Niezabitowski v Roads and Traffic Authority of NSW

7 On 28 June 2004, the respondent gave the applicants a written compensation notice, in accordance with s 42, containing notification of the compulsory acquisition and their entitlement to compensation in the amount determined by the Valuer-General.

8 The applicants did not then accept the offer of compensation (as they could have done under s 44) but instead, on 17 September 2004, lodged an objection to the amount of compensation offered with the Land and Environment Court, as they were entitled to do: s 66.

9 The objection became proceedings within class 3 of the Court's jurisdiction: Land and Environment Court Act 1979 s 19(e), Div 2 (Court Act).

10 The Court made directions to bring the matter on for hearing.

11 On 18 January 2005, the respondent filed points of assessment of compensation in the sum of $5,012,490.

12 On 21 April 2005, the applicants filed points of claim claiming $6,054,400.

13 On 29 April 2005, the respondent filed points of defence pleading that the compensation payable was $5,012,490.

14 In March 2006, the proceedings were listed for hearing for five days commencing on 17 July 2006.

15 On 12 July 2006, the applicants filed a notice of discontinuance and, that afternoon, notified the respondent's solicitors of same. This was the first time that the respondent knew about the applicants' intention not to continue with the proceedings.

16 On 14 July 2006, the applicants, by letter, purported to accept the offer of compensation in the compensation notice of 28 June 2004.

17 On 13 July 2006, the respondent filed a notice of motion returnable on 17 July 2006 which, as amended, seeks an order that the notice of discontinuance be set aside or, alternatively, costs on an indemnity basis. I heard that motion on 17 and 18 July 2006.

18 The substantive proceedings which had been fixed for hearing for five days commencing on 17 July 2006 did not proceed because of the applicants' conduct. On 17 July 2006, senior counsel for the applicants informed me that the applicants had decided on 6 June 2006 not to proceed and to attempt to settle the proceedings or, if that were unsuccessful, to file a notice of discontinuance and accept the statutory offer. Unsuccessful settlement negotiations occurred between 6 June and 12 July.

19 On 17 July 2006, counsel for the respondent informed me that the amount of compensation for which the respondent proposed to contend in the substantive proceedings is $2,400,000. This would require an amendment to the points of defence which contends for a figure of $5,012,490. This shows the importance to the parties of the issues before the Court, for the applicants claim that on 14 July 2006 they validly accepted the statutory offer of $5,082,490. Approximately $2.7 million potentially turn on the question whether the offer was still open for acceptance when it was purportedly accepted.

THE LEGISLATIVE FRAMEWORK 20 The scheme of the Just Terms Act is as follows:

(i) An authority of the State ( authority ) must, as soon as practicable after giving a proposed acquisition notice, notify the Valuer-General of the proposed acquisition notice: s 18. (ii) An authority may, with the approval of the Governor, declare, by notice published in the Gazette, that any land described in the notice is acquired by compulsory process: s 19(1). (iii) An owner whose land has been compulsorily acquired by notice under s 19 has a statutory right to be paid compensation: s 37. (iv) The owner can lodge a claim for compensation: s 39. (iv) An authority must, as soon as practicable after receiving a claim for compensation in respect of a compulsory acquisition (or proposed compulsory acquisition), give the Valuer-General a copy of the claim: s 41(1). (v) The Valuer-General is to determine the amount of compensation to be offered to the former owner of land: s 47. (vi) The Valuer-General may determine the amount of compensation to be offered to a former owner of land for a compulsory acquisition of the land before or after the acquisition takes place and even though the former owner has not made a claim for the compensation: s 41(2). (vii) An authority which has compulsorily acquired land must, within 30 days after the publication of the acquisition notice, give the former owners of the land written notice of the compulsory acquisition, their entitlement to compensation and the amount of compensation offered " as determined by the Valuer-General ": s 42(1). (viii) If a former owner of land has not been given a compensation notice as required by the Just Terms Act , the Valuer-General must, as soon as practicable after being requested to do so, give the former owner written notice of the amount of compensation to be offered to the former owner as determined by the Valuer-General: s 42(8). (ix) A compensation notice given to a former owner of land must (among other things), by s 43 (d) offer to pay a specified amount of compensation as determined by the Valuer-General and be accompanied by a form of deed of release and indemnity for completion if the offer is accepted, and (e) inform the owner of the right to object to the amount offered . (x) A person entitled to compensation may accept the amount of compensation offered by the authority in the compensation notice: s 44(1). (xi) Payment of the compensation is to be made within 28 days of the receipt by the authority of a claim for compensation, deed of release and indemnity (duly completed) and any relevant documents of title: s 44(2). (xii) If a person entitled to compensation does not, within 90 days after receiving a compensation notice: (a) accept the amount of compensation offered by the authority; or (b) lodge with the Land and Environment Court an objection to the amount of compensation offered, the offer of compensation is taken to have been accepted: s 45(1). (xiii) Such an acceptance is subject to any decision of the Land and Environment Court on an objection lodged after the 90 day period: s 45(2). (xiv) The authority must, on such an acceptance taking effect, pay the amount of money concerned into a trust account and pay the money to the person entitled to it on receipt of a claim for compensation, deed of release and indemnity (duly completed) and any relevant documents of title: s 45(3). (xv) An authority may, at any time after land is acquired, make an advance payment of compensation to any person who the authority considers is entitled to the compensation. Acceptance by a person of an advance payment does not constitute an acceptance of any offer of compensation made by the authority: s 48(1) and (3). (xvi) A person who receives an advance payment which exceeds the amount of compensation to which the person is entitled, must repay to the authority the amount of the excess: ss 48(4). (xvii) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority: s 66(1). (xviii) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation: s 66(2). (xix) Payment of compensation in respect of matters before the Land and Environment Court is to be made in accordance with any agreement reached during the proceedings or, if no such agreement is reached, in accordance with the decision of the Court: s 68(1). 21 The Court Act relevantly provides: (i) The Land and Environment Court has jurisdiction (referred to as " Class 3 " of its jurisdiction) to hear and dispose of claims for compensation by reason of the acquisition of land under the Just Terms Act : ss 19(e), 24(1). (ii) If a claim is made for compensation because of the compulsory acquisition of land in accordance with the Just Terms Act , and no agreement is reached between the claimant and the authority required to pay the compensation, the claim is (subject to that Act) to be heard and disposed of by the Court and not otherwise: s 24(1). This provision is similar to s 68 of the Just Terms Act but is expressed to be subject to that Act.

22 The Land and Environment Court Rules 1996 provide that a party may at any time discontinue any proceedings brought by the party: Pt 11 r 1. If proceedings are discontinued, the Court may, on the application of the other party, order the discontinuing party to pay the costs of the other party occasioned by the discontinued claim and reasonably incurred before service on the other party of notice of the discontinuance: Pt 11 r 5. This Court's discontinuance rules are different from those in the Uniform Civil Procedure Rules 2005, applicable to other NSW courts, under which a party may only discontinue with leave of the court or by consent and is liable to pay the other party's costs unless the court otherwise orders: UCPR 12.1, 42.19.

RELEVANT PRINCIPLES OF STATUTORY CONSTRUCTION 23 In my opinion, legislation conferring a right to compensation for the compulsory acquisition of land should be construed with all the generality that its words permit. In Marshall v Director-General, Department of Transport (2001) 205 CLR 603 at 623 [38] Gaudron J said: Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit. Certainly, such provisions should not be construed on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute.

24 Statutory interpretation requires that "the context be considered in the first instance, not merely at some later stage when ambiguity might be thought to arise": CIC Insurance Ltd v Bankstown Football Club Ltd (1997) 187 CLR 384 at 408.

25 Contrary to the applicants' suggestion, I see no conflict between s 44(1) and s 66(2) of the Just Terms Act such as to make it necessary to consider the principles applicable to potentially conflicting statutory provisions discussed in Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355 at 381 [69] - [71].

SUMMARY OF SUBMISSIONS 26 The applicants submit that their acceptance of the statutory offer was effective. They contend that in circumstances where an objection has been filed, the statutory offer remains open for acceptance until the Court decides the claim or the parties reach agreement. The requisite agreement, they submit, may be constituted by acceptance of the statutory offer. They submit that this construction of ss 44, 45 and 68(1) of the Just Terms Act is aided by consideration of the historical context in which that legislation was enacted; and that the contrary construction would lead to unreasonable results. They say that they were entitled to discontinue the proceedings pursuant to the Land and Environment Court Rules 1996 Pt 11 r 1.

27 The respondent submits that the applicants' purported acceptance of the statutory offer was ineffective. It contends that a statutory offer of compensation is rejected when an objection is filed with the Court. Thereafter, it says, the Court must "hear and dispose of" the claim for compensation, unless it is disposed of by an agreement between the parties during the course of the proceedings. They submit that this construction of sections 66(2) of the Just Terms Act and 24(1) of the Court Act is aided by the objects provision of the Just Terms Act. They rely on McCloys Pty Ltd v Lake Macquarie City Council (Bignold J, NSWLEC, 16 September 1994, unreported). They say that the contrary construction would lead to unreasonable results that are contrary to public policy. They submit that the Land and Environment Court's discontinuance rule is inconsistent with, and cannot prevail against, s 66(2) of the Just Terms Act: Land and Environment Court Rules 1996 Pt 1 r 5.

28 In argument, I understood the parties to accept, as I do, that if a person entitled to compensation purports to reject an offer within the 90 day period prescribed by s 45(1) of the Just Terms Act, but does not lodge an objection with the Land and Environment Court within that period, then the offer of compensation is taken to have been accepted under s 45(1), unless the Court is satisfied that there is good cause for the person's failure to lodge the objection within that period: ss 45(2), 66(3). However, the applicants say that thereafter the offer remains open for acceptance, whereas the respondent says that the lodging of the objection is an effective rejection of the offer.

DISCUSSION 29 The following provisions of the Just Terms Act require close consideration: 44 Acceptance of offer of compensation (1) A person entitled to compensation under this Part may accept the amount of compensation offered by the authority of the State in the compensation notice. (2) Payment of the compensation is to be made within 28 days of the receipt by the authority of the State of a claim for compensation, deed of release and indemnity (duly completed) and any relevant documents of title. 45 Deemed acceptance of offer of compensation (1) If a person entitled to compensation under this Part does not, within 90 days after receiving a compensation notice: (a) accept the amount of compensation offered by the authority of the State, or (b) lodge with the Land and Environment Court an objection to the amount of compensation offered, the offer of compensation is taken to have been accepted. (2) Such an acceptance is subject to any decision of the Land and Environment Court on an objection lodged after the 90-day period. (3) The authority of the State must, on such an acceptance taking effect, pay the amount of money concerned into a trust account kept under this Part and pay the money to the person entitled to it on receipt of a claim for compensation, deed of release and indemnity (duly completed) and any relevant documents of title. 66 Objection against amount of compensation offered (1) A person who has claimed compensation under this Part may, within 90 days after receiving a compensation notice, lodge with the Land and Environment Court an objection to the amount of compensation offered by the authority of the State. (2) If any such objection is duly lodged, the Land and Environment Court is to hear and dispose of the person's claim for compensation. (3) A person who does not lodge an objection within the 90-day period and who is taken to have accepted the offer of compensation under section 45 may nevertheless lodge an objection under this section, but the Land and Environment Court is not to hear and dispose of the person's claim for compensation unless satisfied that there is good cause for the person's failure to lodge the objection within that period. (4) If the Land and Environment Court decides that the amount of compensation payable (without the addition of interest) does not exceed by more than 10% the amount of compensation offered by the authority of the State, the Court may cancel or reduce the amount of interest that has accrued under this Act in respect of the compensation since the institution of the proceedings. 68 Payment of compensation arising from court proceedings (1) Payment of compensation in respect of matters before the Land and Environment Court is to be made in accordance with any agreement reached during the proceedings or, if no such agreement is reached, in accordance with the decision of the Court. (2) Subject to any such agreement or decision: (a) if the authority of the State gave the owner concerned a compensation notice - the authority is required to pay 90 per cent of the amount of compensation offered in the notice (as an advance payment) within 28 days after the authority is given notice of the institution of the proceedings or (if the owner does not accept that advance payment) the authority is required to pay 90 per cent of that amount into the trust account kept under this Part, or (b) if the authority of the State did not give the owner concerned a compensation notice - the authority may (but is not required to) make an advance payment under this Part or pay an amount into the trust account kept under this Part.

30 Section 24 of the Court Act also requires close consideration: (1) If: (a) a claim is made for compensation because of the compulsory acquisition of land in accordance with the Land Acquisition (Just Terms Compensation) Act 1991, Division 2 of Part 12 of the Roads Act 1993 or any other Act, and (b) no agreement is reached between the claimant and the authority required to pay the compensation, the claim is (subject to any such Act) to be heard and disposed of by the Court and not otherwise. (2) The Court shall, for the purpose of determining any such claim, give effect to any relevant provisions of any Acts that prescribe a basis for, or matters to be considered in, the assessment of compensation

31 The Land and Environment Rules 1996 Pt 1 r 5 and Pt 11 rr 1, 5 and 6 relevantly provide as follows: 1.5 Application of rules (1) The general practice of the Court prescribed by these rules is to apply to all proceedings authorised by or under any existing or future Act to be commenced in the Court, except in so far as that practice is inconsistent with that Act or with any statutory instrument made under that Act. (2) However, the Court may, on terms, dispense with compliance with any requirements of these rules, either before or after the occasion for the compliance arises.

11.1 Discontinuance A party may at any time discontinue any proceedings brought by the party, so far as concerns the whole or any part of any claim by the party.

11.5 Costs (1) If a party to any proceedings discontinues them in whole or in part, the Court may, on the application of another party, order the discontinuing party to pay the costs of any party against whom the discontinued claim was brought and who does not consent to the discontinuance. (2) The costs payable to a party under any order made under this rule are to be the costs of the party occasioned by the discontinued claim and reasonably incurred before service on the party of notice of the discontinuance. (3) Nothing in this rule limits the Court's power to order costs if proceedings are withdrawn under rule 2.

11.6 Discontinuance not defence A discontinuance under this Part as to any claim is not, subject to the terms of any consent to the discontinuance, a defence to further proceedings on the same claim, or any claim which is substantially the same.

32 Section 66(2) of the Just Terms Act does not refer to, but does not preclude, payment of compensation in accordance with an agreement between the parties, for that is expressly provided for in s 68(1) of that Act and in s 24(1) of the Court Act.

33 In my view, a textual analysis tends to support the construction that the time for acceptance of the statutory offer under s 44(1) of the Just Terms Act is unlimited. Section 44(1) provides that a person entitled to compensation may accept the amount of compensation offered, but prescribes no time limit within which acceptance must occur. By contrast, s 66(1), which is also a permissive provision, permits lodgement of an objection with the Court within 90 days.

34 Lapsing or rejection of a statutory offer are not concepts to which the provisions of the Just Terms Act refer. There is no provision that the statutory offer lapses or is rejected when an objection is lodged with the Court. There is a distinction between a statutory offer which has not been accepted, as referred to in s 45(1)(a), and an offer which has been rejected. There is no provision that the statutory offer can be withdrawn, rescinded, amended or varied. In contrast, there are express provisions in the Just Terms Act that a proposed acquisition notice can be withdrawn (ss 14, 16, 17, 69) or be deemed to be withdrawn (s 14(2)), rescinded (ss 31, 70) or amended (s 16(3)). There are express provisions for compensation claims to be withdrawn (ss 39(4), 71(3)). There are express provisions that, in certain circumstances, an authority can reject a claim for compensation (ss 46, 67, 71) and for a deemed rejection of a claim for compensation (ss 46(3), 67(1)).

35 Section 68(1) of the Just Terms Act provides that payment of compensation is to be made in accordance with "any" agreement reached during the proceedings, or if no such agreement is reached, in accordance with the decision of the Court. The word "any" is without limitation. Acceptance of the statutory offer gives rise to an agreement within the ordinary understanding of the effect of acceptance of an offer. In my view, that agreement is within the ambit of the broad expression "any agreement" in s 68(1). The respondent submitted that the words "any agreement" in s 268(1) should be construed as being restricted to an agreement negotiated independently of the statutory offer. I do not accept that submission. In my view, the words should be construed with all the generality that they permit.

36 I do not think that s 3, the objects section of the Just Terms Act, illuminates the construction issue before me.

37 The applicants submit that resolution of the issue is assisted by the fact that the Just Terms Act was enacted against the background of compulsory acquisition legislation in Victoria, South Australia and the Northern Territory which bound the resuming authority to the amount of its offer as the minimum amount of compensation: see Brown, Land Acquisition (3rd ed, 1991) para 3.07. In reply, the respondent reviewed such legislation and submitted that it did not make the resuming authority's offer of compensation absolutely binding on the authority once dispute resolution procedures or legal proceedings had been instituted. I do not think that construing this other legislation is of assistance in interpreting the Just Terms Act. The applicants also submit that assistance is derived from the fact that the Just Terms Act also was introduced after several enquiries and many years of consideration: Second Reading Speech, NSW Legislative Assembly, Parliamentary Debates (Hansard), 11 April 1991, at 1975. I have not found this consideration to be of assistance.

38 The respondent places some reliance on McCloys Pty Ltd v Lake Macquarie City Council (Bignold J, NSWLEC, 16 September 1994, unreported). In that case, Bignold J held that in claims for compensation under the Just Terms Act, the respondent is not bound by the Valuer-General's determination of compensation because of s 66(2) of the Just Terms Act, which provides that if an objection is lodged, "the Land and Environment Court is to hear and dispose of the person's claim for compensation". Consequently it was held that the respondent could adduce evidence of, and contend for, lower compensation. Bignold J said that ss 66 and 68 of the Just Terms Act indicate that the Valuer-General's determination is not "spent" when an objection is lodged. He noted, in particular, that s 68(2)(a) requires the respondent to pay in advance 90 percent of the amount of compensation determined by the Valuer-General within 28 days of the institution of proceedings. The respondent submits that his Honour must therefore have been of the view that the Valuer-General's determination - and therefore the statutory offer - was spent in all other respects. I would not attribute that conclusion to his Honour when that issue was not squarely before him.

39 The respondent's written submissions referred to the lodging of an objection as a "rejection" of the statutory offer. In McCloys, Bignold J also referred to the lodging of an objection as a "rejection" of the statutory offer. I think this was obiter. I consider, with respect, for the reasons that I have expressed above, that the Just Terms Act does not justify that characterisation of an objection.

40 The respondent submits that as the Just Terms Act provides the person entitled to compensation with the option of accepting the statutory offer or lodging an objection with the Land and Environment Court, the offer should therefore be viewed as lapsing upon the filing of an objection. The respondent submits that it is reasonable to interpret the Act in this way, and that the competing construction that the statutory offer remains open after lodgement of an objection has unreasonable consequences, such that it is against public policy. The respondent points to the fact that the person entitled to compensation could make an objection and then decide along the way to accept the original offer. Reasons may include that the case does not go well at hearing; that a witness does not testify as well as expected; or that the applicant does not like its prospects before the particular judge allocated to hear the case, or otherwise fears that judgment may be for a lesser amount than the statutory offer. The respondent points out that a resuming authority cannot unilaterally terminate proceedings and that it is bound by the Valuer-General's determination of compensation reflected in the statutory offer so long as it remains open, even if the Valuer-General's assessment is incorrect or excessive: Gosford City Council v Valuer-General (NSW) (1996) 90 LGERA 413. There is nothing unfair, the respondent says, in binding a person who has lodged an objection to the Court's determination of the claim, unless an agreement is negotiated during the proceedings.

41 On the other hand, on the construction for which the respondent contends, persons entitled to compensation who lodge objections are locked into litigation from which they cannot withdraw. They can only await the decision of the Court or negotiate, if they can, an agreement with the respondent. This may have unfortunate consequences which counter those referred to above that may flow from the contrary construction. Persons entitled to compensation may find that they are unable to continue to fund the litigation, or may not wish to continue to run the risk of litigation, particularly in light of unexpected and perhaps unforeseeable evidence adduced by the respondent. Take the present case. The respondent's points of defence contend for compensation which is only marginally lower than the statutory offer. Yet there has been a dramatic development whereby the respondent has served evidence which will lead it to seek to amend its points of defence to allege that the compensation should be less than half the statutory offer, about $2.7 million less than that initial offer. These sort of difficulties are even more acute in the hypothetical case of a person entitled to compensation who may experience difficulties in obtaining valuation advice within the statutory 90 day period and who therefore lodges an objection intended to be a holding objection to protect the person's position.

42 The respondent says that another unreasonable consequence of the construction for which the applicants contend is that if the applicants' recent purported acceptance of the statutory offer is valid, then the respondent will be obliged to pay statutory interest on the amount of compensation under s 49 of the Just Terms Act, without having the benefit of s 66(4). Under s 66(4) the Court may cancel or reduce the amount of interest that has accrued under the Act since the institution of the proceedings if the Court decides that the amount of compensation does not exceed by more than 10 percent the amount of compensation offered by the authority. Given that a resuming authority is obliged to pay an advance of 90 percent of the amount offered at an early stage and has had the use of the balance, I do not think that this is a particularly significant consideration.

43 Taking all matters into account, I do not think that the respondent's construction is to be preferred because of considerations of unreasonable consequences or public policy. On the contrary, in the context of legislation which seeks to award persons just compensation for compulsory acquisition of their land by the State, the spectre of locking the person into litigation from which there is no escape in any circumstances, other than agreement which may involve capitulation, tends to favour the construction that the statutory offer remains open until the Court decides the case or the parties otherwise agree.

44 In my opinion, that is the correct construction.

45 The respondent submits that even if the "agreement" referred to in s 68(1) of the Just Terms Act includes an agreement constituted by acceptance of the statutory offer, in the present case the applicants purported to discontinue the proceedings before accepting the statutory offer. It submits that if discontinuance was effective (contrary to its primary submission), then the acceptance of the statutory offer was not an agreement "reached during the proceedings" because the proceedings thereby came to an end.

46 In my opinion, the purported notice of discontinuance was ineffective because a person entitled to compensation cannot discontinue proceedings (which have been instituted by lodging an objection) unless an agreement has been reached during the proceedings, as contemplated by s 68(1) of the Just Terms Act. Section 24(1)(b) of the Court Act is to similar effect as s 68(1), but is expressed to be subject to the Just Terms Act. The Land and Environment Court Rules provide that a party may discontinue proceedings without leave and the other parties may then apply for costs: Pt 11 r 1. However, Pt 1 r 5(1) provides that the general practice of the Land and Environment Court prescribed by the rules does not apply if that practice is inconsistent with proceedings authorised by an existing Act. Discontinuance, in my opinion, would be inconsistent with s 68(1) of the Just Terms Act unless an agreement had first been reached between the parties. It would also be inconsistent with s 24(1) of the Court Act.

47 Consequently, the notice of discontinuance filed by the applicants was, in my view, ineffective and should be set aside, because at the time it was filed there was no agreement between the parties. The proceedings, therefore, remain on foot. When, shortly after the purported discontinuance, the applicants accepted the statutory offer, there was an agreement between the parties which, for the reasons I have given, was an agreement reached during the proceedings within the meaning of s 68(1) of the Just Terms Act. It was also an agreement reached between the parties within the meaning of s 24(1)(b) of the Court Act. The Court has thereby ceased to have any function in relation to the substantive proceedings. It has only a residual function, which includes resolution of issues such as those with which I am now concerned: disposal of the proceedings and costs.

48 Consistently with the conclusions that I have expressed, the applicants could now discontinue the proceedings, or the Court should dismiss them. As there has not been an effective discontinuance, it seems to me to be appropriate to dismiss the proceedings.

COSTS 49 In my opinion, where an applicant accepts a statutory offer after lodging an objection with the court and thereby abandons the proceedings which it commenced, there should usually be a costs order in favour of the respondent. In the present case there is an additional factor which, in my view, makes it just to order indemnity costs against the applicants after 6 June 2006. That was the date on which the applicants decided that they would not continue with the proceedings and ceased preparation for the hearing.

50 After they made their decision, the applicants continued to create the appearance that they were proceeding with their objection in order to secure a tactical advantage while endeavouring to negotiate a settlement with the respondent. In the meantime, the respondent continued to incur costs. Back in March 2006 this matter had been fixed for hearing for five days commencing on 17 July 2006. On 19 June 2006 the matter came before me for directions. Directions were made, with the agreement of both parties, that the parties' valuers jointly confer by 30 June 2006. Further directions were made at that time concerning tender of documents and other pre-trial matters. It was not until 12 July 2006 that the applicants filed a notice of discontinuance and notified the respondent. It was frankly made clear to me on 17 July 2006 by the applicants' senior counsel that since 6 June 2006 they have had no intention of proceeding with the hearing that had been fixed to commence on 17 July 2006.

51 The real cause and occasion of the costs incurred by the respondent after 6 June 2006 was the tactical position adopted by the applicants.

52 The principles concerning when indemnity costs should be ordered were addressed by this Court in Westfield Management Ltd v Direct Factory Outlets Homebush Pty Ltd (No 4) [2005] NSWLEC 168 (Pain J) and Jacobson v Ballina Shire Council [2006] NSWLEC 375 (Jagot J) . In Lactos Fresh Pty Ltd v Finishing Services Pty Ltd (No 2) [2006] FCA 748 at [171], Weinberg J approved the following summary of principles relating to the imposition of indemnity costs by Sheppard J in Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225 at 233 - 234: In consequence of the settled practice which exists, the Court ought not usually make an order for the payment of costs on some basis other than the party and party basis. The circumstances of the case must be such as to warrant the Court in departing from the usual course. That has been the view of all judges dealing with applications for payment of costs on the indemnity or some other basis whether here or in England. The tests have been variously put. The Court of Appeal in Andrews v. Barnes (supra) at 141 said the Court had a general and discretionary power to award costs as between solicitor and client ' as and when the justice of the case might so require .' Woodward J in Fountain Selected Meats appears to have adopted what was said by Brandon LJ (as he was) in Preston v. Preston (supra) at 637; namely, there should be some special or unusual feature in the case to justify the Court in departing from the ordinary practice. Most judges dealing with the problem have resolved the particular case before them by dealing with the circumstances of that case and finding in it the presence or absence of factors which would be capable, if they existed, of warranting a departure from the usual rule. But as French J said (at p 8) in Tetijo , ' The categories in which the discretion may be exercised are not closed' . Davies J expressed (at p 6) similar views in Ragata (supra).

Notwithstanding the fact that that is so, it is useful to note some of the circumstances which have been thought to warrant the exercise of the discretion. I instance the making of allegations of fraud knowing them to be false and the making of irrelevant allegations of fraud (both referred to by Woodward J in Fountain and also by Gummow J in Thors v Weekes (1989) 92 ALR 131 at 152; evidence of particular misconduct that causes loss of time to the Court and to other parties (French J in Tetijo ); the fact that the proceedings were commenced or continued for some ulterior motive (Davies J in Ragata ) or in wilful disregard of known facts or clearly established law (Woodward J in Fountain and French J in J-Corp (supra)); the making of allegations which ought never to have been made or the undue prolongation of a case by groundless contentions (Davies J in Ragata ); an imprudent refusal of an offer to compromise (eg Messiter v Hutchinson [1987] 10 NSWLR 525, Maitland Hospital v Fisher (No. 2) [1992] 27 NSWLR 721 at 724 (Court of Appeal), Crisp v Keng ( unreported, Court of Appeal, NSW, Kirby P, Priestly JA, Cripps JA, No 40744/1992, 27 September 1993) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records (supra)). Other categories of cases are to be found in the reports. Yet others to arise in the future will have different features about them which may justify an order for costs on the indemnity basis. The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis.

It remains to say that the existence of particular facts and circumstances capable of warranting the making of an order for payment of costs, for instance, on the indemnity basis, does not mean that judges are necessarily obliged to exercise their discretion to make such an order. The costs are always in the discretion of the trial judge. Provided that discretion is exercised having regard to the applicable principles and the particular circumstances of the instant case its exercise will not be found to have miscarried unless it appears that the order which has been made involves a manifest error or injustice.

53 In Rosniak v Government Insurance Office (1997) 41 NSWLR 608 at 616, Mason P, with whom Clarke JA agreed on this aspect, said: Later cases have emphasised that the discretion to depart from the usual ' party and party' basis for costs is not confined to the situation of what Gummow J described as the ' ethically or morally delinquent party' ( Botany Municipal Council v Secretary, Department of the Arts, Sport, the Environment, Tourism and Territories (1992) 34 FCR 412 at 415): see Baltic Shipping Co v Dillon , ' Mikhail Lermontov ' (1991) 22 NSWLR 1 at 34; Colgate-Palmolive Co v Cussons Pty Ltd (1993) 46 FCR 225 at 233-234. Nevertheless the court requires some evidence of unreasonable conduct, albeit that it need not rise as high as vexation. This is because party and party costs remain the norm, although it is common knowledge that they provide an inadequate indemnity. Any shift to a general or common rule that indemnity costs should be the order of the day is a matter for the legislature or the rule-maker: Huntsman Chemical Co Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 248.

54 In my opinion, the applicants have engaged in unreasonable conduct in the relevant sense. As a matter of justice to the respondent, there should be an indemnity costs order in its favour from 6 June 2006.

ORDERS 55 The proceedings should now be disposed of in accordance with my reasons, subject to giving the parties the opportunity to address me as to the form of final orders. The orders that I propose are as follows:

1. Order that the applicants' notice of discontinuance filed on 12 July 2006 be set aside. 2. Order that the proceedings be dismissed. 3. Order that the applicants pay the respondent's costs to 6 June 2006 on the ordinary basis and thereafter on the indemnity basis including the costs of the respondent's notice of motion which was returnable on 17 July 2006.

56 I direct the parties to arrange with the Registry on or before 28 July 2006 for the matter to be listed before me in the week commencing 8 August 2006 for the purpose of settling the form of final orders.

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