Plaintiff v Respondent

Supreme Court of Victoria|2010-04-23|Before: OSBORN J

LAND COMPENSATION - Costs of disputed claim - General principles - Non-applicability of rules relating to offers of compromise - Potential relevance of Calderbank offer - Issues based awards of costs - Costs consequent upon refusal of Calderbank offer - Special award of costs - Incidental questions of costs - Three counsel - Reserved costs - Costs of transcript - Mediation order - Section 91 Land Acquisition and Compensation Act 1986.

2 Interest has been agreed in the sum of $188,020.64 as at 26 February 2010 and thereafter until payment of the principal sum at the daily rate of $50.44.

3 The remaining issue is the question of costs. The Corporation seeks orders that the Corporation pay Mr Love's costs of the proceeding up to 15 November 2007 on the party-party scale and that Mr Love pay the Corporation's costs of the proceeding from 16 November 2007 on the solicitor-client scale. It seeks a further order that the Corporation's costs include three counsel, transcript and all reserved costs. It also seeks an order for the Corporation's costs of, and incidental to, the application for costs heard on 26 February 2010 on the party-party scale.

4 Mr Love submits that he should receive his costs of the proceeding up until 17 April 2009 on a party-party basis but because:

(a) Mr Love's success at trial was, when compared to the Corporation's offer of 17 April 2009, only marginal; and

(b) Mr Love failed in the very substantial claims which were, in effect, the reasons for the matter proceeding to trial;

Mr Love ought to pay on a party-party basis 80 per cent of the costs of the Corporation for the trial of the proceeding and the Corporation ought pay on a party-party basis 20 per cent of Mr Love's costs for the trial of the proceeding.

5 Mr Lane, the solicitor for the Corporation, has sworn an affidavit in which he sets out the history of claims for compensation, advances of compensation, and offers of compensation in this matter.

CLAIMS FOR COMPENSATION MADE BY THE RESPONDENT

I am informed by Tim Pontefract of the Corporation and believe that on about 27 October 2003 the Respondent provided a Response to Offer ("the Response to Offer"). By the Response to Offer, the Respondent claimed:

Reinstatement of all services, fences, water drainage and bund wall. 2. The value of the amenity tree plantation in the sum of $279,500.

The value of the land taken in the sum of $370,560.

The Response to Offer referred to a valuation by Robin Hocking for $370,650 and a valuation of the tree plantation for $279,500. These amounts total $650,060. No further monetary amounts were attributed to the other items of loss set out in the Response to Offer...

On about 3 March 2006 the Respondent provided Particulars of Claim as at 3 March 2006 which totalled $876,720.97 and included:

Market value $300,564 2. Disturbance claims totalling $511,445.65 including: 1. Loss of amenity $60,000 2. Loss of trees $279,550 3. Loss associated with loss of access to quarry/landfill between 28 March 2000 and June 2004 "to be provided" 4. Costs associated with rectification of Central Creek culvert "to be provided"

Legal and valuation expenses totalling $30,334.92

Solatium (10% of the value of the acquired land) $30,056.40 2. Interest ...
On about 16 November 2007, the Respondent provided Amended Particulars of Claim as at 16 November 2007, which totalled $18,286,941 and included:

Market value $300,564 2. Claims pursuant to section 41(1)(c), (d) and (e) totalling $4,867,652.88 including: 1. Loss of amenity $60,000 2. Loss of trees $279,550 3. Loss associated with loss of access to quarry/landfill between 28 March 2000 and June 2004 $3,550,000 4. Costs arising due to the design of the Central Creek Culvert: * 62 hours at $120 per hour $7,440 * Additional fill required $787,251

Legal and valuation expenses totalling $30,334.92

Solatium (10% of the market value of the acquired land) $5,712,000 2. Interest $7,376,390.88...
On about 16 March 2009 the Respondent provided Amended Particulars of Claim as at 16 March 2009 which totalled $16,267,000 and included:
1. Market value $10,507,000
2. Claims pursuant to section 41(1)(c), (d) and (e) totalling $3,403,000 including:
  1. Loss of amenity $60,000
  2. Loss of trees $279,550
  3. Claim 2(h), (previously Loss associated with loss of access to quarry/landfill between 28 March 2000 and June 2004) deleted - incorporated under item 1 (market value) of claim
  4. Costs arising due to the design of the Central Creek Culvert:
    - 62 hours at $120 per hour $7,440
    - Additional fill required $2,925,000

c. Legal and valuation expenses totalling $30,334.92

Solatium (an amount not exceeding 10% of the market value of the "before" land) $2,326,731
Interest...

I am informed by Tim Pontefract and believe that on 4 October 2002 the Corporation advanced the Respondent an amount of $170,000 and a further amount of $99,000 was advanced to the Respondent on 27 October 2004.

I am informed by Tim Pontefract and believe that on 28 November 2001 the Corporation wrote to the Respondent, offering the sum of $170,000 as compensation and providing a certificate of valuation...
I am informed by Tim Pontefract and believe that on 13 August 2004 the Corporation wrote to the Respondent and offered the sum of $269,000 (inclusive of $170,000 previously advanced)...
On 28 April 2006 Garland Hawthorn Brahe on behalf of the Corporation filed and served a Notice of Sum Offered and Particulars in the amount of $275,000...
On 3 April 2009, Garland Hawthorn Brahe sent a facsimile to McCluskys Lawyers, solicitors for the Respondent, containing a "Without Prejudice" offer in the sum of $950,000, plus interest in accordance with the provisions of section 53(1) of the Land Acquisition and Compensation Act 1986 ("the Act"), and the Respondent's costs of the proceeding in accordance with the provisions of the Act and the Supreme Court Rules...
Also on 3 April 2009, Garland Hawthorn Brahe sent by facsimile to McCluskys an offer of compromise dated 3 April 2009 in the amount of $950,000, plus interest in accordance with the provisions of section 53(1) of the Act...
On 17 April 2009, Garland Hawthorn Brahe filed and served a Notice of Sum Offered and Particulars in the amount of $440,339.92, less the amount of any GST included in the claim for legal, valuation and other professional expenses pursuant to section 41(1)(f) of the Act...[1]

6 As my principal judgment in this matter indicates, on 17 May 2004 Mr Hocking, a valuer retained by Mr Love, advised him:

If VicRoads come within the vicinity of $240,000 I will be pleased to recommend that you consider accepting ...

7 He further explicitly doubted the prospects of any claim based on alleged loss of access.

8 The above history of claims and offers falls to be considered within the context of this advice and the history of the matter more generally as set out in my principal judgment.

9 It can been seen from the history of claims that the date from which the Corporation seeks costs on a special basis (namely 16 November 2007) is the date from which a quantified claim has been made for loss associated with loss of access to the quarry/landfill between 28 March 2000 and June 2004.

10 It can also been seen from the history of offers that the amount of compensation awarded by the Court is $4,000 more than the amount offered by formal notice filed and served in the proceeding on 17 April 2009, and it is substantially more than was offered on 28 April 2006.

11 Further the compensation awarded is substantially less than was offered on 3 April 2009 on a without prejudice basis by way of a 'Calderbank'[2] offer and by way of an offer of compromise purportedly served in accordance with r 26 of the Supreme Court Rules.

12 The trial of the proceeding ran from 20 April to 28 May 2009 and from 18 August 2009 to 18 September 2009 - a total of 47 days. In addition the parties served and filed substantial further affidavit material during the course of the trial and made extensive written submissions. It can thus be seen that a very substantial quantum of costs was incurred after these without prejudice offers were made.

13 In both Mario Piraino Pty Ltd v Roads Corporation[3] and Coastal Estates Pty Ltd v Shire of Bass,[4] Gobbo J referred with approval to the observations of Wells J in the case of Minister for the Environment v Florence,[5] bearing on the underlying character of proceedings of this kind and issues of costs:

His Honour said: "Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s18 of the Act, a claim to compensation which he could hardly be expected to renounce."Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. 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. But costs are, as always, discretionary, and no hard and fast rule will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sorts of cases."

His Honour concluded, at 135 "Against the history of a wide ranging discretion given to this Court with respect to costs, I am, I apprehend, to construe s36 flexibly and not restrictively, to the intent that the special nature of the jurisdiction to which it relates should be duly recognized, and orders made in that jurisdiction that are just and expedient."[6]

14 I have taken a like view of this general statement of principle.[7]

15 Section 91 of the Land Acquisition and Compensation Act 1986 ('the LAC Act') provides:

(1) In any proceedings under this Part, the Tribunal or the Court (as the case requires) may award such costs as it thinks proper but in making an order for costs must, if the Tribunal or Court considers it appropriate to do so, take into consideration -

(a) the amount of compensation awarded by the Tribunal or Court as compared with the amount (if any) offered by the Authority; and

(b) the extent to which, in the opinion of the Tribunal or Court, the proceedings have arisen from, or been affected by -

(i) unreasonable conduct on the part of the claimant or the Authority; or

(ii) the failure of the claimant to give adequate particulars of the claim or supply supporting material when required to do so; or

(iii) an excessive claim by the claimant; or

(iv) an unduly depressed offer by the Authority; and

(c) any other matters which under this Act are to be taken into account in determining the allocation of costs.

(2) The Court may make an order with respect to the assessment of costs in the same manner as it may in respect of any other matter before the Court.

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

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

16 In the Coastal Estates case, Gobbo J held that Order 26 of the Supreme Court Rules relating to offers of compromise could not operate 'along with, or so as to override' s 91 of the LAC Act:

(1) O. 26 is inconsistent with s91;

(2) The history of the legislation demonstrates the long and special role of open offers;

(3) There are good policy reasons set in history as to why open offers have a special role to play in relation to costs; and

(4) The practice of the court recognises the use and value of open offers.[8]

17 It follows that the provisions of what is now styled r 26.08 are not applicable to cases of this kind.

26.08 Costs consequences of failure to accept

(1) This Rule applies to an offer of compromise which has not been accepted at the time of verdict or judgment.

(2) Where an offer of compromise is made by a plaintiff and not accepted by the defendant, and the plaintiff obtains a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders, the plaintiff shall be entitled -

(a) if the claim of the plaintiff is for damages for or arising out of death or bodily injury, to an order against the defendant for the plaintiff's costs in respect of the claim taxed on an indemnity basis;

(b) in the case of any other claim of the plaintiff, to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis and for the plaintiff's costs thereafter taxed on an indemnity basis.

(3) Where an offer of compromise is made by a defendant and not accepted by the plaintiff, and the plaintiff obtains a judgment on the claim to which the offer relates not more favourable to the plaintiff than the terms of the offer, then, unless the Court otherwise orders -

(a) the plaintiff shall be entitled to an order against the defendant for the plaintiff's costs in respect of the claim up to and including the day the offer was served taxed on a party and party basis; and

(b) the defendant shall be entitled to an order against the plaintiff for the defendant's costs in respect of the claim thereafter taxed on a party and party basis.

(4) For the purpose of paragraph (3), where the offer of compromise was served on the first or a later day of the trial of the proceeding, then, unless the Court otherwise orders -

(a) the plaintiff shall be entitled to the plaintiff's costs in respect of the claim to the opening of the court next after the day on which the offer was served taxed on a party and party basis; and

(b) the defendant shall be entitled to the defendant's costs in respect of the claim thereafter taxed on a party and party basis.

(5) Where a plaintiff obtains judgment for the recovery of a debt or damages and -

(a) the amount for which the Court pronounces judgment includes an amount for interest or damages in the nature of interest; or

(b) by or under any Act the Court awards the plaintiff interest or damages in the nature of interest in respect of the judgment amount -

for the purpose of determining the consequences as to costs referred to in paragraphs (2) and (3) the Court shall disregard so much of the amount recovered by or awarded to the plaintiff for interest or damages in the nature of interest as relates to the period after the day the offer of compromise was served.

(6) For the purpose only of paragraph (5), the Court may be informed of the fact that the offer of compromise was served, and of the date of service, but shall not be informed of its terms.

(7) Paragraphs (2) and (3) shall not apply unless the Court is satisfied by the party serving the offer of compromise that that party was at all material times willing and able to carry out the party's part of what was proposed in the offer.

(8) Where the plaintiff obtains judgment for the recovery of a debt or damages, and the amount of the debt or the damages was not in dispute, but only the question of liability, paragraph (2) shall not apply unless the Court is satisfied that the plaintiff's offer was of a genuine compromise. [9]

18 I respectfully agree with this conclusion. In particular I agree that s 91 provides not only the relevant head of power with respect to the award of costs in cases of this kind but also provides guidance as to the exercise of the relevant discretion. Rule 26 is inconsistent with s 91.

In my opinion, all of the factors that tell against the operation of O.26 in its paramount form tell almost as strongly against a hybrid version whereby O.[26] offers are added to the discretionary matters set out in s91. It is difficult to see how a without prejudice offer could be given effect to, alongside the direction to take the statutory offers into account. How can a claimant's offer of compromise be balanced against the enjoinder, to consider whether the claim was excessive? Again, how is an unduly low open offer served contemporaneously with a much higher secret offer to be considered?[10]

20 It followed in his Honour's view that insofar as s 91(1) requires the Court where it considers appropriate to do so, to take into consideration the amount 'offered' by the Corporation and whether the 'claim' is excessive, it is to be understood to refer to open offers and claims of the kind contemplated by the LAC Act itself or made pursuant to directions of the court.

21 It is unnecessary for present purposes to analyse the relevant provisions of the LAC Act relating to offers and claims save to observe that it must be remembered that there is a potentially significant power imbalance between an acquiring authority and claimants. It is the intent of the legislation that the authority make a properly informed and appropriate offer of compensation on the basis of the material available to it prior to the generation of a disputed claim.[11] That intention is reinforced by the terms of s 53 of the LAC Act relating to interest.

22 It appears that the question of whether offers of compromise can or should be referred to in the discretion of the Court has not arisen for explicit reconsideration by this Court in the intervening period.[12] The decision of Coastal Estates has now stood for 17 years. The LAC Act has been amended 15 or more times during this period. These amendments include amendments made in conjunction with amendments to the Valuation of Land Act 1960 ('the VL Act'). In turn s 26 of the VL Act which governs costs in reviews and appeals on valuation matters under that Act was substituted in its current form in 2006. Section 26 of the VL Act now refers to the following factor:

(b) any offer, whether or not made without prejudice, by a party in respect of the valuation;[13]

23 No legislative amplification of s 91 has occurred since the decision in Coastal Estates. In my view the decision in Coastal Estates should be regarded as correctly stating the meaning of 'claim' and 'offer' where those terms are used in s 91 of the LAC Act. Accordingly, the terms should be understood as meaning 'open claim' and 'open offer'. Considerations of comity strongly support this view.[14]

24 Nevertheless I do not accept the contention made on behalf of Mr Love that the decision in Coastal Estates should be treated as authority for the proposition that no regard can be had to a Calderbank offer. A Calderbank offer is an offer of settlement made on a 'without prejudice save as to costs' basis. Ordinarily where the Court awards costs, it does so on a party-party basis.[15] If costs are to be awarded on a solicitor-client or indemnity basis, something special or unusual must be demonstrated to justify this course.[16] The unreasonable refusal of a Calderbank offer of settlement may be regarded as a special circumstance and may thus justify an award on one of these higher bases.[17]

25 The differential between party-party costs and solicitor-client or indemnity costs is itself an inducement to settle. In Spencer v Dowling, Winneke P stated:

There can be no doubt that, in litigation in superior courts, the usual measure of costs awarded is costs on a party/party basis. There is, likewise, no doubt that a court does have the power to award costs on a higher measure if the circumstances require it. This practice in the superior courts is, in my experience, universal although it is well recognised that there is occurring an ever increasing gap between party/party costs and those actually incurred. In the case of Bass Shire Council v King, Nathan J. expressed at 1 the practice in what are, in my view, appropriate terms:

It is undoubtedly a principle of law that costs follow the event on a party and party basis, but that the courts are free to depart from that principle if confronted with circumstances where the conduct of one or other of the parties ... would warrant the ordering of costs on an indemnity basis. There must be special circumstances which lift the case out of the ordinary.

This practice has continued to apply notwithstanding expressions of view by individual judges that it is capable, in today's circumstances, of working injustice: see, for example, per Rogers J. (as he then was) in Qantas Airways Ltd. v Dillingham Corp.. The practice is designed to reflect a compromise between the interests of successful and unsuccessful litigants. As Handley J.A. observed in Cachia v Hanes the practice is also adopted to provide an "important spur to settlement". Sheppard J. in Colgate-Palmolive Co. v Cussons Pty. Ltd. restated the practice and pointed out:

This has been the settled practice for centuries in England. It is a practice which is entrenched in Australia. Either legislation ... or a decision of an intermediate court of appeal or of the High Court would be required to alter it. [18]

26 In Colgate-Palmolive Company v Cussons Pty Limited, Sheppard J listed some of the circumstances which have been thought to justify an award of indemnity costs:

...[I]t 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; 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); 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; Maitland Hospital v Fisher (No 2); Crisp v Keng) and an award of costs on an indemnity basis against a contemnor (eg Megarry V-C in EMI Records). 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. [19]

27 A Calderbank offer is put forward on the basis that if rejected, it may be relied on in respect of the question of costs after the determination of the substance of the litigation.

28 The judgment in Coastal Estates does not address Calderbank offers. I have come to the conclusion that it is open to have regard to a Calderbank offer made either on behalf of a claimant or the authority when a Court exercises its discretion under s 91.

29 Section 91 governs factors relevant both to liability for costs and the standard on which they are assessed.

30 Section 91 provides that the factors a Court may take into consideration include 'unreasonable conduct on the part of a claimant or the authority.'

31 Whether a party has acted unreasonably in respect of the conduct of litigation falls to be decided by reference to all the circumstances of the particular case.

32 In my view, there is no satisfactory reason why a without prejudice offer of settlement should be excluded as potentially relevant to a judgment of the circumstances of a case as a whole.

33 A key feature of a Calderbank offer is that it is not an offer to which offer of compromise provisions whether imposed by statute or rules of court apply.[20]

34 The question which is ordinarily raised by a Calderbank offer made in other forms of litigation is ultimately whether the rejection of the offer was unreasonable in all the circumstances of the case.[21]

35 This issue reflects the factor identified by s 91(1)(b)(i) of the LAC Act.

36 In other forms of litigation in this Court a Calderbank letter is not necessarily determinative of costs issues, but is a potentially relevant factor to be taken into account. Other circumstances including those bearing generally on the issue of unreasonable conduct are likewise relevant under s 91.

37 If regard is had to a Calderbank offer, the open claims and offers made in a proceeding would still themselves remain relevant. The open claims and offers made will ordinarily have determined to a significant degree, the procedural steps taken in a proceeding, the forensic framework of a hearing and the evidentiary content of that hearing. A Calderbank offer may nevertheless comprise an additional potentially relevant factor.

38 It may be entirely reasonable for a claimant to offer to settle a claim pursuant to the LAC Act, which is attended by significant potential cost and uncertainty, for somewhat less than the claimant's assessment of the proper compensation payable. Conversely it may be unreasonable to refuse such an offer of settlement.

39 It would be a harsh thing to preclude a claimant in such circumstances from reliance upon a without prejudice offer to settle made on a Calderbank basis, if the claimant was thereafter successful in obtaining an award of compensation exceeding the offer and the refusal of the offer was unreasonable.

40 Like reasoning applies to an authority which is prepared to offer more than its assessment of the compensation payable, in order to avoid substantial risks of costs and uncertainty. This is particularly so in cases where there is a real risk that costs may very substantially exceed the compensation awarded (as has occurred in the present case).

41 Whilst the statutory offer system provided for in the LAC 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 may turn upon facts which are essentially within the knowledge of the claimant. They are analogous to claims for common law or equitable damages in a commercial context, in respect of which the process of trial is commonly attended by risks as to quantum. It is difficult to see why Calderbank principles should be applied in other areas of litigation, where plaintiffs may be entirely free from fault in terms of the underlying cause of action, but such principles should not be applied to LAC Act proceedings.

42 Once it is accepted that there may be a real risk of substantial costs in litigation involving the assessment of compensation for the compulsory acquisition of land, it follows from the considerations I have set out above that it is just to allow parties to take reasonable steps to minimise their risk. The use of Calderbank letters provides such a step. The ultimate effect of the application of Calderbank letter principles is not to penalise one party by way of exemplary costs, but simply to indemnify the other party in respect of costs which would not have been incurred if the opposing party had acted reasonably.

43 There is also a public interest in encouraging the reasonable settlement of proceedings of the type here in issue. As the present case demonstrates, proceedings of this type have the capacity to take up very substantial Court resources and time. The time of the Court is a publicly funded resource. Inefficiencies in the use of that resource should be taken into account in the management of litigation.[22]

44 For the above reasons, this Court should, where it considers it appropriate to do so, take into account Calderbank offers made in the course of proceedings under the LAC Act as a potentially relevant circumstance bearing on the reasonableness of the conduct of either the claimant or an authority.

Should each of the parties receive an award of costs in the present case and, if so, in respect of what aspects of the proceeding?

45 The Corporation concedes that Mr Love should get his costs up until 15 November 2007.

46 Thereafter it seeks its costs on the basis that prior to this date Mr Love's claim for market value was $300,564 and the Corporation's offer was $250,000. After this date Mr Love pursued a claim for loss of access to a hypothetical landfill, put first as a disturbance claim in the sum of $3,550,000 and ultimately quantified as a loss of market value claim in excess of $10 million (an amount claimed in the alternative by reference to the concepts of special value, severance and disturbance).

47 In this claim Mr Love failed. He also pursued until the latter part of the trial, a claim for drainage impacts relating to a culvert on Central Creek, which was first raised on 16 November 2007 in the sum of $794,691. At that date he also increased his solatium claim to a multi-million dollar claim. As a result the total claim increased from $876,720.97 plus interest and costs to $10,910,550.12 plus interest and costs.

48 I agree with the defendant's submission that the claims made on 16 November 2007 fundamentally changed the character of the proceeding. I further accept that Mr Love failed on the principal issues raised by the amended claim and in particular failed totally with respect to the loss of access claim and the drainage impacts claim.

49 As against this, it follows from my decision as to compensation that Mr Love was entitled to elaborate the narrative of the consequences of the acquisition as he experienced them. In my view allowance must be made for Mr Love's costs in respect of this issue and in particular the evidence adduced in respect of his claim for solatium.

50 It is desirable however that the costs of taxation should be minimised, and restricted to those of one side only if possible. Having regard to the evidence filed and served as a whole on behalf of the parties and to the course of the hearing, I would allow the Corporation 80 per cent of its costs after 16 November 2007. This figure reflects a set-off in respect of the costs to which I have held Mr Love has established an entitlement relating to solatium, together with costs relating to the special value and disturbance claims which I have upheld. The submissions made on behalf of Mr Love with respect to the issue of costs implicitly accept that an issues based award of costs is appropriate. The issues in respect of which Mr Love is entitled to an allowance for costs are in large part issues relating to which evidence other than expert evidence was relevant. Further, they were issues in respect of which Mr Love adduced evidence which was disproportionate in extent to that adduced by the Corporation because of the nature of the factual issues involved. I have taken all these factors into account in fixing the set-off which has resulted in the reduction which I have fixed in the costs which should go to the Corporation. I have also taken into account the extent and nature of the evidence adduced by Mr Love and the Corporation on these issues as against other issues in the case.

51 I turn then to the situation following the offers made in April 2009. On 17 April 2009 and prior to the commencement of the hearing, the Corporation made an open offer of a sum only marginally less than that ultimately recovered by way of compensation by Mr Love. Fourteen days prior to this it had offered a figure in settlement by way of Calderbank offer which substantially exceeded the amount ultimately obtained by Mr Love. In my view the Corporation should get the whole of its costs after the making of the Calderbank offer. Mr Love has succeeded in obtaining an award for less than 50 per cent of the amount offered to him on a without prejudice basis. It is appropriate to elaborate this conclusion by reference to the factors expressly identified in s 91.

(a) The amount of compensation awarded by the Tribunal or Court as compared with the amount (if any) offered by the authority.

The amount of compensation awarded by the Court is more than was formally offered by the Corporation as at 16 November 2007 and marginally more than that offered immediately prior to the trial on 17 April 2009. These factors favour Mr Love, but more particularly so prior to 17 April 2009.

(b) (i) The extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by, unreasonable conduct on the part of the claimant of the authority.

In my view, the refusal of the Calderbank offer was unreasonable (for reasons to which I shall return). The trial of the proceeding would have been unnecessary if the offer had been accepted. Conversely the conduct of the authority was reasonable and in particular the making of the Calderbank offer was entirely reasonable in the circumstances of the case.

(ii) The extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by, the failure of the claimant to give adequate particulars of the claim or supply supporting material when required to do so.

In my view the material filed and served pursuant to the Court's directions as at the date of the Calderbank offer did not satisfactorily support the claims made by Mr Love. In particular it did not establish the causal foundation of the claims for loss of value of landfill potential, nor did it make out the drainage impacts claim. The material subsequently put forward on behalf of Mr Love did not cure these problems. The material as a whole suffered from the defects identified in my principal judgment.

(iii) The extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by, an excessive claim by the claimant.

It is conceded on behalf of Mr Love that 'numerically at least' the claim is properly to be considered 'excessive' in the sense contemplated by s 91(b)(iii).

I am satisfied that Mr Love's claim was excessive for the reasons set out in my principal judgment. The claims for loss of landfill potential and drainage impacts were both unfounded and excessive. The claims in respect of solatium and loss of tree value were also excessive. In 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. It is fundamentally for this reason that I am 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.

(iv) The extent to which, in the opinion of the Court, the proceedings have arisen from, or have been affected by, an unduly depressed offer by the authority.

No unduly depressed offer was made by the Corporation in this case.

There are no other matters under the Act which are required to be taken into account in the determining the allocation of costs.

52 The Calderbank offer of 3 April 2009 was expressed in the following terms (omitting formal parts):

"WITHOUT PREJUDICE

SAVE AS TO COSTS"

We have been instructed by Roads Corporation to offer to your client the sum of $950,000 for compensation in this matter.

In addition to the sum offered, Roads Corporation will -

pay interest in accordance with the provisions of Section 53(1) of the Land Acquisition and Compensation Act 1986 (the "Act"); and
pay your client's costs of the proceeding in accordance with the provisions of the Act and the Supreme Court Rules.

This Offer is inclusive of all advances of compensation previously paid by our client to your client and remains open for acceptance for 14 days from the date of this facsimile.

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.

This offer is intended to mirror the Offer of Compromise made this day in the sum of $950,000. It is not open to Mr Love to accept both this offer and the Offer of Compromise.[23]

The discretion with respect to costs must, like every other discretion, be exercised taking into account all relevant considerations and ignoring all irrelevant considerations.[24] It is neither possible nor desirable to give an exhaustive list of relevant circumstances. At the same time, a court considering a submission that the rejection of Calderbank offer was unreasonable should ordinarily have regard at least to the following matters:

(a) the stage of the proceeding at which the offer was received;

(b) the time allowed to the offeree to consider the offer;

(d) the offeree's prospects of success, assessed as at the date of the offer;

(e) the clarity with which the terms of the offer were expressed;

(f) whether the offer foreshadowed an application for an indemnity costs [order] in the event of the offeree's rejecting it.[25]

54 It is appropriate to address the factors identified.

(a) The stage of the proceeding at which the offer was received

The Calderbank offer was made prior to the commencement of the 10-week trial and the incurring of the very substantial costs involved in that trial. It was made at a time when the parties had put forward their cases by way of extensive affidavit material, intended to comprise evidence in chief at the trial.

It was, in my view, apparent that Mr Love's case was in a fundamental sense speculative, and that he faced very real difficulties in establishing its causal basis in respect of the major issues between the parties. Each of the threshold difficulties which I have identified in my principal judgment was implicit in the evidence at this point in time. Further, Mr Love had himself rejected independent advice from Mr Hocking which reflected a commonsense basis for resolving the claim and mirrored the underlying basis of the Corporation's position.

(b) The time allowed to the offeree to consider the offer

The time allowed was reasonable having regard to the completion of the interlocutory stage of the proceedings and the evidence filed on behalf of the parties including, in particular, the evidence filed on behalf of the Corporation.

The extent of compromise offered was significant having regard to the very substantial additional amount offered above that put forward by way of open offer, and the underlying realities of the matter as I have found them in my principal judgment.

(d) The offeree's prospects of success, assessed as at the date of the offer

In my view Mr Love's prospects of success were not good assessed as at the date of the offer. The causal foundations of the principal claims were not made out by the evidence he had filed and served. This included evidence as to the relevant factual matrix and Mr Herdman's affidavit articulating the valuation basis for Mr Love's principal claim. This evidence was confronted not only by the Corporation's case but by the independent advice Mr Love had received from Mr Hocking.

It was submitted on behalf of Mr Love that it was not unreasonable to reject the Calderbank offer having regard to the prospects of success of the culvert claim at that point in time. I do not accept that the advice from Mr Love's expert substantiated the causal basis for the culvert claim at the time of the Calderbank offer. Further the causation problems confronting that claim were ultimately so overwhelming that it was withdrawn. The speculative possibilities attending the culvert claim, did not render refusal of the Calderbank offer reasonable.

The present case is one of the kind referred to by Byrne J in Foster v Galea (No2):

Where a party makes a Calderbank offer which is reasonable in all the circumstances, especially in comparison to the offeree's prospects of success or where the offeree's prospects of success were not good[26], the Court has displayed a readiness to make a special order. As I observed in the Lorden Holdings case, the policy of the court is to encourage litigating parties to undertake genuine settlement negotiations and, for the purpose, to face up to serious offers of settlement. [27]

(e) The clarity with which the terms of the offer were expressed

The offer was clear. Further it was made when the parties had had the opportunity to consider the evidence relating to the claim for some seven years and the case for both Mr Love and the Corporation was articulated by very extensive evidentiary material. The case which was confronting Mr Love was in my view sufficiently clear to establish a proper context for consideration of the offer.

(f) Whether the offer foreshadowed an application for an indemnity costs [order] in the event of the offeree's rejecting it

The offer did not foreshadow an application for indemnity costs. Nor did it specifically state that it was made pursuant to the principles stated in Calderbank v Calderbank.[28] Nevertheless it was headed "Without Prejudice Save as to Costs" and was served simultaneously with a purported notice of compromise under r 26. It stated that if it was not accepted it would be produced to the Court on the question of costs. It further stated that it was intended to 'mirror' the offer of compromise made that day in the sum of $950,000.

55 Putting the above matters together, I am of the view that the refusal to accept the Calderbank offer was unreasonable in the context of the case as it stood at the date of the offer. In particular it was 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.

56 The compromise offer was a real compromise, made at a point when the parties respective cases could sensibly be assessed after years of preparation. Its refusal was unreasonable.

57 In the circumstances Mr Love should pay the costs of the Corporation on a solicitor-client basis from the date of the Calderbank offer, despite the fact that no application for costs on this basis was expressly foreshadowed in the Calderbank letter. The foreshadowing of such an application is a factor to be taken into account in deciding whether refusal of the offer was unreasonable. It is not a precondition to reliance upon the offer as a basis for a special award of costs.

58 I am fortified in this conclusion by underlying policy considerations. It is in the public interest to encourage sensible settlement of proceedings of this kind. The parties must be encouraged to undertake genuine settlement negotiations and face up to serious offers of settlement.

59 The Corporation submits that it should receive costs on a solicitor-client basis, because the principal claims made on behalf of Mr Love were untenable. In Murdaca v Maisano,[29] Nettle JA referred to the decision in Fountain Select Meats (Sales) Pty Ltd v International Produce Merchant Ltd in terms which encapsulate the relevant concept:

As Woodward J put it, it is appropriate to consider awarding solicitor/client costs or indemnity costs whenever it appears that a party properly advised should have known that he had no chance of success. In such cases the action must be presumed to have been commenced or continued for some ulterior motive or because of some wilful disregard of the known facts or the clearly established laws.[30]

60 I prefer the view in the present case that, although as the trial progressed it became increasingly clear Mr Love's principal claims must fail, the state of the evidence was not such as to make it manifest that the claims were untenable prior to the commencement of the trial. At the time of commencement of the trial the evidence did not satisfactorily establish either the causal basis for the principal claims made by Mr Love or their quantum, but it was not clear that further evidence might not be available. The better characterisation is that Mr Love's principal claims were highly speculative rather than unarguable. From Mr Love's point of view he might thereafter have been able to call evidence satisfactorily addressing the threshold difficulties I have referred to in my principal judgment and bolstering the valuation evidence available to him. In the event however he could not address the threshold difficulties confronting him and failed to call cogent valuation evidence.

61 The proper basis for a special order for costs in this case is thus in my view the unreasonable refusal of the Calderbank offer made shortly prior to trial.

62 I accept that in this particular case it is appropriate for the Court to assist the Taxing Officer by specifying in its order that this was a case for three counsel. The written submissions made on behalf of Mr Love in respect of costs state in part:

On any view, it was a complex case, requiring three counsel for each party.

The dimensions of the documentary evidence, nature of the issues, extent of the hearing and quantum of the claim confirm that this is correct.

63 I am further satisfied that the requirement for three counsel arose from the manner in which Mr Love put forward his case and the nature of its content.

64 The costs order should also expressly resolve the issues of reserved costs and transcript.

65 Despite the history of mediation in this matter, in which individual claims as small as $5,000 were unable to be resolved, I am also disposed to direct that the quantum of costs be mediated, in an endeavour to avoid the very high costs which will be attendant upon a full taxation. The parties have agreed to this course. The costs of the mediation should be borne by the respondent.

66 Subject to any further submissions as to the appropriate form of order, I propose to order in substance that:

(a) The applicant pay the respondent's costs including any reserved costs and costs of transcript up to 15 November 2007.

(b) The respondent pay 80 per cent of the applicant's costs including any reserved costs and costs of transcript from 16 November 2007 to 3 April 2009.

(c) The respondent pay the applicant'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.

(d) The respondent pay the applicant's costs of, and incidental to, the application for costs heard on 26 February 2010 including the costs of three counsel and transcript costs.

(e) The assessment of costs be referred in the first instance to mediation before a mediator appointed by the President of the Law Institute of Victoria, and the incidental costs of such mediation be paid by the respondent, including the payment of fees to the mediator.

(f) The mediation take place within 150 days and in the event of an unsuccessful outcome to such mediation, costs be taxed in accordance with the rules of the Supreme Court.

(g) Reserve liberty to apply for further directions with respect to the taxation of costs.

[1] Affidavit of Ronald Gavan Lane sworn 25 February 2010, [3]-[6],[8]-[14].

[2] See Calderbank v Calderbank [1976] Fam 93.

[6] Coastal Estates Pty Ltd v Shire of Bass {1994] 1 VR 210, 213.

[7] Murdesk Investments Pty Ltd v Roads Corporation [2007] VSC 175, [24]-[25].

[8] Coastal Estates Pty Ltd v Shire of Bass {1994] 1 VR 210, 217.

[10] Coastal Estates Pty Ltd v Shire of Bass {1994] 1 VR 210, 217.

[11] See ss 31, 33, 36, 37, 46, 47, 48 and 51.

[12] Balmford J 'noted' the finding in Coastal Estates in Roads Corporation v Onans & Anor [2001] VSC 160, [7].

[14] Lipohar v R (1999) (1999) 200 CLR 485, 525, [100].

[15] Rule 63.27, 28 and 32; Spencer v Dowling [1996] VSC 51; [1997] 2 VR 127, 147.

[16] PCRZ Investments Pty Ltd v National Golf Holdings Ltd [2002] VSCA 24, [35]-[36]; Masha Nominees Pty Ltd v Mobil Oil Australia Pty Ltd (No 2) [2006] VSC 56, [11]; Thomopoulos v Faulks [2006] (No 2) VSC 286, [5]-[7]; Macedon Ranges Shire Council v Thompson [2009] VSCA 209, [13]-[15]; Chen v Chan (No 2) [2009] VSCA 233, [10]; Love v State of Victoria & Roads Corporation (No 2) [2009] VSC 531.

[17] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435; Berrigan Shire Council v Ballerini (No 2) [2006] VSCA 65; Thomopoulos v Faulks (No 2) [2006] VSC 286, [8]-[10]; Lollis v Loulatzis (No 2) [2008] VSC 35; Chen v Chan (No 2) [2009] VSCA 233, [17]; Love v State of Victoria & Roads Corporation (No 2) [2009] VSC 531; Telstra Super Pty Ltd (ACN 007 422 522) v Alan Michael Finch (No 2) [2010] VSCA 25.

[18] [1996] VSC 51; [1997] 2 VR 127, 147 (citations omitted).

[19] [1993] FCA 536; (1993) 46 FCR 225, 233-4 (citations omitted).

[20] Velardo v Andonov [2010] VSCA 38, [47] per Ashley JA.

[21] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435.

[22] Cf Aon Risk Services Australia Ltd v Australian National University Investments [2009] HCA 27; (2009) 239 CLR 175, 182, [5].

[23] Exhibit 'RGL-9' to the affidavit of Ronald Gavan Lane sworn 25 February 2010.

[24] See House v R [1936] HCA 40; (1936) 55 CLR 499, 505.

[25] Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2) [2005] VSCA 298; (2005) 13 VR 435, [25].

[26] Citing Porter v Lachlan Shire Council No 2 [2006] NSWCA 252 at [8].

Acquisition and Compensation Act 1986

Court (General Civil Procedure) Rules 2005

At a glance

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Judgment (170 paragraphs)

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Legislation Cited (3)

Cases Cited (7)