Land and Environment Court
New South Wales

Medium Neutral Citation:

Halley v Minister Administering the Environmental Planning and Assessment Act 1979 (No 3) [2011] NSWLEC 94

Hearing dates:

30 and 31 (written submissions) May 2011

Decision date:

31 May 2011

Jurisdiction:

Class 3

Before:

Pepper J

Decision:

The orders of the Court are as follows:

1. the applicant is to pay the respondent's costs of the proceedings, excluding the costs of the motion before Biscoe J on 3 December 2009 and the directions hearing of 27 November 2009, on a party/party basis as agreed or assessed.

2. the applicant is to pay the respondent's costs of this motion.

3. the exhibits are to be returned.

Catchwords:

COSTS - whether costs follow the event in cases concerning compensation for compulsory acquisition or whether some other costs principle applies - whether the applicant should pay the Minister's costs of the proceedings in circumstances where she was awarded compensation but 'lost' the proceedings

Legislation Cited:

Civil Procedure Act 2005, s 98
Land Acquisition (Just Terms Compensation) Act 1991, ss 3(1), 54(1), 59(a)
Land and Environment Court Act 1979, ss 19(e), 24, 25
Land and Environment Court Rules 2007, r 3.7
Lane Cove Local Environmental Plan 1987, cl 18G
Uniform Civil Procedure Rules 2005, r 42.1

Cases Cited:

AMP Capital Investors Ltd v Transport Infrastructure Development Corp [2008] NSWCA 325; (2008) 163 LGERA 245
Banno v Commonwealth of Australia (1993) 45 FCR 32
Buchanan; Kapanke; Moyle v Sutherland Shire Council [2007] NSWLEC 243
Dillon v Gosford City Council (No 3) [2010] NSWLEC 168
Doueihi v Roads and Traffic Authority of New South Wales [2005] NSWCA 201
Gee v Port Stephens Council [2003] NSWLEC 260; (2003) 131 LGERA 325
Geoffrey v Roads and Traffic Authority of NSW [2007] NSWLEC 405
Halley v Minister Administering the Environmental Planning and Assessment Act 1979 [2009] NSWLEC 209
Halley v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 6; (2010) 170 LGERA 449
Halley v Environmental Planning and Assessment Act 1979 [2010] NSWCA 361; (2010) 178 LGERA 327
Halloran v Shoalhaven City Council; Sealark Pty Ltd v Shoalhaven City Council [1999] NSWLEC 259
Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2001] NSWCA
137; (2001) 113 LGERA 439
Ray Fitzpatrick Pty Ltd v Minister for Planning (No 5) [2008] NSWLEC 183
Serbian Cultural Club "St Sava" Inc v Roads and Traffic Authority (NSW) (No 2) [2008] NSWLEC 78
Taylor v Port Macquarie - Hastings Council [2010] NSWLEC 153; (2010) 175 LGERA 189
Walker Corp Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27
Wollong Pty Ltd v Shoalhaven City Council [2002] NSWLEC 164; (2002) 122 LGERA 331

Category:

Procedural and other rulings

Parties:

Diane Kay Halley (Applicant)
The Minister Administering the Environmental Planning and Assessment Act 1979 (Respondent)

Representation:

Counsel:
Mr T S Hale SC (Applicant)
Mr R P L Lancaster SC (Respondent)
Solicitors:
Bradfield and Scott Lawyers (Applicant)
Pikes Lawyers (Respondent)

File Number(s):

31077 of 2008

EX TEMPORE Judgment

Introduction

1By notice of motion filed 23 March 2011, the Minister Administering the Environmental Planning and Assessment Act 1979 ("the Minister") seeks an order that the applicant in Class 3 compulsory acquisition proceedings pay his costs of the proceedings (excluding costs of a notice of motion heard before Biscoe J on 3 December 2009 - Halley v Minister Administering the Environmental Planning and Assessment Act 1979 [2009] NSWLEC 209 - and a directions hearing before the Court on 27 November 2009).

2In support of the notice of motion, the Minister relied on a bundle of documents and an affidavit of Mr David Baxter sworn 23 March 2011. Mr Baxter is the solicitor for the Minister in the proceedings. The affidavit did no more than annex correspondence passing between the parties concerning the foreshadowed application for costs.

3The application is opposed by Ms Diane Halley, the applicant to the compulsory acquisition proceedings.

4The application for costs flows from a decision of Lloyd J handed down on 15 January 2010 (Halley v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWLEC 6; (2010) 170 LGERA 449). In that decision, his Honour determined that the compensation to which the applicant was entitled for the compulsory acquisition of Lot 2 in Deposit Plan 1126043 ("the land") was in the sum of $1,315,000. His Honour reserved the question of costs.

5The decision at first instance was unsuccessfully appealed (Halley v Minister Administering the Environmental Planning and Assessment Act 1979 [2010] NSWCA 361; (2010) 178 LGERA 327).

6In my opinion, the appropriate disposition of the motion is that it should be upheld and, therefore, Ms Halley should pay the Minister's costs of the proceedings and the costs of the motion.

Background

7On 18 July 2008, by notice published in the Government Gazette the Minister compulsorily acquired the land under the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act").

8Prior to the acquisition, the acquired land was part of a larger parcel of land owned by Ms Halley at 1 Nott Lane, Longueville. On the larger parcel of land was an existing dwelling fronting Nott Lane. The original parcel of land was itself a subdivision of an allotment defined as Lot 212 in Deposited Plan 866891, that extended from Arabella Street to the waterfront with a dwelling on the lot fronting Arabella Street.

9The whole of the land slopes steeply down to Woodford Bay on the Lane Cove River, to which the acquired land has a frontage. The acquired land is in an area of suburban bushland in Longueville on the foreshore of Woodford Bay. The land was acquired by the Minister for the purpose of preserving it as regional open space.

10By compensation notice dated 15 August 2008, the Minister offered Ms Halley an amount of compensation as determined by the Valuer-General in the sum of $2,016,500.

11On 28 October 2008, Ms Halley filed a Class 3 application in this Court challenging the amount of compensation offered.

12By points of claim filed on 5 December 2008, Ms Halley claimed compensation in the amount of $3,500,000, plus disturbance costs to be determined, together with the costs of the proceedings.

13In the original points of defence filed on 27 February 2009, the Minister contended that the compensation payable to Ms Halley was $2,115,000. By amended points of defence filed on 1 May 2009, the Minister contended that the compensation payable was $1,315,000.

14The proceedings were listed for hearing on 7-9 December 2009. Shortly before the hearing, the Minister filed a notice of motion seeking leave to rely on three expert reports filed and served out of time. The application was heard and determined by Biscoe J on 3 December 2009. Leave was granted in respect of one of the reports, but refused in respect of the other two. The Minister's oral application for hearing dates to be vacated was also declined. The Minister was ordered to pay the applicant's costs of the notice of motion and the costs of an earlier related directions hearing on 27 November 2009.

15In this application, Ms Halley made no complaint about the Minister's conduct prior to the hearing. Given that a costs order was made in her favour, and given that it cannot be said that the Minister's conduct in this regard had any impact on the conduct of the hearing itself, there would have been little utility in doing so in any event.

16Ms Halley did not prepare any written submissions in chief for the acquisition proceedings. She submitted additional submissions in writing after the hearing concluded in relation to various matters, including that the applicant's claim for compensation was, by the time Lloyd J reserved his judgment, in the amount of $2,385,000. No amendment to this effect was, however, made to the points of claim, nevertheless, Lloyd J proceeded to determine the proceedings on the basis of this reduced sum.

The Decision of Lloyd J

17Before Lloyd J, Ms Halley's primary submission was that the original parcel of land was, as at the date of acquisition, able to be subdivided into two allotments and that the construction of Nott Lane could be extended to serve the additional allotment, which would have fronted Woodford Bay. The Minister contended, by contrast, that the land had no development potential and should merely be valued as part of the original land holding.

18The foreshore land, including the acquired land, had been reserved for public purposes since the commencement of the County of Cumberland Planning Scheme Ordinance in 1951. As at the date of acquisition the land was zoned Regional Open Space Reservation 9(c) under the Lane Cove Local Environmental Plan 1987 ("the LEP"). The residue land on which an existing house was situated was zoned Residential 2(a2) under the LEP. The parties' town planning experts, Mr N Ingham for Ms Halley and Mr N Dickson for the Minister, agreed that if the acquired land had not been reserved for the public purpose, the underlying zoning would have been Residential 2(a2) under the LEP.

19Mr Ingham contended there were three options for development of the original parcel assuming the Residential 2(a2) zoning. Option three, which was Mr Ingham's preferred option, was a subdivision of the land to create two allotments, one with the existing house on it and a second on the waterfront. Ms Halley's valuer, Mr W Wotton, valued the acquired land on the basis of this third option, that is, that the original parcel of land had the potential to be further subdivided to create a third residential allotment in the block between Arabella Street and the waterfront.

20Mr Dickson disagreed with Mr Ingham's analysis and opined that all times consent for the subdivision was unlikely. The Minister's valuer, Mr R Briggs, valued the acquired land on the basis that the approval of a subdivision was unlikely and that the land should be valued adopting a before and after approach in which there had been a loss of part of a single allotment.

21Lloyd J accepted the fact that the land before the compulsory acquisition was physically capable of being subdivided, however, he concluded that "the likelihood of any consent being granted for a subdivision was extremely remote " (at [39]). This conclusion was premised on his preference of the evidence of Mr Dickson over that of Mr Ingham.

22His Honour articulated the reasons why he had come to this view which were as follows (at [40]-[47]):

(a) the subdivision would be contrary to the objectives of zone W8 of the Sydney Regional Environmental Plan (Sydney Harbour Catchment) 2005 ("the SREP") (at [40]);

(b) the erection of a dwelling house on an additional allotment would be contrary to cls 25 and 26 of the SREP (at 41);

(c) the proposed development would have been highly visible from significant vantage points in and around Woodford Bay, which was contrary to the controls for the intended character of the area contained in the Sydney Harbour Foreshores and Waterways Area Development Control Plan (at [42] and [43]);

(d) an additional dwelling on the strip of land between Arabella Street and the foreshore of Woodford Bay would have made this the only place where there were three (rather than two) dwellings on the slope from street to water, which would stand out as an anomaly (at [41]) and which would not be consistent with the scale, design and siting of that which existed in the area (at [43]);

(e) assuming that all the other land zoned Regional Open Space 9(c) in the area had been zoned Residential 2(a2), this might have afforded an opportunity for a two lot subdivision, but not a three lot subdivision (at [43]);

(f) the subdivision would have been contrary to the zone objective for the Residential 2(a2) zone (at [44]);

(g) the subdivision would have been contrary to cl 18G of the LEP (at [44]);

(h) the subdivision would have been contrary to the objectives of the Land Cove Development Control Plan No 1 - Control of Development Adjacent to Bushland (at [45]);

(i) the area of foreshore along Woodford Bay was a valuable stretch of urban bushland that the council was committed to preserving and protecting (at [46]);

(j) the council has consistently enforced the planning controls referred to above for development in or adjacent to bushland, an approach endorsed by decisions of the Court (at [46]); and

(k) the subdivision would have required constructing an extension to Nott Lane to provide access to the new lot, involving loss of trees and a visible structure (at [47]).

23Thus, for all these reasons his Honour concluded that it was "highly unlikely that a consent for further subdivision of the original parcel would have been approved by the Council and also highly unlikely that the Court would overturn any decision to refuse such development" (at [48]). It followed that a hypothetical purchaser would conclude that the land had "little if any potential for subdivision" (at [49]).

24As a consequence of his findings, Lloyd J had to reject the valuation of Mr Wotton, whose evidence was based solely on the land being available for subdivision, and accepted instead the valuation of Mr Briggs.

25His Honour therefore determined that the market value of the acquired land was $1,300,000, together with an amount of $15,000 for loss attributable to disturbance (the latter amount was agreed to by the parties).

Judgment of the Court of Appeal

26The Court of Appeal (Tobias JA, with whom Giles and Hodgson JJA agreed) held that Lloyd J had misinterpreted the zoning maps put before him. In particular, Lloyd J had failed to appreciate that there were three different kinds of open space zoning around the foreshore. As a consequence, the land zoned 6(b) was not considered, as it ought to have been, by him in his reasons. This constituted an error of law, but the error was found to be understandable in the context of the way in which Ms Halley had framed her case at the trial (at [27]-[30]).

27The Court went on to consider the town planning evidence in some detail. In relation to Mr Ingham's evidence, the Court made three observations (at [32]-[34]):

(a) when opining as to what type of development would have taken place along the Woodford Bay area had the reservation not been in place, Mr Ingham could put it no higher than "it could" have resulted in a number of properties being subdivided and developed. Mr Ingham did not opine, as advanced by Ms Halley, that but for the reservation the lots running from Arabella Street to the foreshore would have been subdivided into three lots (at [32]);

(b) Mr Ingham accepted that even if the reservation had not taken place there would still have been a 30m foreshore building line required in order to provide a protected buffer of vegetation along the whole of the foreshore (at [33]); and

(c) Mr Ingham accepted that cl 18G of the LEP would be applicable to any consideration by the council of any further subdivision of the land into two lots as proposed by Ms Halley. This meant that there were a number of planning controls applicable to the area within which the acquired land was located, that could not be ignored for the purpose of the hypothetical subdivision exercise (at [34]).

28The Court of Appeal unanimously held that notwithstanding the error, "the primary judge's conclusion that it was highly unlikely that the Council would consent to the further subdivision of [the land] ... was based upon a series of findings of fact that were divorced from the issue in respect of which the error is alleged" (at [79]).

29Furthermore (at [79]-[82]):

79 ...In particular, his Honour's reasoning was essentially dependent upon his application of planning controls which, it was common ground, he was required to apply in circumstances where it was open to him to find that it was highly unlikely that the Council would approve a third lot between Arabella Street and the waterfront in circumstances where any dwelling house erected thereon would be highly visible from the Lane Cove River and Northwood Wharf. Such visibility would be contrary, in particular, to the objective of the very zone that his Honour was required to assume applied not only to the acquired land but also to at least three allotments to the north and south of the acquired land.

80 Furthermore, in my view it is critical that at trial it was accepted, as Mr Ingham's evidence established, that the Council would insist on a foreshore building line of up to 30 metres along the whole of the foreshore within which bushland would be maintained and that Mr Ingham's evidence was non-specific as to the nature of any development or subdivision pattern that may have occurred had the 6(b) zoning been disregarded. In this context it must be remembered that the issue of the visibility of buildings between Arabella Street and the waterfront on the north-western side of Woodford Bay had been the subject of controls since 1987 when the LEP came into force.

81 There was no evidence that supported the proposition that the visibility and bushland considerations would not have applied had the reservation of the foreshore land been ignored. Maintenance of the bushland strip along the foreshore was a given, whether it was a result of the reservation or of Mr Ingham's foreshore building line.

82 Also of critical importance is the fact that in his evidence Mr Ingham did not assert that, absent the reservation, the subdivision pattern of the allotments between Arabella Street and the north-western side of Woodford Bay would have included a pattern of three lot subdivisions in the vicinity of Lots 211 and 212.

30Accordingly, it was not accepted that Lloyd J's error in failing to acknowledge the 6(b) zoned land was sufficiently material to, or operative upon, his Honour's decision to warrant its setting aside. This was because "it was highly unlikely that the Council would approve the subdivision of [the land] ... into two allotments thereby creating an additional dwelling which would be visually prominent contrary to the planning controls applicable at the time" (at [85]).

Applicable Principles Relating to an Award of Costs in Compulsory Acquisition Cases

31The issue at the heart of this application is the correctness of what has been described as a "general principle" (Walker Corp Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27 at [35] quoted in Taylor v Port Macquarie - Hastings Council ; [2010] NSWLEC 153; (2010) 175 LGERA 189 at [20]), namely, that a person who has had their land acquired by compulsion should generally not bear their own costs and should be permitted to access this Court to present an arguable and well organised case undeterred by any prospect of suffering an adverse costs order should the case fail.

32Mr Tim Hale SC, appearing for Ms Halley, endorsed this "general principle" and submitted that only when the applicant presents an unarguable and disorganised case would the Court consider exercising its discretion to award costs against the applicant. To hold otherwise, he contended, would be to overturn longstanding established precedent and principle in this and other courts.

33Mr Richard Lancaster SC, appearing on behalf of the Minister, did not submit that the case had been conducted in a manner that could properly be described as shambolic or wholly lacking in merit. Nevertheless, he argued that when regard was had to the current state of authorities and to the relevant statutory framework governing awards of costs in compulsory acquisition cases in this Court, it was open to the Court to exercise its discretion to award the Minister costs as sought in the present case.

34This was because, on any view Mr Lancaster SC submitted, Ms Halley had 'lost' the proceedings given that the amount of compensation awarded by the Court was precisely the amount of compensation advanced by the Minister in its amended points of defence which, moreover, was less than the amount the Minister had initially offered Ms Halley as determined by the Valuer-General.

35The starting point for any consideration of an award of costs in compulsory acquisition cases is s 98 of the Civil Procedure Act 2005 ("the CPA"). Section 98 of the CPA provides that "subject to rules of court and to this or any other Act" costs are in the discretion of the court (s 98(1)(a)).

36It follows that the general discretion conferred by s 98 is subject to the Uniform Civil Procedure Rules 2005 ("UCPR"), the Just Terms Act and any specific legislative provisions governing an award of costs in this Court, pursuant to either the Land and Environment Court Act 1979 or the Land and Environment Court Rules 2007 ("the 2007 Rules").

37Turning first to the UCPR, under r 42.1 if the Court makes an order as to costs, the general rule that costs follow the event is applicable unless it appears to the Court that "some other order should be made as to the whole or any part of the costs".

38Second, in relation to the legislative framework by which awards of costs are made in proceedings conducted in this Court, proceedings brought by an applicant for the determination of compensation for the compulsory acquisition of land under the Just Terms Act are proceedings of the type described in ss 19(e), 24 and 25 of Land and Environment Court Act.

39Significantly, these proceedings are explicitly not within the special category of Class 3 proceedings to which the provisions of r 3.7 of the 2007 Rules apply. Rule 3.7(2) effectively states that the "some other order" referred to in r 42.1 of the UCPR should be made in respect of the Classes of proceedings within the Court's jurisdiction that are nominated in that rule. The "other order" contained in r 3.7(2) is that costs do not follow the event and that the Court is precluded from ordering costs unless it is fair and reasonable to do so in all the circumstances.

40Given the proximity of the promulgation of the 2007 Rules to the passage of the CPA and the UCPR, the exclusion of the Just Terms Act from r 3.7 is telling and cannot be ignored. It manifests an unequivocal intention by the legislature that, albeit by omission from the terms of r 3.7(2), the ordinary rule that costs follow the event is to apply to claims for compensation for compulsory acquisition. I do not accept, as Mr Hale SC submitted, that the omission is premised on a general body of knowledge and understanding that the "general principle" referred to above applies, that absent disorganisation or an unarguable case, a claimant should not be made to pay the costs of the resuming authority in compensation proceedings under the Just Terms Act.

41Third, the Just Terms Act itself is silent with respect to awards of costs in this regard. Mr Hale SC relied on s 59(a) of that Act to advance an argument that because under the Act legal costs are considered to be a component of the compensation payable to an applicant as disturbance, this evinced an intention by Parliament that costs ought not be payable by an applicant consequent upon any legal proceedings determining the compensation payable.

42Section 59(a) of the Just Terms Act relevantly provides as follows:

59 Loss attributable to disturbance

In this Act:

loss attributable to disturbance of land means any of the following:

(a) legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land...

43But a distinction must be drawn between the "legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land" and the legal costs of the proceedings. The former are those properly forming part of the compensation payable to an applicant as a loss attributable to disturbance. The latter, however, are not ( Halloran v Shoalhaven Council; Sealark Pty Ltd v Shoalhaven City Council [1999] NSWLEC 259 at [7] and Buchanan; Kapanke; Moyle v Sutherland Shire Council [2007] NSWLEC 243 at [5]). The Just Terms Act, therefore, says nothing about the payment of legal costs the subject of this application.

44Mr Hale SC drew upon ss 54(1) and 3(1)(a) and (b) of the Just Terms Act to submit that because the primary rationale and object of the legislation is to ensure that an applicant is justly compensated for an involuntary appropriation of the applicant's land, this provided, at the very least, an implicit basis for the Court to make "some other order" in respect of costs. This, it was argued, had been recognised by the Court "for decades", and the passage of neither s 98 of the CPA, r 42.1 of the UCPR, nor r 3.7 of the 2007 Rules impinged upon the well developed principles governing the exercise of the Court's discretion to award costs in compulsory acquisition litigation. This was because, as Biscoe J pithily observed in the decision of Taylor v Port Macquarie - Hastings Council (at [19], emphasis added):

...The interference with the rights of the individual, the confiscatory nature of compulsory acquisition and the statutory entitlement to just compensation have led to the development of different principles in determining costs in cases concerned with compensation for the compulsory acquisition of land compared with ordinary litigation.

45In Taylor , Biscoe J quoted from his earlier judgment in Walker Corp Pty Ltd v Sydney Harbour Foreshore Authority (at [34]-[37]), wherein he described the evolution of these "different principles" as follows (at [20], emphasis added):

20 I recently considered those principles in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27 at [34]-[37]:

34 The discretion to award costs in compensation matters is one that has been "uniquely applied to tilt the discretion in favour of the dispossessed owner": Nasser v Roads and Traffic Authority (NSW) [2006] NSWLEC 562, 149 LGERA 289 at [32]. As Jagot J said in Simpson v Bagnall [2008] NSWLEC 79 at [10]:

...the compulsory acquisition of land is a serious matter where a dispossessed owner has no option other than to come to court if they dispute the amount of compensation offered. The consequence is that, in the ordinary course, a dispossessed owner can expect to obtain the usual order for costs in their favour, particularly when the amount of compensation determined is greater than that offered by the resuming authority.

35 As a general principle, a person who has had their land taken by way of compulsory acquisition should not bear their own costs, but rather should be allowed to access the Court to present an arguable and well organised case without being deterred by the prospect of being ordered to pay costs if the case proves unpersuasive: Banno v The Commonwealth (1993) 81 LGERA 34 at 53, 45 FCR 32 [at 51], Pastrello v Roads and Traffic Authority (NSW) [2000] NSWLEC 209, 110 LGERA 223 at [17]; AMP Capital Investors v Transport Infrastructure Development Corporation (No 3) [2007] NSWLEC 724 at [18]-[21]; AMP Capital Investors v Transport Infrastructure Development Corporation [2008] NSWCA 325, 163 LGERA 245 at [102].

36 In Serbian Cultural Club 'St Sava' Inc v Roads and Traffic Authority (NSW) (No 2) [2008] NSWLEC 78 a nil determination of market value gave rise to no order for costs. In that case Jagot J observed at [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 that must be exercised judicially having regard to all of the relevant circumstances.

This decision was cited with approval in BMP Manufacturing Pty Ltd v Roads and Traffic Authority of New South Wales (No 2) [2009] NSWLEC 41.

37 In Banno v The Commonwealth (1993) 81 LGERA 34, 45 FCR 32, Wilcox J referred to the court's general discretion as to costs and the public interest in allowing applicants in compulsory acquisition matters access to the court without being deterred by the prospect of being ordered to pay costs if their case proves unpersuasive. His Honour went on to observe at LGERA 53:

I distinguish the situation of resumees who pursue a vexatious, dishonest or grossly exaggerated claim or present their case in such a way as to impose unnecessary burdens on the Commonwealth or the Court.

46In Taylor his Honour went on to summarise the various expressions in the authorities, not limited to this Court, of the "different principles" (or the "general principle" referred to in Walker ) that have developed in respect of awards of costs in proceedings for compensation consequent upon a compulsory acquisition (at [21]-[22]):

21 The principles applicable to costs in proceedings for compensation for compulsory acquisition of land have been similarly expressed in many other cases, not limited to cases in this Court, including the following:

(a) In Minister for the Environment v Florence (1979) 21 SASR 108 at 134-135; 45 LGRA 127 at 149-150 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 s 18 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.

(b) "The resumption of land is a serious matter. It is not apparent to me why a person who has had his land taken by a government or some other statutory authority should, in addition to losing his land, bear his own costs of seeking what in fact turns out to be just compensation" North Albury Shopping Centre Pty Ltd v Albury Municipal Council (1983) 49 LGRA 215 at 221 per Cripps J.

(c) "The Court has a general discretion as to costs, but the discretion must be exercised on principled grounds. The Commonwealth has succeeded on all issues. It would therefore seem difficult to justify ordering it to pay the applicants' costs. Moreover, if this was ordinary litigation, the Commonwealth might reasonably expect to obtain an order that the applicants pay its costs. But this is not ordinary litigation. The relationship between the parties giving rise to the litigation did not arise out of their mutual desire; it arose because of a unilateral decision of the Commonwealth to acquire the applicants' land in order to satisfy a perceived public need. The acquisition left the applicants in the position of either accepting the Commonwealth's assessment of the proper compensation or of having the court rule on its adequacy. Perhaps people in that position should be allowed access to the Court, to present an arguable and organised case, without being deterred by the prospect of being ordered to pay the Commonwealth's costs if their case proves unpersuasive. I distinguish the situation of resumees who pursue a vexatious, dishonest or grossly exaggerated claim or present their case in such a way as to impose unnecessary burdens on the Commonwealth or the Court": Banno v Commonwealth of Australia (1993) 45 FCR 32 at 51; 81 LGERA 34 at 53 per Wilcox J.

(d) "It has been said many times that the compulsory acquisition of land from an unwilling owner is a serious interference with that person's entitlement to quiet enjoyment and generally wide discretion to do with their own land as they see fit. It is a power of the State which is exercised for the public benefit. Very seldom does the resumption work to the benefit of the dispossessed owner. There needs to be a strong justification for awarding costs against an applicant where the effect of making that order is to erode the benefit of the just compensation recovered as a consequence of the Court's determination. It is only in special cases that the Court will deprive the owner of the full benefit of the compensation which is determined as fair and just in the circumstances of the case. An order for costs against the interests of the applicants in this case would clearly have a significant impact on the ultimate amount to be recovered by the applicants": Pastrello v Roads and Traffic Authority of NSW [2000] 110 LGERA 223 at [17]-[18] per Talbot J.

(e) "It is only in special cases that the Court will deprive a dispossessed owner of the benefit of a costs order particularly when the amount recovered is greater than that offered by the resuming authority at any time and significantly greater than any amount offered prior to the litigation": Horton v Wyong Shire Council (No 2) [2005] NSWLEC 45 at [28] per Talbot J.

(f) After referring to the judgment of Cripps J in North Albury Shopping Centre , Bignold J said in Constantino v Roads and Traffic Authority (NSW) (No 2) [2005] NSWLEC 209, 144 LGERA 224 at [8]-[10]:

This general approach to the exercise of its costs discretion in proceedings to determine compensation for compulsory land acquisition has consistently permeated the decisions of this Court throughout its history, although it has never been translated into a general or inflexible rule that every claimant obtaining a judicial determination of compensation should obtain a costs order in the proceedings resulting in that determination.

(g) In Wollong Pty Ltd v Shoalhaven City Council (2002) LGERA 331 at [41] Talbot J said:

The question remains whether the applicant was sufficiently unreasonable in refusing the offers to settle to justify an order that it pay the respondent's costs on a party and party basis or whether the philosophy expressed by Wilcox J in Banno v Commonwealth (1983) 81 LGERA 34 should prevail.

His Honour concluded that the applicant should pay the respondent's costs on the ordinary basis after the service of the respondent's Calderbank letter [ Calderbank v Calderbank [1976] Fam 93].

22 The application of these principles can be seen in decisions of the Court of Appeal. In AMP Capital Investors Ltd v Transport Infrastructure Development Corporation (No 3) [2007] NSWLEC 724 the Valuer General had determined the amount of compensation to which AMP was entitled in the amount of $683,150. AMP claimed compensation of $21,465,352. This Court at [1] determined compensation as nil yet ordered that each party pay its own costs notwithstanding the result. The costs order was not disturbed on appeal: AMP Capital Investors Ltd v Transport Infrastructure Development Corporation (2008) 163 LGERA 245. In Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439 the statutory valuation had been $727,500. This Court determined compensation at $186,031.54. The Minister unsuccessfully sought to have Overton pay its costs. The costs decision of the primary judge was upheld on appeal. Stein JA at [72] observed that such proceedings were not like ordinary litigation. In Residents Against Improper Development Inc v Chase Property Investments Pty Ltd (2006) 149 LGERA 360 at [251] McClellan CJ at CL obliquely referred to the special costs principles developed in relation to proceedings under the Just Terms Act .

47As the case law currently exists there is, in my view, a tension between the statutory framework discussed above, namely, that generally costs follow the event, and the "different principles" that have evolved outside this legislative context for determining costs in cases concerned with compensation for the compulsory acquisition of land.

48The resolution of this tension is, in my opinion, to be had in the orthodox application of the legislation and by a careful analysis of the current state of the authorities. Once this task is complete it becomes clear, to me at least, that the "general principle" previously relied upon in cases concerning compensation for compulsory acquisition that the starting point for any determination of costs is that an applicant either should not have to bear his or her own costs or should not have to pay the resuming authority's costs, can no longer be maintained. To hold otherwise would be to disregard, erroneously in my view, the express and unambiguous language of the legislation outlined above.

49I accept that this position does not sit comfortably with a considerable body of opinion of this Court. But many of these cases were decided before the enactment of the CPA, the UCPR or the 2007 Rules. They must now be viewed through a different prism and approached with caution. Judicial comity alone is no answer to this altered legal landscape. However, to the extent that the views I express in this judgment may be seen a departure from those articulated in more recent decisions of this Court (for example Walker , Taylor and Dillon v Gosford City Council (No 3) [2010] NSWLEC 168 at [59]-[60] per Sheahan J), they are offered with the greatest of respect.

50The authorities usually cited in support of the "general principle" do not, upon closer scrutiny, derogate from the conclusion that I have reached above. In the Court of Appeal decision in Overton Investments Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 1979 [2001] NSWCA 137; (2001) 113 LGERA 439, the statutory valuation of the resumed land made by the Valuer-General was in the sum of $727,500. The appellant elected not to accept this sum and commenced proceedings in this Court for the amount of compensation to be determined under the Just Terms Act. The Court determined compensation in the amount of $186,031.54 and held that there be no order as to costs.

51The appellant appealed both the amount of compensation and the costs order. In dismissing the appeal, the Court (Stein JA, with whom Powell JA and Ipp AJA agreed) noted that it was not the case that costs should always follow the event in an award of compensation in compulsory acquisition cases (at [69]). The Court also noted that while the Valuer-General's determination and its relationship to the ultimate award of the Court was relevant, it was not determinative (at [71]). Likewise, it was not "a simple matter of ascertaining who won or lost the litigation" (at [72]). Rather, "a judge is entitled to 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" (at [72]).

52The Court was at pains to observe that (at [74]):

74 On a final note, it was said that if a landowner was not entitled to his costs of a trial where an award of compensation is obtained, then he could be at the mercy of the Government in prolonging the litigation. I do not accept that this is so and indeed, the opposite could be claimed. That is, if a landowner is always to get its costs so long as it obtains an award of compensation, however small, the resuming authority may be at the mercy of the landowner in prolonging a trial.

53Accordingly, on a fair reading of Overton it appears that the Court expressly disavowed any "general principle" that a claimant should be awarded his or her costs upon an award of compensation for land compulsorily acquired or that failing this, that each party should bear their own costs.

54In Banno v Commonwealth of Australia (1993) 45 FCR 32, a case concerning the Commonwealth equivalent to the Just Terms Act, Wilcox J specifically referred to the fact that compulsory acquisition cases are "not ordinary litigation" (at 51) and went on to state (at 51, emphasis added):

... The relationship between the parties giving rise to the litigation did not arise out of their mutual desire; it arose because of a unilateral decision of the Commonwealth to acquire the applicants' land in order to satisfy a perceived public need. The acquisition left the applicants in the position of either accepting the Commonwealth's assessment of the proper compensation or of having the Court rule on its adequacy. Perhaps people in that position should be allowed access to the Court, to present an arguable and well-organised case, without being deterred by the prospect of being ordered to pay the Commonwealth's costs if their case proves unpersuasive. I distinguish the situation of resumees who pursue a vexatious, dishonest or grossly exaggerated claim or present their case in such a way as to impose unnecessary burdens on the Commonwealth or the Court. The present applicants' case was arguable. It was presented efficiently and economically, the hearing occupying only two days.

55With respect, his Honour's comments rose no higher than "perhaps" and amounted to a tentative articulation of policy rather than any statement of authoritative principle. Banno is not binding authority that absent vexation, dishonestly or a grossly exaggerated claim, an applicant will not be ordered to pay the acquiring authority's costs.

56In AMP Capital Investors Ltd v Transport Infrastructure Development Corp [2008] NSWCA 325; (2008) 163 LGERA 245, AMP disputed the amount of compensation offered ($683,150) and commenced proceedings in this Court for approximately $21.46 million. The primary judge ultimately held that the betterment figure exceeded the market value and disturbance amount and no compensation was ordered. The primary judge refused the resuming authority's application for costs stating (quoted at [102]):

102 Mr Hale accepted that the circumstance that there had been a compulsory acquisition was a factor that the primary judge could take into account: see Banno v The Commonwealth (1993) 45 FCR 32; 81 LGERA 34 at [53]; Pastrello v Road and Traffic Authority (NSW) (2000) 110 LGERA 223 at [17]; Overton Investments Pty Limited v Minister Administering Environmental Planning and Assessment Act 1979 (2001) 113 LGERA 439 at [72].

57AMP appealed and the resuming authority cross-appealed the costs order. The Court of Appeal dismissed both appeals. The Court of Appeal's reasons for dismissing the costs cross-appeal were as follows (at [103]-[105]), per Hodgson JA. Although his Honour was in the minority in respect of the disposition of the appeal, his reasons for dismissing the costs cross-appeal were endorsed by the majority, namely, Bell JA at [112] and Gyles AJA at [125]):

103 However, he [Mr Hale] submitted that the primary judge failed to take account of important matters, especially that there had been an expensive twelve day hearing, in which AMP had lost completely. He submitted that the primary judge treated the factor that there had been a compulsory acquisition as determinative or presumptive, and impermissibly fettered her discretion: cf Thaina Town (on Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150 at [45].

104 In my opinion, the judgment of the primary judge showed she did have regard to these relevant matters, and did exercise a discretion. No basis is shown for appellate intervention.

105 I note that in any event, my opinion is that, as a result of the appeal, AMP should have succeeded to the extent of something over $1 million. Normally, this would carry costs at first instance. However, the basis on which AMP should have succeeded was not raised below; and my tentative view is that, even if AMP were to succeed to this extent, the costs order below should not be disturbed.

58Given that the primary judge had stated that a costs order in favour of the resuming authority was not appropriate because not only were the proceedings compulsory acquisition proceedings, but also because AMP was successful on several issues and there was no disentitling conduct, Hodgson JA's reasons for dismissing the appeal were, with respect, unremarkable. The primary judge did not, as was submitted during the appeal, treat the fact that the litigation concerned compensation for compulsory acquisition as determinative or presumptive thereby fettering the exercise of her discretion, rather she had regard to all relevant matters and exercised her discretion accordingly and properly.

59In my opinion, upon proper analysis AMP does not stand for the proposition advanced by Mr Hale SC, namely, that in compulsory acquisition proceedings, absent vexation, disorganisation in the conduct of the hearing or manifest hopelessness, the Court is bound to order that either there be no order for costs or that the applicant's costs are to be paid by the resuming authority.

60Having said this, the proposition that the fact that the litigation concerns compulsory acquisition proceedings is a relevant factor to be considered in the exercise of the Court's discretion in awarding costs cannot be cavilled with. It is. Any court that were to wholly ignore this factor would, in my view, err in the exercise of its costs discretion.

61I also accept that in compulsory acquisition cases it may often be difficult to determine what the 'event' is for the purpose of applying, as a starting point, the general rule that costs follow the event (as noted in Overton at [72]). This is particularly so where the Court can have before it, in effect, a tripartite contest between an amount of compensation determined by the Valuer-General, an amount sought by the resuming authority and an amount sought by the applicant. But this application does not present one of those scenarios.

62Mr Hale SC relied upon the decision of the then Chief Judge of this Court McClellan J in Gee v Port Stephens Council [2003] NSWLEC 260; (2003) 131 LGERA 325 to argue, by analogy, that just as there were sound policy considerations militating against a conventional award of costs in Class 1 merit appeals, conventional orders as to costs should equally not be made in Class 3 compulsory acquisition cases. This was because, as McClellan J stated, in merit appeals "minds may reasonably differ" and parties to a merit appeal ought not, as a matter of fairness, be burdened with costs orders consequent upon such differences. The present matter, Mr Hale SC contended, was an illustration of a case where all that had occurred was that reasonable town planning minds had differed.

63But Gee may be distinguished from the present case in two respects. First, it was decided before r 3.7 of the 2007 Rules was promulgated and a statutory regime enacted governing, together with s 98 of the CPA and r 42.1 of the UCPR, the award of costs in this Court in Class 3 matters. Second, while both town planners were undoubtedly respected experts in their field, it nevertheless remains the fact that both the trial judge and the Court of Appeal emphatically rejected the town planning evidence at the very heart of Ms Halley's case. Put another way, Ms Halley did not advance sufficient planning evidence to support her claim, which, in the opinion of the Court of Appeal, was stated at a high level of generality. Furthermore, because her valuation evidence was tethered to her town planning evidence, the rejection of the latter inexorably led to the rejection of the former. The result was therefore premised on more than simply the reasonable difference between expert minds.

64In summary, absent an express legislative provision to this effect, I reject as a determinative, or even presumptive, factor in the exercise of the Court's discretion on costs, the fact that the subject matter of the proceedings concerns the compulsory acquisition of land. In my view, it is but one of a number of factors that must be taken into account in determining which party, if any, should pay the costs of the proceedings. Other factors include, for example, the relationship between the Valuer-General's determination and the ultimate award of the Court, whether there was disentitling conduct by either of the parties to the litigation, the strength of the claim for compensation, whether there were reasonable attempts by either party to settle the proceedings and which party was successful.

65After the hearing concluded, and at the request of the Court, the Minister furnished the Court with illustrations drawn from the authorities of examples of cases in which the applicant in Class 3 compulsory acquisition proceedings had been ordered to pay part, or all, of the costs of the acquiring authority. Ms Halley was given the opportunity of commenting on these cases in further written submissions.

66The comfort that could be obtained from these authorities was limited to the extent that each case, as Mr Hale SC correctly noted in his further written submissions, turned on its specific facts and circumstances and each case gave rise to significant points of distinction from the present proceedings. What the cases did illustrate, however, was that, as Jagot J observed in Serbian Cultural Club "St Sava" Inc v Roads and Traffic Authority (NSW) (No 2) [2008] NSWLEC 78 (at [16]), "there are no hard and fast rules leaning to any automatic results".

67To the extent that some of the cases provided to the Court involved offers of compromise or Calderbank letters ( Wollong Pty Ltd v Shoalhaven City Council [2002] NSWLEC 164; (2002) 122 LGERA 331 and Doueihi v Roads and Traffic Authority of NSW [2005] NSWCA 201) I found them to be of little assistance.

68Because City of Botany Bay v New South Wales Land and Housing Corporation [2011] NSWLEC 4 concerned Class 4 proceedings challenging the validity of a decision of the respondent under Pt 5 of the Environmental Planning and Assessment Act 1979 and did not touch upon the compulsory acquisition of land, I found it to be of limited relevance to the issues for determination in this application.

69Similarly, in both Geoffrey v Roads and Traffic Authority of NSW [2007] NSWLEC 405 and Ray Fitzpatrick Pty Limited v Minister for Planning (No 5) [2008] NSWLEC 183, the applicant discontinued the proceedings after accepting the amount offered in the statutory notice. After examining the conduct of the applicant in each case (in Geoffrey there was disentitling conduct whereas in Ray Fitzpatrick there was none), the Court applied the principle that because the applicant had abandoned the proceedings, the applicant should pay the acquiring authority's costs (Geoffrey at [36]-[39]) and Ray Fitzpatrick at [50]). That is to say, in neither case did the Court have ultimate recourse to the "general principle" referred to above.

70Before I leave Geoffrey and Ray Fitzpatrick , however, I wish to make one observation. It is this, that there is little difference in principle between an award of costs in compulsory acquisition cases where the applicant abandons his or her claim by accepting the statutory offer during the course of proceedings and, applying the reasons I have expressed above, an award of costs against an applicant following upon an applicant's lack of success in proceedings measured by the fact that the Court determined the applicant's compensation to be the same as that contained in the statutory offer. If the "general principle" in determining costs in compulsory acquisition proceedings is to be consistently applied, as the policy underpinning it would seemingly demand, the result ought to be the same, namely, that there is no order as to costs. But this is not what generally occurs. I do not understand why, as a matter of policy, applicants are (assuming no disentitling conduct) burdened by costs in the former scenario, but not in the latter, when in the former savings as to time and costs may be effected by the applicant accepting the statutory offer, albeit late. Applicants might, in the former scenario, be tempted to pursue proceedings to finality in the hope of avoiding an adverse costs order. Such an outcome should be avoided.

71Finally, in Dillon the Court awarded the costs of the substantive proceedings to the applicants on the basis of their success insofar as they recovered more than the Valuer-General's determination, more than the original claim put by the council, and more than the amount contended for by the council at the hearing. Costs were awarded notwithstanding that the compensation determined was less than the amount the applicants sought during earlier negotiations, and was marginally less than the offer the applicants made to the council during the hearing. Sheahan J ordered the respondent to pay 75% of the applicant's costs. I do not see how this case assists the Minister.

Ms Halley Should Pay the Minister's Costs

72Consistent with my reasoning above, the point of departure in determining whether or not Ms Halley should pay the Minister's costs is the ordinary rule that costs follow the event. But also consistent with the principles discussed above, I have taken into account the fact that these are proceedings concerning the compulsory taking of Ms Halley's land by the Minister. Were this the only relevant factor, I would, without more, probably be disinclined to award costs. However, it is not.

73It remains the case, as I concluded above, that notwithstanding that an award of compensation was made to Ms Halley, on any measure she was unsuccessful in the litigation. Had she accepted the compensation determined by the Valuer-General she would have been $701,500 better off. Had she accepted the compensation contained in the Minister's original points of defence, she would have been $800,000 better off. Had she accepted the compensation claimed in the amended points of defence, while she would be no better off, she would nevertheless have avoided any further legal costs being incurred by both herself and the Minister.

74Moreover, it was not until the conclusion of the hearing before Lloyd J that Ms Halley reduced her claim for compensation from $3.5 million dollars to $2,385,000. In the result, while both sums could not be sustained, the former amount appeared to be wholly untenable, although not unarguable in the sense of hopeless.

75In addition, while in any merit based proceedings it is the case that reasonable expert minds may differ, a fair reading of both Lloyd J's decision and that of the Court of Appeal reveals that the Minister's case was a strong one. At first instance, the Court preferred the evidence of the town planner retained by the Minister and Lloyd J rejected the valuation evidence put forward by the valuer engaged by Ms Halley, premised as it was solely on the land being available for subdivision. In the Court of Appeal, the appeal was dismissed with the Court emphasising that the applicable planning controls meant that Lloyd J's conclusion that the subdivision was remote was valid.

76Having said this, it cannot be said that either party engaged in material disentitling conduct during the hearing (to the extent that the Minister had done so earlier, this was rendered immaterial by the award of costs against him by Biscoe J). Furthermore, as Mr Lancaster SC properly acknowledged, Ms Halley's claim was neither vexatious nor dishonest, and her prosecution of the litigation was not disorganised.

77Having regard to all these factors and circumstances, it is my opinion that an appropriate exercise of the Court's discretion is that Ms Halley ought to pay the Minister's costs of the proceedings, excluding the costs previously ordered in her favour by Biscoe J.

Orders

78The orders of the Court are as follows: