Real Property - Resumption or acquisition of land - Compensation - Statutory discretion on costs - Excessive claim.

Land Acquisition Act 1993 (Tas), s60(1) and (2).

Minister for the Environment v Florence (1979) 21 SASR 108; Mario Piraino Pty Ltd v Roads Corporation [1991] VicRp 90; (1990) 72 LGRA 394, referred to.

Judgment Number: [2005] TASSC 9

1 In Sorell Council v Downie [2005] TASSC 2, I determined that compensation of $1,010,000 was payable by the acquiring authority, the Sorell Council ("the Council"), to the claimant, William Bruce Downie ("Mr Downie") for 443.7 hectares of land acquired from him. This decision deals with the costs of those proceedings.

2 The general rule that costs follow the event is modified in relation to compensation claims referable to the compulsory acquisition of land by the Land Acquisition Act 1993, s60(1) and (2), which follow:

"60 (1) The costs of, and incidental to, any arbitration or proceedings before the Court under this Act are in the discretion of the arbitrator or the Court.

(2) In exercising a discretion to award costs under subsection (1), the Court or arbitrator must take into consideration -

(a) where the subject matter of the proceedings or arbitration relates to the amount of compensation payable, the amount of compensation awarded as compared with the amount (if any) offered by the acquiring authority; and

(b) the extent to which the proceedings or arbitration has arisen from, or been affected by -

(i) unreasonable conduct on the part of the claimant or the acquiring 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

(iv) an unduly depressed offer by the acquiring authority."

The inclusion of the above provisions in the Land Acquisition Act was a departure from the approach to costs that had prevailed under the Public Authorities' Land Acquisition Act 1949 and the Lands Resumption Act 1957, both of which statutes were repealed by the Land Acquisition Act. Under the repealed statutes, the Court's discretion as to costs was unfettered, which generally meant that costs followed the event. Difficulties that arose from the application of that general rule to cases that involved the assessment of compensation for acquired land are:

* A claimant almost invariably recovers compensation. If the recovery of any amount of compensation is taken to be the event that entitles a claimant to costs, a claimant can litigate the amount claimed with virtual impunity as to costs.

* If the event is taken to be whether the claimant recovers more or less compensation than was offered by the acquiring authority, a claimant who recovers less than the amount offered may be obliged to bear the costs of both parties. This could be unjust, bearing in mind that a claimant, having been deprived of the acquired land, has no choice but to pursue a claim for compensation and ordinarily it is reasonable for an acquiring authority to meet a claimant's costs of doing so.

3 It seems clear that the Land Acquisition Act, s60, has, like the Land Acquisition and Compensation Act 1986 (Vic), s60, been modelled on the Land Acquisition Act 1969 (SA), s36. In my consideration of the question of costs, I have paid regard to Minister for the Environment v Florence (1979) 21 SASR 108, which deals with the South Australian provision, and Mario Piraino Pty Ltd v Roads Corporation [1991] VicRp 90; (1990) 72 LGRA 394, which deals with the Victorian provision. I am conscious, however, of differences between those provisions and the Tasmanian provision, which include a qualification in those States on the requirement that the Court must take into consideration the specified matters.

4 In gross terms, the highest offer of compensation made by the Council to Mr Downie was $820,781 and the lowest offer of settlement made by Mr Downie was $3,755,920. These offers included amounts in relation to timber acquired from Mr Downie. As the compensation payable to Mr Downie for timber was agreed during the hearing and this issue occupied no Court time, it is appropriate to bear in mind that the compensation assessed for land alone, the issue litigated, was $700,000. The highest offer of compensation made by the Council for the land was $521,000 and the lowest offer of settlement made by Mr Downie for the land was $3,000,000. It is also pertinent that on several occasions prior to the hearing of the proceedings, the solicitor for Mr Downie suggested that the parties attend mediation and the Council, by its solicitor, deflected those suggestions and ultimately refused to attend a formal settlement conference because the parties were "miles apart".

5 To my mind, in a case such as the present, the predominant consideration mandated by s60(2) is whether the amount of compensation awarded exceeds the amount offered by the acquiring authority. I take this view, as it is only when the acquiring authority has offered in excess of the amount awarded that it can be said that it was not necessary for the claimant to take proceedings in order to obtain compensation of the amount awarded.

6 I am not persuaded that the proceedings arose from or were affected by unreasonable conduct on the part of Mr Downie. I infer from the expert evidence called on behalf of Mr Downie that the amount of his claim was consistent with expert advice he had received to the effect that the appropriate means of valuing the acquired land was a discounted cash flow method, which valued it at between $3,500,000 and $4,000,000. It was not unreasonable for Mr Downie to advance a claim consistent with that advice. In the absence of any clear guide to the valuation method that should be adopted by a valuer in the circumstances of this case, it was inevitable that there would be a substantial divergence between the views of experts on the value of the acquired land. No legal principle purports to, or could, close the methods of valuing that might be acceptable to the Court, Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 [280]. Whilst a significant portion of the evidence put before the Court was irrelevant because it related to matters that occurred subsequent to the assessment date, both parties were responsible for allowing this to occur. It is not a basis for a finding of unreasonable conduct on the part of Mr Downie.

7 No material put before me provides any basis for concluding that the proceedings arose from, or were affected by, any failure on the part of Mr Downie to provide adequate particulars of his claim or supply supporting material when required to do so.

8 Mr Downie's claim was excessive when measured against the amount of compensation he was awarded. Mr Estcourt QC submits that a substantial portion of the proceedings concerned the discounted cash flow method of valuing the land and this method of valuation, which was not adopted by the Court, underpins the excessive claim made by Mr Downie. Whilst this submission is sound, it is the method of valuation, not the value that it produced, that affected the proceedings. Had that method of valuation produced a value higher than the Council's offer that was not excessive, its effect on the proceedings would have been just the same. A related proposition advanced on behalf of the Council is that Mr Downie's failure to satisfy the Court that the discounted cash flow method was the appropriate means of valuing the land should be reflected in any order as to costs. I do not accept this proposition. The approach adopted when assessing the compensation payable to Mr Downie was as enunciated in Spencer v The Commonwealth of Australia [1907] HCA 82; (1907) 5 CLR 418. No particular method of valuation was found to be decisive for the purposes of the Spencer approach, although regard was paid to all of the various methods of valuation advanced by the expert witnesses. In these circumstances I do not consider that I should craft an order for costs that reflects the outcome of any particular issues, save for the issue of whether the compensation awarded exceeded the amount offered by the Council.

9 The Council attributes its refusal to participate in a mediation or a formal settlement conference on the amount of Mr Downie's claim and, in effect, contends that had his claim not been excessive, the matter would have settled. On this basis it is contended that the excessive claim affected the proceedings. In my view, I should only give weight to this contention if satisfied that but for the excessive claim it is likely the proceedings would have settled for no less than the amount awarded. However, as the Council refused to participate in a mediation, I am in no position to reach any conclusion about whether, or for what amount, the claim was likely to have settled. I consider that the stance taken by the Council to mediation was unreasonable and ignores the reality that not infrequently apparently intransigent parties whose positions are wide apart are able to achieve a settlement through mediation. Mr Downie's willingness to participate in a mediation was an indication of some flexibility on his part. I am not satisfied that had Mr Downie's claim been for an amount that was not excessive when compared with the amount awarded, the proceedings are likely to have settled for not less than that amount.

10 On balance I consider that the order I should make is that the Council pay Mr Downie's costs of and incidental to the proceedings to be taxed.