Serbian Cultural Club 'St Sava' Inc & Serbian Cultural Club Limited v Roads and Traffic Authority of New South Wales

KEY ISSUES: Costs :- compensation for the compulsory acquisition of land - first applicant received slightly more than Valuer-General's determination and second applicant received no compensation - related applicants - appropriate costs orders - whether costs should follow the event given respondent's success - increased costs by reason of applicants' having filed and served further expert reports after joint reports - respondent ordered to pay 50% of first applicant's costs - no order as to costs between respondent and second applicant

Civil Procedure Act 2005 LEGISLATION CITED: Courts and Other Legislation Amendment Act 2007 Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979

AMP Capital Investors v Transport Infrastructure Development Corporation (No 3) [2007] NSWLEC 724 Banno v The Commonwealth (1993) 45 FCR 32 Downie v Sorell Council (2005) 141 LGERA 304 Jax Franchising Systems Pty Ltd v State Rail Authority (New South Wales) [2003] NSWLEC 397 Maloney v Cowra Shire Council [2000] NSWLEC 107 Nasser and Others v Roads and Traffic Authority of New South Wales (NSW) (2006) 149 LGERA 289 CASES CITED: Nevitoro Investments v Hawkesbury City Council [2000] NSWLEC 151 Niezabitowski v Roads and Traffic Authority of New South Wales (2006) 147 LGERA 417 Overton Investments Pty Ltd v the Minister Administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439 Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223 Rukavina and Robertson v Wagga Wagga City Council (1993) 80 LGERA 8 Serbian Cultural Club 'St Sava' Inc & Serbian Cultural Club Limited v Roads & Traffic Authority of New South Wales [2007] NSWLEC 673 State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32 Yakas v Roads and Traffic Authority (NSW) (No 2) (2004) 139 LGERA 116

APPLICANTS Mr J J Webster SC SOLICITORS DLA Phillips Fox LEGAL REPRESENTATIVES:

RESPONDENT Mr P Tomasetti SC SOLICITORS Henry Davis York

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

SERBIAN CULTURAL CLUB 'ST SAVA' INCORPORATED First Applicant

SERBIAN CULTURAL CLUB LIMITED Second Applicant

ROADS AND TRAFFIC AUTHORITY Respondent

JUDGMENT Jagot J: 1 On 17 October 2007 I delivered my principal reasons determining the applicants' entitlement to compensation in accordance with the requirements of the Land Acquisition (Just Terms Compensation) Act 1991 with respect to the respondent's acquisition of part of 256 Seventeenth Avenue, Hoxton Park for road purposes (Serbian Cultural Club 'St Sava' Inc & Serbian Cultural Club Limited v Roads & Traffic Authority of New South Wales [2007] NSWLEC 673).

2 The first applicant, the owner of the land, claimed compensation between $2.17 and $2.45 million. The respondent said the first applicant had an entitlement to compensation in the amount of $538,000. The second applicant, the occupier of the land, claimed compensation between about $716,000 and $1.89 million. The respondent said the second applicant had no entitlement to compensation.

3 I determined the applicants' entitlement to compensation in the order of just over $742,000 for the first applicant and nil for the second applicant. Orders were entered on 7 December 2007, pursuant to which costs remained outstanding, which has been argued today.

4 The applicants claim that the appropriate costs orders are as follows: (1) The respondent pay the first applicant's costs as agreed or assessed.

(2) Either that each party pay its own costs or that the respondent pay the second applicant's costs up to and including the date 26 October 2006, and the second applicant pay the respondent's costs thereafter.

5 On 26 October 2006 the respondent made an offer of compromise to the second applicant for the payment of compensation excluding statutory interest and costs in the amount of $80,000.

6 The respondent claims that the appropriate costs order is: (1) In respect of the first applicant, each party pay its own costs.

(2) Either that the second applicant pay the respondent's costs or that the second applicant pay the respondent's costs from 27 October 2006 onwards.

7 The parties agreed that the competing costs claim should be determined under s 69 of the Land and Environment Court Act 1979 as in force before its amendment on 28 January 2008 by the commencement of the Courts and Other Legislation Amendment Act 2007 (see in particular cl 10 of Sch 6 to the Civil Procedure Act 2005).

8 The applicants' submissions relied on the reasoning in numerous earlier decisions, particularly the following: · Banno v The Commonwealth (1993) 45 FCR 32 at 51, and the observations of Wilcox J that compensation proceedings for compulsory acquisitions are not "ordinary litigation", arising as they do from the unilateral exercise of State power. · Pastrello v Roads and Traffic Authority of New South Wales (2000) 110 LGERA 223 at [17] where Talbot J referred to compulsory acquisitions as a "serious interference" with private property rights, so that there needed to be "strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation". · Nasser and Others v Roads and Traffic Authority of New South Wales (NSW) (2006) 149 LGERA 289 at [31] to [38] in which Pain J referred to a number of decisions generally to the same effect as Banno and Pastrello , including her Honour's judgment in Yakas v Roads and Traffic Authority (NSW) (No 2) (2004) 139 LGERA 116 at [21]. Pain J held that an applicant who obtains a greater award of compensation than initially offered should generally obtain a costs order in its favour unless the applicant has pursued propositions that were frivolous, vexatious, dishonest or grossly exaggerated, and assuming the proceedings were not extended by reason of any procrastination or time wasting by the applicant. · State of Tasmania v Effingham Pty Ltd (No 2) [2006] TASSC 32 at [27] - [28], generally to the same effect as Banno and Pastrello. · Downie v Sorell Council (2005) 141 LGERA 304 at 112-113 in which Pastrello was also referred to with approval. 9 The applicants submitted that: (1) The first applicant obtained an award of compensation slightly greater than the Valuer-General's determination and 40% greater than the respondent's position in the proceedings.

(2) The first applicant's claims that were rejected were nevertheless supported by expert evidence. The rejection of the evidence did not make the claims of the first applicant vexatious, frivolous or ambit claims in nature.

(3) The first applicant ran the flooding issue after an agreement with the respondent about certain physical works to ameliorate flood impacts broke down.

(4) The delay in bringing the proceedings to hearing was not the result of any unreasonable conduct of the first applicant. There was formal mediation and break down of the agreement about the flooding issue, both of which affected the timely disposition of the proceedings.

(5) The second applicant's claims were rejected, but again were supported by expert evidence.

(6) The second applicant's claims also were not vexatious, frivolous or ambit in nature.

(7) The quantum of costs that the respondent has apparently incurred with respect to the second applicant's claims (some $350,000 or thereabouts) would significantly erode the benefit of the compensation awarded to the first applicant if a costs order were made against the second applicant.

(8) None of the claims for either applicant approached the level of arguments that should never had been contemplated at all, and hence special costs orders were not justified.

10 The respondent relied on many of the same decisions as the applicants but emphasised different aspects of those decisions including the following: · The exception that Wilcox J made in Banno for applicants who make grossly exaggerated claims or impose unnecessary burdens on the resuming authority, also at 51 of the decision. · Pain J's observation in Yakas at [21] that applicants and their advisers who lodge large ambit claims at the commencement of proceedings which are then reduced during the hearing to a more realistic level need to exercise care, as such conduct may well result in the court declining the exercise of a costs discretion in the applicant's favour. · Overton Investments Pty Ltd v the Minister Administering the Environmental Planning & Assessment Act 1979 (2001) 113 LGERA 439 at [72] - [74], particularly the observation that one must "look realistically at the litigation, the issues, the way it was conducted and the result, in order to assess who really succeeded and to what extent". · Cases in which special costs orders had been made including Maloney v Cowra Shire Council [2000] NSWLEC 107 at [14] - [16], Nevitoro Investments v Hawkesbury City Council [2000] NSWLEC 151 at [34] - [36], Rukavina and Robertson v Wagga Wagga City Council (1993) 80 LGERA 8 at 9 - 10, and Jax Franchising Systems Pty Ltd v State Rail Authority (New South Wales) [2003] NSWLEC 397.

11 The respondent submitted that a realistic appraisal of the outcome disclosed that the first applicant had been unsuccessful. The first applicant could have accepted the Valuer-General's determination of compensation at any time before judgment (referring to Niezabitowski v Roads and Traffic Authority of New South Wales (2006) 147 LGERA 417) Some four or more years later the first applicant ended up with only marginally more than that determination.

12 Moreover, the first applicant ran its case in a way that imposed unnecessary and substantial burdens on the respondent, particularly with respect to the flooding issue. The first applicant's claims about flooding were wholly rejected. The respondent said the process that the first applicant adopted generally with respect to its evidence (that is, as the reasons for judgment disclose, continuing to file and serve separate reports from experts after the joint reports had been finalised) significantly increased the costs of the proceedings and undermined the efficacy and object of having joint reports. Hence, according to the respondent, the first applicant made unreasonable claims and acted unreasonably in the conduct of the proceedings.

13 The respondent said that the second applicant was wholly unsuccessful both on the law and the facts, resulting in a determination of a nil entitlement to compensation. Its claims were held to be inconsistent with those of the first applicant, and unsustainable on the evidence. An offer of compromise had been made which was not accepted. However, in all of the circumstances, the respondent's position with respect to the second applicant was that costs should simply follow the event, consistent with the usual compensatory principle that a successful party should be indemnified on account of its costs.

14 It is not necessary for me to repeat at any length the principles with respect to costs generally or in proceedings such as these. The parties between them referred to a large number of the relevant decisions to which I would add a reference to the most recent decision of Pain J in AMP Capital Investors Limited v Transport Infrastructure Development Corporation (No 3) [2007] NSW LEC724 in which the applicant obtained a nil award of compensation due to a betterment claim being accepted. Pain J rejected the respondent's argument that it should obtain an order for costs referring to Banno, Overton and Pastrello, and decided that each party should pay its own costs of the proceedings.

15 Further, as Stein J observed in Overton at [74], it is not the case that an owner is at the mercy of the government in prolonging litigation about compensation for a compulsory acquisition if an owner does not automatically obtain an award for costs. Equally as Stein J said the government would be at the mercy of an owner in prolonging a trial if an owner always received a costs order.

16 The cases show that there are no hard and fast rules leaning to any automatic results. The discretion with respect to costs is a broad one but must be exercised judicially having regard to all of the relevant circumstances.

17 Those circumstances include the close relationship between the first and second applicants and the nature of the claims they made (which I ultimately determined to be inconsistent). This factual context makes it difficult to consider the position of each applicant separately, even though it is clear that different results were reached.

18 I do not accept that the decisions to which I have referred set the bar for a special costs order as high as that contended for by the applicants; namely, that such an order may be made only where claims have been put forward which should never have been made at all. In short, having expert evidence to support a claim does not automatically mean that the claim may be realistically and reasonably maintained in all of the circumstances, particularly where, as here, the claims of the first and second applicant (supported by different expert evidence) were ultimately held to be inconsistent.

19 There cannot be much doubt that a realistic appraisal of all of the circumstances of these proceedings leads to the conclusion that the respondent was basically successful. The first applicant obtained an award of compensation only slightly exceeding that determined by the Valuer-General, albeit greater than that contended for by the respondent in the hearing. The second applicant's claims were rejected.

20 There are factors in this case which, when weighed with all other relevant circumstances, lead me to the conclusion that it would not be in the interests of justice for the first applicant to obtain the full benefit of the usual order as to costs in its favour. In particular, the first applicant obtained only slightly more than the Valuer-General's determination. Leaving aside the finding of inconsistency between the claims of the first and second applicant, the first applicant was unsuccessful in respect of most of the issues argued. The first applicant was wholly unsuccessful with respect to the flooding claims. The flooding claims involved a discrete issue which generated a need for significant preparation in terms of expert evidence and otherwise and use of court time. The way in which the applicant dealt with the flooding issue would undoubtedly have led to unnecessary costs being incurred and a considerable burden being imposed upon the respondent. In particular, I have in mind the unhappy history of the filing of numerous separate expert reports after the joint reports had been completed. I do not think that the respondent's change of position about flooding works is an adequate justification for disregarding the significant additional burdens imposed by the way the applicant's evidence on the flooding issue emerged in all of the circumstances of this case.

21 Although the respondent disavowed any approach of apportioning costs with respect to the first applicant, I do not accept that the appropriate response to all of the circumstances is that the first applicant and respondent should each be ordered to pay their own costs of the proceedings. Ultimately, the first applicant did obtain a slightly greater award of compensation than the Valuer-General determined. It is true that the respondent cannot in any way be criticised for that fact, but that is not the point. These are proceedings for compensation arising out of the compulsory acquisition of land. In all of the circumstances to which I have referred, including but not limited to the flooding issue, I consider that there should be an order that the respondent pay 50% of the first applicant's costs as agreed or assessed.

22 With respect to the second applicant, it is important to recognise one distinguishing feature from the Jax litigation. In Jax the unsuccessful applicant was found to have no interest in the land. In this case, the second applicant did have an interest in the land, albeit an interest which was found not to sound in compensation.

23 Neither party relied on the offer of compromise as necessarily dictating any particular result in these proceedings insofar as the second applicant was concerned. I agree given that the particular nature of the issues, and the way in which those issues were ultimately resolved.

24 Given the close relationship between the applicants, this is a case where the issue of a costs order against the second applicant potentially undermines the award of compensation. Ultimately the repeated observations in the decisions to which I have referred, that such proceedings are not "ordinary litigation", carry weight. The second applicant not only believed its interest in land was compensable, but adduced expert evidence to support its claims. It is true that I rejected the claims and the supporting evidence. Be that as it may, the second applicant was the occupier of land from which it was dispossessed in part by the respondent's compulsory acquisition, and was not offered compensation on its own account in its capacity as dispossessed occupier. In these circumstances it would be contrary to the interests of justice to conclude that as a successful party the respondent should simply obtain a costs order against the second applicant. Rather, in my view, and similar to the result reached in AMP Capital Investors, there should be no order as to costs as between the respondent and the second applicant.

25 This result (namely, an order for costs in favour of the first applicant limited however to 50% of its costs, and the second applicant and respondent each to pay their own costs) fairly represents the nature of the proceedings, all relevant circumstances, and the compensatory purpose of a costs order.

26 Accordingly I make the following orders: (1) The respondent is to pay 50% of the costs of the first applicant, as agreed or assessed. (2) As between the respondent and the second applicant, each party is to pay its own costs.

DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.