Land and Environment Court of New South Wales CITATION : Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 3) [2004] NSWLEC 204 APPLICANT Kirela Pty Limited (ACN 079 721 127) PARTIES : RESPONDENT The Minister administering the Environmental Planning and Assessment Act 1979 FILE NUMBER(S) : 30088 of 2002 CORAM: Cowdroy J KEY ISSUES: Compulsory Acquisition of Land :- costs - offer of compromise - Calderbank Offer Land Acquisition (Just Terms Compensation) Act 1991, s 39, s 49(2), s 55 LEGISLATION CITED: Land and Environment Court Act 1979, s 69(2) Land and Environment Court Rules 1996, Pt 13 r 27 Supreme Court Rules 1970, Pt 22, Pt 52 r 17(2) Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 21 NSWLR 349 ; Banno and Anor v Commonwealth of Australia and Anor (1993) 81 LGERA 34 ; Calderbank v Calderbank (1975) 3 WLR 586; Jones v Bradley (No. 2) [2003] NSWCA 258; Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 [2003] NSWLEC 135; CASES CITED: Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 2) [2004] NSWLEC 68; M T Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No 3) [2000] VSC 163; Smallacombe and Ors v Lockyer Investment Co. Pty Limited (1993) 42 FCR 97; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Schulte-Hordelhoff v Patons Brake Replacements Pty Ltd [1965] VR 369; Wollong Pty Ltd v Shoalhaven City Council (2002) 122 LGERA 331 DATES OF HEARING: 08/04/2004 EX TEMPORE 04/08/2004 JUDGMENT DATE : APPLICANT Mr A. Galasso (Barrister) SOLICITORS Minter Ellison LEGAL REPRESENTATIVES: RESPONDENT Mr J. Webster SC SOLICITORS Blake Dawson Waldron JUDGMENT: IN THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES 30088 of 2002 Cowdroy J 8 April 2004 Kirela Pty Limited (ACN 079 721 127) Applicant v The Minister administering the Environmental Planning and Assessment Act 1979 Respondent Judgment No. 3 - Costs Introduction 1 Judgment in these proceedings was delivered on 29 August 2003 in Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 [2003] NSWLEC 135 in which the Court awarded the amount of compensation for the market value of the applicant's land acquired pursuant to s 55(a) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Act") in the sum of $4,750,000. 2 In Kirela Pty Limited v The Minister administering the Environmental Planning and Assessment Act 1979 (No. 2) [2004] NSWLEC 68 the Court awarded the amount of compensation for disturbance of the land pursuant to s 55(d) of the Act in the sum of $18,006. 3 By Notice of Motion dated 12 September 2003 the applicant seeks an order that the respondent pay the applicant's costs of the proceedings. To determine such question it is necessary to consider the facts surrounding offers of compromise made by each party. 4 By Compensation Notice dated 17 December 2001 issued pursuant to s 42(2) of the Act the respondent offered the sum of $2,913,150 as compensation for the acquisition of the applicant's land made up as follows:- Market Value (Section 55(a)) $2,868,000; Disturbance (Section 55(d)) $45,150. Such offer was unacceptable to the applicant which instituted these proceedings. 5 By letter dated 20 June 2001 the applicant claimed compensation in the amount of $23,200,000 pursuant to s 39 of the Act. 6 By offer of compromise forwarded by letter dated 15 January 2003 the respondent made an offer of a total of $5,000,000 by way of compensation under the Act, including interest itemised as follows:- Market Value (Section 55(a)) $4,460,000; Disturbance (Section 55(d)) $225,000; Interest (Section 49) $315,000. Such offer was stated to be subject to the following condition:- 2. The Applicant and the Respondent shall pay their own costs of these proceedings. 7 The written offer also contained the following statement:- If in any trial of this matter judgement is entered on terms not more favourable to the applicant than the terms of this offer, the Respondent will rely upon this offer of compromise in an application pursuant to Part 52A Rule 22(6) of the Supreme Court Rules. 8 By letter dated 29 January 2003 the respondent purported to make its offer pursuant to Part 22 of the Supreme Court Rules 1970 ("the Supreme Court Rules") which are adopted by this Court pursuant to Part 13 rule 27 of the Land and Environment Court Rules 1996. 9 Such offer was not accepted by the applicant. Instead the applicant by letter dated 6 May 2003 offered to settle its claim for the sum of $9,250,000 plus costs. Such offer was not accepted by the respondent and the matter proceeded to a hearing. 10 The applicant submits that it is entitled to its costs of the proceedings because it was awarded more compensation namely $4,750,00 pursuant to s 55(a) of the Act than the sum of $2,868,000 which was offered in the Compensation Notice issued on 17 December 2001. The amount awarded for market value also exceeded the amount of $4,460,000 which was specified in the offer made by the respondent on 15 January 2003. Additionally the virtually the whole of the hearing was occupied by the claim for market value of the land. The issue of disturbance could not be resolved and was determined separately, the hearing of which occupied less than one day. 11 The respondent submits that the offer made by it in its offer of compromise of 15 January 2003 exceeded the sum which the Court awarded. Accordingly it should be entitled to payment of its costs from the date of such offer. 12 In its written submission the respondent conceded that its offer was not validly made pursuant to Part 22 of the Supreme Court Rules because it was conditional upon the inclusion of costs. However during the hearing of this application such concession was withdrawn and the respondent contended instead that the offer was a valid offer under Part 22 of the Supreme Court Rules. The respondent alternatively submits that the offer was made in accordance with the principle contained in Calderbank v Calderbank (1975) 3 WLR 586. 13 The applicant submits that the offer made by the respondent failed to comply with the requirements of Part 22 of the Supreme Court Rules and that the Respondent had specifically acknowledged that the offer was made pursuant to such part. Accordingly the applicant submits that the offer is invalid and further has no effect as a Calderbank offer. Findings 14 In Associated Confectionery (Aust) Ltd v Mineral and Chemical Traders Pty Ltd (1991) 21 NSWLR 349 Giles J (as he then was) determined that Pt 22 of the Supreme Court Rules was not satisfied in respect of an offer that was made expressed to be inclusive of costs. His Honour held that such an offer was in conflict with Pt 52 r 17(2) which provides:- (2) If a notice of offer contains a term which purports to negative or limit the operation of subrule (1), that offer shall be of no effect for any purpose under Part 22 or this rule. 15 It follows that the offer made by the respondent, being made in effect inclusive of costs, did not comply with the provisions of Part 22 of the Supreme Court Rules. 16 Authority exists for the proposition that an offer which fails to comply with the procedure provided by statutory rules may be treated as a Calderbank offer: see Schulte-Hordelhoff v Patons Brake Replacements Pty Ltd [1965] VR 369. It is apparent that a conflict exists concerning whether an offer, made inclusive of costs, can be said to constitute a Calderbank offer: see Smallacombe and Ors v Lockyer Investment Co. Pty Limited (1993) 42 FCR 97 but compare M T Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No 3) [2000] VSC 163 (3 May 2000). 17 The Court considers that the offer made by the respondent constituted a Calderbank offer since the applicant could have ascertained the amount of its costs and thereby calculate the net residue it would receive in respect of its claim for compensation. However such conclusion does not lead to the result that the respondent is entitled to costs. In Jones v Bradley (No. 2) [2003] NSWCA 258 the Court of Appeal affirmed the decision in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323 wherein Giles JA held that a Calderbank offer did not automatically result a different order as to costs which would otherwise have followed and that a court must consider whether the failure to accept such an offer in all the circumstances warrants a departure from the ordinary rule as to costs. The Court must consider the circumstances of each case in its exercise of its discretion granted to it pursuant to s 69(2) of the Land and Environment Court Act 1979. 18 An important consideration is the fact that the applicant was obliged to institute these proceedings to obtain an award of compensation which exceeded the amount offered in the Notice of Compensation. Additionally the applicant was successful in obtaining an award which exceeded the amount as itemised in the respondent's offer of compromise for the principal issue in dispute, namely the market value of the acquired land. 19 A second consideration relates to the uncertainty of the offer. The respondent's offer required the applicant to assess its own costs on a solicitor and client basis and then deduct such sum in order to calculate the residue which would represent the amount of compensation for the compulsory acquisition of the applicant's land. The evidence of the solicitor for the applicant establishes that up to 15 January 2003 the applicant's legal costs excluding expert witness and other costs amounted to $267,000. There is no evidence of the quantum of the experts costs but an estimate is made that the witness costs and other costs of the proceedings up to 15 January 2003 was between $215,000 to $220,000. Prima facie, after deduction of such costs from the offer of compromise the residue is less than the amount which the applicant was finally awarded for compensation. 20 Thirdly, the nature of these proceedings should also be considered. Wilcox J in Banno and Anor v Commonwealth of Australia and Anor (1993) 81 LGERA 34 at p 53 suggested that people who have had their land compulsorily acquired 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 [acquirer]'s costs if their case proves unpersuasive." 21 In Wollong Pty Ltd v Shoalhaven City Council (2002) 122 LGERA 331 at p 337 Talbot J stated :- Applicants who appeal to this Court following an offer to pay compensation by an acquiring authority should not be discouraged from testing the adequacy of the offer by the threat of a punitive costs order… 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… 22 In this case for the reasons considered above the Court is satisfied that the applicant is entitled to its costs of the proceedings. Orders 23 The Court makes the following order:- 1. ORDER that the respondent pay the applicant's costs of these proceedings. DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.