as landfill.[72]

Did the trial judge err in calculating compensation?

54 The core of Mr Love's complaint on appeal was not that his Honour had erred in his rejection of the methodology of Mr Herdman, or in his conclusion that critical parameters of Mr Lonergan's DCF analysis were unreliable, but rather that he was mistaken in considering that, having found that the highest and best use of the land was for industrial purposes, he was not required, in addition, to allow any amount for the land's inherent potential as a landfill. Mr Love submitted that, notwithstanding the finding of highest and best use, the trial judge was nevertheless required to take into account the potential of the land for landfill and that he erred in failing to do that. It was contended that s 5A(3)(a) of the VL Act requires any potential use to be taken into account when determining the value of land; so too s 5A(3)(f) requires that any potential capacity of the land to yield a monetary return should be taken into account.

55 This submission reflected the issues raised in grounds 1, 2, 3, and 4.

56 In developing the submission, Mr Love contended that the trial judge made an error of law when he disregarded the potential of the WA149 land for landfill purposes, on the basis of his factual findings that the use of the subject land as a landfill was not presently a viable use. He submitted that this assessment ignored the potential use of the large void, created by the quarry, for use as landfill. This approach was argued to contravene established principles, namely, that the acquired land must be valued in its present condition but with all its potential including any alternative use which a hypothetical purchaser may have had in contemplation at the date of acquisition. Mr Love relied on the well known statement by Isaacs J in Spencer v The Commonwealth as guiding the determination of the value of land compulsorily acquired for the purpose of assessing compensation, and as reflected, as noted above, in the terms of s 40 of the Act:[73]

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.

57 In Turner v Minister of Public Instruction[74] Sir Owen Dixon emphasised the need to take into account, in an appropriate way, the potential use to which the land may be put:[75]

Whatever else may be true as to the process of valuation employed, it is the entire land which must be valued as at the date of resumption. It is, of course, to be valued in cases of compensation with a view to ensuring that the actual value contained in the land is replaced in the hands of the owner by an equivalent amount of money. The value must therefore be the value to the owner which the land possessed to him in its condition at the date of resumption. That value was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded. At the same time the value of these things must be assessed according to the condition of the land as it stood at the time of resumption: 'it is the present value alone of such advantages that falls to be determined': Cedars Rapids Manufacturing & Power Co. v Lacoste. You must not notionally bring what is only potential into actual being and value it as if it existed.

58 Mr Love did not contend that, in assessing compensation, the trial judge should have taken account of all of the potentiality of the land by simply combining a figure representing the 10 per cent prospect of obtaining landfill approval in the short term with the figures ascertained by reference to future industrial use. Rather, he argued that it was necessary for the judge to have included some additional figure (which may not have been as high as 10 per cent) as representing the potentiality for landfill on top of that representing future industrial use. It was only by considering all of the potentiality the land enjoyed that the proper value could be determined for the purposes of compensation. In a somewhat similar context in the United Kingdom, Lord Scott, in Transport for London (London Underground Limited) v Spirerose Limited (in administration),[76] said that an expropriated owner has:[77]

the right to have included in his compensation the value to be attributed to any development potential the land may have. His compensation does not have to be confined to the existing use value of the land.

59 An alternative characterisation of this submission was that the trial judge had erred in failing to properly apply the 'loss of a chance' approach in making his award and had he done so he would have found that Mr Love had a compensable loss in relation to the landfill potential, as a minimum to the extent of the 10 per cent prospect of landfill approval existing as at 15 November 2001 such chance having been lost by July 2002, by the end of the window of opportunity. An analogy was drawn with the recognition of a loss of opportunity in contract and tort and claims made under legislation such as the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (NSW).[78] In Malec v JC Hutton Pty Ltd[79] Deane, Gaudron and McHugh JJ considered the future or hypothetical degeneration of the effect of physical injury, and said:[80]

The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded ... The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place.

60 Mr Love submitted that the approach taken in Malec's case should have been applied by the trial judge with the result that allowance should have been made for the potential benefit of the landfill. He argued that such an allowance should have been made regardless of the valuation of the land on the basis of future industrial use as the landfill potential represented an additional potential use of the land and represented a potential capacity of the land to yield a monetary return. It was submitted that the chance to realise that monetary return was foreseeable as a result of the acquisition.[81]

61 On the basis of Spencer, Turner, Spirerose, and Malec, Mr Love argued that the judge had erred in failing to make allowance for the benefits to the hypothetical purchaser arising from the following features of the subject land:

(1) the Special Use category 4 Extractive (SUZ4) Zoning of the WA149 site;

(2) its present uses, including quarrying and the benefits of the continuance of this use for a prospective purchaser, including a purchaser with a mind to future industrial or commercial development;

(3) the synergies available to a combined landfill/quarry operation on the WA149 site especially given that the filling of the excavated hole was at the relevant time the most economic use to which the land could be put (in the short to medium term);

(4) the fact that none of these uses would 'necessarily have been foregone' in achieving the land's future industrial potential, especially given the likely extended timeframe for such redevelopment and the potential for industrial development to proceed on the other parts of the land at the same time as the quarry/landfill use.

62 In response, the Corporation argued that there was no substance to the contention that the trial judge disregarded the potential of the land for landfill purposes or that he failed to take into account the benefits arising from the features of the land. His Honour considered each such attribute of the land.[82] The Corporation submitted that rather than determining that he was not required to allow any amount for the land's inherent potential as a landfill, as Mr Love contended, the trial judge held that no separate or additional allowance should be made for an alleged loss of value due to lost landfill potential by reason of the acquisition because Mr Love was unable to overcome, relevantly, the first and second threshold difficulties, namely, that uncertainty of access did not adversely affect prospects of approval and could have been resolved by means of a permit condition and there was no real short term prospect of obtaining landfill approval because community need could not be established. In particular, the Corporation argued, the unchallenged finding on the first threshold difficulty meant that any loss of landfill potential arising from uncertainty of access could not be attributed to the acquisition. The hypothetical purchaser would not have regarded such uncertainty as existed as preventing a successful application for a planning permit and works approval in the 'before' or 'after' situation. As a result, there was no difference in value in the 'before' and 'after' situation on account of 'access uncertainty' that stood to be compensated.

63 The Corporation acknowledged that, in some circumstances, in determining the highest and best use of land, the Court might take into account an aggregation of potential uses. This was recognised to be so in ISPT Pty Ltd v Melbourne City Council[83] where there was a range of potential uses for the land in question. In ISPT this Court held that notion of highest and best use clearly permits a combination of uses.[84] In a joint judgment, the Court said:[85]

In our view the language of s 5A(3) is apt to embrace the potential description of highest and best use in terms of alternatives. First, in the absence of an apparent intention to the contrary, the use of the singular in the phrase 'the highest and best use' should be understood to embrace the plural. Secondly, subs (3) (a) couples the phrase 'highest and best use' with the phrase 'and to any potential use'. Further subs (3)(f) required the tribunal to take into account the actual and potential capacity of the land to give a monetary return. It seems to us that the notion of potential use applicable to vacant land must have the theoretical capacity to embrace potential alternatives if such alternatives are proven to exist. Thirdly, the underlying notion of highest and best use takes account of all factors affecting its present and future potential and there is no sensible a priori reason for necessarily excluding alternative uses from such concept.

64 Whether a single use or a number of alternative uses is 'the highest and best use' in the individual circumstances of a case will depend upon the evidence and the factual findings that are open to be made. This was emphasised by the Court in ISPT when it said:[86]

Whether the highest and best use is in fact proven to be a single use or a package of alternative uses will depend on the evidence. What use or uses are properly described as highest and best use will be a question of fact.

65 In ISPT the evidence supported a finding of a package of alternative uses as the highest and best use without specifying a single, precise use. The highest and best use of the land was held to be specifically an intensive development with a tower building, of a similar volume to an existing building, and underground parking. More generally, it was held that the tower block could be used for either office or residential or institutional purposes, or some combination thereof, but most probably office use. The ground floor level of such an intense development was considered most probably to be used for a retail or quasi-retail purpose.[87] However, importantly, there was a finding that it was not the case that there were two distinct markets in Melbourne, one for office space and one for residential redevelopment.[88] These were not competing markets or incompatible uses. The tower would have a capacity for mixed use, and a hypothetical purchaser would be aware of that, and a value could be arrived at which reflected a consistent package of alternative uses.

66 The circumstances of the case, and the evidence relied on in ISPT, are vastly different from the circumstances arising here and the evidence adduced before the trial judge. We do not consider that s 5A(3)(a) of the VL Act permits an aggregation of inconsistent potential uses to be subsumed within the identification of the 'highest and best use' of land, nor does it permit, as Mr Love would have it, that the value of land should include not only its highest and best use but any other potential capacity in addition, even where that potential use is incompatible with the realisation of the highest and best use. We agree with the Corporation that ISPT, while it recognised that in some circumstances the highest and best use will include a package of uses, it is not authority for the proposition that one can aggregate values for potential uses where those uses are inconsistent with each other.

67 On the issue of competing uses, on the appeal Mr Love appeared to shift his case from that presented at trial. It is apparent from his Honour's reasons that the co-ordinated or integrated use of the land Mr Love contended for at trial involved quarrying, landfill, farming and other related uses.[89] The evidence adduced was directed to what the Corporation described as 'a pretty stark contrast' between future industrial use, submitted to be the highest and best use by the Corporation, and the use contended for by Mr Love of a concurrent quarry and landfill. Indeed, it was initially conceded at the hearing of the appeal that there would be a point in time at which a hypothetical purchaser, having bought the land, would elect as to which pathway (industrial use or landfill) he or she was going down.

68 However, it was later contended before us that what Mr Love had in mind was an extension of the quarrying operation, followed at some subsequent time by landfill, followed again after the expiry of what might be a substantial period, the use of the land for industrial purposes. All three uses were argued to be compatible. This was said to demonstrate the complementarity of the use of the land for landfill and for future industrial use. Mr Love described the use of the land for landfill as an 'alternative interim use', following upon the end of long-term quarrying, that was consistent with future industrial use. In support of the proposition that landfill use was compatible with subsequent industrial use, Mr Love relied on the following

passage from the trial judge's reasons:[90]

I accept that at the date of acquisition Mr Love operated his property as an integrated unit used for interrelated and sequential land uses. He had for a number of years used it for the purposes of grazing beef cattle and progressively given it sequentially over to use for quarrying basalt, and a series of landfills. In turn he ultimately contemplated that it would go over to urban land use of some industrial nature.

The conclusion that the highest and best use of the land at the acquisition date was constituted by its value as future industrial land does not preclude it from having further special value to Mr Love. This is because the notion of future industrial use is itself consistent with interim alternative use not destructive of its future value. In the present case that interim use was most obviously the continuation of the residential and agricultural use of the land by Mr Love potentially for some 20 years or so before subdivision for industrial purposes.

...

The actual use of the land for industrial use remained at the date of acquisition a long term proposal, perhaps in the order of 20 years ahead. In the interim period the land was of value to Mr Love as a source of income from a profitable farming operation and as his family home.

69 Mr Love placed emphasis on the time frame envisaged before subdivision for industrial purposes. A period of 20 years was argued to provide the scope necessary for the interim use of the land for landfill purposes.

70 However, in our view, the reliance placed upon this passage is misguided. Mr Love's submission ignored the qualification placed on any interim alternative use by the trial judge, namely, that any such use must not be destructive of its future value. The submission also ignored the finding of the trial judge that the interim use of the WA149 land for the expanded quarrying operation that was contemplated as part of the landfill proposal would destroy the land's potential for subsequent development. In the context of considering whether the WA149 land had special value, his Honour made plain that while the continued use of the land for the integrated purpose of farming and quarrying was feasible, the WA149 land could not be used for a quarrying operation in the period leading up to industrial development. This was because such use would be destructive of its future potential. He said:[91]

It is more difficult to regard quarry use as potentially contributing to special value ... because that use was on the evidence destructive of the ultimate developmental potential of the land ... The proposal put at trial was that the landfill use would be concurrent with the expansion of the quarrying operation, not something that occurred some time after quarrying had been completed or within an interim period before industrial use could commence.[92]

71 Most importantly, the finding that the use of the WA149 land for a combined quarrying/landfill operation would be destructive of its developmental potential for industrial use was reinforced by the evidence of Mr Brown and Mr Dudakov. As the judge said:[93]

I also accept the evidence of Mr Brown and Mr Dudakov that if WA149 were extracted to its full extent and filled with putrescible waste above natural ground level, then its capacity for future industrial development would be regarded in the market as seriously diminished because of limitations on the form of development possible.

72 It follows that the potential uses of the land for landfill and future industrial use were not compatible and thus could not be combined under s 5A(3)(a) of the VL Act. There was no requirement for the trial judge to add landfill potential as a 'top up' to the highest and best use of the land for future industrial use.

73 Nor do we consider that s 5A(3)(f) permits an aggregation of conflicting and inconsistent potential uses because such an approach could lead to highly inflated and unfair valuations that could not sensibly reflect what a hypothetical purchaser would be prepared to pay.

74 Furthermore, putting to one side the question of inconsistent uses, the VL Act cannot be used to create entitlements to compensation on a compulsory acquisition over and above the entitlements conferred by Part 4 of the Act. Section 5A of the VL Act must be read in the context of the exercise mandated by the Act, which, so far as market value is concerned, requires the Court to determine the amount of money that would have been paid for the interest in land on the date of acquisition by a willing but not anxious seller to a willing but not anxious purchaser. This involves consideration of use or uses to which the land can be put, and the land is valued on the basis of its highest and best use or uses. This incorporates its income-earning potential.

75 At trial, the Corporation led evidence of comparable sales of land with future industrial potential. By contrast, Mr Love adduced evidence to support his contention that the hypothetical purchaser would value the land based on its potential to support the quarry/landfill operation that he envisaged. Mr Love did not call any evidence about the value of the land based on its future industrial potential.[94] He did not postulate a 'package' of uses representing the highest and best use for the land. The judge below accepted that the highest and best use for the land was as the Corporation had argued, namely for future industrial development, and rejected Mr Love's argument that its highest and best use was for a quarry and landfill operation. The future income generating potential of the land was thereby taken into account.

76 In any event, it is unnecessary to arrive at a definitive conclusion on the scope of s 5A(3)(a) and s 5A(3)(f) as the trial judge made an unchallenged finding that it would not be viable to use the land for landfill.[95] This was based on the assessment of the likely operating costs and was not dependent on the question of the prospects of landfill approval. The trial judge said:[96]

I accept the Corporation's submission that on the evidence the prudent hypothetical purchaser would expect a maximum of 100,000 to 130,000 tonnes per annum as a waste stream for the purposes of a reasonable hypothetical development calculation. This would result in a significant increase in operating cost from $7.40 per tonne. I accept as substantially correct the logic of the final written submission made on behalf of the Corporation to the effect that:

Adopting Mr Herdman's capex, initial Mr Alsop leachate cost of $7.95 (later increased) and Herdman's leachate cost of $2 (noting Messrs Meredith and Lonergan were at $3), for a total of $20.85 [capex and] opex based on 200,000 tonnes per annum, the margin, at $25, is only $4.15. If opex increases by more than $4.15 per tonne, as it inevitably will, based on Mr Currie's evidence and as accepted by Mr Herdman, the site is unviable. At an assumed 150,000 tonnes per annum, Mr Herdman adopted $10 per tonne opex and at an assumed 100,000 tonnes per annum, he adopted $15 per tonne opex, the site is not viable.

77 In finding that the use of the land for landfill was not viable, the trial judge was not confining his attention to the present circumstances. He considered hypothetical circumstances. The finding of a lack of viability meant that the landfill potential had not been proven to exist. It could thus be ignored for the purpose of determining the value of the land in accordance with s 5A of the VL Act. In other words, the trial judge found that, even if the potential uses could be combined, the landfill potential had no monetary value and thus could be properly ignored in assessing compensation. This was supported by the finding which the Corporation described as critical,[97] namely, that even if a hypothetical purchaser considered that there was 100 per cent certainty of obtaining landfill approval (contrary to the actual findings made by the trial judge), nevertheless there was no positive value to be ascribed to the proposal to establish a landfill, taking into account the expert evidence on which Mr Love relied.[98]

78 In our opinion, the trial judge, having found that the highest and best use of the land was future industrial use, did not err when he failed to take into account, in

addition, the landfill potential of the land.[99] Furthermore, far from disregarding the existence of a large quarry hole on the WA149 land in determining the market value of the land, the judge took the quarrying operations into account, as part of the proposal for concurrent use with landfill, and found, contrary to the contention of Mr Love, that such a combined use did not yield a value which was higher than future industrial use, was not viable, was destructive of future industrial development and had no positive value, even if the second threshold difficulty, the lack of any realistic short-term prospect of obtaining approvals, could be overcome.

80 For the sake of completeness, we mention that, insofar as Ground 2 challenged as not open to the trial judge the finding that the prospects of works approval and planning approval of the WA149 were low, we reject that ground on the basis of the evidence we have discussed with respect to the lack of a community need for a landfill. We consider that it was open to the trial judge to arrive at the finding that the prospects of obtaining approvals for the WA149 to be used as landfill were low.

81 In support of Ground 5 of the grounds of appeal, Mr Love emphasised that during the time that the Corporation made arrangements with contractors to carry out the duplication of Cooper Street, there was uncertainty as to how access was to be reinstated to the WA149 land.[100]

82 At trial Mr Love argued, as mentioned above, that because of the uncertainty of access to the WA149 land throughout the window of opportunity (June 2001 - July 2002), the market value of the land was diminished inasmuch as the land lost its landfill potential for the hypothetical purchaser. This was also characterised, on the hearing of the appeal, as a 'loss of a chance' caused by the uncertainty of access.

83 The trial judge accepted that an applicant for a landfill would need to demonstrate that satisfactory heavy vehicle access could be provided.[101] However, he found that there was no doubt that the hypothetical purchaser would be satisfied in principle that, despite existing uncertainties, long term satisfactory heavy vehicle access could indeed be provided to the WA149 land.[102] Further, the resolution of access issues would not per se have prevented a successful application for landfill approval, rather such issues would have been resolved by a permit condition, requiring access to be to the satisfaction of the Corporation (as the highway authority).[103] Thus, the trial judge found that the access uncertainty was not sufficient to prevent the grant of a permit or, in the longer term, the satisfaction of a permit condition relating to access.[104]

84 Moreover, he found that an independent and competent town planner would have advised the hypothetical landowner not to delay application for a planning permit on account of access issues as they then stood[105] and inferred that the hypothetical purchaser would not have regarded such issues as preventing a successful application.[106]

85 In any event, the trial judge found that the 'primary uncertainty' regarding reinstatement of the pre-existing access point was in a sense irrelevant as that access point would have been inadequate for landfill purposes.[107] It was 'entirely feasible', he added, in both the 'before' and 'after' scenarios, to have created a new access point from Cooper Street some 300 metres to the east of the existing quarry road access point.[108]

86 Thus, the primary claim for compensation failed at trial because the access uncertainty following the acquisition, such as there was, did not adversely affect the potential of the WA149 land for approval as landfill and thus would not have altered the value of the land in the mind of the hypothetical purchaser in that respect.[109]

87 On the appeal, as mentioned above, there was no direct attack upon the finding, which his Honour described as the first threshold difficulty, that the hypothetical purchaser would not have regarded any uncertainty about access to the WA149 land in the 'after' situation as having affected any value the land had by reason of its landfill potential.

88 Rather, Mr Love submitted that his Honour was inconsistent in finding that the hypothetical purchaser would not have delayed making an application for approval of a landfill, despite the uncertainty of access,[110] while yet finding that Mr Love had acted reasonably in delaying his decision to apply for approvals until the access issue was resolved.[111] The question to be addressed is: Was the trial judge inconsistent in the conclusions he drew from access uncertainty?

89 Mr Love submitted that, his land having been included by the NRWMG in the draft Schedule to its proposed RWMP, he considered the access problem caused by the Cooper Street duplication as a serious impediment to proceeding any further with his landfill approval process. This was supported by the evidence of Mr Kerr that the access uncertainty also delayed Conundrum's decision to move its plant. Mr Love was not to know that the EP Act was to be amended in July 2002 and that if he delayed, he would risk being excluded from obtaining approval for the WA149 land as a potential site for future landfill.

90 The trial judge accepted that Mr Love acted reasonably in delaying any application for land use approvals during the window of opportunity, having regard to the uncertainty that then existed as to the resolution of access arrangements for the WA149 land,[112] and his concerns about Whittlesea City Council ['the WCC']. He said: [113]

In my view it was not unreasonable for Mr Love to seek road access arrangements broadly equivalent to those provided to the adjoining WCC land and to the Pioneer Hanson Group quarry site on the opposite side of Cooper Street (which was also serviced by the intersection provided for the council tip road). The WCC and the Pioneer Hanson Group were as Mr Love submits not merely his neighbours, but also commercial competitors. I accept that this motivation with respect to equivalent treatment was a substantial cause of the position he adopted during the window of opportunity. The delay in applications for land use approvals was not simply motivated by a desire to improve access to his own property independently of the mode in which the Corporation implemented the duplication of Cooper Street.

91 His Honour rejected the submissions of the Corporation on this point:[114]

I do not accept the Corporation's submission that the relatively low pre-existing level of traffic on the quarry road and/or its inferiority in safety terms, meant it was unreasonable for Mr Love to respond as he did.

92 The judge noted the particular concerns in Mr Love's mind, partly based on his personal experience with the WCC. He commented that:[115]

Mr Love gave evidence the most significant issue in his mind was that WCC might use the need for upgraded access against him. He said he did not activate applications for land use approvals:

... basically because I took the view that if we'd gone down that track we would have highlighted the access problem that we were confronted with and it's an issue of - the road was growing in terms of traffic volume and what would have been an acceptable access in the 1990s wasn't going to be an acceptable access in the period after the duplication was completed because of the massively increased traffic volume. I felt that it was important to make sure that that issue was bedded down before we went down the track of applying for a permit. Because I was concerned that if it became highlighted, given what I had seen of what Whittlesea had done with regard to Planning Amendment L1430 and others before that that we stood a very good chance of the region pulling the plug on their recognition ... And it was just one of those commercial judgments.

I accept Mr Love's further evidence that WCC was a key player in the region. Mr Love believed that pressure would be brought to bear by WCC to extract from him a substantial cost to finalise the access matter. The basis of this belief was his previous experience of dealings with WCC involving both himself and others.

Whether or not the potential risk of trouble from WCC was as significant as Mr Love perceived, I accept that objectively it cannot be said to have been unreasonable to delay in making application for land use approvals, pending resolution of the access arrangements, having regard to the range of practical considerations I have referred to.

93 There are three reasons for rejecting Mr Love's submissions on inconsistency.

94 First, the trial judge himself noted that he was willing to make the finding that Mr Love had acted reasonably in delaying despite his finding that the hypothetical purchaser would not have delayed. He said:[116]

Further I accept that the resolution of access arrangements was from Mr Love's perspective, not unreasonably regarded as a building block for land use approval applications for a landfill, despite my conclusion that the hypothetical purchaser properly advised, would not have regarded resolution of such arrangements as a reason for necessarily delaying application for approval. The resolution of the issue affected the choice of practical arrangements Mr Love might wish to make in progressing the landfill proposal (eg could access be kept well removed from his house; could costs be avoided; could the need for agreement with WCC be avoided; what arrangements should be made with Conundrum; could a ground for potential difficulty with WCC in respect of land use approval be avoided). It was not unreasonable of Mr Love to pursue resolution of this issue during the period of the window of opportunity.

95 The trial judge was thus drawing a distinction based on the peculiar concerns of Mr Love, which he subjectively and reasonably held on the basis of his own personal history and the relationships he had formed with the WCC, but which would not, objectively speaking, have concerned the hypothetical purchaser. They were not considerations that could be properly imputed to the properly advised hypothetical purchaser who would not have regarded the need to finalise access arrangements as materially affecting the landfill potential of the land.

96 Secondly, the Corporation submitted, and we agree, that the findings of the trial judge that, on the one hand, the hypothetical purchaser would not have delayed in applying for land use approvals and, on the other hand, Mr Love had acted reasonably (or not unreasonably[117]) in delaying his application, were consistent because they were made for conceptually different and unrelated purposes under the Act. The test for loss of market value is to consider the hypothetical purchaser as at the relevant date, a static date, and to ask, what would that purchaser, properly advised, have done?[118] That is a very different question from the question whether Mr Love had experienced a loss suffered as the natural, direct and reasonable consequence of a divestment or diminution in his interest in land for which provision is not otherwise made. That question is appropriate to the issue of loss attributable to disturbance[119] and not to an assessment of loss of market value. Mr Love's claim in this context was, as he put it, a claim for 'consequential damage',[120] one for 'lost opportunity arising from changes to the legislative environment during a period of uncertainty and delay as to reinstatement of quarry/tip access roads',[121] even if 'the precise type of damage may not have been fully or precisely foreseen or anticipated'[122] by the Corporation. This question involved an assessment of the loss a claimant might have personally sustained on the day of acquisition or at some later time. The Corporation argued, and we agree, that disturbance loss, unlike severance, is personal to the disposed owner and depends upon the owner showing that he or she has suffered an actual loss that is a natural, direct and reasonable consequence of the acquisition, drawing on notions from tort.[123] The two questions are distinct and raise quite different considerations. There was thus no inconsistency between his Honour's findings.

97 At the hearing of the appeal, Mr Love conceded that the reasonableness of his conduct, while relevant to disturbance, may not be relevant to an assessment of loss of market value or severance. As mentioned above, there was no ground of appeal challenging his Honour's findings in relation to disturbance.

98 Third, his Honour found that the reasonableness or otherwise of Mr Love's conduct was immaterial because no landfill approval could have been obtained during the window of opportunity, even if there had been no delay and preparations had commenced in June 2001.[124] In a finding which is not under challenge, he said:[125]

I am satisfied on the basis of the evidence ... that the works approval process could not have been completed within the window of opportunity identified on behalf of Mr Love between June 2001 and July 2002, irrespective of any delay occasioned by uncertainty as to the resolution of the Cooper Street access issue.

99 The evidence on which his Honour relied was given by Mr Borelli, a town planning consultant, called by Mr Love and Mr Lane, a hydrogeologist, also called by Mr Love.[126] The evidence of Mr Parker, a geotechnical engineer, called by the Corporation 'compel[led] this conclusion'.[127]

100 In other words, even assuming, contrary to the second threshold difficulty, that approval was likely, such a process would not have been completed in under two years.[128] There was thus no loss of a 'chance'. This comprised the third threshold difficulty, described above, and which led to a rejection of the consequential loss claim, the claim of loss attributable to disturbance. His Honour said:[129]

Nevertheless [even if Mr Love acted reasonably], the consequential loss claim must fail because no landfill approval could have been obtained in the time available during the window of opportunity ('the third threshold difficulty'). Mr Love's strategy but for the acquisition was to obtain approvals in the period between 2001 and 2003. In practical terms it was necessary for him to resolve arrangements with Conundrum before a works approval application could be made to the EPA. In commercial terms it was also necessary for him to sort out some arrangement with a major waste source collector. In addition to these steps it was necessary to undertake site specific investigations before the works approval application was made to the EPA. In turn the EPA required time to consider the application and in the present case that consideration would have included consideration of the difficult issue of need. After the EPA's decision the matter would on the balance of probabilities have gone to the Victorian Civil and Administrative Tribunal ('VCAT') either by way of appeal by Mr Love or by way of appeal by the WCC. The EPA's approvals process would have been accompanied in parallel by an application for planning approval and the evidence supports the view that the WCC would have refused planning permission also requiring an appeal to VCAT.

Both the planning permit application and the works approval application would require co-ordination with the conditions governing the continuing operation of the quarry. The EID Act works authority governing WA149 would also require modification if a quarry and a landfill were to be operated on the same site simultaneously. Conditions relating to buffers between the two uses and constraints upon landfill use during blasting and similar matters would require resolution.

The evidence as a whole demonstrates that the landfill could not have obtained final land use approvals pursuant to the relevant legislation and most critically the EP Act in under two years.

101 The finding, described as 'critical' by the Corporation, is also of importance here. That is, even if one put to one side the concerns about the limited prospects of approval for landfill, it was nevertheless the case that no positive value could be ascribed to the landfill proposal.[130]

102 The 'loss of a chance' was thus the loss of something with no positive value. If that chance was qualified by the finding that actually the prospects of approval were no more than 10 per cent, the loss of the chance would be 10 per cent of something with no positive value.[131] Thus, whatever landfill potential there was it did not sound in monetary value; the potential was thus not to be included within an assessment of compensation based on the notion of market value, as the trial judge correctly held.[132]

103 For all these reasons, we reject the submissions based on the consequences of the uncertainty as to access.

105 In his discussion of the notion of severance in Roads Corporation v Murdesk Investments Pty Ltd[133] Chernov JA emphasised two key concepts associated with it: the connection to market value and the need for the reduction in market value to be caused by the severance. He said:[134]

It is plain enough, and the contrary was not pressed by either party, that where only a portion of the owner's land is compulsorily acquired the proper measure of compensation payable to the owner is the value of the land taken as well as the value of any depreciation in the remaining land occurring by reason of the acquisition. As is made apparent in Castle Hill Brick Tile & Pottery Works Pty Ltd v Baulkham Hills Shire Council, 'severance damage' is the depreciation in the value of the retained land resulting from its division into two or more parts, or its reduction in area, and consequent loss of value for some current or higher potential use. So much is recognised by s 41(1)(c) of the Act which requires the Valuation Court, in assessing the amount of compensation payable to a claimant in respect of an interest which is compulsorily acquired, to have regard to factors that include 'any loss attributable to severance'. ... the term 'loss attributable to severance' is defined in s 40 as meaning 'the amount of any reduction in the market value of [the remaining land] ... caused by its severance from the acquired land'. And ... s 41(3) relevantly prescribes:

If less than the whole of the land ... is acquired ... the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.

106 Mr Love placed emphasis upon the finding by the trial judge that 'interference with the pre-existing right of access onto Cooper Street ... was one potentially capable of causing loss falling within the statutory definition of severance'.[135] His Honour further held that:[136]

It seems to me ... that subject to demonstration of the necessary causal link, it is open to Mr Love to contend that the severance of access to the WA149 land after the acquisition and during the window of opportunity occasioned delay in seeking approval for a landfill, which crystallised in loss of market value upon the change to the EP Act. Such a claim potentially falls within the concept of severance as statutorily defined.

107 While the trial judge accepted that it was conceivable that the loss of access could fall within a claim for severance, he ultimately found that no compensation should be awarded. His Honour based this conclusion on two separate reasons. First, the trial judge found that, because of the inadequacy of access points for landfill purposes in the 'before' scenario, there was no severance of access which could itself have been utilised for landfill purposes.[137] Secondly, in any event, the trial judge found that the claim for severance was confronted by the first threshold difficulty. Whatever access difficulties resulted from the severance of access to the WA149 land after the acquisition and during the window of opportunity occasioning delay in seeking approval for a landfill (alleged to have crystallised in loss of market value upon the change to the EP Act), access difficulties did not in fact cause a loss of market value. Rather, the underlying potential for landfill was unaffected because of the first threshold difficulty;[138] the uncertainty of access would not have been regarded by the hypothetical purchaser as having affected any value the land had by reason of its landfill potential.

T]he fundamental problem confronting Mr Love is that severance sounds in loss of market value as at the date of the loss. Loss of market value means the amount of money that would have been paid for the relevant interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

109 Mr Love submitted that the trial judge applied the wrong test to the assessment of severance compensation. The error was argued to lie in the consideration by the judge of whether or not an application could have been brought within a 'window of opportunity' rather than assessing the value of the land at the relevant dates, having regard to the prospects of approval at those dates. This was argued to reflect the same set of vices as his Honour's analysis of market value in assessing the highest and best use of the land and the omission of the effect of the potential of the WA149 land for landfill use. It was alternatively characterised as the claim that the trial judge erred in requiring Mr Love to demonstrate a necessary causal link as a component of establishing loss as a consequence of severance.

110 Mr Love submitted that while his Honour found that the WA149 land had:

(1) a 10 per cent prospect of approval for a landfill in the 'before' scenario; and

(2) no prospect of approval after the amendment to the EP Act which took effect on 1 July 2002 ,

he erred in law in his assessment of compensation for severance in failing to make an allowance for this 10 per cent reduction in the assessment of market value, having regard to the events after the date of acquisition. The 10 per cent reduction in market value attributable to the difference in the prospects of approval should have been taken into account in the assessment of severance and, it was submitted, should have been additional to the diminution of the market value of the land as assessed under its highest and best use.

111 Mr Love relied on Adelaide Fruit & Produce Exchange Co Ltd v Adelaide City Corporation[140] as authority for the proposition that, unlike market value, severance claims can be assessed, and in appropriate cases ought to be assessed, by reference to events after the acquisition date. This was accepted by the trial judge.[141] Mr Love urged that although the lack of any prospect of approval was not crystallised until July 2002 (months after the acquisition), the 10 per cent reduction in market value that the amendment to the EP Act brought should have been taken into account as part of the severance claim.

112 To this, the Corporation responded in a variety of ways. First, they submitted that the trial judge did not make a finding there that there was 'no prospect' of approval after the amendment to the EP Act. His Honour said only that this was an argument presented by Mr Love. This is reflected in the following paragraphs of the Reasons:

In July 2002, however, the EP Act was amended to require in effect that the site be included in a regional plan approved by the EPA as a pre-condition to the grant of a works approval. Mr Love's land was not so included at the time and has not been so included since. As a consequence there was what was described on behalf of Mr Love as a window of opportunity for the obtaining of land use approvals for landfill use only between June 2001 and July 2002.[142]

Nevertheless severance of the right of access to the highway potentially embraces a loss of market value in the balance of Mr Love's land, occurring after the date of acquisition, and in the present case crystallising at the end of the window of opportunity which Mr Love alleges closed with the amendment to the EP Act in July 2002.[143]

Although the access was not fully constructed until April 2004, its nature was resolved by late October 2002. Nevertheless that resolution occurred only after the closure of the window of opportunity in July 2002, upon which Mr Love's claim is premised.[144]

113 Without a finding that, as at the end of the window of opportunity, there was no prospect of approval, it could not be concluded that there had been a comparable reduction in market value. More importantly, the Corporation submitted that in the 'after' situation which was assessed as after 1 July 2002, given that severance loss may crystallise later in time, there was no prohibition upon new sites. It was rather that the amended EP Act required that a site first be on the relevant regional plan. There was thus no 'closing' of the window; it was a matter of satisfying the new test for obtaining approval. We agree.

114 The problem to be faced by Mr Love, once the EP Act was amended, was satisfying the new test in circumstances in which there was no realistic short-term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval. This was primarily due to the absence of community need, which was discussed above. There was unlikely to be any community need for a landfill from at least the start of the window of opportunity, through the whole of its duration, and beyond. This was the factor which created the primary difficulty for the WA149 land to obtain approval. It was, as the Corporation argued, not a matter of the amendment to the EP Act 'closing' the window of opportunity but the likely inability of the WA149 land to satisfy the new test for the same reason that there would be difficulties in obtaining approvals in any event, because of an absence of community need. In those circumstances, it would be wrong to conclude that as on 1 July 2002 a loss had crystallised, namely, that the 10 per cent prospect of approval had been eliminated by reason of the acquisition.

115 Insofar as the trial judge made a finding about Mr Love's prospects after the amendment to the EP Act it was in these terms:[145]

[A]lthough it continues to be open to Mr Love to request the EPA to modify the relevant RWMP (now a Metropolitan Plan), I accept (having regard to the evidence of Dr Bellair and the documentary evidence as a whole) that there are and have been no practical prospects of modification given the scheduled provision of landfill space within it and the patent lack of need for further space.

116 While Mr Love was correct, in a sense, contrary to the submissions of the Corporation, to suggest that the trial judge found that, in the 'after' scenario, he had no prospect of obtaining landfill approval once the amendment had been made to the EP Act, the finding was qualified by indicating that there was no practical prospect of satisfying the new test by reason, again, of the lack of community need. Given the qualified nature of the finding, it could not be inferred, as Mr Love urged, that the elimination of his prospects of approval was attributable, in the circumstances, to the acquisition.

117 Furthermore, Mr Love's submissions fail by reason of the time period upon which his submissions are premised. If the loss argued to be attributable to severance was crystallised in July 2002, as the relevant 'after' date, this would mean that the relevant planning permit and works approval would have to have been obtained at some time prior to 1 July 2002 as the relevant 'before' date, to demonstrate the diminution of market value of the land between the two dates. Even assuming, contrary to the second threshold difficulty, that approval was likely, the process of obtaining landfill approval could not have been obtained in under two years. The claim thus depends upon overturning the unchallenged finding that 'no landfill approval could have been obtained in the time available during the window of opportunity',[146] even if preparations has commenced in June 2001.[147] This third threshold difficulty removed the viability of any claim for loss attributable to severance, dependent as it was upon landfill approvals being able to be obtained in the 'before' scenario and thus amounting to a compensable loss by reference to the 'after' scenario. In other words, the failure to obtain planning approvals was not attributable to the severance because the planning approvals could not have been obtained before July 2002; the severance did not cause any reduction in market value associated with the inability to obtain planning approvals. The second key element Chernov JA associated with severance, that of causation, was not made out and Mr Love was unable to demonstrate any error in the reasons of the trial judge with respect to his approach or findings on severance.

119 The trial judge was not satisfied that the landfill potential was of special value[148] to Mr Love, as there was 'no evidence justifying the conclusion that any landfill potential of the land was of greater value to Mr Love than its market value'.[149] However, he accepted that the land had some special value to Mr Love in respect of its residential and agricultural uses.[150] He made an award in respect of specific items of special value, inter alia, loss of trees,[151] loss of access facilities,[152] and loss of amenity,[153] totalling over $70,000.[154]

120 On appeal, Mr Love argued that the lost landfill potential did constitute a pecuniary advantage that was incidental to the value represented by his ownership and occupation of the land and that his Honour erred in failing to recognise its special value as an alternative to the market value claim.

121 The principles underlying special value were considered by Callinan J in Boland v Yates[155] in which he emphasised the economic character of special value and the near exclusivity of the interest:[156]

The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. None of the examples given by the Full Federal Court are true examples of special value. There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.

122 In Dangerfield v Town of St Peters,[157] the High Court specifically considered landfill potential as bearing a special value present in the circumstances of the case. There the land which was compulsorily acquired had been leased to a rubbish collector and used for the disposal of rubbish. It had an on-going capacity to accommodate rubbish for another 35 to 45 years, and the rubbish collector's lease had 23 years to run from the date the land was acquired. The land was not suitable for construction but could be used for recreational purposes. The High Court held that it was wrong for the land to have been valued at the price that a purchaser wanting it for recreational purposes would have been willing to pay for it and that it should have been valued as land used and usable for the disposal of rubbish, in accordance with its special value.

123 Barwick CJ[158] reaffirmed the principles governing the assessment of compensation for land with a special value as the additional amount that the owner would have been prepared to pay to purchase the land to use it for the purpose for which it has a special value, rather than see the land foregone. He said:[159]

The basis of assessing compensation for the taking of land which has a special use, as undoubtedly the land had, has long been settled. Lord Moulton said, speaking for their Lordships of the Privy Council in Pastoral Finance Association Ltd. v. The Minister:

'Probably the most practical form in which the matter can

be put is that they' (the dispossessed owners) 'were entitled

to that which a prudent man in their position would have been

willing to give for the land sooner than fail to obtain it.'

That is to say, one supposes that the owner of the land, with his knowledge of it and its suitability for the special purposes to which he has been putting it, was considering buying that land for that purpose from a willing seller. The sum he would pay to secure that land for those purposes rather than lose it will be the value of the land to him. The knowledge and experience he had of the particular use to which it could successfully and lawfully be put must be reflected in that sum. Here the owners were familiar with the business of the cartage of city garbage and aware of the potential of this land for the disposal of it. They knew that there was no other land available for that purpose. They knew that the land might lawfully be put to the proposed use for a very considerable time. That time, even if clean air regulations or the like were to prevent the burning on the land of combustible material, was apparently of the order of fifteen or twenty years. But no such regulations were in existence and as things then stood the land may well have been usable for rubbish disposal for up to some thirty or forty years.

124 Mr Love described himself as a 'resource based business operator' and his primary production business as an integrated one included quarrying, landfilling, farming and other related uses. He submitted that the complementary nature of quarrying and landfill also reduced the risk involved in establishing the landfill operation. It was argued that the land had the potential for a co-ordinated package of land use and that this gave rise to its special value to Mr Love.[160]

125 The Corporation pointed out that the trial judge made no finding that Mr Love was a 'resource based business operator'. It was not shown that Mr Love had a capacity for economic exploitation of the landfill potential that was exclusive, or almost exclusive, to him, by reason of his knowledge and experience of putting the land to that use over a period of years. The evidence was that Mr Love had not operated a landfill or a quarry. The quarry on the WA149 land was operated by Conundrum. His evidence was that he would need 'bankable contracts' before he could proceed to operate a landfill, yet as at the acquisition date each of the major collectors of waste was bound by arrangements tying them to other sites save for Collex.[161] As mentioned above, ultimately, his Honour found that a hypothetical purchaser would conclude that landfill was 'not viable' because, amongst other reasons, the waste stream would not be sufficient to make it a viable enterprise.[162]

126 In our opinion, the complementarity which Mr Love asserted, and which formed the basis of his claim for special value, was no more than assertion.

127 The circumstances considered in Dangerfield are vastly different from those applying here, not least the extensive period of time in which the land had been used in the manner which gave it its special value, its suitability for rubbish disposal, together with the significant prospects of lawful future use in that manner for 15 to 20 years, were it not for the acquisition. In sharp contrast, there was no history here of a landfill business having been established. Indeed, there was evidence that there were significant hurdles facing Mr Love in any attempt to establish such a business. To apply for permission to operate a landfill required excision of the landfill application area from existing works approval WA149 under the Extractive Industries Development Act 1995. As Conundrum leased the WA149 land from Mr Love for its quarry operations, the co-operation of Conundrum was required before a joint quarry/landfill business could be established.[163] The trial judge found that, in June 2001, there was no agreement between Conundrum and Mr Love as to their ongoing relationship.[164] There were significant issues that remained unresolved as at the relevant date.[165] It was not until 2006 that the existing lease was renewed and then, importantly, without agreement on matters concerning landfill.[166] Furthermore, Dangerfield can be distinguished because here Mr Love was faced again with the second threshold difficulty that there was no realistic short term prospect of approval for a landfill as there was no demonstrable community need at the time of the acquisition nor was it estimated that there was likely to be community need for a landfill in the area for some considerable time, the existing capacity being sufficient for at least 10 years and probably 25.[167]

128 Moreover, there was a finding by the trial judge that any landfill would have exploited the market value of such a use and was not a characteristic of the land of special value to Mr Love. This was based upon evidence given by the valuers called on Mr Love's behalf.[168] We consider the judge's rejection of the claim for special value based on landfill potential to have been open to him and to have been arrived at without error.

130 It follows that the appeal should be dismissed.

131 On 23 April 2010, the trial judge made orders as to the costs of the proceeding as follows:

(1) The Corporation pay Mr Love's costs including any reserved costs and costs of transcript up to 15 November 2007.

(2) Mr Love pay 80 per cent of the Corporation's costs including any reserved costs and costs of transcript from 16 November 2007 to 3 April 2009.

(3) Mr Love pay the Corporation's costs on a solicitor-client basis, including the costs of three counsel, reserved costs and transcript, from 4 April 2009 up until the completion of the trial of the proceeding.

(4) Mr Love pay the Corporation's costs of, and incidental to, the application for costs heard on 26 February 2010 including the costs of three counsel and transcript costs.

132 His Honour also made orders referring the assessment of costs to mediation.

133 In awarding costs to the Corporation on a solicitor-client basis from 4 April 2009 in order (3), the trial judge took into account a facsimile sent by the Corporation's solicitors to Mr Love's solicitors on 3 April 2009 expressed to be 'without prejudice save as to costs' offering to settle the matter for the sum of $950,000 plus interest[169] plus costs[170] (the 'Offer'). The trial judge treated the Offer as a Calderbank offer.[171] The amount offered was almost twice what Mr Love eventually recovered as compensation under the Act.

134 By summons dated 7 May 2010, Mr Love sought leave to appeal against orders (3) and (4). The application for leave to appeal in relation to costs was referred to the Court hearing the appeal by Mandie and Hansen JJA on 28 May 2010.

135 The proposed grounds of appeal in respect of costs orders (3) and (4) are as follows:[172]

(10) The trial judge erred in law when he misdirected himself as to the scheme of the Act as to the exercise of the Court's discretion as to costs and in particular as to the meaning and effect of section 91(a) of the Act.

(11) The trial judge erred in law when he took into consideration on the question of costs, the 'without prejudice save as to costs' letter dated 3 April 2009 from the Corporation's solicitors to Mr Love's solicitors and distinguished the decision in Coastal Estates Pty Ltd v Bass Shire Council[173] to the effect that only open offers are to be taken into account in the exercise of the discretion as to costs under s 91 of the Act.

(12) The trial judge erred in law when he concluded that the construction of s 91 of the Act adopted in Coastal Estates did not address Calderbank offers and that it was open to have regard to a Calderbank offer made on behalf of an Authority when a Court exercises its jurisdiction under s 91 of the Act.

(13) The trial judge erred in law when he held that the letter dated 3 April 2009 from the Corporation's solicitors to Mr Love's solicitors was a Calderbank offer when it did not refer to the decision in Calderbank v Calderbank[174] and did not claim solicitor-client or indemnity costs in the event that the offer was not accepted.

136 The grounds of appeal turn on the decision of the trial judge to take into account the Offer and to award the Corporation its costs on a solicitor-client basis from the date of the Offer to the conclusion of the trial of the proceeding on the ground that Mr Love's refusal to accept the Offer was unreasonable in the circumstances.

137 Mr Love submitted, in substance, that the trial judge erred when he had regard to the Offer in the award of costs, given the nature of the discretion conferred by s 91 of the Act. He submitted that the decision below was contrary to the authority in Coastal Estates, which had stood for 17 years.

138 For its part, the Corporation filed a Contingent Notice of Contention in which it flagged its intention to contend that the orders made by the trial judge as to costs should be affirmed on one or more of the following grounds:

(a) Coastal Estates was wrongly decided and ought to be overruled, alternatively, not followed;

(b) The orders were a proper exercise of the discretion under s 91 of the Act in all of the circumstances, including the unreasonable conduct of and the excessive claims made by Mr Love in the proceeding.

139 The costs of a proceeding for compensation under Part 10 of the Act are governed by s 91(1) of the Act, which provides that the Court 'may award such costs as it thinks proper'. However, s 91(1) also provides that the Court must, if it thinks 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

(vi) 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.

140 The central question on the application for leave to appeal is whether it was open to the trial judge to have regard to an offer made 'without prejudice save as to costs' when exercising the discretion conferred by s 91 of the Act. Section 91 does not expressly preclude consideration of such an offer. The question is whether such a limitation must be implied, having regard to the terms of s 91, and to the scheme of the Act as a whole.

141 As Mr Love correctly submits, whether s 91 permits consideration of offers of compromise was considered by Gobbo J in Coastal Estates. The Court was there asked to apply Order 26 of the Supreme Court Rules or, alternatively, to consider offers of compromise in the exercise of its discretion as to costs in proceedings brought under the Act. Gobbo J held that O 26 could not operate along with, or so as to override, s 91 for the following reasons:

(b) The history of the legislation governing the compulsory acquisition of land demonstrated the long and special role of open offers;

(c) There were good policy reasons set in history as to why open offers had a special role to play in relation to costs; and

(d) The practice of the Court recognised the use and value of open offers.[175]

142 Justice Gobbo described the regime in the Act as being one that required open offers and counter offers to be made, and observed that O 26 had by its nature a 'decisive effect', with the result that open offers served and filed following commencement of proceedings under the Act would be largely, if not wholly, meaningless if O 26 was applied.[176] His Honour thus distinguished 'open' offers from 'secret' offers and held that 'secret' offers were not 'within the reference to offer in s 91'.[177] He concluded: [178]

In my opinion, whatever might be said of particular situations, there is no useful basis for treating secret offers as offers which are to be taken into account in the application of s. 91.

143 The trial judge agreed that O 26 is inconsistent with s 91, that 'secret' offers were not included in the reference to 'offer' in s 91 and that Coastal Estates should be regarded as correctly stating that the terms 'claim' and 'offer' in s 91 should be understood as meaning 'open claim' and 'open offer'.[179] However, his Honour did not accept that the decision in Coastal Estates should be treated as authority for the proposition that no regard could be had to a Calderbank offer under s 91. If costs were to be awarded on a solicitor-client or indemnity basis, something special or unusual had to be demonstrated in order to justify this course. The unreasonable refusal of a Calderbank offer could be regarded as a special circumstance that could justify an award on one of the higher bases.[180]

144 It was his Honour's view that the judgment in Coastal Estates did not address Calderbank offers, and that it was open to the Court to have regard to a Calderbank offer made either on behalf of the claimant or the Authority when exercising the discretion under s 91. Section 91(1)(b)(i) required the Court, if it considered it appropriate, to consider 'unreasonable conduct on the part of the claimant or the Authority'. Whether a party had acted unreasonably in respect of the conduct of litigation fell to be decided by reference to all the circumstances of a particular case and there was no reason why a 'without prejudice' offer of settlement should be excluded as potentially relevant to a judgment of the circumstances of the case as a whole.[181]

145 Accordingly, the trial judge took into account the Offer in considering whether the proceedings had been affected by unreasonable conduct on the part of the parties. Having reviewed the factors identified in Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2),[182] his Honour concluded that the refusal to accept the Offer was unreasonable in the context of the case as it stood at the date of the Offer and was, in particular, unreasonable having regard to the extent of the compromise offered and to the very substantial uncertainties that attended a speculative case which was not, on proper analysis, made out by the evidence then put forward by Mr Love.

Ground 10 and 11 - the first and second grounds as to costs

146 These are the principal grounds upon which Mr Love seeks to overturn the orders of the trial judge as to costs. Whether the trial judge erred in law when he took into account a 'secret' offer on the question of costs will depend on whether s 91 carries the implied restriction for which Mr Love contends. That is a question of statutory construction, requiring analysis of both the text and context of s 91.

147 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).[183]

148 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 Part 10 of the Act have arisen from or been affected by the matters referred to in sub-paragraphs (i) to (iv). Sub-paragraph (i) draws attention to 'unreasonable conduct' on the part of the claimant or the Corporation.

149 It was Mr Love's submission that the various circumstances set out in (i) to (iv) must be read consistently with paragraph (a), which refers to the scheme of 'open' offers in the Act and not to 'secret' or 'without prejudice' offers. He submitted that as sub-paragraphs (iii) and (iv) also refer to the statutory scheme of open offers and claims under the Act, sub-paragraphs (i) and (ii) must be construed so as not to negate the references in paragraph (a) and sub-paragraphs (b)(iii) and (iv) to the statutory scheme of open offers. Drawing on the principle that a specific provision must prevail over a general one where there is a conflict,[184] Mr Love submitted that s 91(1)(b)(i), which refers generally to unreasonable conduct by one or other of the parties, might be regarded as a general provision, whereas s 91(1)(a), which deals with the amount (if any) offered by the Corporation relative to the compensation awarded by the Court, should be regarded as a specific provision dealing with that particular subject matter. As a result, sub-paragraph (b)(i) must give way to paragraph (a) in respect of offers made by the Corporation. If sub-paragraph (b)(i) permitted consideration of 'secret' offers by the Corporation, that would conflict with the consideration required by paragraph (a).

150 Furthermore, on Mr Love's analysis, not even a response to an open offer made by the Corporation could be considered under sub-paragraph (b)(i). Mr Love submitted that an unreasonable response to an open offer would fall to be considered in the exercise of discretion as to costs under paragraph (a).

151 However, paragraph (a) plainly does not 'cover the field' in respect of offers made by the Corporation. It is not the only part of s 91 under which offers made by the Corporation are to be considered - the Court is required to consider under sub-paragraph (b)(iv) the extent to which the proceedings have arisen from or been affected by an unduly depressed offer by the Corporation. The legislature has therefore expressly provided for the Court to take into consideration, if the Court thinks it appropriate, both the amount offered by the Corporation relative to the award under paragraph (a) and an unduly depressed offer by the Corporation under paragraph (b).

152 In our view, the Court is required to consider different questions under paragraphs (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 paragraph (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 paragraph (a). As a result, insofar as paragraph (b) captures conduct in the form of responses to offers and counter offers, it will not necessarily cover the same ground as paragraph (a) so as to give rise to a conflict between those provisions or otherwise detract from the consideration required by paragraph (a).

153 In Minister for the Environment v Florence,[185] 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, paragraph (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 paragraphs (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 paragraphs (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 paragraphs (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.

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

155 We respectfully agree with the analysis of Wells J. In our view, paragraph (b) invites a different inquiry from the inquiry mandated by paragraph (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.

156 Accordingly, we do not accept the submission that if paragraph (a) refers only to open offers by the Corporation, sub-paragraph (b)(i) cannot refer to conduct concerning or arising out of an offer - be it an open or a secret offer - made by the Corporation. In our view, the terms of s 91(1) do not require unreasonable conduct to be excluded from consideration under sub-paragraph (b)(i) simply because the conduct in question relates to an offer made by the Corporation. There is nothing in the terms of s 91 to exclude from such consideration an offer made 'without prejudice save as to costs'.

157 The question remains as to whether the exclusion should nonetheless be implied from the Act as a whole and particularly, as Gobbo J put it in Coastal Estates, from its 'scheme' for the making of offers and claims for compensation.[186] Does the Act read as a whole, and in particular the scheme of offers and claims described in Part 3 of the Act, require s 91(1)(b)(i) to be construed so as to exclude from consideration conduct in response to or arising out of a without prejudice offer made by the Corporation?

158 It is uncontroversial that the scheme in Part 3 of the Act for the making of offers and counter offers is one that postulates that there be one or more open offers of compensation. In Coastal Estates, Gobbo J expressed the view that although the scheme in the Act was apparently directed to the period before a disputed claim was referred to the Court, the scheme of open offers and counter offers was not confined to that period and there was 'no reason why some of the steps of offer and counter offer could not be taken after referral' to the Court.[187] His Honour also emphasised what he described as 'a long established legislative recognition of offers' and observed that there was nothing in any of the predecessor legislation up to 1986 that enabled offers to be made 'without prejudice'.[188] Indeed, the Act extended the role of formal offers in compensation matters. The open nature of the offers and their capacity to be accepted in whole or in part made for the maximum and earliest attempts to prevent disputes and for maximum disclosure thereafter of each party's case. This was consistent with the special history of the area and with the special nature of the jurisdiction.[189] His Honour reasoned that in the absence of some express provision, it must follow that offers for the purpose of the operation of the costs formula had to be open offers.

159 Part 3 of the Act sets out a formal process for the making of offers and claims (or counter offers) commencing in s 30 with the conferral of a claim on a person whose interest in land has been compulsorily acquired. Section 31 requires the Corporation, within 14 days after the date of acquisition, to set out the amount that the Corporation, on the information available to it, has assessed as a fair and reasonable estimate of the amount of compensation payable to the claimant.[190] This offer is binding upon the Corporation. Section 33 then provides for the claimant to respond by either serving a notice of acceptance on the Corporation or by serving a notice of claim upon the Corporation.[191] If the claimant does neither of these things, the matter becomes a 'disputed claim'. If the claimant serves a notice of claim upon the Corporation, s 36 requires the Corporation to serve upon the claimant a statement in writing replying to the notice of claim. In that statement, the Corporation may admit the claim as to whole or as to part, offer to vary the amount of the compensation previously proposed, or reject the claim and repeat its initial offer of compensation. The claimant may accept or reject an offer to increase or vary the compensation previously offered. If it decides to reject it, or if the Corporation rejects the claim by the claimant, or if the Corporation fails to reply to the notice of claim, the claim again becomes a 'disputed claim' for the purposes of the Act.

160 Mr Love correctly points out that this scheme for the making of offers and counter offers contemplates that they be made openly. He argues that this shows the legislative intention that the regime in its entirety be open. He submits that there is a serious advantage to a claimant in ensuring that the 'open offer regime' is observed. Given the claimant's entitlement to obtain an advance of compensation under s 51 based on an offer made, a 'without prejudice' offer would give rise to serious disadvantage, in that the claimant has no right to serve a notice on the Corporation requiring an advance of compensation pursuant to such an offer. In oral submissions, it was also submitted that the operation of s 53 of the Act, which provides for the Corporation to pay interest at penalty rates on any amount representing the difference between the amount awarded and the amount offered by the Corporation, would be compromised if offers other than open offers could be made.

161 We accept that the offers and counter offers referred to in Part 3 of the Act must be open offers and that the Act generally contemplates that the process of making offers and counter offers be transparent. However, where the offer, or the offer to vary the amount offered, is not accepted by the claimant, or where the Corporation rejects the claim by the claimant or fails to reply to the notice of claim, the claim that was created at the outset by s 30 of the Act becomes a 'disputed claim'. A disputed claim may be referred to the Tribunal or the Court for determination of the amount of compensation to be paid in respect of the claim.[192] The claim then becomes the subject of proceedings under Part 10 of the Act.[193] In this Court, O 8 of the Supreme Court (Miscellaneous Civil Proceedings) Rules 2008 (Vic) applies to the proceeding and it will be entered into the Valuation, Compensation and Planning List. The proceeding becomes subject to directions by the judge in charge of the List, who has power to give directions for the conduct of the proceeding which the judge thinks conducive to its effective, complete, prompt and economical determination.

162 Once the claim has become a disputed claim which is capable of being referred to the Court or Tribunal for determination the focus in the Act shifts from the process of offer and counter offer to the resolution of the disputed claim. We see no compelling reason why all further offers made in an endeavour to resolve the disputed claim should be have to be made on an open basis. The fact that a claimant cannot seek an advance in relation to a Calderbank offer simply reflects the fact that the function of a Calderbank offer is to bring about a resolution of the proceedings once and for all. If the offer is accepted, then the amount offered is 'advanced'. Moreover, the provision for payment of interest remains based upon the offers made before the claim became a disputed claim. The claimant is not disadvantaged in the application of this provision by the making of a Calderbank offer. To the contrary, the Corporation is still required to pay interest based on amounts of open offers made before the claim became a disputed claim, whether or not a much higher offer was made subsequently. This will be the case, even if the subsequent offer is an open offer.

163 There may be good reasons for the use of 'without prejudice' or Calderbank offers once a claim has become a disputed claim and been referred to the Court or Tribunal for determination. That determination will be the product of inter partes litigation. As the trial judge pointed out, whilst the statutory offer regime in the Act will generally facilitate the ascertainment of land value, in many cases it may not do so with respect to the quantum of disturbance claims. Such claims are essentially claims for damages, and the process at trial is attended by risks as to quantum.[194] Moreover, the very question of land value is one in respect of which reasonable minds might reasonably differ. Once it is accepted that there may be a real risk of substantial costs in litigation under Part 10 of the Act, the parties should not be deprived of the opportunity to manage that risk by making 'without prejudice' offers. This would work to the advantage of the claimant as well as to the Corporation by indemnifying the relevant party in respect of costs which would not have been incurred had the other party acted reasonably.

164 Hence, where a disputed claim is attended by significant potential cost and uncertainty, it may be reasonable for a claimant to offer to settle the claim under the Act for less than the claimant's assessment of the proper compensation payable. As the trial judge observed, it would be a harsh thing to prevent a claimant from relying on a 'without prejudice' offer, made on a Calderbank basis, if the claimant was later awarded compensation exceeding the offer, and the refusal of the claimant's offer was unreasonable.[195]

165 Although the Corporation is in a different position to the claimant, in that it has taken the decision to acquire the claimant's interest in land and has exercised powers of compulsion in order to do so, it may be exposed to significant unnecessary costs if it encounters an unreasonable or unscrupulous claimant. It too should be able to protect itself in respect of the costs of litigation in appropriate circumstances. It is not the case, as senior counsel for Mr Love submitted, that the Corporation can always protect itself by simply making a further open offer. If the Corporation is required to compulsorily acquire interests in land from a large number of neighbouring interest holders, it is unrealistic to expect the Corporation to make public an offer that is calculated to achieve a settlement of legal proceedings rather than to truly reflect the compensation payable under the Act. To do so would be to invite further litigation. This, in circumstances where the Act contemplates and encourages agreement and settlement.[196]

166 We agree with senior counsel for the Corporation that while the policy underlying paragraph (a) may have been for the Corporation to proceed by way of open offers and to permit the claimant to have the benefit of those, the policy underpinning paragraph (b) is different. It appears to be directed to discouraging the institution or the continuing conduct of litigation which is either without merit or the conduct of which is prolonged by excessive claims or unreasonable conduct of one sort or another. The ability to use 'without prejudice' offers once proceedings under the Act have commenced is consistent with such a policy.

167 We therefore reject the submission that the scheme for the making of open offers and claims in Part 3 of the Act precludes the making of a 'without prejudice' or Calderbank offer once a disputed claim had been referred to the Court or Tribunal. Part 3 of the Act sets out a process to enable agreement to be reached in respect of the compensation payable by the Corporation or, alternatively, for the compensation payable to become the subject of a 'disputed claim' that may be referred to the Court or Tribunal for determination in the absence of agreement. Thereafter, in the absence of agreement and in the context of legal proceedings between the claimant and the Corporation concerning the amount of compensation payable, the processes of the Court or Tribunal for the conduct of civil proceedings are generally applicable. The parties ought then to be in a position to apply pressure to settle and to protect themselves in respect of the costs of the litigation, which may be substantial.

168 It follows that it is open to a Court or Tribunal to consider conduct arising from the making of a 'without prejudice' offer when having regard to unreasonable conduct by one or other of the parties under s 91(1)(b)(i) of the Act.

169 Mr Love submitted that if there is no basis or statutory power under s 91(1)(a) of the Act to have regard to a 'without prejudice' or 'secret' offer, as Gobbo J held in Coastal Estates and the trial judge accepted, then there can be no basis for considering the rejection or otherwise of such an offer as being 'unreasonable' under s 91(1)(b)(i) of the Act. We do not accept this submission. Whether or not paragraph (a) is limited to open offers, the Offer was made to Mr Love, and it was open to him to accept it. Had he done so, he would have been significantly better off, and the expenses of a protracted hearing would have been avoided. The basis for the finding that the rejection of the Offer was unreasonable, was to be found in Mr Love's ability to accept the Offer and the consequences that flowed from his rejection of the Offer.

170 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.[197] 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.[198]

171 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.

172 In Taylor v Port Macquarie-Hastings Council,[199] the Land and Environment Court of New South Wales observed that 'the interference with the rights of the individual, the confiscatory nature of compulsory acquisition and the statutory entitlement to just compensation [had] led to the development of different principles in determining costs in cases concerned with compensation for the compulsory acquisition of land compared with ordinary litigation'.[200] Justice Biscoe held that there had to be a strong justification for awarding costs against an applicant where the effect of making that order was to erode the benefit of the just compensation recovered as a consequence of the Court's determination and that it was only in special cases that the Court would deprive the owner of the full benefit of the compensation which was determined as fair and just in the circumstances of the case.[201] In the Federal Court of Australia,[202] Wilcox J also recognised the special position of the claimant in compensation proceedings and that the relationship between the claimant and the Corporation (the Commonwealth) arose not out of mutual desire, but because of the unilateral decision of the Commonwealth to acquire the claimant's land. His Honour observed that people in the position of the claimant 'should be allowed access to the court to present an arguable and well-organised case without being deterred by the prospect of being ordered to pay costs' if their claim was unpersuasive. However, his Honour distinguished the position of a claimant who pursued a 'vexatious, dishonest or grossly exaggerated claim or who presented the case in such a way as to impose unnecessary burdens on the Commonwealth or the Court'.[203]

173 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. [204] 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.[205]

174 In this case, the trial judge made a series of costs orders reflecting the peculiar history of offers, claims and advances of compensation in the matter. Having regard to the history of offers and claims in the matter,[206] his Honour had ample reason to make the orders that he made. On the facts before the trial judge, Mr Love succeeded in obtaining an award for less than 50 per cent of the amount offered to him on a 'without prejudice' basis and a very substantial quantum of costs was incurred after the Offer was made.[207] His Honour found that the refusal of the Offer was unreasonable and that the trial of the proceeding would have been unnecessary

175 We accept, as Mr Love submitted, that the award of special of costs to the Corporation from 4 April 2009 onwards was the result of the finding that Mr Love's rejection of the Offer was unreasonable for the purposes of s 91(1)(b)(i) of the Act, rather than the result of the finding that the claim made by Mr Love was excessive. If the trial judge had erred in taking into account the Offer in making the order in (3), that error would have been material.

176 In our view, however, the trial judge correctly identified the factors to which he could have regard in exercising his discretion as to costs under s 91 of the Act. He made no error of principle as a result of having had regard to the Offer in the context of s 91(1)(b)(i).[209]

177 The first and second grounds as to costs must fail.

178 Mr Love submits that the trial judge erred when he concluded that the construction of s 91 of the Act adopted in Coastal Estates did not address Calderbank offers, and that it was open to have regard to a Calderbank offer made on behalf of an Corporation when a Court exercises its jurisdiction under s 91 of the Act.

179 Having regard to our conclusion that is was open to the judge below to have regard to the Offer under s 91(1)(b)(i), consideration of this ground would be a sterile exercise. Whether Gobbo J addressed Calderbank offers in Coastal Estates could have no bearing on the outcome of the appeal.

181 Mr Love submits that the judge below erred in law when he held that the Offer was a Calderbank offer when the communication by which the Offer was made did not refer to the decision in Calderbank v Calderbank and did not claim solicitor-client or indemnity costs in the event that the offer was not accepted.

182 The Offer was made in a facsimile to Mr Love's solicitors expressed to be 'without prejudice save as to costs'. It made the offer to pay $950,000 in compensation along with interest and costs and expressed the Offer to be inclusive of advances already paid and to remain open for acceptance for 14 days from the date of the facsimile (3 April 2009). The facsimile then stated, 'If this offer is not accepted by your client, our client shall produce a copy of this facsimile transmission to the Court on the question of costs.'

183 A Calderbank offer is no more than an offer that:

(a) is expressed to be without prejudice save to the question of costs; and

(b) indicates that the offer will be adduced into evidence on the question of costs.[210]

184 The Offer satisfies both criteria. We are satisfied that the Offer was a Calderbank offer.

185 The fact that a Calderbank offer refers specifically to the decision in Calderbank v Calderbank and/or expressly claims solicitor-client or indemnity costs if the offer is not accepted may be relevant to the Court's exercise of its discretion to award costs on a special basis, in that such matters may inform the question of whether it was reasonable to reject the offer.[211] However, the absence of references to these matters does not mean the offer is deprived of effect as a Calderbank offer.

Conclusion on the application for leave to appeal on costs

187 Mr Love has raised an important question of principle by his proposed challenge to the costs orders in question. Leave to appeal is granted. However, the appeal on the question of costs should be dismissed.

[1] Roads Corporation v Love [2010] VSC 32 ('Reasons').

[2] Roads Corporation v Love [2010] VSC 154 ('Costs Reasons').

1. [3] The land is comprised in two Certificates of Title: Volume 10321 Folio 252 (410 Cooper Street) and Volume 10321 Folio 255 (460 Cooper Street).

[4] This was effected by publication of a Notice of Acquisition in the Government Gazette on that day.

[5] On the date of acquisition the void was about 924,000 cubic metres but the proposal was that over five to 10 years it would have a tipping space of 4 million cubic metres: see Reasons, [292], fn 79, [398]. There had been no use of the void for landfill at the time of the trial.

[6] NRWMG is one of many regional waste groups established by Part IX Division 2A of the Environment Protection Act 1970 which are created, inter alia, to plan for municipal waste management in the regions. The groups prepare and keep up to date Regional Waste Management Plans which must be approved under the Environment Protection Act 1970 (Vic) and thereupon becoming binding on councils.

[12] The terms of the orders are set out below, [131].

[13] [2008] VSCA 16; (2008) 18 VR 329.

[14] With whom Maxwell P (and Redlich JA) agreed.

[15] [2008] VSCA 16; (2008) 18 VR 329, 333-4 [12] (citations omitted).

[19] Outline of Submissions on behalf of appellant and applicant for leave, dated 1 November 2010, [2].

[20] For the definition of 'market value' see [12] above.

[21] Reasons, [28]. Now would it have affected any value in the 'before' situation: Ibid [20].

[24] [1998] 1 VR 83. Phillips JA was speaking within the context of an appeal to the Court of Appeal from a tribunal under s 52 of the Administrative Appeals Tribunal Act 1984 but the observations are nevertheless applicable to an appeal similarly restricted to a question of law from a trial judge.

[27] This was despite the terms of, for example, Ground 2. See below [28].

[28] The State Planning Policy Framework required that the siting and management of waste disposal facilities must be in accordance with State environment protection policies which directed the hypothetical purchaser to the significance of issues relating to the appropriate siting of landfills, environmental management considerations and the terms of the relevant RWMP. See reasons [206]-[207].

[29] See Reasons, [209]. See n 28 above.

[30] See Reasons, [219]-[220], and [41] below.

[31] See Reasons, [207] ff and [7] above.

[32] The Corporation was thus entitled to proceed, as it did, on the basis that Mr Love did not claim that the trial judge committed an error in relation to disturbance loss: Respondent's Outline of Submissions, 28 January 2001, n 20. There was no application made for leave to amend the grounds of appeal.

[33] Reasons, [31], [533], [600], [601].

[36] The prospect of use for an integrated business including quarrying, landfill, farming and other related uses was also relied upon by Mr Love in his claim for special value.

[42] Reasons, [30], see also [329].

[52] Ibid [266]. The Corporation at trial relied upon a council policy, the Cooper Street Precinct Strategy, which sought to limit tipping to currently active sites; however, the trial judge accepted that there was significant doubt as to the weight to be attributed to the policy and found that the hypothetical purchaser would not have regarded the policy as either necessarily precluding or endorsing the landfill potential of the WA149 land: Reasons [316], [325].

[70] Ibid [46], and see also [601].

[71] This critical finding is also important for refuting Mr Love's submission based on 'loss of a chance' because the chance would be the chance of making a loss.

[73] [1907] HCA 82; (1907) 5 CLR 418, 441.

[74] [1956] HCA 7; (1956) 95 CLR 245.

[76] [2009] UKHL 44.

[78] See Jacfun Pty Ltd v Sydney Harbour Foreshore Authority [2011] NSWSC 119, [53]-[55]; Berryman v Hames Sharley (WA) Pty Ltd [2008] WASC 59; (2008) 38 WAR 1, 88 [567].

[79] [1990] HCA 20; (1990) 169 CLR 638.

[81] See Macdonald v Australia Wool Innovation Ltd [2005] FCA 105, 246, 247.

[82] His Honour took account of the zoning of the WA149 land at, for example, [134]; its present and future uses at, for example, [139], [603]-[605]; its combined capacity for quarrying and landfill, [50], [545], and the question of whether a combined quarrying/landfill proposal was compatible with future industrial use, [603]-[605].

[83] [2008] VSCA 180; (2008) 20 VR 447 (Warren CJ, Kellam JA and Osborn AJA).

[85] Ibid 462, [56] (citations omitted).

[90] Reasons, [603], [604], [607]. This was taken from that part of the trial judge's reasons concerned with special value, a different context from that for which Mr Love sought to use it.

[92] The judge remarked upon the opposing contentions for the alternative uses of the land (at [330]) describing Mr Love's submission for a landfill not as a use that would arise after quarrying had been completed but rather as a use that would occur concurrently with the quarrying, as is apparent from Appendix A to his Honour's reasons (Mr Lonergan's Discounted Cash Flow Valuation) which shows the proposed commencement date for landfill as 1 July 2004 with an inflow of 100,000 tonnes of waste in the year ended 30 June 2005. It was because of the proposed concurrency between the quarry operation and the landfill that the evidence of Mr Kerr, as the managing director of Conundrum, the lessee of the quarry, was relevant, most particularly concerning the need for a further agreement between Conundrum and Mr Love if landfill was to take place on the WA149 land. (See Reasons, [709]-[721]. Mr Herdman, the other accountant called by Mr Love, similarly sought to value a combined and concurrent quarry and landfill as is apparent from his Honour's identification (at [398]) of one of the many assumptions Mr Herdman's methodology relied upon, namely, the creation of a tipping space of 4 million cubic metres and an annual waste stream of 200,000 cubic metres with 'the release of void tipping space on a continuing and uninterrupted basis sufficient to accommodate such a waste stream'. The proposal put at trial, to which Mr Love's evident was addressed, was that filling would commence while quarrying continued to increase the void and one would follow the other. As is evidence from his Honour's reasons, the position at trial was clearly that the basis of the claim was for concurrent use (at [709]-[721]).

[96] Ibid (original emphasis)(citations omitted).

[97] This is referred to at [52] above.

[98] Reasons, [46], and see also [601].

[99] There was also some doubt whether the submission that the landfill potential should be added to the highest and best use had ever been put at trial. This is apparent from the Particulars of Claim which included a claim for loss associated with 'loss of access to Quarry/Landfill between 28 March 2000 and June 2004': Particulars of Claim (dated 16 November 2007), Appeal Book B250) and which did not include a claim for loss of landfill potential that was to be added, in some way, to an alternative highest and best use, such as future industrial use. See also Amended Particulars of Claim (dated 16 March 2009) (Appeal Book B, B 255). The claim at trial was for concurrent use of the quarry operations and the landfill; there was no claim made that the landfill potential should be added as a 'top up' on the alternative future industrial use. This is consistent with there being no mention of the latter claim in his Honour's careful judgment that shows meticulous attention to detail. Transcript, pp. 31; 63. We deal further with the notion of a 'loss of a chance' at [100]-[102] below.

[118] Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418, 441 (Isaacs J).

[119] For the definition of 'loss attributable to disturbance' see [15] above. See also Halwood Corporation Limited v Roads Corporation (1995) 89 LGERA 280; Halwood Corporation Limited v Roads Corporation [1998] 2 VR 439.

[120] Outline of Submissions on behalf of appellant/applicant for leave, dated 1 November 2010, [34].

[123] Studley Developments Pty Ltd v Department for Planning and Urban Growth [1994] VicRp 45; [1994] 1 VR 643, 647; Studley Developments Pty Ltd v Department for Planning and Urban Growth [1993] VicRp 3; [1993] 1 VR 15, 22.

[128] Ibid [69], [682], [700], [701], [727], [728], [733].

[131] Ibid [558]-[559]. His Honour found that, on an assumption that there was 100 per cent certainty of obtaining landfill approval, and choosing a realistic gate price of $25 per tonne, the revised calculations made by Mr Meredith (called by the Corporation) yielded a value of minus $3,654,535. On the assumptions made by Mr Lonergan (called by Mr Love) as to gate price, waste volume, timing and capital expenditure timing, the result was minus $1,772,647. In other words, both of the discounted cash flow valuations came to a negative figure without making an adjustment for the chance of getting approval or not.

[133] [2008] VSCA 16; (2008) 18 VR 329.

[134] Ibid 336-7, [21] (emphasis added)(citations omitted).

[135] Reasons, [60]. See Tanner v Minister for Education and Training [2002] NSWLEC 40; (2002) 119 LGERA 321.

[137] Ibid [63], [188]. For the definition of 'loss attributable to severance' see [14] above.

[140] [1961] HCA 20; (1961) 106 CLR 85.

[141] Reasons, [58], [61], [87], [109].

[144] Ibid [162] (emphasis added). See also [660]-[669].

[147] Ibid [728] (as mentioned above, in [98]).

[148] See the definition of 'special value' extracted above at [13].

[151] Ibid [625]; however, this was a much more modest sum than that which Mr Love had originally claimed.

[155] [1999] HCA 64; (1999) 167 ALR 575.

[156] Ibid 654, [292] (emphasis added) (citations omitted).

[157] [1972] HCA 15; (1972) 129 CLR 586.

[158] With whom McTiernan and Windeyer JJ agreed.

[159] Ibid 589-590 (citations omitted).

[165] Ibid. There was an allegation by Mr Kerr that in the course of negotiations Mr Love 'moved the goal posts' and Mr Love made the same allegation against Mr Kerr (Reasons, [717]).

[166] Reasons, [718], and see [709].

[169] In accordance with s 53(1) of the Act.

[170] In accordance with the provisions of the Act and the Supreme Court (General Civil Procedure) Rules 2005 (the 'Supreme Court Rules').

[171] See Calderbank v Calderbank [1975] 3 All ER 333.

[172] These followed grounds of appeal (1)-(9) in respect of the principal judgment. See above, [28].

[173] [1994] VicRp 13; [1994] 1 VR 210.

[174] [1975] 3 All ER 333.

[176] Ibid 216. In the event that O 26 had no operation, the Court was also asked to take into account offers of compromise generally in the exercise of its discretion under s 91. In this context, his Honour said that all of the factors that told against the operation of O 26 'in its paramount form' told almost as strongly against a 'hybrid version' whereby O 26 offers were added to the discretionary matters set out in s 91: Ibid 217.

[182] [2005] VSCA 298; (2005) 13 VR 435, 442, [25].

[183] Paragraph (c) would appear to have no application, as the Act does not prescribe any other matters that are to be taken into account in determining the allocation of costs.

[184] The principle is referred to as the generalia specialibus rule. See Hoffman v Chief of Army [2004] FCAFC 148; (2004) 137 FCR 520, 528-529 [12]-[15] (Black CJ, Wilcox and Gyles JJ); Australian Broadcasting Authority v Project Blue Sky Inc (1996) 71 FCR 465, 483 (Wilcox and Finn JJ); Smith v The Queen [1994] HCA 60; (1994) 181 CLR 338, 348 (Mason CJ, Dawson, Gaudron and McHugh JJ); Refrigerated Express Lines (A/Asia) Pty Ltd v Australian Meat and Live-Stock Corporation (No 2) [1980] FCA 38; (1980) 29 ALR 333, 347 (Deane J); No 20 Cannon Street Ltd v Singer & Friedlander Ltd [1974] Ch 229, 235G (Megarry J).

[185] (1979) 21 SASR 108, 135.

[186] As Dixon CJ said in Commissioner for Railways (NSW) v Agalianos [1955] HCA 27; (1955) 92 CLR 390, 397 the context, the general purpose and policy of a provision and its consistency and fairness are surer guides to its meaning than the logic with which it is constructed.

[189] Ibid 213. To like effect, his Honour referred to the fact that the procedures of the Court from 1965 onwards compelled valuations to be disclosed well before the hearing and all evidence to be placed on affidavit and filed and served before any hearing. Where no offer had been made, a direction was inevitably given requiring a notice of some offer to be filed and served. These procedures of the Court were so settled and clear that it was difficult to believe that the legislature would not have had regard to this practice in framing the legislative changes when it enacted the Act. Again, the scheme of the Act appeared to recognise the existing procedure, for it extended the previous system of open offers to provide for mandatory offers even before there was any claim for compensation: Ibid 215.

[190] In making this offer, the Authority must have regard to a valuation of the land carried out by the Valuer-General or an appropriately qualified person, and the offer must be accompanied by a copy of the certificate of valuation to which the Authority has had regard in making the offer, a statement explaining any difference between the offer and the valuation, and a statement in the prescribed form setting out the principle rights and obligations of persons whose interests in land have been acquired under the Act.

[191] Like the initial offer of compensation, the notice of claim must contain certain details. If the claimant disputes the valuation to which the Authority had regard in making its offer, it must be accompanied by a copy of the Certificate of Valuation from an appropriately qualified person upon which the claim is based and a statement setting out the method and basis of that valuation.

[196] Section 85 of the Act provides for the Court to order the parties to attend a compulsory conference and s 86 describes the objects of a compulsory conference as including to provide a forum in which the parties may discuss their respective reasons for making or rejecting the disputed claim and where possible settle or resolve the matters in dispute before the dispute is heard by the Court.

[199] [2010] NSWLEC 153; (2010) 175 LGERA 189.

[201] Ibid 200, [21](d), referring to Pastrello v Roads and Traffic Authority (NSW) [2000] NSWLEC 209; (2000) 110 LGERA 223, 225 [17]-[18].

[202] Banno v Commonwealth of Australia (1993) 45 FCR 32.

[204] In Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27, [34], Biscoe J referred to other decisions of that court that had recognised that the discretion to award costs in compensation cases tilted the discretion to award costs in favour of the dispossessed owner: Nasser v Roads and Traffic Authority (NSW) [2006] NSWLEC 562; (2006) 149 LGERA 289, [32]; Simpson v Bagnall [2008] NSWLEC 79, [10].

[205] Minister for the Environment v Florence (1979) 21 SASR 108, 135.

(a) On 28 November 2001, the Corporation made an offer to Mr Love in the amount of $170,000;

(b) On 27 October 2003, Mr Love made a response to offer in amounts totalling $650,060;

(c) On 13 August 2004, the Corporation made a further offer in the amount of $269,000;

(d) On 3 March 2006, Mr Love filed Particulars of Claim amounting to some $876,720;

(e) On 28 April 2006, the Corporation served a Notice of Sum Offered in the amount of $275,000;

(f) On 11 November 2007, Mr Love filed Amended Particulars of Claim totalling $18,286,941;

(g) On 16 March 2009, Mr Love filed Amended Particulars of Claim totalling $16,267,000;

(h) On 3 April 2009, the Corporation made the Offer (in the form of a facsimile containing a 'without prejudice' offer in the sum of $950,000 plus interest plus costs). On that same day, the Corporation also served an offer of compromise in the same amount under O 26;

(i) On 17 April 2009, the Corporation filed a further Notice of Sum Offered in the amount of $440,339.92

[208] His Honour further found that the proceedings had arisen from or had been affected by an excessive claim by Mr Love. The claims for loss of landfill potential and drainage impacts were both unfounded and excessive. The claims in respect of solatium and the loss of tree value were also excessive. As a consequence, the claim for compensation as a whole was grossly excessive. In turn, the excessive nature of the claim was the principal cause of the costs incurred by the parties both in preparation and at trial. For that reason, his Honour expressed himself to be fundamentally of the opinion that following the 17 November 2000 amended claim, the costs award should reflect the overwhelming success of the Corporation upon the issues between the parties after that date (Costs Reasons, [51]).

[209] It was not submitted that his Honour acted on a manifestly erroneous view of the facts or that the award was manifestly unreasonable: Wightman v Johnson [1995] VicRp 81; [1995] 2 VR 637, 639-40; ETNA v ARIF[1999] VSCA 99; [1999] 2 VR 353, 378.

[210] M T Associates Pty Ltd v Aqua-Max Pty Ltd (No 3) [2000] VSC 163, [125] (Gillard J); Calderbank v Calderbank [1975] 3 All ER 333, 342 (Cairns LJ). In Calderbank v Calderbank, 342, Cairns LJ described the form of the offer that came to be known as a Calderbank offer as:

... an offer ... made in the form that it [is] without prejudice to the issue as to damages but reserving the right of the [offeror] to refer to it on the issue of costs ...

[211] Joint v Stephens (No 2) [2008] VSC 69, [57]; Hazeldene's Chicken Farm Pty Ltd v WorkCover Authority (Vic) (No 2) [2005] VSCA 298; (2005) 13 VR 435, 442, [25].