Land and Environment Court of New South Wales CITATION : NSW Golf Club Ltd v Valuer General [2007] NSWLEC 322 APPLICANT NSW Golf Club Ltd PARTIES : RESPONDENT Valuer General FILE NUMBER(S) : 31264 of 2004 CORAM: Talbot J KEY ISSUES: Costs :- Valuation appeal - principles to be applied. Crown Lands Act 1989 s34; LEGISLATION CITED: Land and Envirornment Court Act 1979 s 69 Land and Environment Court Rules Part 16 Rule 4; Valuation of Land Act 1916 s 6A(1), s 14I. CASES CITED: Latoudis v Casey (1990) 170 CLR 534 DATES OF HEARING: 31/05/2007 DATE OF JUDGMENT: 6 June 2007 APPLICANT P McEwen SC SOLICITORS Bicknell & Monteith LEGAL REPRESENTATIVES: RESPONDENT A Pickles (Barrister) SOLICITORS Crown Solicitors Office JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES Talbot J 6 June 2007 31264 of 2004 NSW Golf Club Limited v Valuer General JUDGMENT 1 Talbot J: These proceedings were by way of an objection against a land value determined by the Valuer General as at 1 July 2003. The applicant seeks an order for costs. 2 The land value has particular significance for the applicant as lessee of the subject land pursuant to s 34 Crown Lands Act 1989. The appeal proceeded on the basis that the correct valuation exercise is to ascertain land value pursuant to both s 6A(1) and s 14I of the Valuation of Land Act 1916. 3 As at 1 July 2003 the Valuer General assessed the land value of the subject land as $3,750,000. Prior to the commencement of the hearing Mr Hallias, valuer, contended on behalf of the Valuer General for a land value figure of $5,900,000. Ultimately that figure was reduced to $4,650,000. However, in the event that the Court supported the valuation by Mr Hallias, the Valuer General conceded that the value of $3,750,000 in the Notice of Valuation as at 1 July 2003, could be maintained. 4 In earlier proceedings this Court adopted a valuation on behalf of the applicant made by the late Frank Egan in the sum of $2,236,000 as at 1 July 1993. Although Mr Egan had died in the meantime, his further valuation prepared as at I July 2003 in the sum of $2,400,000 was in evidence. The applicant relied on registered valuer Terry Dundas who contended for a primary figure of $400,000, based on the capitalisation of rent method. Alternatively, Mr Dundas argued that a figure of $1,250,000 could be derived from a sale of land at Pitt Town to Kellyville Golf Club. 5 I determined the value at 1 July 2003 as $2.5 million, some 33 percent below that contended for by the Valuer General and consistent only with the valuation by Mr Egan. The value determined by the Court was 525 percent above the primary figure adopted by Mr Dundas and 100 percent greater than the secondary figure adopted by him based upon the Pitt Town sale. 6 In the course of my judgment delivered 2 February 2007, I accepted the opinion of Mr Hallias that the rate of return from land held by a not-for-profit organisation could be in the order of 2 percent. When this capitalisation rate is applied to the range of current rents for golf courses between $40,000 and $50,000, the land value figure of $2, 500,000 can be confirmed. The opinion of Mr Dundas was rejected in all relevant respects. 7 However, notwithstanding who may be regarded as the winning or losing party, success is not necessarily the determinative measure for making a costs order in this category of class three proceedings. Part 16 Rule 4(2) is in the following terms and applies: - Costs in certain proceedings …. (2) No order for the payment of costs will be made in proceedings to which this Rule applies unless the Court considers that the making of a costs order is, in the circumstances of the particular case, fair and reasonable. 8 The Court arguably must start with the principle that there will not, in normal circumstances, be an order for costs in an appeal from an administrative decision even where a party is successful. That much of the policy that could emanate from the rule is longstanding. Changes that have evolved over the years, culminating in the present rule, relate to the circumstances where costs orders may be made in proceedings by way of an appeal from an administrative decision. In the context of the present rule costs will only be awarded where the Court finds it to be fair and reasonable to do so. 9 In my view there can be no fixed criteria other than to maintain an approach, which is even-handed. Each case must be considered on its individual merits. In earlier decisions of the Court following the introduction of the present rule, there have been attempts to enumerate a list of the variety of circumstances under which a costs order may be appropriate. When considering such a list, caution needs to be exercised so that one set of circumstances does not set fixed criteria as a precedent for another set of circumstances. What may be fair and reasonable in one case may be entirely inapplicable in others. 10 The opening words of the rule appear to inform the context of the test for the exercise of judicial discretion based on the normal meaning of the words "fair and reasonable". I agree with the submission by Mr Peter McEwen SC that the process involves a subjective assessment based on objective matters. Mr Pickles, who appears for the Valuer General suggests that if something occurs that is not in the ordinary course of the litigation, then the rule is engaged. 11 Having regard to the circumstances of the present case the following particular matters can be noted: - 1. The applicant was only partly successful in the sense that the amount contended for by the Valuer General was reduced. However as indicated above, the final figure determined by the Court was significantly greater than anything suggested by Mr Dundas although commensurate with the valuation made by the late Mr Egan. 2. Except to the extent of the discrepancy between the positions adopted by the respective parties, there was no element of irrationality in the position taken by either the applicant or the Valuer General. 3. The appeal was an administrative appeal and that in itself is a relevant factor. 4. Although some important valuation issues were involved, including an understanding of the relationship between sections 6A and s 14I, the parties were not in major dispute in respect of the principles to be applied. The differences arose as a consequence of the application of the evidence available. 5. The special nature of the position of the applicant in relation to the subject land, in the sense that the determination of land value has a direct impact on the amount of rent payable for the balance of its term of the lease. It is argued by the respondent that this is only a marginally different position to a land owner who objects to land value determined for the purposes of the levying of a municipal rate or land tax. 6. Neither party is guilty of relying upon a host of evidence, which ultimately proved to be irrelevant or irrational. 12 Some attempt was made during argument to draw a comparison with proceedings by way of objection to an offer of compensation following compulsory acquisition of land from a private individual. I do not find the analogy helpful. Firstly, that category of Class 3 proceedings are not captured by Part 16 Rule 4(2). Moreover, the issues at stake in a resumption case are in most cases clearly distinguishable on the basis that an applicant has been deprived of a fundamental right to enjoy its property and is seeking just and reasonable compensation for that loss. Although a rent paying tenant may in a sense have a commercial interest in the outcome, that interest is not akin to a loss of an inherent property right. The subject Class 3 proceedings are more akin to a dispute between a landlord and tenant more often than not resolved by an administrative tribunal. It is most significant that the rule maker has singled out Class 3 valuation proceedings to be included within the ambit of Part 16 Rule 14(2) and not Class 3 compensation proceedings. 13 I perceive therefore that starting with the principle that parties generally cannot expect that there will be an order for costs, the test could be simply whether, in the present instance, having regard to the whole of the circumstances surrounding the litigation, it is fair and reasonable for one party, the respondent, to pay the costs of the other, the applicant. If both parties have acted in good faith and not engaged in some form of conduct that dislodges the presumption that there will be no order as to costs and there are no special circumstances that need to be taken into account in the context of an administrative appeal, then the rule appears to provide that no order can be expected. 14 Notwithstanding that there is authority that it is appropriate to make an order as to costs based on the outcome in valuation appeals the relevant decisions to this effect pre-date the making of the current rule and accordingly render no relevant support to the applicant's argument. 15 In a supplementary written submission made by the applicant (with the consent of counsel for the respondent), Mr McEwen argues that the assessment of what is fair and reasonable under the rule does not attract an increased or heightened level or requirement for that criteria to be accepted as applicable beyond the similar approach taken in the application of the general rule. He submits that to read into the words of the rule a two step approach – viz first the need to acknowledge there will be no order and secondly unless it is fair and reasonable-works as a tautology insofar as it replicates the general rule. 16 As the High Court has emphasised in Latoudis v Casey (1990) 170 CLR 534, the function of a costs order is compensatory. In civil proceedings an order usually will be made even though the unsuccessful party has nearly succeeded or has acted reasonably in commencing or defending the proceedings. At p 567 McHugh J noted "that costs operate as an indemnity and that the rationale of making a costs order is that it is just and reasonable that the successful party should be reimbursed for the costs incurred in bringing or defending the action..." 17 The real starting point for the analysis is s 69 of the Land and Environment Court Act (LEC Act), which "Subject to the rules …" provides costs are in the discretion of the Court. Latoudis v Casey was decided on general principles absent any express statutory provision, such as s 69. 18 Rather than leaving the Court with an unfettered discretion under the general rule s 69 has foreshadowed the possibility of a contrary or constraining provision in the rules of the Court. Rule 4(2) expresses the way in which the discretion should be exercised in the particular proceedings nominated. 19 It is incorrect therefore to regard the application of the rule as being no more or less than the exercise of the general rule. Rule 4(2) establishes a context or policy in respect of the prescribed proceedings based upon a principle that parties should not be constrained from commencing administrative appeal proceedings by the threat of a costs order against them if they are unsuccessful. Starting with a status quo or assumption that ordinarily there will be no order as to costs the balance of the rule recognises that there may be circumstances where it could be fair and reasonable to depart from that position. It is therefore against that assumed context that what is fair and reasonable must be assessed. 20 As well as an argument based on the disadvantageous position of a tenant of the Crown who is restricted to an appeal to the Court as the only recourse where it is dissatisfied with the impact of an assessment of land value on rent payable to the landlord, the applicant also refers to an offer to settle, at a figure consistent with the Court's determination, immediately prior to the commencement of the hearing. A "without prejudice" letter dated Friday 6 October 2006 stated: - "We are instructed to advise that our client will accept a figure of $3m. as the value of the club's land as at 1 July 2003. Please advise if your client is agreeable to that figure." 21 The hearing commenced the following Monday and the Respondent was advised the offer would expire that day. It was not accepted. The Respondent communicated a counter offer of $3,375,000 prior to the commencement of the hearing on 9 October 2006. The applicant does not contend that its offer meets the Calderbank test or that it can be treated as a formal Offer of Compromise. Nevertheless it is a circumstance of the case which indicates that the applicant was prepared to take a more realistic view about the prospective outcome at least in the latter stages of preparation for the hearing. However by that time the informal offer was in practical terms of little assistance. 22 The parties are in agreement that the competing arguments are finely balanced on the basis that neither side can be regarded as having been wholly successful. Both counsel adopted the concept of a sporting analogy of either a "golden point" or "penalty shoot out" result in the context of whether a costs order should be made. Nevertheless the Court has a full and unfettered discretion to be exercised within the compass of the rule. 23 I do not regard the commercial circumstances of the applicant's position as adding a great deal of weight to the applicant's argument. Although s 14I takes account of that position the Valuer General is an independent entity without any direct interest in the outcome of the objection or the appeal. The determination of land value is a statutory administrative task to be carried out impartially in accordance with established legal methods and principle. 24 The applicant makes a valid point that it was successful in achieving an outcome which was a substantial reduction on the position contended for by the Valuer General. Conversely, the applicant's primary claim, at least until the "without prejudice" offer was made at the "heel of the hunt", was equally untenable. In my opinion the fact of the reduction, in itself, is not enough to shift the underlying presumption there will be no order as to costs. If the applicant is entitled to gain the benefit of a compensatory costs order in this case so also might be the respondent. 25 Having regard to the whole of the circumstances of the case as outlined above, I am not satisfied that within the context of Part 16 Rule 4 that it is fair and reasonable for this applicant to have the benefit of an order for costs in its favour. 26 The application is dismissed. 27 No argument was advanced by either party regarding the liability for costs of the proceedings relating only to costs. I do not regard the Rule, Part 16 Rule 4, as dislodging the established principle that an argument in relation to costs alone is in the nature of ordinary litigation and that the successful party would generally be entitled to the exercise of the Court's discretion by an award of costs in its favour. Without the benefit of any argument to the contrary I would be prepared to make an order to the effect that the applicant pay the respondent's costs of the application for a costs order. 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.