Court of Appeal Supreme Court New South Wales

• Medium Neutral Citation: Brock v Roads and Maritime Services (formerly Roads and Traffic Authority of NSW) [2012] NSWCA 404
• Hearing dates: 5 November 2012
• Decision date: 11 December 2012
• Before: Beazley JA at [1]; Meagher JA at [2]; Tobias AJA at [3]

Decision

1. Appeal allowed in part.

2. Set aside Order 2 made by Sheahan J on 29 November 2010 in so far as his Honour rejected the appellant's claim to compensation for loss attributable to disturbance within s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991, with respect to the stock watering system installed by the respondent to serve the appellant's land.

3. Set aside Orders 1, 2, 3 and 4 made by Sheahan J on 16 May 2012 and in lieu thereof order as follows:

(i) the respondent to pay the appellant's costs of the proceedings;

(ii) the respondent to pay the appellant's costs of her Notice of Motion filed on 12 May 2011;

(iii) the appellant to pay the respondent 's costs of its Notice of Motion filed on 17 June 2011, such costs, as agreed or assessed, to be paid within six months of any such agreement or assessment;

4. Direct the parties within 14 days of the publication of these reasons to consult for the purpose of attempting to compromise the appellant's claim for disturbance with respect to the maintenance, operating and replacement costs of the stock watering system on the basis that in the event that no agreement can be reached, the Court will order that the issue be remitted to the Land and Environment Court for further consideration and determination.

5. The respondent to pay 75 per cent of the appellant's costs of the appeal.

6. Note that the amounts referred to in Order 2 made by Sheahan J on 29 November 2010 and Order 2 made by his Honour on 16 May 2012 will need to be adjusted upon determination of the appellant's disturbance claim referred to in paragraph 4 above.

[Note: The Uniform Civil Procedure Rules 2005 provide (Rule 36.11) that unless the Court otherwise orders, a judgment or order is taken to be entered when it is recorded in the Court's computerised court record system. Setting aside and variation of judgments or orders is dealt with by Rules 36.15, 36.16, 36.17 and 36.18. Parties should in particular note the time limit of fourteen days in Rule 36.16.]

• Catchwords: COMPULSORY ACQUISITION OF LAND - compensation - valuation of land - acquisition of part of appellant's land for construction of road - whether primary judge erred in application of "before and after" method to value acquired land - impact of acquisition on value of residual land - claims for losses attributable to disturbance - need to avoid double counting - no errors of law except in relation to stock watering claim.; COSTS - valuation proceedings following compulsory acquisition of land - no presumption that costs should follow the event - appellant acted reasonably in pursuing claim - error of primary judge in failing to take these matters into account.
• Legislation Cited: Civil Procedure Act 2005; Land and Environment Court Act 1979; Land Acquisition (Just Terms Compensation) Act 1991; Limitation Act 1969; Uniform Civil Procedure Rules 2005
• Cases Cited: Almona Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 112; (2008) 160 LGERA 375; Banno v Commonwealth of Australia (1993) 45 FCR 32; Brock v Roads and Traffic Authority of New South Wales [2010] NSWLEC 244; Brock v Roads and Traffic Authority of New South Wales [2012] NSWLEC 114 (costs); Dillon v Gosford City Council [2011] NSWCA 328; (2011) 184 LGERA 179; (2011) 284 ALR 619; House v R [1936] HCA 40; (1936) CLR 499; Minister for the Environment v Florence (1979) 21 SASR 108; (1979) 45 LGRA 127; Sydney Water v Besmaw Pty Ltd [2002] NSWCA 147; Roads and Traffic Authority of New South Wales v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155; Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66
• Category: Principal judgment
• Parties: Lynette Verlie Brock (Appellant); Roads and Maritime Services (formerly Roads and Traffic Authority of NSW) (Respondent)
• Representation: R D Marshall (Appellant); P Tomasetti SC with H Irish (Respondent); Bilbie Dan Solicitors (Appellant); Henry Davis York Solicitors (Respondent)
• File Number(s): CA206210 of 2011

Decision under appeal

• Before: Sheahan J
• File Number(s): LEC30132 of 2009

Judgment

1 BEAZLEY JA: I agree with Tobias AJA.

2 MEAGHER JA: I agree that the orders and directions proposed by Tobias AJA should be made for the reasons that his Honour gives.

3 TOBIAS AJA: On 31 October 2008, the respondent compulsorily acquired a total of 6.85944 hectares of the appellant's land located at Glenarvon Road, Lorn near East Maitland (the acquired land). The area of the appellant's land pre-acquisition was 73.6858 hectares (the parent land). It comprised a number of lots and was irregular in shape. The eastern boundary of the parent land had a frontage to the Hunter River (the River).

4 The public purpose for which the acquired land was compulsorily taken was for the construction of what was referred to as the "Third Hunter River Crossing". It provided, relevantly, for the construction of a new stretch of road atop the levee bank along the western side of the River and generally along the eastern boundary of the parent land. This left, as part of the parent land, a strip of land between the River and the acquired land. All the works were to be contained in a corridor oriented generally in a north-south direction and the acquired land was to provide much of that corridor.

5 Pursuant to s 42(1) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Just Terms Act), the respondent offered the appellant compensation as determined on behalf of the Valuer-General in the sum of $650,000 for market value, and $74,828 for disturbance, being a total of $724,828. This offer was not accepted by the appellant whereupon on 27 February 2009 she lodged with the Land and Environment Court pursuant to s 66(1) of the Just Terms Act an objection to the amount of compensation so offered. On 24 March 2009, the respondent paid to the appellant an advance payment of compensation pursuant to s 48(1) of the Just Terms Act in the sum of $668,007.89 (the advance payment).

6 The proceedings to determine the appellant's claim for compensation were heard by Sheahan J between 10 and 14 May 2010 and decided on 29 November 2010 (the primary judgment). As his Honour recorded at [9] of his reasons in that judgment, in its final articulation the appellant's claim was particularised as follows: (RED 33)

(a) Market Value - s 55(a), (c) and (f) item

(on the basis of a total severance, or $835,000

on a restricted access basis)                                                          $1,110,000

Disturbance - s 55(d) and s 59 items

(b) Eastern Fence maintenance                                                     $214,122.07

(c) Stock Watering system maintenance/replacement                         $30,828.46

(d) Legal fees (s 59(a))                                                                  $16,300

(e) Valuation fees (s 59(b))                                                            $12,750

(f) Erection of additional cattle yards on the

northern parcel (including power and

water (s 59(f))                                                                                 $43,000

(g) Air conditioning of Brock residence (including

rewire) (s 59(f))                                                                               $12,790

(h) Replacing bees and hives (s 59(f))                                           $1,400

(i) Modification of internal fencing to reorient

the farming operation on a north-south basis

(s 59(f))                                                                                           $5,000

(j) Financial advice (s 59(f))                                                            $330

(k) Signage and warning lights at

stock crossing sites on both Glenarvon Road and

the new road (s 59(f))                                                                     $55,000

7 With respect to the disturbance claims, items (d), (e), (h) and (j) were not contested by the respondent. They totalled $30,780. To that amount the primary judge added the sum of $600 for signage (item (k)). However, his Honour rejected items (b), (c), (f), (g) and (i). He accordingly assessed the appellant's disturbance claim in the sum of $31,380.

8 With respect to the appellant's market value claim, his Honour adopted the "before and after" valuation method the effect of which was to capture not only the market value of the acquired land but also any loss attributable to severance and injurious affection. The latter is described in s 55(f) of the Just Terms Act as being, relevantly,

any ... decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

9 Loss attributable to severance is defined in s 58 to mean the amount of any reduction in the market value of any other land of the claimant which is caused by that other land being severed from other land of the claimant.

10 The primary judge determined the value of the parent land before acquisition in the sum of $2,100,045 and the value of the appellant's land after acquisition (the residue land) in the sum of $1,696,764. He then deducted from his "after" calculation a further sum of $33,806 being an allowance for the cost to the appellant of having to maintain a stockproof fence constructed by the respondent at its cost on the boundary between the acquired land and the residue land (the eastern fence). Accordingly, his Honour's "after" valuation was $1,662,958 which when deducted from his "before" value of $2,100,045, resulted in a figure of $437,087. To that amount his Honour added disturbance in the sum of $31,380 resulting in a total amount of compensation awarded to the appellant of $468,467: Brock v Roads and Traffic Authority of New South Wales [2010] NSWLEC 244.

11 The appellant's appeal to this Court arising out of the primary judgment concerned only disturbance items (b),(c), (f) and (i). That appeal is confined to questions of law: Land and Environment Court Act 1979 (NSW) s 57(1) (the Court Act).

12 In her submissions on the appeal the amount claimed by the appellant in relation to item (b), being maintenance costs of the eastern fence, was reduced from $214,122.07 to $80,719.92. As I have indicated, his Honour did not treat that item as a disturbance claim pursuant to s 59(f) of the Just Terms Act but assessed it as part of the "after" valuation of the residue land in the amount of $33,806.

13 Section 55(d) of the Just Terms Act requires any loss attributable to disturbance to be considered when determining the amount of compensation to which a dispossessed owner is entitled. That loss is relevantly defined by s 59(f) to mean:

any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

14 It is to be noted, and was accepted by the appellant during the course of argument, that provided the primary judge had not made any relevant error of law in determining the cost of the eastern fence maintenance claim in the sum of $33,806, then whether that amount was assessed pursuant to s 59(f) or was taken into account, as his Honour did, as part of the "after" valuation of the residue land, would make no difference to the ultimate outcome.

15 When his Honour delivered the primary judgment he reserved the costs of the proceedings. On 12 May 2011, the appellant filed a Notice of Motion seeking an order that the respondent pay her costs of the proceedings. On 24 May 2011, she filed an amended Notice of Motion but elected not to proceed with it. On 17 June 2011, the respondent filed a Notice of Motion in which, relevantly, it sought an order pursuant to s 16(1A) of the Court Act that the appellant repay to the respondent $187,987.44 together with interest calculated from the date of payment and for a further order that each party pay its own costs of the proceedings.

16 As to the first of those orders, the appellant argued that notwithstanding s 16(1A) of the Court Act, the Land and Environment Court did not have jurisdiction to order the appellant to repay to the respondent the difference between the advance payment and the amount of compensation ultimately awarded. In a judgment delivered on 16 May 2012, the primary judge held that he did have jurisdiction to order the repayment and he ordered accordingly. As to the issue of the costs of the proceedings, his Honour held that each party should pay their own costs. He therefore dismissed the appellant's Notice of Motion filed on 24 May 2011 but ordered that the appellant pay the respondent's costs of both Notices of Motion: Brock v Roads and Traffic Authority of New South Wales (No 2) [2012] NSWLEC 114. The appellant appeals against his Honour's order that each party pay their own costs of the proceedings, submitting that he ought to have ordered the respondent to pay the appellant's costs thereof.

Some background information

17 The appellant's expert valuer was a Mr Gregory Jones of Robertson & Robertson, Valuers, whereas the respondent's valuer was a Mr Dempsey. Other relevant witnesses were two fencing contractors being a Mr Hollingshed on behalf of the appellant and a Mr Burrell on behalf of the respondent. The respondent also called an agricultural expert, Mr John Dymock.

18 The parent land comprised a number of allotments which, when combined, essentially involved what was referred to in the evidence as a northern parcel, a western parcel, and a southern parcel. The northern and southern parcels each had frontage to the River. The eastern boundary of the western parcel adjoined the western boundary of what was referred to as the Ferraro property (which was bounded on its northern boundary by the northern parcel, on its southern boundary by the southern parcel and on its eastern boundary by the River. Located at the intersection of the north-western corner of the southern parcel and the south-eastern corner of the western parcel was a property known as Rose Farm. There was a sufficient overlap of the northern boundary of the western parcel with the southern boundary of the northern parcel to enable stock to be transferred from the northern to the western parcel and vice versa without trespassing on other property.

19 Prior to the acquisition, Glenarvon Road generally followed the western bank of the River which formed part of the northern parcel. The road then continued across the Ferraro property into the southern parcel for a short distance whereupon it made a right angle turn and proceeded west as far as the western boundary of the southern parcel and then turned south following the boundary of that parcel until it made a further right angle turn to the west. It then proceeded towards Lorn.

20 Located on the southern portion were cattle yards and a loading ramp which apparently gave easy access to Glenarvon Road. There were no such facilities on the northern or western parcels. There were also two water troughs located on the southern parcel which were connected to the town water supply. Otherwise pre-acquisition, the appellants stock had direct access from the northern and southern parcels to the River for the purpose of watering.

21 The parent land was identified in the relevant planning documents as flood liable and part of it was and is used as a levee bank as part of the Hunter Valley Flood Mitigation Scheme. Most of the levee bank fell within the area of the acquired land and in some sections the new road was located on top of the bank. Nevertheless, most of the residue land lay to the west of the acquired land and its road corridor.

22 The parent land had been in the Brock family since the mid to late 1950s. The appellant acquired it in 1995 on her father's death. In general terms, the primary judge found (at [33]) that the residue land was mainly level grazing land and classified by NSW Agriculture as "class 4", that is, mainly suitable for grazing and lucerne growing rather than crop cultivation. At the time of acquisition, the appellant ran 100 head of cattle and 233 goats upon the parent land. It was acknowledged by the respondent that goats required more constant and intensive attention and more resilient fencing than cattle. Whereas the appellant's cattle grazed over the northern, western and southern parcels, the goats were confined to the southern parcel. Historically, her family operation on the southern parcel had been orientated on an east-west basis in that the southern parcel was divided by a fence which ran east west thus enabling stock in the paddocks so created to have direct access to the water in the River. That access was generally denied as a consequence of the acquisition.

23 I turn now to each of the disturbance claims which are the subject of challenge. As noted at [11] above, the appellant can only succeed if she demonstrates that the primary judge has erred on a question of law.

Disturbance Item (b) - The eastern fence maintenance claim

(a) The decision of the primary judge

24 At [61] of his reasons, his Honour noted that the appellant made two fencing claims of which the first was item (b) and the other item (i). The former involved a claim with respect to the maintenance and replacement costs of the eastern fence which separates the acquired land from the residue land. The basis of the claim, as noted by his Honour at [64], was that the fence, being constructed parallel to the River and below the levee bank, presented a potential liability for maintenance and replacement following a flood. In this context the evidence was that fences in close proximity to the River would normally, or at least where possible, be constructed at right angles to the direction of flow and would be of light construction making repair or replacement relatively cheap. However, the eastern fence was so constructed as to be stockproof with respect to both cattle and goats and was, therefore, of more robust construction.

25 Evidence with respect to the quantification of this claim was given by Mr Hollingshed on behalf of the appellant and Mr Burrell on behalf of the respondent. The former assessed the claim at $214,122.07 whereas the latter assessed it at $93,285.

26 At [68] his Honour recorded the submission of the respondent that the subject claim did not fall within s 59(f) of the Just Terms Act as the possibility of the fence being damaged by future floods was not a financial loss which was "a direct and natural consequence of the acquisition". Rather, it was a cost which was a direct and natural consequence of the River flooding.

27 Further at [69] the primary judge recorded that reliance was placed by the respondent upon the following passages from the judgment of Hodgson JA, with whom Ipp JA agreed, in Sydney Water Corporation v Besmaw Pty Ltd [2002] NSWCA 147 where his Honour said: (Red 46)

[11] ... s59(f) of the Land Acquisition (Just Terms Compensation) Act provides that the acquirer should pay to the owner of the land acquired 'any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition'.

[12] At first sight, the provision might seem unreasonable, and in need of a narrow construction, because the mere possibility that financial costs might reasonably be incurred at some time in the future seems hardly to justify an immediate payment of the full amount of those costs.

[13] In my opinion, the answer to that consideration is that 'might reasonably be incurred' must be taken as referring to the time as at which compensation is being assessed; so that compensation is payable under this item only if the financial costs have actually been incurred or if it would, at the relevant time, be reasonable to incur them.

28 Although the respondent denied that the subject fencing claim fell within s 59(f), it conceded that the cost of maintenance and replacement of the fence was one that was properly captured in the "before" and "after" method of valuation. At [72] the primary judge noted that the claim should be included as a factor to be adjusted in the "after" scenario although the amount to be so included and adjusted "must be calculated appropriately".

29 For reasons not presently relevant, his Honour then found that only a 730 metre length of the fence might require maintenance and replacement and that so far as the actual cost of the works were concerned, he preferred the evidence of Mr Burrell to that of Mr Hollingshed so that, on a reduced length of 730 metres on the rates adopted by Mr Burrell, the relevant cost was $33,806 excluding GST calculated at the rate of $36.96 per lineal metre for replacement, $3.35 per lineal metre for debris removal and $5 per lineal metre for removal of the existing fence.

30 His Honour's conclusion with respect to this issue was as follows:

[77] I agree that it is reasonable to assume that the subject property will still be used as farmland in 100 years time, as it has been, already, for approximately 180 years. However, a 20 year period is a more realistic timeframe that a prospective purchaser would consider when making a decision based on the very hypothetical calculations of an expert he might engage. Using the same assumptions as Mr Jones, but utilising Mr Burrell's cost estimates, a fence length of 730m, and a 20 year period, a net present value of $29,536 is calculated, $4,269 less than Mr Burrell's estimate for complete replacement. However, applying a more liberal estimate, based on the uncertain nature of flooding risk, the figure of $33,806 will be adopted for adjustment of the "after" value of the residue land.

(b) The appellant's submissions

31 At [12] of the appellant's written submissions, it was acknowledged that to prevent her stock crossing onto the new road, a stockproof fence had to be built on its western side where it adjoined the residue land. This acknowledgment was capable of being construed as a concession that it was the carrying out of the relevant public purpose for which the acquired land was taken, namely, a new regional road, that gave rise to the necessity to provide for the construction of the eastern fence including the cost of its maintenance and/or replacement. If this be so, it constituted an injurious effect within s 55(f) of the Just Terms Act and would be reflected in the "after" value of the residue land.

32 Nevertheless, it was contended that the primary judge should have dealt with the claim to loss falling within s 59(f) as a separate matter to which regard must be had under s 55(d). It was submitted that in doing so his Honour should have accepted the evidence of the appellant's expert valuer, Mr Jones, who considered that a 100 year period to cater for a 1:100 year flood should be employed to determine the present value of maintaining and/or replacing 730 metres of fencing at the present cost of $45.31 per lineal metre. Those figures would produce a net present value of $80,719.92 which was the amended amount now claimed for this head of disturbance.

33 It was therefore submitted that his Honour had erred in adopting the timeframe of 20 years which a "prospective purchaser" would consider when making a decision to acquire the residue land, in order to define what was in fact a claim for disturbance. The methodology his Honour adopted at [77] of his reasons was, so it was submitted, contrary to this Court's decision in Roads and Traffic Authority of New South Wales v McDonald [2010] NSWCA 236; (2010) 79 NSWLR 155 where at [88] with the agreement of Giles and Macfarlan JJA, I said:

[88] ... Attributable disturbance would rarely, if ever, be captured by the adoption of the "before" and "after" method of valuation. The reason for this is that loss attributable to disturbance relates to losses or costs incurred post-acquisition and as a "direct and natural consequence of the acquisition": see s 59(f). ...

(c) The respondent's submissions

34 The respondent submitted that the onus lay upon the appellant to demonstrate that the maintenance in perpetuity of a stockproof fence on the western side of the acquired land to prevent stock entering onto it, was a financial cost reasonably incurred (or that might reasonably be incurred) relating to the actual use of the acquired land as a direct and natural consequence of the acquisition. Reference was then made to the decision of Jagot J in Almona Pty Ltd v Roads and Traffic Authority of New South Wales [2008] NSWLEC 112; (2008) 160 LGERA 375 at [55]-[63]. Relevantly, her Honour observed at [56] that

[e]ach of the heads of compensation in s 59 involves a causal relationship between the fact of the acquisition (that is, the taking of the land as effected by publication of the acquisition notice, referred to in s 20) and some cost. This suggests that the focus of s 59 is costs connected in some way to the acquisition itself.

35 Her Honour then referred to the decision of this Court in Roads & Traffic Authority of New South Wales v Peak [2007] NSWCA 66 at [74] where it was observed that the

public purpose was the reason for the acquisition. Section 59(f) focuses on costs reasonably incurred relating to the actual use of the land as a direct and natural consequence of the acquisition. (emphasis in original).

36 Jagot J considered that the Court in Peak had accepted a distinction between the acquisition (or the taking of the land) and the public purpose for which it is taken. Accordingly, it was submitted that where the relevant cost is incurred or is likely to be incurred in the future as a result of the effect or impact of carrying out of the public purpose, a claim to recover that loss cannot be framed as disturbance under s 59(f). If the effect or impact of the carrying out of the public purpose can be shown to have caused a decrease in the value of the residue land, then the claim falls within s 55(f) and not s 59(f).

37 It was further submitted that in the present case it was a question of fact for the primary judge to determine whether the claim was within the description in s 59(f) so as to be a relevant matter to be considered within s 55(d); and that this depended upon whether the costs were reasonably incurred as a direct and natural consequence of the acquisition rather than because of the carrying out of the public purpose for which the relevant land was acquired. His Honour considered the latter to be the case and that involved a finding of fact which was beyond challenge.

(d) No error of law is disclosed

38 In my opinion, it is implicit in his Honour's approach to the present issue that he considered that the on-going maintenance of the eastern fence was an impost that had the effect of decreasing the value of the residue land by reason of the carrying out of the public purpose for which the acquired land was taken. Common sense indicates that the eastern fence was necessary in order to prevent the appellant's stock from wandering onto what was to be a relatively busy road with a projected daily traffic flow of 6500 vehicles by 2016 with a maximum speed limit of 80 kph. On the facts, the subject matter of the claim was within s 55(f) rather than s 55(d) (as a cost within s 59(f)).

39 Furthermore, as I would understand the observations of Hodgson JA at [13] of Besmaw, s 59(f) only applies to a cost which, at the time of assessment, it would then be reasonable to actually incur. In other words, costs within s 59(f) do not include costs which are not to be actually incurred or likely to be so incurred as at the date of assessment and which may only be incurred as a possibility at some time in the future. If this is correct, it would follow that the present claim could only be considered as falling within s 55(f) and as such would also be taken into account in the "after" valuation of the residue land. However, as this construction of s 59(f) was not the subject of argument, it would not be appropriate to express a concluded view on the point.

40 The distinction between the two provisions was pellucidly described by Jagot J in Almona at [60] (omitting citations):

... The words "the acquisition" [in s 59 (f)] direct attention to the fact of the taking of the land. The words "direct and natural consequence of the acquisition" direct attention to the nature or degree of the required causal relationship ... Costs incurred or that might be incurred as a direct and natural consequence of the acquisition are potentially captured. The carrying out of the public purpose is possible because of the acquisition, but that does not mean that costs incurred because of the carrying out of the public purpose are themselves a direct and natural consequence of the acquisition. They are a result of the public authority, in pursuit of its statutory powers, deciding to carry out the public purpose for which it acquired the land.

41 The primary judge's finding at [72] to which I have referred at [28] above contained the implicit finding of fact that the construction of the eastern fence and its on-going maintenance would result in a decrease in the value of the residue land by reason of the construction of the proposed road. The taking of the acquired land did not, of itself, require the erection of the fence. The public purpose for which it was taken - the new road with its increase in traffic - did. It was the road which posed a potential danger to the appellant's stock, not the change in title of the acquired land.

42 It follows from the foregoing that as a matter of valuation principle, his Honour was correct in the approach to the present claim that he took at [77] of his reasons. No error of law has been demonstrated.

43 However, the appellant in Ground 8 of her Amended Notice of Appeal alleged that his Honour erred in law at [77] of his reasons by arbitrarily and without any evidence deciding to limit the "disturbance claim" for fencing replacement due to flood damage to a period of 20 years. In my opinion, this ground has no merit. His Honour was required to assess any decrease in the value of the residual land. He did so by reference to the allowance which a hypothetical purchaser of the residue land would consider appropriate in terms of an on-going potential liability to maintain and at times replace the eastern fence. That purchaser would take into account his then estimate of the period that he would be the owner of the residue land for once he sold that land he would no longer be subject to that liability. In one sense, his Honour's adoption of the period of 20 years was arbitrary but it was one that was open to him and in any event involves a finding of fact which cannot be the subject of challenge.

44 For the foregoing reasons I would reject the appellant's challenge to item (b) of her disturbance claim. Of course, as I have already observed, subject to the question of the 20 years, it matters not in terms of the ultimate outcome whether the $33,806 which his Honour allowed for this item was treated as a matter within s 55(d), by reason that it was a cost within s 59(f), or as a matter within s 55(f).

Disturbance Item (i) - The internal fencing claim

(a) The decision of the primary judge

45 His Honour dealt with this issue in one paragraph in the following terms:

[62] The internal fencing claim is for $5,000, to cover materials for modification or replacement of fences in the southern parcel to facilitate its division into four paddocks for more efficient management. The RTA accepts the amount claimed as reasonable, but the court does not accept that the work involved is a direct and natural consequence of the acquisition, and the claim is refused.

(b) The appellant's submissions

46 The appellant relied on a number of findings by the primary judge under the heading "Injurious Affection and Severance". At [102] his Honour noted that prior to the acquisition, the area east of the new road and west of the River formed part of two paddocks which were fenced in an east/west direction enabling stock on both sides of the levee bank, in their respective paddocks, to access directly the water in the River. At [103] he noted that the only means of regular access for stock to the River post acquisition would be beneath the northern abutment of the new bridge at the southern end of the southern parcel. This was because, from a practical point of view, the traffic projections on the new road would not permit of stock crossing the road to gain direct access to the River notwithstanding that the respondent had provided gates in the fences on both the eastern and western side of the new road which could provide access from that part of the residue land to the River.

47 The appellant then submitted that the subject claim related to the actual use of the acquired land and was a direct and natural consequence of the acquisition. This was because the claim was a basic step in the "complete re-orientation" of the appellant's farming activities following and as a consequence of the acquisition.

(c) The respondent's submissions

48 The respondent submitted that the issue was whether the facts on which the claim sum was based fell within the terms of s 59(f). The primary judge found that they did not and that was a question of fact and did not involve a question of law.

(d) No error of law is disclosed

49 In her evidence the appellant asserted that she would need to modify and replace some portions of the existing internal fencing within the southern parcel in order to create two paddocks using goat proof fencing. However, the evidence did not appear to explain why this need was generated by the taking of the acquired land. In these circumstances, it was open to the primary judge to find, as he did, that the internal fencing modification was not a direct and natural consequence of the acquisition. As the respondent submitted, this was a finding of fact which cannot be impeached on appeal.

Disturbance item (c) - The stock watering system claim

(a) The primary judge's decision

50 The respondent installed an electric pumping system because the appellant had lost her historic easy access to free water from the River. The pumping system pumped water from the River into a large holding tank on the southern parcel which was then reticulated to a number of troughs. The appellant claimed the costs of operating and maintaining that system. As his Honour found (at [79]), and this is not challenged or contradicted on appeal, the appellant's claim related to the loss of easy access to water from the River over that part of the residue land lying to the south of the east/west section of Glenarvon Road and to the west of the acquired land. However, in times of flood, or when stock needed to be held within a paddock for particular reasons, stock "in that area" were watered from one of two troughs connected to the town water supply. I would understand the expression "in that area" to be a reference to the area which was also to be provided with water from the new pumping system.

51 At [80], the primary judge noted that the respondent's position was that having provided the new stock watering system, the appellant had been adequately compensated for the loss of direct stock access to free river water. The amount claimed was said to be "speculative, too remote, and unreasonable". Reliance was placed upon the passages from the judgment of Hodgson JA in Besmaw which I have recorded at [27] above.

52 The claim was calculated by Mr Jones as $30,828.46. That sum represented the net present value of costs estimated to be incurred annually over a period of 105 years being $128 for maintenance and $320 for electricity as well as $4,200 for a replacement pump every 15 years. Those costs were inflated at a rate of 3 per cent per annum and the net present value was calculated using a discount rate of 5 per cent.

53 The primary judge dealt with the claim in the following terms:

[82] However, the costs that Mr Jones has estimated cannot be viewed in isolation without taking into account, firstly, the beneficial effect of a more expansive reticulated stock watering system available to the applicant's land lying to the west of the acquired land, and, secondly, the savings on the costs of purchasing town water.

[83] In my opinion, the benefits conferred by the respondent's provision of the reticulated water system outweigh the burden caused to the applicant by the running and maintenance of that system. Therefore, this claim for disturbance (or any allowance for it in the "after" valuation) is rejected.

(b) The appellant's submissions

54 The appellant submitted that the first matter taken into account by his Honour at [82] of his reasons was contrary to this Court's reasoning in McDonald. She further submitted that the second reason was not supported by the evidence or any findings as to whether the town water troughs were in the same location as the new troughs containing water pumped from the River or any analysis supported by quantitative evidence, as to the actual cost of town water for stock watering in the past and as to any projected savings in the future.

(c) The respondent's submissions

55 The respondent submitted that his Honour's finding at [79] was that the troughs into which water from the River was pumped were in the same area as the two troughs connected to the town water supply. This was a finding of fact which could not be impeached.

56 It further submitted that it was appropriate for the liability in respect of the cost of maintenance and running of the stock watering system to be determined as part of the "after" valuation of the residue land in the same way as his Honour had dealt with the ongoing liability for the maintenance of the eastern fence. In other words, a hypothetical purchaser of the residue land would take into account the ongoing costs of maintaining and operating the stock watering system in determining the price that he or she would pay for the residue land noting that that liability would cease when that land was on-sold. The respondent further submitted that the finding of the primary judge at [83] was a finding of fact which was open to him. Furthermore, the issue with which the primary judge was faced was whether the facts on which the claimed sum was based fell within the words of s 59(f) which itself was a question of fact. After considering those facts in context, his Honour found they did not fall within the provisions of s 59(f).

(d) The primary judge erred

57 In my view, [82] of his Honour's reasons does contain a number of legal errors. First, his Honour did not address whether the amount claimed represented costs within the terms of s 59(f) and therefore loss attributable to disturbance within s 55(d). Specifically, he made no findings as to whether the relevant costs related to the actual use of the acquired land by the appellant and whether they might reasonably be incurred as a direct and natural consequence of the acquisition. There is much to be said for the view that the necessity to provide a stock watering system, and thereafter to incur costs in maintaining and operating it, related to the actual use of the acquired land by the appellant's stock in gaining direct access across that land, pre-acquisition, to the River and that cessation of that use was a direct and natural consequence of the acquisition as it would otherwise involve a trespass onto the respondent's land.

58 Secondly, his Honour was in error in so far as he appears to have considered that as the stock watering system had a beneficial effect on, presumably, the value on the relevant part of the residue land, that fact was to be taken into account when determining the "after" value of that land. If the relevant claim meets the requirements of s 59(f), then the decision in McDonald does not permit any value added to the residue land as a result of the incurring of the relevant costs to be taken into account when assessing the loss attributable to disturbance or the amount of compensation: McDonald at [84(e)], [100], [102], [103(b) (fourth dot point)]. That is because where a cost is a loss attributable to disturbance within s 59(f), the fact, if it be the fact, that the expenditure in question adds value to the residue land cannot be taken into account when determining the value of that land in the application of the "before" and "after" method of determining the market value of the acquired land.

59 Thirdly, and perhaps most significantly, there was no statutory warrant for the sort of balancing exercise which his Honour undertook at [82] and [83] of his reasons. If he was to reject the claim as not falling within s 59(f), his Honour had to make a finding that the cost in question would not be reasonably incurred as a direct and natural consequence of the acquisition or that its being incurred did not relate to the actual use of the acquired land. Those findings were not made. In the absence of such findings, his Honour was required to take any loss attributable to disturbance into account when determining the amount of compensation. At the same time he was not permitted to take into account any increase in the value of the residual land other than one which occurred at the date of acquisition. It follows, in my view that his Honour's approach did not accord with the statute and thereby resulted in legal error.

60 In the foregoing circumstances this Court, which has no power to make findings of fact, is bound to remit the present issue to the Land and Environment Court for further consideration. The maximum amount of the claim is $30,828.46. The cost of a re-hearing before the primary judge with respect to this issue would probably be greater than the amount claimed. In these circumstances, it is appropriate that before this issue is remitted to the Land and Environment Court, the parties should have the opportunity to see whether they can reach agreement on an appropriate amount. The final orders which I propose will contain an appropriate direction to that effect.

Disturbance Item (f) - The additional cattle yards claim

(a) The primary judge decision

61 The appellant's evidence on this issue was set out at [4] of her affidavit sworn 27 October 2009 as follows: (BlueVol2 240)

I will need to construct additional cattle yards on the parcel of the Land on the northern side of Glenarvon Road as I will have to keep my beef cattle in the paddocks on northern parcel for longer periods allowing my goat herds to remain in the paddocks on the southern parcel. I will also require the yards to contain any sick or injured animals or those having difficulty calving as I will not be able to readily move those animals across Glenarvon Road to my cattle yards on the southern parcel.

62 At [84] of his reasons, the primary judge noted that the appellant's claim for new cattle yards was based on her assertion that the northern parcel of the residue land will not be as accessible to her stock as it was prior to acquisition unless new yards are constructed, according to her evidence, in the paddock just north of the Ferraro property on the western side of Glenarvon Road. The issue which thus arose was whether the new cattle yards were necessary as a direct and natural consequence of the acquisition because the appellant was denied use of the acquired land for the purpose of moving her cattle between the northern parcel and the southern parcel.

63 As his Honour noted at [85] of his reasons, prior to the construction of the new road, the appellant moved her cattle between the northern and southern parcels of her land by walking them either along the frontage to the River of the neighbouring Ferraro property with Mr Ferraro's consent or, since she acquired the land in 1995, through a gate located near Rose Farm on the opposite (western) side of her land. The latter access was reliant on two gates at the pinch point where the north-west corner of the southern parcel met the south-east corner of the western parcel, being opened and chained against each other so as to create access along a small string of land not owned by her but which apparently belonged to the estate of a gentleman known as McDougall (the McDougall land).

64 His Honour recorded (at [86]) that after the acquisition the appellant's only legal access between the northern and southern parcels would effectively be severed by the new road as walking cattle along that road would be dangerous to both traffic and stock. The respondent rejected that claim on the basis that the asserted need for the new cattle yards was not a "direct and natural consequence of the acquisition of the land" (my emphasis). It submitted that even if the acquired land had not been taken and the new road had not been constructed, the question of legal access between the northern and southern parcels would have remained an issue. This was because at no time did the appellant have legal access to the land between the River and the Ferraro property but was dependant upon Mr Ferraro's continued consent for her to use that route. Equally, her access at the north-eastern corner of Rose Farm involved her using the McDougall land which was not in her ownership.

65 At [88] the primary judge said: (RED 51)

The respondent submits that the claim for new cattle yards is not justified, as Mrs Brock can still move her cattle along the new road, and the RTA relies on the evidence of its agricultural expert, Mr Dymock (Exhibit R2), who maintained under cross-examination that a second set of stockyards is not required, that the access under the bridge is perfectly adequate, and that it would still be safe and quite legal to walk the stock along the road reserve. Stock can legally cross the roads when necessary, subject to the correct posting of relevant movable warning signs, and possibly a flashing yellow light on any accompanying vehicle.

66 With respect to the reference in the above paragraph to Mr Dymock's cross-examination, he gave evidence (at Black 64) that there was a 12 metre wide road reserve between the new eastern boundary of the residue land and the carriage way of the new road which was at a higher level than that boundary being generally on the top of the levee bank. His evidence was that cattle could be walked along the road reserve safely provided there were two or three people to ensure that they did not stray onto the road.

67 At [90] the primary judge recorded the submission of the respondent that the Rose Farm access between the northern and southern parcels of the appellant's land was available to her in the "after" situation in precisely the same manner as it was available to her in the "before" situation. His Honour considered that any right or title to deny her access over the McDougall land would likely be extinguished by virtue of s 65 of the Limitation Act 1969 (NSW) and that it was highly unlikely that any "better" claim would be pressed at any relevant time.

68 His Honour concluded this issue at [91] in the following terms:

I find that the respondent's submissions on these issues, including the adverse possession aspect, persuasive, and, therefore, I hold that the claim for new cattle yards is unjustified. Accordingly, the disturbance claim for the cattle yards is rejected, and will not be reflected in the "after" valuation.

(b) The appellant's submissions

69 The appellant accepted that prior to the acquisition she could move her cattle between the northern and southern parcels by walking them either along Glenarvon Road or along the bank of the River fronting the Ferraro property to the east of Glenarvon Road with Mr Ferraro's permission or across the east/west portion of Glenarvon Road and thence through a gate located near Rose Farm on the western side of her land and which involved access along the small strip of the McDougall land. It was submitted that the second of these routes was denied by the acquisition as the new regional road prevented access from the River frontage land of both the Ferraro property and the northern parcel to that part of the latter parcel to the west of the new road reserve.

70 The appellant further submitted that post acquisition there were three possible ways "on paper" in which she could move her cattle between the northern and southern parcels. The first was by walking her cattle along the western road reserve of the new road which would not require Mr Ferraro's consent. However, this would involve, so it was submitted, interrupting the flow of an estimated 6500 vehicles passing along the road each day at a maximum speed of 80 kph. The second was by using the so called Rose Farm access but which would involve trespassing upon the McDougall land. The third was by moving the cattle on the southern parcel into the existing cattle yards and thence onto a cattle truck and then driving the truck up the new road to the northern parcel. However, to load or unload cattle onto or from the cattle truck at the northern parcel would require the installation of new cattle yards at that location.

71 The appellant next submitted that his Honour's acceptance of the respondent's submission that "if the roadworks had never been heard of and Mrs Brock or the hypothetical vendor were selling this land, all these questions would arise as well" involved a "market value approach" to the assessment of an item of disturbance. Criticism was then made of his Honour's observation at [87] that sought to explain the respondent's submission on the basis that because the appellant in the "before" scenario did not have legal access to the land between the River and the Ferraro property his Honour was, in effect, confusing the determination of market value by reference to the "before" and "after" method of valuation with what was an item of disturbance.

72 The appellant then sought to challenge his Honour's rather tentative finding at [90] of his reasons to the effect that it was unlikely that anyone would have a "better" claim to the McDougall land over which the appellant travelled with her cattle at the north eastern corner of Rose Farm. It was therefore submitted that the successor in title to that land could exclude the appellant from it. The statute of limitations had no application to bar that successor from taking action to exclude the appellant with the consequence that the only legal and safe manner in which the appellant could move her cattle between the northern and southern parcels of the residue land was by truck.

(c) The respondent's submissions

73 The respondent submitted that the appellant's contention was that in the "after" scenario, her only legal access between the northern and southern parcels would be effectively severed by the new road as walking cattle along that road would be dangerous to both traffic and stock. However, even if that was so, the acquisition did not affect the Rose Farm access which was just as available after the acquisition as it was before and which had been used without interruption since at least 1995. Furthermore, it was still open to the appellant, as it was before acquisition, to move her cattle along the Ferraro bank of the River with Mr Ferraro's permission. Both those means of access remained as legally sound or imperfect post-acquisition as they were pre-acquisition. The submissions of the appellant as to whether or not she could be barred by the successor in title to the McDougall land utilized for the Rose Farm access from taking action to exclude the appellant, was irrelevant.

74 It was further submitted that in any event the primary judge had implicitly accepted the evidence of Mr Dymock that the new cattle yards were not necessary and would be an over capitalisation of the residue land. Further, his Honour's acceptance (at [91]) of the respondent's submissions "on these issues" included a reference to the respondent's submission to which he referred at [88] and which I have recorded at [65] above. That submission included the evidence of Mr Dymock that it would be both safe and legal for the appellant to walk her stock along the 12 metre wide road reserve between the eastern fence and the western edge of the new carriageway.

(d) No error of law is disclosed

75 In my opinion, his Honour's finding at [91] that the claim for new cattle yards was unjustified has implicit in it a factual finding that the incurring of the cost of those yards would not be reasonable with the consequence that the requirements of s 59(f) would not be satisfied. As the respondent submitted, the Rose Farm access was still available and unaffected by the acquisition. The fact that it involved the appellant trespassing upon the McDougall land was irrelevant to the realities of the situation which was that that form of access had been available to the appellant and, presumably, her father for many years without interruption. In addition, his Honour accepted (at [96]) the evidence of Mr Dymock that it would be both legal and safe for the appellant to walk her cattle along the western road reserve of the new road. His Honour's acceptance of Mr Dymock's evidence was a factual finding which is not open to challenge. That finding meant that, both before and after the acquisition, the appellant could move cattle between the northern and southern parcels by walking them along Glenarvon Road or the western road reserve of that road. That being the position, it could not be said that the cost of erecting new cattle yards was made necessary because the appellant had no other means of lawfully moving cattle between the northern and southern parcels.

76 Accordingly, for the foregoing reasons, in my opinion no error of law has been demonstrated with respect to his Honour's rejection of the appellant's claim for new cattle yards.

The costs issue

77 As I have indicated his Honour dealt with the issue of costs in a judgment delivered on 16 May 2012 when he ordered that each party pay her or its own costs of the proceedings. For the purpose of dealing with this issue, it is necessary first to refer to the history of the offers and counters offers which were made prior to the hearing as well as to the amount of compensation for which each of the appellant and respondent contended at trial.

(a) The history of offers and counter-offers

78 The subject land was acquired on 31 October 2008. Thereafter the following occurred:

(i) The statutory offer was made by the respondent on 1 December 2008 in the sum of $650,000 for market value and $74,828 for disturbance items, a total of $724,828;

(ii) The respondent's offer was based on a valuation report prepared for the Valuer-General by Mr Andrew Hood of Tim Haffner & Associates Pty Ltd, Valuers. At [26] of the costs judgment his Honour set out the basis upon which Mr Hood valued the acquired land. He noted that the valuer found no "directly comparable sales evidence" and that he had analysed eight sales in a nearby area and, "controversially", a sale at Coolongolook near Bulahdelah. According to his Honour (at [27]), the appellant raised a large number of issues with Mr Hood and relied upon a supporting valuation from Robertson & Robertson of $1,529,000 inclusive of disturbance;

(iii) On 25 February 2009 the appellant's solicitor emailed the respondent indicating that he had been instructed to file an objection in the Land and Environment Court pursuant to s 66(1) of the Just Terms Act but offering to accept $1.2 million "all inclusive". Class 3 proceedings in the court were then commenced on 27 February 2009. It is apparent that the appellant's offer of $1.2 million was rejected;

(iv) On 24 March 2009 the respondent paid the appellant an advance of $668,007.87 being 90 per cent of the s 42(1) statutory offer. That advance payment was made pursuant to s 48 (1) of the Just Terms Act;

(v) On 20 July 2009 the appellant and the respondent reached agreement whereby the respondent at its expense would implement certain property and irrigation "adjustment plans" worth $334,700 for the benefit of the residue land. The major items so provided were the eastern fence and the stock watering system;

(vi) On 17 December 2009 the hearing was fixed to commence on 10 May 2010. The parties' respective valuers finalised their joint report on 12 April 2010;

(vii) On 30 April 2010, the solicitors for the respondent forwarded to the solicitors for the appellant a formal "offer of compromise" that purported to comply with Parts 20 and 42 of the UCPR and which was to remain open until 2pm on Friday, 7 May 2010. It offered total compensation in the sum of $550,000 exclusive of statutory interest and costs but inclusive of the advance payment of $668,007.89. In other words, had the appellant accepted that offer, she would have been required to repay to the respondent the difference between the two amounts;

(viii) On 3 May 2010, the respondent counter offered in the sum of $450,000 plus costs in addition to the advance payment. This offer was made on a Calderbank basis to remain open for acceptance until 4pm on Friday, 7 May 2010;

(ix) On 4 May 2010, the appellant's solicitors wrote to the respondent's solicitors offering to settle her claim for the sum of $450,000 inclusive of interest in addition to the advance payment but excluding costs. The effect of that offer was that it amounted to total compensation in the amount of $1.118 million. This offer was open for acceptance until 10.30am on Monday, 10 May 2010 being the date of commencement of the trial;

(x) On 5 May 2010, the respondent's solicitors wrote to the appellant's solicitors enclosing a revised formal "offer of compromise" open until 10.30am on Monday, 10 May 2010, increasing the total compensation payment from $550,000 to $600,000. The respondent's solicitors also made it "absolutely clear" that the property adjustments carried out on the appellant's property formed part of the compensation offered in addition to the total compensation in the "offer of compromise". However, the offer was inclusive of the advance payment with the consequence that if accepted the appellant would have had to repay the respondent the sum of $68,007.89;

(xi) As none of the various offers or counter offers had been accepted, the trial commenced on 10 May 2010 and continued until 14 May 2010 although the first day was taken up with an all-day site visit. The evidence extended over three days from 11 May to 13 May 2010. The last day, 14 May 2010, was taken up by submissions;

(xii) At the hearing, the appellant's case was that she was entitled to compensation in relation to the items and in accordance with the amounts referred to at [9] of the primary judgment and which I have recorded at [6] above;

(xiii) The respondent contended at trial that the appellant should be awarded no more than $180,000 for market value, $140,000 for injurious affection and severance and disturbance in the sum of $30,780. In other words, it called evidence from Mr Dempsey to establish that the amount that the appellant should be awarded for all items other than disturbance was the sum of $320,000. As the primary judge noted at [14], [50] and [51] of the primary judgment and [44] of the costs judgment, the essential difference in the valuation approach of the two valuers evident at the hearing was that Mr Jones claimed that the appellant's land should be valued as a "rural residential/retreat" whereas Mr Dempsey considered that it should be valued as "farming land" only. His Honour determined this issue in favour of Mr Dempsey. Nevertheless, he arrived at market value compensation (including severance and injurious affection) in the amount of $437,087 which was $117,087 more than Mr Dempsey's market valuation. His Honour's award of disturbance was the same as Mr Dempsey's figure with an additional $600 for road signage.

(b) The primary judge's decision

79 At [13] - [22] of the costs judgment his Honour set out what he regarded as the relevant principles to be applied in determining the issue of costs. Leaving aside the principles applicable to Calderbank offers, he accepted that the relevant principles were those stated by Basten JA, with the agreement of Macfarlan JA and Handley AJA, in Dillon v Gosford City Council [2011] NSWCA 328; (2011) 184 LGERA 179; (2011) 284 ALR 619 at [60]-[72]. At [60] Basten JA noted that the power to award costs in Class 3 proceedings in the Land and Environment Court arises under s 98 of the Civil Procedure Act 2005 (NSW) which provides that "costs are in the discretion of the Court". However, his Honour held that UCPR Rule 42.1 which provides that "the court is to order that costs follow the event unless it appears to the court that some other order should be made ..." did not apply to proceedings in Classes 1, 2 and 3 of the Land and Environment Court's jurisdiction. Accordingly, the discretion remained unfettered in the sense that there was no presumption that costs should follow the event.

80 After considering a number of authorities and various provisions of the Just Terms Act as well as a number of propositions advanced by the appellant in that case, Basten JA summarised the position in the following terms:

[70] ... [The appellant's propositions] support the proposition that a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.

[71] That approach is also consistent with the absence of any general presumption that costs should follow the event: the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered.

[72] Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case. These may include a comparison between the positions adopted by the parties at the commencement of proceedings and the final outcome. To the extent that a claimant obtains less than the valuation provided by the Valuer-General, the claimant has been unsuccessful in the litigation. That will be a factor to be taken into account, but the weight given to that factor may depend upon the extent of the failure. The Court may also take into account the time and expense incurred in relation to specific items. Beyond such general statements, it is unhelpful to go, lest the very generality of the discretion be thought to be fettered in some way. In short, the purpose of an award of costs must be taken into account, namely to compensate the party for expenditure incurred in the course of litigation; the nature of the litigation and the reasonableness of the conduct of the litigation are central considerations.

81 I interpolate that the principle underlying Basten JA's observations in the preceding paragraph has its genesis, as his Honour noted at [64] of his reasons in Dillon, in the judgment of Wells J in Minister for the Environment v Florence (1979) 21 SASR 108; (1979) 45 LGRA 127 where at 134 - 135 his Honour said:

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 or fast rule would ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise maybe in certain sorts of cases.

82 Similarly, in Banno v Commonwealth of Australia (1993) 45 FCR 32 at 51 (also referred to by Basten JA), Wilcox J observed:

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 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.

I pause to observe that both Wells and Wilcox JJ were highly experienced advocates and judges in cases involving the assessment of compensation upon the compulsory acquisition of land.

83 At [100] of the costs judgment the primary judge noted that the respondent did not seek its costs from the appellant but that the latter sought an order for costs in her favour against the respondent. At [101] he considered that the crucial issue was the effect of the settlement offers which had been made. At [105] his Honour noted the appellant's submission that the offers of 30 April and 6 May made by the respondent came only some ten days, including two weekends, prior to the hearing and were, therefore, very late and set "too tight" a timeframe for her response. At [106] he observed that if a court concluded that the time allowed was not reasonable, the offer could not function as a genuine "offer of compromise".

84 After noting at [107] that there was more for the court to consider than a simple arithmetical comparison between offers, his Honour summarised the settlement offer history in the following terms: (Red 113)

[108] In this matter the statutory offer was $650,000 for market value plus $74,828 for disturbance. Mrs Brock's claim, as finally framed, was $1,110,000 for market value plus almost $400,000 for disturbance. The RTA contended for $180,000 plus $140,000 for injurious affection/severance, and $30,780 for disturbance (with "fall back" positions up to an additional $58,565). In the last minute negotiations (see [92] - [95] above), the RTA made offers in excess of what the Court ultimately awarded, but Mrs Brock was holding out for $450,000, plus the amount advanced ($668,007.89), plus costs.

[109] All of those figures in the previous paragraph were exclusive of, and in addition to, the adjustment works worth $334,700.

[110] When settlement was not achieved, the RTA contended at trial for $320,000 plus $30,780, and the Court awarded $437,087 plus $31,380, accepting the RTA's case in many respects.

85 After setting out the party's respective submissions, his Honour observed at [113]:

[113] Clearly Mrs Brock would now be better off had she accepted the statutory offer, at any time, or either of the offers of compromise made close to the hearing, so I cannot accept that she was, in any way, successful in her litigation.

86 As to the genuineness of the offers of compromise, his Honour then considered the relevant authorities with respect to Calderbank offers and, in particular, the issue as to whether it was reasonable in all the circumstances for any of the relevant offers made by either party to be accepted. However, at [120] he observed that as the respondent was not pressing its possible claim for costs against the appellant and due to the total unavailability of an order for indemnity costs in favour of the appellant in the circumstances of the negotiations, there was no need to pursue the question of reasonableness further. One might infer from this observation that his Honour did not regard the offers of settlement to be of any further relevance.

87 Nevertheless, at [122] the primary judge noted that notwithstanding that both sides had put timeframes on their offers and that the appellant had not claimed that she did not have enough time to give consideration to the question of settlement, nevertheless the respondent

was not submitting that Mrs Brock was unreasonable in not accepting the statutory offer or any subsequent offers.

On the basis of that concession and given that his Honour did not consider it necessary to consider whether the rejection by the appellant of any of the respondent's offers was in the circumstances unreasonable, it follows that her non-acceptance of both the statutory offer as well as the subsequent offers could not be a disqualifying factor or at least one in respect of which determinative weight could be given when considering the appropriate order for costs to be made in the proceedings.

88 The primary judge's conclusion with respect to the costs issue was then expressed in the following terms: (Red 118-119)

[123] Mrs Brock may have had unrealistic hopes or expectations for her litigation, and the RTA exercised its entitlement to put a harder line in the court case than it had in the acquisition itself, or in the pre-trial negotiations, but I can find no basis for a finding that either side behaved unreasonably, such that an order for costs is warranted.

[124] I have concluded that there should be no order as to costs, and that each party must pay its own, in respect of the substantive proceedings.

(c) The appellant's submissions

89 The appellant's submissions may be summarised as follows:

(i) There was no finding by the primary judge that the appellant had been unreasonable in rejecting either the statutory offer of compensation or any of the subsequent offers made by the respondent prior to trial; on the contrary, the respondent declined to submit that the appellant was unreasonable in not accepting those offers;

(ii) His Honour held (at [123]) that there was no basis for a finding that either party behaved unreasonably. In the context in which that finding was made, his Honour must have considered that the manner in which both the appellant and the respondent conducted the litigation did not involve any unreasonable behaviour on the part of either;

(iii) The appellant, as a dispossessed owner, was entitled to reasonably test the adequacy of the compensation offered. Accordingly, absent any "unreasonable" disentitling conduct, she ought to have been awarded the costs of the proceedings;

(iv) Although his Honour (at [123]) considered that the appellant may have had unrealistic hopes or expectations for her litigation, he did not find that she was acting unreasonably in maintaining those hopes or expectations;

(v) As the primary judge noted at [44] of the costs judgment, the essential difference in the valuation approach of the two valuers was that Mr Jones asserted that the highest and best use of the parent land was as a rural residential retreat whilst Mr Dempsey considered that its highest and best use was as a grazing property or farm;

(vi) However, his Honour did not make any finding to suggest that either Mr Jones' approach was unarguable or that the appellant was acting unreasonably in relying on Mr Jones' valuation particularly as the evidence established that Mr Jones had adopted the valuation approach employed by the valuer the respondent relied upon in making its statutory offer post acquisition;

(vii) Finally, prior to acquisition, the parent land was a peaceful farm with a river frontage which was only affected to a very limited degree by the old Glenarvon Road whereas post acquisition her property straddles a major regional thoroughfare running along the top of a levee bank with an anticipated daily traffic flow of 6500 vehicles by 2016 at a speed limit of 80 kph;

(viii) In the foregoing circumstances, the primary judge's order that the appellant be denied her costs of the proceedings was inconsistent with the application of correct principle and thus involved a question of law;

(d) The respondent's submissions

90 The respondent accepted that as a general principle, a person who has had their land taken away by way of compulsory acquisition should not bear their own costs but 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 costs of the acquiring authority if the case proves unpersuasive. In the present case, the appellant claimed compensation of at least nearly $1.2 million. She was unsuccessful in the litigation but nevertheless was not required to bear more than her own costs of the proceedings.

91 It was further submitted that his Honour's exercise of discretion could not be the subject of appellate intervention unless error was demonstrated in accordance with the principles established by House v R (1936) HCA 40; (1936) 55 CLR 499 at 504-505.

(e) The primary judge erred

92 In my opinion the appellant's submissions should be accepted. Only two factors were referred to by the primary judge which could be said to be in some way adverse to her. The first was his Honour's statement at [113] of the costs judgment that she would have been better off had she accepted the statutory offer or either of the offers of compromise made close to the date of trial. As she did not accept those offers, his Honour considered that she was unsuccessful in her litigation. With the benefit of hindsight this was so.

93 The second was his Honour's observation at [123] that the appellant may have had unrealistic hopes or expectations for her litigation. However, she was entitled to rely on the advice of Mr Jones and her legal representatives and there was no suggestion that she was acting unreasonably in doing so.

94 Neither of these factors could, as a matter of principle, carry determinative weight in the application of the discretion with respect to costs in what has been referred to in the authorities as "out of the ordinary litigation". Further, neither factor is capable of displacing the principle that a claimant for compensation with respect to the compulsory acquisition of his or her land should usually be entitled to recover the costs of the proceedings where he or she has acted reasonably in pursuing the proceedings and has not conducted them in a manner which gives rise to unnecessary delay or expense. In the present case, his Honour specifically found (at [123]) that he could find no basis for a finding that the appellant (or for that matter the respondent) behaved unreasonably in the conduct of the litigation. Additionally, as the appellant submitted, his Honour did not find that it was unreasonable for the appellant to have held hopes or expectations with respect to the outcome of her litigation which ultimately turned out to be unrealistic.

95 As was noted by Basten JA in Dillon at [71], an owner of land who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the court in respect of the adequacy of any compensation offered. The appellant took such steps and there was no suggestion that in so doing she acted unreasonably. Although in one sense she was unsuccessful in the litigation in that she obtained less than the statutory offer and accepting that that is a factor to take into account, on the other hand at trial she obtained an award of compensation which, with respect to market value, exceeded the amount contended for by the respondent by $117,087. In other words, at trial the respondent contended that apart from disturbance the amount which should be awarded to the appellant for the market value of the land as well as injurious affection and severance was $320,000. His Honour found that the proper amount was $437,087. To that extent she had a victory at trial.

96 As Basten JA concluded at [72] in Dillon, the purpose of an award of costs, being to compensate the party for expenditure incurred in the course of litigation, must be taken into account although the nature of the litigation and the reasonableness of the conduct of the litigation by the claimant are central considerations.

97 The nature of the litigation is, as Wilcox J observed in Banno, that it is not "ordinary litigation". Furthermore, as I have already noted, there was no finding by the primary judge that the appellant had acted in any way unreasonably in conducting the litigation. Finally, there was no finding by the primary judge that the appellant had pursued a vexatious, dishonest or grossly exaggerated claim.

98 It follows from the foregoing that, given the findings to which I have referred, it is apparent that his Honour's order that the appellant should bear her own costs of the proceedings was inconsistent with the application of the correct principles. That inconsistency involved an implicit erroneous decision as to correct principle and thus gave rise to a question of law.

99 In my opinion, the appellant succeeds in her appeal in respect of the order for costs made by the primary judge in the costs judgment. She is therefore entitled to an order that the respondent pay the costs of the proceedings.

100 That leaves the primary judge's orders with respect to the Notices of Motion which were the subject of the costs judgment. His Honour ordered that the appellant pay the respondent's costs of each of those Notices of Motion. In my view, that order should not be disturbed in so far as it applies to the Notice of Motion filed by the respondent on 17 June 2011. On the other hand, in her Notice of Motion filed on 12 May 2011 the appellant sought an order that the respondent pay her costs of the proceedings, an order which in my view should now be made. She has, therefore, been successful on that motion and her costs thereof should be paid by the respondent.

The costs of the appeal

101 Both parties have been partially successful with respect to the issues argued on the appeal. There were five issues each of which took, approximately, the same amount of time and effort in terms of the written submissions and oral argument. Of the four items of disturbance the appellant has succeeded on only one. Each of the items did not involve a particularly large sum of money. In fact, as the respondent noted in its written submissions, even if wholly successful in respect of all four items, the appellant would only receive compensation in the further sum of $125,742.

102 On the other hand, the issue of costs clearly involved a much larger sum of money and the appellant was successful in her challenge to the order made by the primary judge. In monetary terms, that was the most significant issue from the appellant's perspective. In all the circumstances, in my opinion the appellant is entitled to 75 per cent of her costs of the appeal.

Conclusion

103 The appellant has been partially successful in her appeal. She has established an error of law on the part of the primary judge with respect to the maintenance, operating and replacement costs of the stock watering system. As I have already observed when dealing with that issue, it is not open to this Court to make any finding of fact with respect to it with the consequence that it must be remitted to the Land and Environment Court for further consideration. However, before making any such order, the parties should be given the opportunity of compromising that claim in order to avoid any further unnecessary legal expense.

104 I would therefore propose the following orders and directions:

1. Appeal allowed in part.

2. Set aside Order 2 made by Sheahan J on 29 November 2010 in so far as his Honour rejected the appellant's claim to compensation for loss attributable to disturbance within s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991, with respect to the stock watering system installed by the respondent to serve the appellant's land.

3. Set aside Orders 1, 2, 3 and 4 made by Sheahan J on 16 May 2012 and in lieu thereof order as follows:

(i) the respondent to pay the appellant's costs of the proceedings;

(ii) the respondent to pay the appellant's costs of her Notice of Motion filed on 12 May 2011;

(iii) the appellant to pay the respondent 's costs of its Notice of Motion filed on 17 June 2011, such costs, as agreed or assessed, to be paid within six months of any such agreement or assessment;

4. Direct the parties within 14 days of the publication of these reasons to consult for the purpose of attempting to compromise the appellant's claim for disturbance with respect to the maintenance, operating and replacement costs of the stock watering system on the basis that in the event that no agreement can be reached, the Court will order that the issue be remitted to the Land and Environment Court for further consideration and determination.

5. The respondent to pay 75 per cent of the appellant's costs of the appeal.

6. Note that the amounts referred to in Order 2 made by Sheahan J on 29 November 2010 and Order 2 made by his Honour on 16 May 2012 will need to be adjusted upon determination of the appellant's disturbance claim referred to in paragraph 4 above.

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Decision last updated: 11 December 2012