Roads Corporation v Love [2010] VSC 581

Agricultural infrastructure claims (disturbance loss)

2 Interest has been agreed in the sum of $203,009.48 up to and including 6 December 2010 and thereafter until payment of the remaining balance of the principal sum awarded, namely $135,042.33. It has been agreed that Mr Love is entitled to daily interest from 6 December 2010 at the rate of $38.84 per day.

4 The Corporation seeks orders that Mr Love pay the Corporation's costs of the entire proceeding on a solicitor-client basis. 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 6 December 2010 be paid on a party-party basis.

5 In the alternative, the Corporation seeks its costs of the proceeding on a party-party basis to 3 April 2008, being the date of the expiry of a Calderbank offer delivered by the Corporation to Mr Love, and thereafter on a solicitor-client basis.

6 Mr Love, on the other hand, submits that the Corporation should pay his costs of the proceeding.

7 Mr Lane, the solicitor for the Corporation, has sworn affidavits dated 2 December and 6 December 2010 and the exhibits thereto, in which he sets out the history of claims for compensation, advances of compensation, and offers of compensation in this matter. He also deposes to a number of matters relied upon by the Corporation in support of its contentions referred to in its written and oral submissions.

8 Mr Love relied upon his written and oral submissions, and the affidavits of Antony Christopher Hill dated 3 December 2010, Robin Harvey Hocking dated 27 July 2005, and David Passarella dated 29 April 2005, and all the attached exhibits to those affidavits.

9 The Land Acquisition and Compensation Act 1986 (the " LAC Act") makes provision for the award of costs in land acquisition cases. Section 91 of the LAC Act provides:

91. Costs

(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.

"Court" is defined by s.3 of the LAC Act to mean the Supreme Court.

10 Section 91(1) LAC Act creates no pre-disposition in favour of an award of costs either to a claimant or to an acquiring authority. Although an acquisition of land under the LAC Act in effect provides "no choice" for the claimant, who is compelled to enter into the process to gain an award of compensation, s.41(1)(f) makes provision for compensation to include: "any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest". This covers the expenses of the claimant incurred in the formulation of a claim. However, if the dispute becomes a "disputed claim" and is referred to the Court for resolution, as occurred in this case, the costs discretion provided for in s.91(1) presents a neutral arena for the parties.

11 Under s.91(1) LAC Act, the Court has a general discretion to award such costs as it thinks proper. However, it must if it thinks appropriate to do so, take into account the specific matters in ss.91(1)(a), (b) and (c).[2] However, they are not the only matters to be considered. The discretion which s.91(1) confers is a broad one, to be exercised by the application of accepted principles. As disclosed in the opening text of the sub-section, namely "... the Court (as the case requires) may award such costs as it thinks proper", the discretion has a wide operation and is not necessarily limited by the specific criteria in paragraphs 91(1)(a), (b) and (c).

12 Further, s.91 LAC Act preserves the discretion of the Court to assess the basis on which costs are to be paid. Pursuant to r.63.28 of the Supreme Court (General Civil Procedure) Rules 2005 (the "Rules"), four bases of assessment are open: party party, solicitor client, indemnity or such other basis as the Court directs. Solicitor client costs are dealt with in r.63.30.

13 It has been observed that the conceptual basis underlying the discretion as to costs in compulsory acquisition proceedings differs from that involved in ordinary civil litigation, because the claimant has been placed in the situation giving rise to the litigation by the action of the State and through no choice of his own.[3] However, such considerations, although providing a realistic background against which the discretion is to be exercised, do not displace obligation of the Court to give proper effect to the language of the statute.

14 The principal matters relied upon by the Corporation for its cost claims are:

(a) alleged unreasonable conduct on the part of the claimant (s.91(1)(b)(i));

(b) an excessive claim by the claimant (s.91(1)(b)(iii)); and

(c) a Calderbank letter delivered by the Corporation to Mr Love dated 20 March 2008.

15 As to the general principles applicable to the determination of costs in cases brought under the LAC Act, in Roads Corporation v Love[4] Osborn J referred to the references of Gobbo J in both Mario Piraino Pty Ltd v Roads Corporation[5] and Coastal Estates Pty Ltd v Shire of Bass,[6] where his Honour cited with approval the observations made in Minister for the Environment v Florence[7], where Wells J 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.

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.

16 Osborn J in Murdesk Investments Pty Ltd v Roads Corporation[9] adopted a like approach, noting that it "elaborates the underlying context in which that discretion is to be exercised".[10]

17 I approach the question of costs in the present matter from the same perspective.

18 The Calderbank letter in this proceeding was dated 20 March 2008. It was sent by facsimile transmission from the solicitors acting for the Corporation to the solicitors then acting for Mr Love. The letter was endorsed "Without Prejudice Save as to Costs". Omitting immaterial parts, it was in the following form:

We have been instructed by Roads Corporation to offer to your client the sum of $5,960,000 for compensation in this matter.

In addition to the sum offered, Roads Corporation will -

• pay your client's costs of the proceeding on a party/party basis to the date of service of this Offer, the costs to be taxed in default of agreement.
• pay interest in accordance with the provisions of section 53(1) of the Land Acquisition and Compensation Act 1986.

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 $5,960,000. It is not open to Mr Love to accept both this offer and the Offer of Compromise.

19 The 14 days provided for acceptance of the offer expired on 3 April 2008. Mr Love did not accept the offer within the time it was open for acceptance, or at all.

20 The trial of the proceeding was conducted between 10 May and 31 July 2010. It occupied a total of 29 days. Mr Love gave evidence at the trial and was cross-examined. A total of five town planning and geotechnical engineering experts were called. Three valuers and one accountant were called. A total of 22 expert witnesses were called in fields of expertise ranging from geology, hydrogeology, blasting and quarrying, landfill and costings. The parties relied upon substantial affidavit material during the course of the trial and made extensive written submissions. Preparation for the case would have been a considerable exercise involving a significant investment of time and money.

21 Accordingly, a very substantial quantum of costs was incurred by both parties after the service of the Calderbank letter and this was or ought to have been appreciated by Mr Love as likely at the time when he refused the offer.

22 Mr Love relied upon the precedent set by Gobbo J in Coastal Estates v Shire of Bass[11] for the proposition that s.91 of the LAC Act excluded the operation of Order 26 of the Rules which provides a formal regime for the delivery of "secret" offers of compromise with adverse cost consequences for the recipient arising in the event of non-acceptance and in the event of failing to better the offer at trial. Mr Love submitted that the principle extended to Calderbank letters delivered in the course of proceedings under the LAC Act, such that a "secret" offer made in this way, if refused, could not result in adverse costs consequences for the recipient of the offer.

23 Gobbo J in Coastal Estates held that Order 26 of the Rules 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.[12]

24 In this regard, Gobbo J further observed:[13]

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 s.91. 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?

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.

25 Accordingly, in the view of Gobbo J in Coastal Estates 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, this is to be understood to refer to open offers and claims of the kind contemplated by the LAC Act itself.

26 Osborn J in Roads Corporation v Love[15] respectfully agreed with the analysis and conclusion of Gobbo J in Coastal Estates v Shire of Bass, and in particular agreed that s.91 provided not only the relevant head of power with respect to the award of costs in cases of this kind but also provided guidance as to the exercise of the relevant discretion, and that O.26 of the Rules is inconsistent with s.91. In this regard, Osborn J said:[16]

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.

27 It follows from the authority of Coastal Estates, as Osborn J said in Roads Corporation v Love[17] "that the provisions of what is now styled r.26.08 are not applicable to cases of this kind". Rule 26.08 provides:[18]

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.[19]

28 Further, Osborn J in Roads Corporation v Love[20] referred to the history of s.91 LAC Act since Coastal Estates was decided, noting that:[21]

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.[22] 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;[23]

29 An amendment to s.91 was introduced after the decision in Coastal Estates. At that time s.91(2) LAC Act was noted by Gobbo J to be in the following form:[24]

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

30 Sub-section 91(2) LAC Act is now in different terms:

(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.

31 The phrase "the taxation of costs" has now been replaced with the phrase "the assessment of costs" where it appears in s.91(2) LAC Act. However, the exercise of assessing costs is not materially different to the exercise of taxing costs. Indeed, the definitions of taxation and taxation of costs are defined in r.63.01 to include the process of the "assessment" of costs as follows:

taxation or taxation of costs means the assessment, settling, taxation or review of costs. [Emphasis added]

32 Accordingly, in my opinion, the amendment to s.91(2) was not intended to expand the reach of the sub-section so as to commit Coastal Estates to the annals of legal history, nor did it have this effect.

33 Nevertheless s.91 was considered by Osborn J in Roads Corporation v Love[25] in the context of a Calderbank offer. In following that decision in this case, 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 in a land acquisition and compensation matter.

34 Osborn J in Roads Corporation v Love, drew a distinction between an open offer of the kind considered in Coastal Estates, and a "secret offer" of the kind often made in a Calderbank letter. In concluding 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 LAC Act, his Honour observed:[26]

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.

...

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. If costs are to be awarded on a solicitor-client or indemnity basis, something special or unusual must be demonstrated to justify this course. 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. (Footnotes omitted]

...

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.

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.

35 To these I would add the following observations as to the essential differences between a Calderbank offer on the one hand, and an offer of compromise made under O.26 of the Rules on the other, derived from Charles Blackman and Ors v Peter Gant and Anor[27] which were noted as follows:[28]

The Court of Appeal in Hazeldene's Chicken Farm considered the operation of a Calderbank letter. It was not invited by the facts of the case to consider the operation of an offer of compromise made under Order 26.

A Calderbank offer to settle a proceeding is different from an offer of compromise served in accordance with Order 26. In Foster v Galea (No.2) ("Foster"), Byrne J [at 7] contrasted the "fairly mechanical regime of Rule 26.08" with the "more flexible one of discretion as to costs" which exists with an offer of the Calderbank type. Byrne J further observed in Foster, an offer of compromise which fails to satisfy the formal requirements of r.26.02 and r.26.03, may nevertheless be sufficient to be considered as an offer to the effect of a Calderbank offer, in which case the approach to its consideration will be governed by the principles of Hazeldene's Chicken Farm.

The more inflexible costs regime established by Order 26 is emphasised by r.63.16 which provides in relation to making a costs order following service of an offer of compromise:

Where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment, liability for costs shall be determined in accordance with Rule 26.08.

Rule 63.16 limits the discretion of the Court as to costs and imposes a mandatory requirement to apply r.26.08 in accordance with its terms where an offer of compromise is served and the offer has not been accepted at the time of verdict or judgment.

The essential differences between a Calderbank letter and an offer of compromise made under Order 26 are twofold.

In the first place, unlike the position with a Calderbank letter, rejection by a defendant of an offer of compromise made by a plaintiff does not merely give rise to a matter to which the Court should have regard when considering whether to order indemnity costs. Provided the threshold elements are made out, namely: the service of an offer of compromise which complies with Order 26; the non-acceptance of the offer at the time of verdict or judgment; and the obtaining by the plaintiff of a judgment on the claim to which the offer relates no less favourable to the plaintiff than the terms of the offer; the plaintiff becomes entitled under r.26.08(2) to a special order for costs pursuant to either r.26.08(2)(a) or (b), whichever is applicable. In other words, in making a claim for a special costs order under r.26.08(2), the plaintiff who is successful at trial in equalling or bettering the offer of compromise which has not been accepted by an unsuccessful defendant, starts from a position of an entitlement to costs on a special basis, once the threshold matters have been established.

In the second place, although as is made clear in Hazeldene's Chicken Farm, a Calderbank letter does not give rise to any presumption that the party rejecting the offer should pay the offeror's costs on an indemnity basis if the offeree receives a less favourable result at trial, the effect of r.26.08 is quite different. In particular r.26.08(2) gives rise to an entitlement to an award of costs in favour of a plaintiff on the special basis provided for, "unless the Court otherwise orders". This creates a regulatory presumption permitting costs to be awarded in this manner, subject to the Court being satisfied that special circumstances exist which justify the Court's discretion being exercised in a manner which departs from the Rule. Such circumstances may include, but are not necessarily limited to, considerations as to whether the rejection of the offer was reasonable.

[Footnotes omitted]

36 When considering the effect of an unaccepted Calderbank offer on the question of costs, the Court retains a discretion which is to be exercised having regard to relevant considerations.

37 In Hazeldene's Chicken Farm Pty Ltd v Victorian WorkCover Authority (No 2)[29] the Court of Appeal held that the mere fact that the result achieved was less than the offer made in a Calderbank letter does not shift the burden to the offeree to prove reasonableness. Rather, the Court, in adopting the observations of Redlich J in Oversea-Chinese Banking Corporation v Richfield Investments Pty Ltd,[30] rejected the notion that there was any such presumption, holding that the weight of authority:

... strongly points to an approach that involves no preconceptions about when the rejection of a Calderbank offer should lead to the making of a special costs order. It will do so where it is concluded that the rejection of the offer was unreasonable.

38 The Court of Appeal in Hazeldene's Chicken Farm referred to the exercise of the discretion with respect to costs, like every other discretion, being undertaken after taking into account all relevant considerations and ignoring irrelevant considerations. The Court further observed, in the context of the exercise of the discretion as to costs when a Calderbank offer has been rejected and when the Court is called upon to determine whether that course was unreasonable, that it should ordinarily have regard to at least the following matters:[31]

(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 indemnity costs in the event of the offeree's rejecting it.

39 Accordingly, no material inconsistency arises between the common law principles developed in relation to Calderbank offers and the operation of s.91 LAC Act in relation to costs. The two can operate together without discord through the mechanism of s.91(1)(a)(i) LAC Act where the Court is invited to take into consideration in determining an award of costs "the extent to which ... the proceedings have arisen from or been affected by ... unreasonable conduct on the part of the claimant or the Authority." Unreasonableness in failing to accept an offer advanced in a Calderbank letter may, in the appropriate case, fall within the conduct described in the sub-paragraph. Further, in taking this approach, the statutory discretion vested in the Court to award costs provided by s.91 LAC Act is not illegitimately circumscribed.

40 Further, in adopting this approach, the interests of effective case management are furthered - an interest which has now attracted much greater focus as a goal to be achieved in the administration of justice, compared with the position nearly 17 years ago when Coastal Estates was decided. As the High Court observed in Aon Risk Services Australia Limited v Australian National University:[32]

In the past it has been left largely to the parties to prepare for trial and to seek the court's assistance as required. Those times are long gone. The allocation of power, between litigants and the courts arises from tradition and from principle and policy. It is recognised by the courts that the resolution of disputes serves the public as a whole, not merely the parties to the proceedings. [Footnote omitted]

41 In this regard, the exposure to the differential between party-party costs and solicitor-client or indemnity costs resulting from a properly drawn Calderbank letter containing an offer to settle the proceeding on reasonable terms, provides a powerful inducement to settle. In Spencer v Dowling, Winneke P stated:[33]

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 JA 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.

42 For the further reasons reflected in the decision of Osborn J in Roads Corporation v Love,[34] I respectfully agree with the conclusion as stated by his Honour that this Court should, where it considers it appropriate to do so, take into account Calderbank offers made in the course of proceedings under s.91 of the LAC Act as a potentially relevant circumstance bearing on the reasonableness of the conduct of either the claimant or an authority.[35]

43 Given the findings of the Court in the Principal Judgment, taking into account the extent of the claims made by Mr Love and pressed at trial when compared with the open offers made by the Corporation and the level of compensation advanced by the Corporation at trial, it is beyond question that Mr Love lost his case. As such the usual rule as to costs should apply, and costs should follow the event. I reject the submission of Mr Love that the Corporation should pay his costs of the proceeding. On the contrary, he should pay the costs of the Corporation of the proceeding.

44 The only issue is the basis on which such costs are to be assessed and whether any and what special costs order ought to be made in favour of the Corporation.

45 I now turn to the following questions which are relevant to determining the outstanding issue, namely:

(a) whether there was unreasonable conduct on the part of Mr Love in the conduct of the proceeding such as to invite the operation of s.91(1)(b)(i) LAC Act;

(b) whether there was an excessive claim by Mr Love such as to render s.91(1)(b)(iii) LAC Act applicable; and

(c) whether the Calderbank letter delivered by the Corporation to Mr Love dated 20 March 2008, and its non-acceptance by Mr Love amounted to unreasonable conduct on his part within the meaning of s.91(1)(b)(i) LAC Act.

46 It is well established that a special costs order may be made where an action was commenced or continued in circumstances where a party, properly advised, should have known that he had no chance of success, such that it is to be presumed that the proceeding was for some ulterior motive or because of some wilful disregard of the known facts or clearly established law.

47 In Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd[36] Woodward J said in a passage which has been cited with approval in numbers of subsequent decisions:[37]

I believe that it is appropriate to consider awarding "solicitor and client" or "indemnity" costs, whenever it appears that an action has been commenced or continued in circumstances where the applicant, 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 law. Such cases are, fortunately, rare. But when they occur, the court will need to consider how it should exercise its unfettered discretion.

48 In Macedon Ranges Shire Council v Thompson,[38] Redlich JA and Beach AJA said:

Costs may be ordered whenever it appears that an action has been commenced in circumstances where the applicant properly advised should have known it had no chance of success. When a litigant presses on where on proper consideration their case should have been seen to be hopeless, the discretion to make a special costs order may be enlivened. French J (as he then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia & Anor considered that the discretion to award such costs would be enlivened when a party persisted, for whatever reason, in what should on proper consideration have been seen to be a hopeless case, and alluding to the presumption referred to by Woodward J in Fountain Selected Meats said that it was an unnecessary condition of the power to award such costs that a collateral purpose or some species of fraud be established. But where the litigant did not recognise that its case was without merit a court may be disinclined to make a special costs order. The Court must measure the litigant's conduct against the facts then known or which ought to have been known, the inquiries that the litigant ought reasonably to have made and the legal advice which the litigant ought reasonably to have obtained. This exercise may be subject to some qualification in respect of a self represented litigant. [Footnotes omitted]

49 A relevant factor in the consideration of an award of costs will arise where a party in the litigation is self-represented. In the usual case, such a person, while having every right to proceed unrepresented, will suffer the limitations of a lack of knowledge of the law, an unfamiliarity with court practices and the risk of lack of objectivity.

50 The Court of Appeal in Macedon Ranges v Thompson considered the position of a self-represented litigant in a little more detail, noting that, as a general rule, a court will be more reluctant to make an order for indemnity costs against a litigant in person than against a represented litigant.[39] However, the Court also observed that circumstances may well arise which call for an award of costs against a self-represented person. In this regard, the Court cited with approval the following observations of Robson J in Vink v Tuckwell where his Honour conveniently summarised the effect of the authorities dealing with circumstances in which a non-represented litigant might be subject to an order for indemnity costs:[40]

There are special considerations applying to indemnity cost orders against litigants in person, as the following authorities disclose.

In Bhagat v Royal and Sun Alliance Life Assurance Australia Ltd, Hodgson CJ in Eq observed:

"... I accept that a court does have to make allowances for the position of litigants in person, and to try to ensure that such a litigant does not lose out because of lack of expertise; although there is a limit to what the Court can do in that regard, while still remaining an impartial determinant of a dispute. The Court may in those circumstances refrain from making orders against litigants in person for conduct that might be considered as justifying orders for costs against represented litigants. By the same token, litigants in person can cause great hardship and expense to other parties, through making allegations and claims that lawyers would recognise as allegations and claims that could not reasonably or even properly be made, and through making proceedings much longer and much more expensive than they would otherwise be, by not focusing accurately on the real issues in the case. Conduct of that nature by legally represented parties would often lead to orders for indemnity costs. Litigants in person may escape the consequence of indemnity costs, but I do not think that the circumstance that a party is a litigant in person is a ground for displacing the ordinary result that costs follow the event."

In Bhagat v Global Custodians Ltd, the Full Court of the Federal Court (constituted by O'Loughlin, Whitlam and Marshall JJ) observed Hodgson CJ in Eq did not say that litigants in person always escape the consequence of indemnity costs and declined to interfere with the decision of the trial judge to order indemnity costs against the unrepresented litigant. These judgments were cited with approval by Kenny J in Ogawa v The University of Melbourne (No 2).

In Spalla v St George Motor Finance Ltd (No 8), Kenny J said:

"From time to time the courts overcome their reluctance to order indemnity costs against a self-represented litigant: see, for example, Bhagat v Global Custodians and Ogawa v The University of Melbourne (No 2)."

Further in Salfinger v Niugini Mining (Australia) Pty Ltd (No 4), Heerey J said as follows:

"In Spalla v St George Motor Finance Ltd (No 8), Kenny J recently noted that courts have from time to time overcome a reluctance to order indemnity costs against self-represented litigants: Bhagat v Global Custodians and Ogawa v The University of Melbourne (No 2). Kenny J considered the competing interests in determining whether to make an award of indemnity costs against a self-represented litigant. A lack of knowledge of the law, unfamiliarity with court practice and a lack of objectivity are common traits of unrepresented litigants. A person's ability to redress should not depend on lawyerly skills or an ability to pay for legal representation. However, the Court owes a duty to all parties to ensure that the trial is conducted in a fair and timely fashion and without significant difficulties and unnecessary expense for the parties against whom an unrepresented litigant proceeds: see Bhagat v Royal and Sun Alliance Life Assurance Australia. In this instance the expense, delay and difficulties caused by the applicant's fraudulent and unreasonable behaviour overshadow any limitations that arose from his status as self-represented."

51 In this case, Mr Love was represented by solicitors and by senior and junior counsel until shortly prior to the trial. It was during the period while Mr Love was represented that the course for his case was charted. His expert witnesses were selected and vetted, their reports were served and filed with the Court, supporting affidavits were served and filed, and particulars of his case were prepared, served and filed. At trial, Mr Love proceeded to present his case for the most part on the basis of the material which had been earlier prepared. Further, Mr Love was able to secure legal representation, including senior and junior counsel, for that part of the trial which dealt with the separate questions concerning the notional planning permit.

52 In this instance the Corporation relies essentially upon conduct which it says was unreasonable in the preparation of the case for trial. This work was undertaken during the period when Mr Love was legally represented. As such, any expense caused by any unreasonable conduct on the part of Mr Love would clearly overshadow any limitations that arose from his status as a self-represented litigant while presenting his case at trial.

53 As to unreasonable conduct in the preparation and advancing of Mr Love's case, the Corporation relies upon the following:

(b) the difference between his claim and the compensation award after trial was significant;

(c) the Corporation incurred substantial costs in meeting various claims which were abandoned by Mr Love;

(d) properly advised, Mr Love ought to have known that the case he sought to advance was doomed to fail;

(e) the failure to accept the Calderbank offer dated 20 March 2008.

54 As to the allegation that Mr Love's claim was excessive within the meaning of s.91(1)(b)(iii), LAC Act, in 15 Lorimer Street Pty Ltd v The Secretary to the Department of Infrastructure,[41] Byrne J said:[42]

The word "excessive" in [that section] ... in the context in which it is found plainly means something more than that the sum claimed is greater than the amount [of] compensation awarded. This is the situation in most if not all successfully disputed claims. It has a pejorative connotation in the sense that the sum claimed exceeds the sum awarded to a degree which is unreasonable or worthy of criticism. This is not only a function of the difference between the two sums but also the reason for this difference. In my view what parliament intended by para (iii) is that the court or Tribunal should have the power to punish a Claimant by an adverse costs order for making a claim which amount is so unreasonably large that it ought not in the circumstances have been referred to the court or tribunal for determination. [Emphasis added]

55 In Coastal Estates,[43] Gobbo J regarded as relevant to the exercise of the discretion as to costs under s.91(1) that the proceedings were prolonged because of an excessive claim by the claimant.[44]

56 As to the Corporation's position that the difference between Mr Love's claim and the compensation awarded in his favour following the trial was significant, although this was manifestly the case, this factor in itself is not such to justify the award of costs against Mr Love on a special basis in this case as from the commencement of the proceeding.

57 Mr Love's claims for compensation for market value for the acquired land increased progressively as the matter proceeded to trial as follows:

10 September 2004 (particulars of claim): $6,235,000;

24 December 2004 (amended particulars of claim): $12,355,000;

26 July 2005 (further amended particulars of claim): $17,855,000;

16 November 2007 (yet further amended particulars of claim were filed, which remained in this form to trial): $38,120,000;

10 May 2010 (at the commencement of the trial): 30,420,000.[45]

58 The claim made by the further particulars dated 16 November 2007 stands out as a fundamental shift in position by Mr Love. This was based upon the report of Mr Herdman which was completed in October 2007. This claim more than doubled the market value claim which had been previously advanced. The claim in this form was prepared by Mr Love's former solicitors, McCluskys. It was on this claim that the Corporation was compelled to prepare its case for trial and expend considerable money in so doing.

59 Mr Herdman's report upon which the market value claim of $38,120,000 was founded, as from 16 November 2007, was in turn founded upon drilling tests conducted by Mr Natoli on Mr Love's land in 2007. These tests were interpreted by Mr Love and those advising him to reveal that the total rock resource on his land was not of 15 million tonnes as previously thought, but a resource in the order of 53 million tonnes.

60 However, to exploit this resource to the full, it was necessary to work the site beyond the recommendations of the quarry permit panel, that is below the water table and to the east of the gas pipeline. Mr Herdman in undertaking his calculations was instructed to accept that a planning permit would have issued on this basis by at least February 2002, and indeed well prior to that time so as to enable a quarry to be in full operation by that date producing and selling 700,000 tonnes of rock per annum. Mr Herdman did not proffer any opinions of value based on hypothetical cash flows founded on any alternative scenarios, such as the cash flow position as it would have been in the event of the quarry planning permit being confined to working the site above the water table or to the west of the gas pipeline or being confined by both limitations. Mr Herdman proceeded on the basis of only one assumption as to the planning permit, that is, it would not be limited as recommended by the quarry permit panel.

61 Advancing Mr Love's case on this extremely narrow basis was a high risk enterprise. It ultimately failed on a number of inputs adopted by Mr Herdman upon which he based his calculations, including his critical assumptions as to the extent of the planning permit, which were found to be incorrect, and the assumption that as at the acquisition date,11 February 2002, there existed on the site a fully operational quarry with an established market producing and selling 700,000 tonnes of rock per annum, and the assumption that a future landfill use would be permitted and ultimately in operation.

62 Apart from Mr Herdman's valuation evidence, which in turn was founded upon Mr Natoli's geological evidence, Mr Love's case did not improve significantly with the passage of time. Indeed, based upon at least one piece of expert evidence obtained in August 2004, it went backwards. Mr Love had available to him other valuation evidence, apart from the valuation evidence provided to him by experts engaged by the Corporation, namely Mr Brown and Mr Dudakov. In particular Mr Love in August 2004 retained Mr Kensley of Charter Keck, a firm of Melbourne based valuers. Mr Kensley assessed compensation payable on Mr Love's land at $3,605,000 on the basis of it being used as industrial land, and "Nil" based on it being used as a quarry. Mr Love did not call Mr Kensley to give evidence at the trial. Mr Love also retained Mr Hocking as an expert valuer. Again he was not called by Mr Love to give evidence at the trial. Similarly, another valuer Mr Nicholson was engaged by Mr Love in June 2005. He too was not called to give evidence. Mr Love also engaged Victorian valuers Croft and Gray, but they were not called to give evidence. I infer that if these witnesses had been called by Mr Love, they would not have assisted the case which he wished to advance.

63 In my opinion, based on the evidence then available to Mr Love as to the market value of his land, as from 16 November 2007 his claim at this level was extravagant. As such, Mr Love's claim, as it was finally advanced, was excessive in the sense that it was so unreasonably large that it ought not in the circumstances have been referred to the Court for determination at that level.

64 I find that the claim of Mr Love for market value of his land was excessive within the meaning of s.91(1)(b)(iii) LAC Act as from 16 November 2007 such as to justify an award of costs against him on a solicitor-client basis in favour of the Corporation as from that date.

65 As to the Corporation's claim that it incurred substantial costs in meeting various claims which were abandoned by Mr Love, the claims varied by Mr Love at the commencement of and during the trial were confined to the following:

(a) prior to giving evidence, he confirmed that his claim for "loss of land fill" now stood at $5 million in lieu of $6.7 million;

(b) on 2 June 2010, he informed the Court that he no longer pressed the claim for: "change to drainage at 275 O'Herns Road";

(c) on 22 June 2010, after giving evidence, Mr Love confirmed that the claim for "farm infrastructure and operational disturbance" was now in the sum of $241,798.81, in lieu of the amounts stated in the claim;

(d) the claim for Mr Love's own time was also revised down from the current claim in the sum of $399,116 to $343,540.

However, I am not satisfied that the Corporation suffered any substantial costs in meeting the various claims as varied by Mr Love.

66 The Corporation also contended that, properly advised, Mr Love ought to have known that the case he sought to advance was doomed to fail. In support of this submission, the Corporation relied upon a number of findings made in the Principal Judgment. In addition, the Corporation's solicitor said in his affidavit sworn 2 December 2010:

1. I am aware of no legal authority in support of the proposition that, on acquisition, a hypothetical business may be assumed to exist and that compensation may be assessed and awarded accordingly. Nor am I aware of any authority which supported the interpretation of s.43(1)(a) of the Act contended for by Mr Love prior to and at trial and upon which his market value claims depended.

67 However, by the same token, the central proposition for which Mr Love contended at trial, and indeed upon which he founded his case for market value, had not been previously the subject of direct authority adverse to the position he sought to advance. Although I found against Mr Love on the point, and decisively so, it could not be said that in advancing his case on this basis it was doomed to fail such as to warrant the award of solicitor-client costs against him from the outset of the proceeding. I arrive at this conclusion, even though his prospects of success on this issue were and remained not strong, and exposed Mr Love to very considerable risk.

68 Finally, as to the Calderbank letter dated 20 March 2008, Mr Love did not accept this offer which, according to its terms, expired on 3 April 2008.

69 Although I accept that Mr Love had a genuine, indeed a passionate, belief that his claim was worth far more than what had been offered to him, and that he ought to reject the offer in those circumstances, the subjective belief of a party in the merit of that person's case is not to the point. It is a matter of considering the reasonableness of the non-acceptance from an objective stand-point.

70 At the time of receiving and considering the Calderbank letter of offer, Mr Love was represented by solicitors and had counsel on hand to advise him if he had wished to seek that advice.

71 The stark reality is that Mr Love has succeeded in obtaining an award for less than 50 per cent of the amount offered to him in the Calderbank letter, disregarding for the moment the offer in relation to interest and costs which would have added further significant sums to the compensation package awarded to Mr Love, had he accepted it.

72 In my opinion, in all the circumstances, it was unreasonable for Mr Love to have not accepted the Calderbank offer.

73 I will consider this conclusion in the light of the factors expressly identified in s.91 LAC Act:

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

74 The amount of compensation awarded by the Court is less than half offered by the Corporation.

(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.

75 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 Corporation was reasonable and in particular the making of the Calderbank offer was entirely reasonable, and indeed generous, 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.

76 I do not consider this to be a relevant factor in this proceeding.

(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.

77 I am satisfied that Mr Love's claim was excessive for the reasons set out earlier.

(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.

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

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

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

80 As considered earlier in these reasons, the Court of Appeal in Hazeldene's Chicken Farm referred to a number of factors which should ordinarily be considered in relation to the assessment of a Calderbank offer and whether its rejection should in all the circumstances be regarded as unreasonable.[46]

81 I will now consider the Calderbank offer of 20 March 2008 in terms of the considerations referred to by the Court of Appeal.

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

82 The Calderbank offer was made on 20 March 2008, well prior to the commencement of the trial. It was made at a time when the parties had in large part put forward their cases by way of extensive affidavit material, intended to comprise evidence in chief at the trial.

83 Mr Love's case by then was burdened with the difficulties which he later faced at trial and which ultimately resulted in adverse findings being made against him. Further, Mr Love had himself rejected independent advice from a valuer, Mr Kensley of Charter Keck, who had assessed compensation payable on Mr Love's land at $3,605,000 on the basis of it being used as industrial land, and "Nil".

84 The case which Mr Love wished to advance, together with its various shortcomings, was in my view sufficiently clear, or ought to have been sufficiently clear, to establish a proper context for consideration of the offer.

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

86 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 by the Corporation at that time, combined with the underlying difficulties facing Mr Love in advancing his claim based on valuation of his land as a quarry site, which by then ought to have been well appreciated by him, had he accepted the advice which ought to have been properly given to him.

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

87 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 which he believed his case enjoyed.

88 In this regard, Mr Love placed reliance upon what he said were representations by the Corporation, or made on its behalf to the effect that he had a good case. He relied upon a file note apparently made in relation to a meeting held on Mr Love's property on 12 February 1997 by a person who apparently relied upon a hearsay appraisal of Mr Love's case as it then was. The file note did not identify the writer, although it appears to have been included in a file maintained by the Corporation and was produced in the course of discovery. The file note included the following passage: "After this meeting I had discussions with reps from Geotech to confirm the information supplied by T. Love about the quality of rock, quantity etc. Was given advice that rock royalties were from 80 cents to $2.40 per cubic metre and that rock quality in the general area was variable. On figures supplied of 15 million cubic metres [tonnes] (all in his property) of good rock gives a range of compensation between $12 million to $30 million if all rock affected". This note was made some five years before the acquisition and some nine years before the sending of the Calderbank letter. I reject this as a reasonable basis for not accepting the offer. It did not provide a reasonable basis for the respondent to advance his case in the way he did, nor to reject the offer put to him in the Calderbank letter.

89 Mr Love also relied upon the professional advice which he relied upon at the trial, including his geological consultant, Mr Natoli, and his valuer, Mr Herdman.

90 He referred to the fact that Mr Meredith's report, being the expert accountant's report on cash flows for a potential quarry on Mr Love's land prepared on behalf of the Corporation, was not given to him until some two months before the trial.

91 He also contended that a number of other factors were present which he said supported his claim, including:

The fact that groundwater was not an issue precluding the establishment or operation of a quarry on the site;

The Quarry Permit Panel in its report of 18 October 1998 dealt with the permit application on the basis of a 15 million tonne total resource, whereas later drilling in 2007 demonstrated that the resource was more likely to be in the order of 53 million tonnes, and that this would have or should have made a significant difference and ultimately swayed the planning considerations very much in his favour;

The fact that it was open for the Court to have accepted Mr Natoli's evidence ahead of the geologists called on behalf of the Corporation;

The fact that he was compelled to rely upon the evidence of rock sales obtained by Mr Herdman as he could not get those details himself from existing operators.

92 However, I find that none of the matters relied upon by Mr Love, provide any reasonable basis for refusing to accept the offer made in the Calderbank letter, either when considered separately, in combination or as a whole.

93 In the present case, Mr Love did not succeed on the principal issue at trial, namely whether the highest and best use of his land was as a quarry and landfill or as a future industrial site. As I found in the Principal Judgment,[47] the explanation for the massive gulf in the monetary sums advanced by the parties as fair compensation for the acquisition lay in the vastly different positions taken by them in relation to the highest and best use to which Mr Love's land might be put. The parties were measuring different things.

94 Although Mr Love lost in his endeavour to prove that the highest and best use for his land was as a quarry and landfill, he did not proceed to trial without evidence to support his position. Indeed, his case was such, both in the scale of his claim and the number of issues it raised, as to call for an elaborate response from the Corporation.

95 Mr Love's claim suffered serious and fundamental defects.

96 In the first place, Mr Love proceeded to trial without a cogent body of evidence to demonstrate that there were purchasers in the market as at the relevant date, 11 February 2002, who were prepared to pay a purchase price for his land, as a future quarry site, anything approaching the amount he claimed as the market value of his land. Such evidence should have been a critical component of his case. It was not present in any form upon which the Court could have placed any reliance.

97 Second, Mr Love's claim, insofar as it was founded on a future landfill operating on his land, was speculative at best. It should not have been pressed in the way it was. It was an unreasonable claim. It gave rise to considerable cost for the Corporation in marshalling a significant body of evidence to meet it.

98 Third, as I have earlier found, Mr Love's market value case, founded as it was on the assumption of an existing hypothetical quarry business operating on his land and generating 700,000 tonnes of sales per annum as at the date of acquisition, was not a strong basis on which to proceed. There was no legal authority which supported the construction of s.43(1)(a) of the LAC Act contended for by Mr Love upon which his market value claims depended. This exposed Mr Love to very considerable risk.

99 Fourth, his claim founded upon Mr Herdman's evidence, was extremely narrowly based. It depended upon an assumed town planning permit being in place without the limitations imposed by the quarry permit panel, an assumed hypothetical quarry being established which produced and sold 700,000 tonnes of rock each year to an established market as at 11 February 2002, and the ultimate development and use of a landfill on the site. These assumptions were found to be incorrect, as were other critical inputs into Mr Herdman's calculations.

100 In approaching the case in the way he did, Mr Love ignored the fundamental and serious difficulties it faced, which continued in spite of the discovery of what was believed to be a 53 million tonne resource in 2007. His prospects of ultimate success remained not good in spite of this discovery, and were not good as at the date of the Calderbank offer made 20 March 2008.

101 The present case is one of the kind referred to by Byrne J in Foster v Galea (No2):[48]

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[49], 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.

(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

103 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.[50]

104 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 $5,960,000.

105 Furthermore, it was delivered to Mr Love's solicitors, McCluskeys Lawyers, who were then in a position to appreciate the potential consequences for costs being awarded against their client on a special basis, in the event of refusal which is regarded as unreasonable.

106 As Osborn J observed in Roads Corporation v Love:[51]

Despite the fact that 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.

107 Looking at the matter overall, 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. The compromise offer was a real and generous compromise, made at a point when the parties' respective cases could sensibly be assessed after years of preparation.

108 In the circumstances, had I not made my finding in relation to the unreasonableness of Mr Love proceeding with his excessive claims beyond 17 November 2007, I would have ordered him to pay the costs of the Corporation on a solicitor-client basis at least from the date of the expiration of the Calderbank offer, namely 3 April 2008.

109 Reflecting the concern of Osborn J in Roads Corporation v Love,[52] I too am fortified in this conclusion by underlying policy considerations. I underline what his Honour said in the earlier case: [53]

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.

110 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. This was a very complex case, involving multiple expert disciplines.

111 I am further satisfied that the requirement for three counsel arose from the manner in which Mr Love advanced his case and the wide ambit of the issues raised by taking that course.

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

113 It is ordered that any orders pronounced on 26 November 2010 be vacated.

114 There be judgment for the Respondent pursuant to the Land Acquisition and Compensation Act 1986 in the sum of $2,822,042.32 together with interest in the sum of $203,009.48 as at 6 December 2010 and thereafter until payment of the remaining balance of the principal sum awarded at the rate of $38.84 per day.

(a) The Respondent pay the Applicant's costs including the costs of three counsel, reserved costs and costs of transcript up to 15 November 2007 on a party- party basis.

(c) The Respondent pay the Applicant's costs on a solicitor-client basis, including the costs of three counsel, reserved costs and transcript, on and from 16 November 2007 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 6 December 2010 including the costs of two counsel and transcript costs on a party-party basis.

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

116 Time for the filing and service of any Notice of Appeal to the Court of Appeal from the Principal Judgment or these orders pursuant to the Supreme Court (General Civil Procedure) Rules 2005 shall not commence to run until this day.

[1] [2010] VSC 537

1. [2]15 Lorimer Street Pty Ltd v Secretary to the Department of Infrastructure (Unreported judgment, Supreme Court of Victoria, 24 April 1998 per Byrne J) "This section has been construed as preserving the court's overriding discretion as to costs, even where the specified matters have been taken into account: Coastal Estates Pty Ltd v Bass Shire [1994] VicRp 13; [1994] 1 VR 210 at 218 to 219 per Gobbo J; Roads Corporation v Dacakis [1995] VicRp 70; [1995] 2 VR 508 at 545, per Batt J and Roads Corporation v Onans (No 2) [2001] VSC 160, per Balmford J, at [5]
2. [3]Murdesk Investments Pty Ltd v Roads Corporation [2007] VSC 175 at [23] to [25]

[4] [2010] VSC 154 at [13]

[5] [1991] VicRp 90; [1991] 2 VR 534.

[6] [1994] VicRp 13; [1994] 1 VR 210.

[7] (1979) 21 SASR 108, 134-5.

[9] [2007] VSC 175, [24]-[25].

[11] [1994] VicRp 13; [1994] 1 VR 210

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

[13] Coastal Estates Pty Ltd v Shire of Bass [1994] VicRp 13; [1994] 1 VR 210, 217.

[15] [2010] VSC 154 at [23]

[16] [2010] VSC 154 at [23]; citing Lipohar v R (1999) [1999] HCA 65; (1999) 200 CLR 485, 525, [100]

[17] [2010] VSC 154

[19] Supreme Court (General Civil Procedure) Rules 2005 - current form.

[20] [2010] VSC 154 at [22 - 23]

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

[24] See: Coastal Estates ibid at 212

[25] [2010] VSC 154

[26] Supra at [23 - 24] and [27-28]

[27] [2010] VSC 246

[29] [2005] VSCA 298; (2005) 13 VR 435.

[30] [2004] VSC 351 per Redlich J.

[31] [2005] VSCA 298; (2005) 13 VR 435 at 442 [25].

[32] Aon Risk Services Australia Limited v Australian National University [2009] HCA 27per Gummow, Hayne, Crennan, Kiefel and Bell JJ at [113]

[33] [1996] VSC 51; [1997] 2 VR 127, 147 (citations omitted)

[34] [2010] VSC 154 at [28-43]

[36] [1988] FCA 202; (1988) 81 ALR 397 at 401

[37] See for example: French J (as he then was) in J-Corp Pty Ltd v Australian Builders Labourers Federated Union of Workers Western Australia (unreported FCA, 9 February 1993), Murdaca v Maisano [2004] VSCA 123 at [40]; Aljade and MKIC v OCBC [2004] VSC 351; Macedon Ranges Shire Council v Thompson [2009] VSCA 209 at [15]; Auswest Timbers Pty Ltd v Secretary to the Department of Sustainability and the Environment [2010] VSC 513.

[38] [2009] VSCA 209

[40] [2008] VSC 316; (2008) 67 ACSR 547 at [103 - 107]

[41] Unreported judgment, Supreme Court of Victoria, 24 April 1998 per Byrne J

[43] [1994] VicRp 13; [1994] 1 VR 210.

[45] Mr Love's claimed loss of market value of $38,120,000 was reduced to $30,420,000 to allow for the moving of the gas line through the WA658 quarry site ($2,000,000) and the deferral of the land fill development on WA658 by five years ($5,700,000) to allow for filling of the void under the land fill with clean fill.

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

[48] [2008] VSC 331, [11].

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

[51] [2010] VSC 154 at [57]

[52] [2010] VSC 154