Reported Decision : 154 LGERA 95 Land and Environment Court of New South Wales CITATION : Collex Pty Ltd v Roads and Traffic Authority of NSW [2007] NSWLEC 433 APPLICANT Collex Pty Ltd PARTIES : RESPONDENT Roads and Traffic Authority of NSW FILE NUMBER(S) : 31175 of 2004 CORAM: Talbot J KEY ISSUES: Costs :- Calderbank letter - indemnity costs refused. LEGISLATION CITED: Land and Environment Court Act s69(2) Botany Municipal Council v Secretary Department of Arts, Sports, The Environment, Tourism & Territories (1992) 34 FCR 412; 76 LGERA 213; Brymount Pty Ltd t/a Watson Toyota (ACN 003 200 459) v Cummins & Anor. Young Shire Council v Cummins & Anor (No. 2) [2005] NSWCA 69; Calderbank v Calderbank [1975] 3 All ER 333; Colgate Palmolive Co. and Another v Cussons Pty Ltd (1993) 46 FCR 225; Collex v RTA [2005] NSWLEC 601 ; Collex Pty Ltd v RTA [2006] NSWLEC 579; Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 399; Hillier v Sheather (1995) 36 NSWLR 414; Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 ; Kirela Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 134 LGERA 30 ; CASES CITED: Maclean v Rottnest Island Authority [2001] WASCA 323; Mandarin International Developments Pty Ltd v Growthcorp (Australia) Pty Ltd (1998) 143 FLR 408 ; Messiter v Hutchinson (1987) 10 NSWLR 525; Re Wilcox (No. 2) (1996) 72 FCR 151; Rosniak v Government Insurance Office (1997) 41 NSWLR 608 ; Smallacombe and Ors v Lockyer Investment Pty Ltd (1993) 42 FCR 97; SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323; Optus v Leighton & Ors (2002) NSWSC 450; Waiviata Pty Ltd v New Millennium Publications Pty Ltd (FCA, Sundenberg J, 18 April 2002, unreported at [6]; Oshlack v Richmond River Council (1998) 193 CLR 72; Wollong Pty Ltd v Shoalhaven City Council 122 LGERA 331 DATES OF HEARING: 20/03/2007 DATE OF JUDGMENT: 16 July 2007 APPLICANT Mr J Webster SC SOLICITORS Collex Pty Ltd General Counsel LEGAL REPRESENTATIVES: RESPONDENT Mr R Lancaster (Barrister) SOLICITORS Corrs Chambers Westgarth JUDGMENT: THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALEs 16 July 2007 31175 of 2004 Collex Pty Ltd v Roads and Traffic Authority of NSW JUDGMENT Introduction 1 Talbot J: On 19 September 2006 I delivered a judgment in favour of the applicant: Collex Pty Ltd v RTA [2006] NSWLEC 579. At [122] I expressly reserved the question of costs in the following way. I noted that the applicant would be entitled to a substantial part of its costs incurred in the litigation. I invited the parties to address the balance of the costs incurred particularly those that ensued from the numerous interlocutory hearings that occurred prior to the substantive hearing. 2 On Thursday 21 July 2006 the applicant's solicitor made the following written offer to the respondent's solicitor: - "WITHOUT PREJUDICE SAVE AS TO COSTS… In the interests of saving time and costs, Collex offers to settle the Application against the RTA on the basis that the RTA pay to Collex the sum of $5, 250 000 (two million and two hundred thousand dollars) in full payment of compensation and costs. This offer remains open until 10am on Tmonday [sic], 25 July 2005. This offer is made pursuant to Calderbank v Calderbank and Collex reserves the right to produce this offer on determination as to the question of costs." 3 A preliminary hearing on a separate question commenced on Monday 25 July 2006. 4 In addition to the usual party/party costs order, the applicant seeks costs on an indemnity basis from 26 July 2005. To substantiate this claim it relies upon the respondent's rejection of its alleged Calderbank offer in circumstances where this offer would have been more favourable to the respondent than the compensation subsequently awarded. Moreover, the applicant alleges unreasonable conduct by the RTA, both before and following the Calderbank offer, in the context in which the offer was made. (Optus v Leighton & Ors (2002) NSWSC 450). The issue of unreasonable conduct is not raised generally. 5 The respondent rejects the applicant's claim for indemnity costs and instead submits that the appropriate order should be that the costs be taxed on the usual party/party basis except for a hearing of 26 May 2006, which it insists was necessitated by the applicant's disentitling conduct. It seeks its costs of this day. 6 Section 69(2) of the Land and Environment Court Act 1979 applies to these Class 3 proceedings and provides: - (2) Subject to the rules and subject to any other Act: (a) costs are in the discretion of the Court, (b) the Court may determine by whom and to what extent costs are to be paid, and (c) the Court may order costs to be assessed on the basis set out in Division 11 of Part 3.2 of the Legal Profession Act 2004 or on an indemnity basis. 7 The applicant submits that its letter of 21 July 2005 was an offer made pursuant to the decision in Calderbank v Calderbank [1975] 3 All ER 333 that conformed to the principles established in that case so that it is a matter the Court should take into account with respect to the question of costs. Moreover it submits broadly that the respondent's actions were unreasonable. With respect to the central inquiry, namely whether the rejection of its offer was reasonable in the circumstances, it says that the respondent's reasons for rejecting the offer were totally inappropriate. 8 The respondent acknowledges that the rejection of a Calderbank offer in circumstances where the outcome of litigation is less favourable than the terms of the Calderbank offer is one circumstance that the Court must take into account in exercising its discretion under s 69: Brymount Pty Ltd t/a Watson Toyota (ACN 003 200 459) v Cummins & Anor. Young Shire Council v Cummins & Anor (No. 2) [2005] NSWCA 69. However, it asserts that several considerations, weigh against the award of indemnity costs in the circumstances of this case. These are as follows: - a) Reasonableness: It was reasonable to reject the offer in the circumstances. b) Temporal considerations: The timing and duration of the offer. It was not open for a reasonable time. c) Adequacy of the Calderbank offer: The offer did not explicitly identify the consequences of its rejection. That is, it did not specify that the applicant would seek indemnity costs as a consequence of its rejection. e) There was subsequently a material change in the applicant's case: 9 Under Part 42 of the Supreme Court Rules (which apply in this Court by virtue of Part 13 rule 27 of the Land and Environment Court Rules), the sanction against an offeree who rejects an offer of compromise and subsequently receives a less favourable verdict is a costs award to the other party on a more favourable basis than the usual costs order. This penalty reflects the Court's policy to encourage the early settlement of claims (Brymount at [10]). 10 The Supreme Court Rules are inapplicable to a Calderbank offer. The latter is an informal offer of compromise not subject to the formal requirements for offers of compromise provided by the Supreme Court Rules. Since the applicant relies on a Calderbank offer there is no presumption that costs will be taxed on an indemnity basis from the date of the offer, contrary to an offer made under the rules (Hillier v Sheather (1995) 36 NSWLR 414). Rather, the ultimate costs order is within the Court's discretion. The rejection of a Calderbank offer is but one consideration that informs the exercise of the discretion. 11 The applicant insists that the central question to consider is, whether the rejection of the compromise offer was reasonable in the circumstances. It submits that the question must be considered in the context of the respondent's overall conduct, including the conduct leading up to the offer of compromise: Optus v Leighton & Ors. That is, the Court must "…look at the spectrum of dealings…and not in any offer and acceptance format" (Optus at [21]). Notably, consideration is confined to one of reasonableness. The applicant therefore maintains that the timing of the Calderbank offer and its content are not relevant considerations. 12 In contrast the respondent submits that the correct inquiry involves examining the three factors cited by Giles J in SMEC Testing Services Pty Ltd v Campbelltown City Council [2000] NSWCA 323, namely reasonableness, temporal considerations, (being the making and duration of the offer) and the content of the letter. 13 In Smallacombe and Ors v Lockyer Investment Pty Ltd (1993) 42 FCR 97, Spender J advocated adopting the flexible approach espoused by Rogers J in Messiter v Hutchinson (1987) 10 NSWLR 525. Such approach requires that in determining whether to make a special costs order a Calderbank letter is a consideration but other circumstances are also relevant. At 528 Rogers J held: - "…at least as a matter of principle, a Calderbank letter should be permitted to be taken into account by the Court in determining whether a special order displacing that which generally obtains of costs following the event should be made… In considering what weight should be given to the offer, the Court will no doubt pay regard to all relevant circumstances..." 14 What Rogers J said is consistent with Giles J's approach in SMEC where he held at [37]: - The making of an offer of compromise in the form of a Calderbank letter (from Calderbank v Calderbank (1976) Fam 93), where the offeree does not accept the offer but ends up worse off than if the offer had been accepted, is a matter to which the court may have regard when deciding whether to otherwise order, but it does not automatically bring a different order as to costs. All the circumstances must be considered, and while the policy informing the regard had to a Calderbank letter is promotion of settlement of disputes an offeree can reasonably fail to accept an offer without suffering in costs. In the end the question is whether the offeree's failure to accept the offer, in all the circumstances, warrants departure from the ordinary rule as to costs, and that the offeree ends up worse off than if the offer had been accepted does not of itself warrant departure: see for example, John S Hayes & Associates Pty Ltd v Kimberley-Clarke Australia Pty Ltd (1994) 52 FLR 201; MGICA (1992) Pty Ltd v Kenny & Good Pty Ltd (1996) 70 FLR 235. 15 In accordance with these flexible approaches, it is appropriate not to specify what factors are relevant considerations, but instead to accept that the rejection of a Calderbank offer is but one consideration and that other circumstances are also relevant. 16 In reply to the applicant's offer the respondent challenged the validity of the purported Calderbank offer on the following grounds:- (1) That it was impermissibly inclusive of costs. (2) That it did not represent a genuine compromise and (3) That is was not open for a reasonable period of time. 17 Therefore it is necessary to examine the purported Calderbank letter itself before there is consideration of whether it was reasonable to reject the offer. 18 The offer was in a lump sum including entitlement to compensation and costs. The respondent submits that as the offer was inclusive of costs, it was not a true Calderbank offer. The decision in Smallacombe is clearly authority that a Calderbank offer must expressly exclude costs. Against this the applicant claims that a Calderbank offer that is inclusive of costs may validly be taken into account by the Court in the exercise of its costs discretion. 19 In Kirela Pty Ltd v Minister Administering the Environmental Planning and Assessment Act 134 LGERA 30 at [16] Cowdroy J acknowledged a conflict that exists between an offer made inclusive of costs and a true Calderbank offer: Smallacombe and Ors v Lockyer Investment Co. Pty Ltd (1993) 42 FCR 97; MT Associates Pty Ltd v Aqua-Max Pty Ltd & Anor (No.3) [2000] VSC 163. 20 In Smallacombe, the respondent's offer of compromise stated: - "our client will pay your clients the sum of $400 000 in full and final settlement of all your clients' claims as against our client including any claim for costs" It was labelled an "all-up offer" in respect of the claim and party and party costs. At [101] Spender J held that the letter was " not a Calderbank letter nor [was] it a letter of the kind considered in Messiter v Hutchinson." Moreover, at [103] he held that "an all up offer of "claim plus costs" ought not to be a relevant consideration on the question of costs and does not fall to be considered in the same way as a Calderbank letter." 21 Spender J also said however that an open offer to pay a sum of money to compromise the proceeding, which is in respect of claim only, or claim and interest, plus agreed or taxed costs, may be considered, together with all relevant circumstances. 22 In Wollong Pty Ltd v Shoalhaven City Council 122 LGERA 331, I considered the form of a purported Calderbank offer which was that compensation be paid as determined by the Valuer General in the sum of $796,770 and that the respondent pay the applicant's costs up to 22 February 2000. Thus it was not an "all-up" offer. At [37] I held that "the without prejudice offer was qualified by an express reservation as to costs", and that "in accordance with general principles, the letter [could] therefore, be taken into consideration on the question of costs (Messiter v Hutchinson (1987) 10 NSWLR 525; Calderbank v Calderbank [1975] 3 WLR 586…)". 23 The respondent also criticises the applicant's offer for failing to identify what were the weaknesses in the respondent's case so as to enable the respondent to properly assess the merits of the offer. The respondent contends in that respect that as no valuation evidence had been filed or served at the time of the offer, there was no basis upon which the respondent could ascertain the strengths and weaknesses of the applicant's case in order to determine whether the offer represented a genuine compromise. 24 In Wollong at [36] I concluded that the offer presented a realistic assessment of a fair and proper compromise for the following reasons: - (1) It was based on a formal valuation of the Valuer General pursuant to s 47 Just Terms Act. (2) It was in terms that defined the amount of compensation offered and left the amount of costs to be agreed or assessed. 25 Expressed in the above way it was not ambiguous and enabled the applicant to understand its full implications (Smallcombe at 97). 26 The respondent also relies on Calderbank, Smallacombe and Messiter to argue that the offer was ineffective as a Calderbank offer because it was made at the last minute and was not open for a reasonable period of time. The applicant acknowledges that the offer was made with only a short time frame but nevertheless maintains that this only goes to the exercise of the Court's costs discretion, (also relying on Smallcombe, Calderbank and Messiter). Furthermore the respondent was fully appraised of the basis of the applicant's claim. The respondent takes particular issue with this point. 27 Collex's offer does not strictly adhere to the principles in Calderbank. It was expressed to be such an offer. However, even if it were not a Calderbank offer, it was nevertheless an offer to compromise the proceedings. Its status as a Calderbank offer or some other type of offer does not invalidate it but influences the weight which it will carry in the Court's assessment of all the circumstances that must be considered when determining an appropriate costs order. An offer of compromise is a consideration that informs the exercise of the Court's broad discretion with respect to costs. Other circumstances are also relevant. 28 Giles JA in SMEC observed at [37] "an offeree can reasonably fail to accept an offer without suffering in cost". The Court must evaluate the weight to give the applicant's offer and determine whether it should have been accepted in the circumstances of the case. 29 The applicant broadly submits that the respondent's action in rejecting the offer was made against the background and under circumstances where its conduct was unreasonable. There were significant and detailed negotiations prior to the offer being made. The respondent did not attempt to consider the possible compromise and preferred to rely what is described as a spurious legal approach to a Deed of Agreement made with a third party Austral. (As to which see Collex v RTA [2005] NSWLEC 601). 30 The response by the respondent is that it was unable to evaluate the merits of the applicant's case. Therefore it was appropriate to give no consideration to the offer. 31 Temporal considerations, namely both the time of the making of the offer and its duration are further relevant factors. The Court must consider whether the offeree's legal advisers had sufficient time to weigh up the prospects of the case as against the likely costs should the claim fail (Brymount at [14]). 32 The offer was sent at 10:31am on Thursday 21 July 2005 and was said to expire at 10:00am on Monday 25 July 2005. Thus according to the applicant it was open for acceptance for just under 4 days. 33 The respondent notes however that at most the offer was open for 1.5 working days. It insists that the offer was not open for a reasonable period making it right to pay no attention to it. (Smallcombe at 101). 34 The applicant cites examples of offers made for both four days (Messiter) and less than a day (Calderbank) that were considered to be adequate. It maintains that in the circumstances four days was adequate. 35 Apart from the fact that the offer preceded valuation evidence and therefore it could not ascertain the strength of the applicant's claim, the respondent submits that at the time the offer was made the parties were in the final stages of preparing for a preliminary hearing confined to determining certain issues. Notably, not the value of the acquired land. It insists that as no valuation evidence had been served, there was no basis on which the respondent could ascertain the strength of the applicant's case in order to determine whether the applicant's offer represented a genuine compromise. Moreover as it was made before valuation evidence had been filed and the value of the claim known, it was not realistic. It compares the limited evidence filed by the applicant prior to the making of the offer with the large amount filed subsequently and relied upon at the final hearing. 36 In addition, the respondent insisted there was utility in having the preliminary hearing in that its outcome would provide guidance to the parties as to how the hypothetical purchaser would approach valuing the resumed land. Furthermore it claims that due to the overall differences between the parties there was a need to litigate. 37 The respondent also comments on the applicant's delay in making its offer. It maintains that it could have been made earlier and submits that its timing in the context of the steps of preparation for the preliminary hearing and the commencement of the hearing suggest that the Calderbank offer was used as an "indiscriminately wielded tactical weapon" (Maclean v Rottnest Island Authority [2001] WASCA 323). 38 In answer to the allegation that the respondent could not ascertain the strength of the claim, the applicant declares it cannot be said that at the relevant time in 2005 the respondent had no real understanding of the applicant's case. 39 In Messiter, Rogers J stated at 529: - "So long as it may fairly be done, the Court should do nothing which would dissuade or discourage a party from making bona fides offers of settlement, no matter how late. Delay in making an offer may, of course, entail consequences in the precise order made but should not automatically demand a complete disregard of the offer of settlement." 40 The RTA did not protest that there was insufficient time to consider the offer or attempt to seek an extension of time. However, lack of valuation evidence in existence at the time of the offer potentially means that the respondent could not properly evaluate the strength of the applicant's case. 41 The respondent cites the lack of an explicit statement that indemnity costs would be pursued as yet another factor against the awarding of indemnity costs. It alleges therefore that the offer was inadequate for failing to explicitly identify the consequences of its rejection, namely that the applicant would be seeking indemnity costs. Instead it argues the offer was put more opaquely as follows "…Collex reserves the right to produce this offer on determination as to the question of costs." The applicant responds that there is no basis for arguing that the offer was not explicit as the obvious intent of the letter was to use its content and the willingness to compromise the claim as a basis for seeking an alternative costs order. Moreover, no other reasonable interpretation of the offer could be inferred. 42 The weight attached to a warning varies from case to case. A mere statement of intention to seek indemnity costs may have little weight. Whereas a reasoned exposition of the weakness of the opponent's case accompanied by a warning, may attract greater weight: Waiviata Pty Ltd v New Millennium Publications Pty Ltd (FCA, Sundenberg J, 18 April 2002, unreported at [6]). 43 In Huntsman Chemical Company Australia Ltd v International Pools Australia Ltd (1995) 36 NSWLR 242 at 250, Kirby P suggested that if such a special costs order is to be made it should follow due and timely warning by the successful party to the unsuccessful party that it would be sought, in order to allow the Court to make the special costs order with the knowledge that the risk had been appreciated and the other party had pressed on regardless. It needs to be framed so that it causes the opposing party to carefully consider whether or not to proceed. 44 Finally the respondent argues that indemnity costs are only awarded in special or exceptional cases: Colgate Palmolive Co. and Another v Cussons Pty Ltd (1993) 46 FCR 225. 45 Ordering costs on a party-party basis is the usual practice. Courts will only depart from this practice if the case exhibits "some special or unusual feature": Re Wilcox (No. 2) (1996) 72 FCR 151 at 152 per Black CJ, or the case is "a strong one:" Mandarin International Developments Pty Ltd v Growthcorp (Australia) Pty Ltd (1998) 143 FLR 408 at 423 per Santow J (SC (NSW)). The question must always be whether the particular facts and circumstances of the case in question warrant the making of an order for payment of costs other than on a party and party basis. (Colgate-Palmolive Co & Another v Cussons Pty Ltd (1993) 46 FCR 225). Conclusion 46 Having regard to the limited time the offer was open at the stage when there was in my opinion no realistic opportunity to assess the value of the offer, it was not unreasonable for the respondent to reject or ignore it. Furthermore, the offer was in such vague terms that the recipient was not able to discern the amount claimed for compensation. It had no means of assessing the applicant's costs incurred to that date. Moreover, I accept that effectively the offer was open for an unreasonable time where the only hearing fixed was in respect of the resolution of preliminary issues which was an essential precursor to the assessment of the value of the property acquired and any consequential losses. Even any extension of time, if the respondent had requested it, would not have been realistic in order to make the respondent consider the strength of the applicant's case where the prospect of the availability of valuation evidence at a proximate time was remote. However, there is no evidence that the offer can be described as an "indiscriminately wielded tactical weapon". 47 The failure to make it clear and specific that the applicant would pursue an application for indemnity costs if the respondent did not accept is also a fact that weighs against the making of a special costs order. 48 There is no justification for accepting a proposition that the conduct of the respondent by rejecting the offer was ethically or morally delinquent (Botany Municipal Council v Secretary Department of Arts, Sports, The Environment, Tourism & Territories (1992) 34 FCR 412; 76 LGERA 213, vexatious (Rosniak v Government Insurance Office (1997) 41 NSWLR 608), in wilful disregard of the facts (Fountain Selected Meats (Sales) Pty Ltd v International Produce Merchants Pty Ltd (1988) 81 ALR 399) or with no chance of success (Fountain Selected Meats). Not only is a finding on any of those grounds not open on the evidence as presented, it would be unreasonable in the extreme to draw such a conclusion at the stage of the proceedings when the offer was made except in the most unusual circumstances none of which I find here. 49 The RTA accepts that in Class three proceedings it is fair and reasonable that Collex is entitled to an award of costs of the proceedings generally following the principle that costs follow the event on a party and party basis. Accordingly the usual order as to costs will be made subject to a consideration of the submissions separately put by the respondent in relation to 26 May 2006. 50 It has not been necessary to make a final determination in relation to any effect of a change in emphasis in the applicant's case for the purpose of resolving the indemnity costs question. Originally the applicant's case was based primarily on comparable sales. Ultimately the Court preferred an alternative basis, although the comparative sales evidence provided a check. I found a discounted cash flow basis was more reliable. The final detailed evidence in respect of the discounted cash flow method was not available to the respondent when the offer was made on 21 July 2005. Indeed it was not finalised or clear until the hearing was substantially advanced. Costs of 26 May 2006 51 The one qualification to the RTA's concession that Collex is entitled to a costs order of the whole proceedings is the costs of and incidental to a directions hearing on 26 May 2006. Relying on what the High Court said in Oshlack v Richmond River Council (1998) 193 CLR 72, the respondent argues that the conduct of the applicant in and about that hearing occasioned unnecessary litigation and expense that amounted to disentitling conduct. 52 The relevant alleged factual circumstances upon which the respondent's submission is based are set out the affidavit of Solicitor Sean Ventris as quoted in the submissions made on behalf of the RTA by Mr Lancaster as follows: - 8.1 The Court had, on 21 October 2005, given answers to preliminary questions concerning the operation of a Deed between Collex and Austral and how the terms of the Deed were to be taken into account by a hypothetical purchaser. 8.2 Collex had, on 15 December 2005, served amended Points of Claim. 8.3 By the end of April 2006, the parties had filed and served their respective valuation evidence-in-chief. 8.4 On 3 May 2006, the Court ordered that Messrs Reed, Holt and Large, all experts retained on behalf of Collex, provide, by 12 May 2006 reports in reply to the report of the RTA's valuer, Mr Preston. Messrs Reed and Holt were to reply to a discrete issue, ie. The 'DCF issue' (discounted cash flow) and Mr Large in respect of valuation issues (other than DCF) generally. 8.5 In giving this order on 3 May 2006, the Court specifically defined 'report in reply' to mean a report "referring to documentary evidence that discloses a contrary fact to an assumption made by Mr Preston and including a copy of relevant documents. It shall not include any new methodology." The orders made on this day, 3 May 2006, also provided a limited time for Mr Preston to provide a response, and then confer with Collex's valuation experts. 8.6 Documents purporting to be 'reports in reply' were filed by Collex on 12 May 2006. On their receipt, the RTA's legal advisers determined that the 'reports in reply' went, in fact, considerably beyond the limits set by the Court in that they included expressions of expert opinion that also went to canvassing the appropriate valuation methodology. 8.7 As a consequence, the RTA relisted the proceedings for a directions hearing on 26 May 2006. On this occasion, the Court agreed with the RTA that in preparing and serving the 'reports in reply', Collex had gone beyond the scope of the Court's orders on 3 May. The Court extended the timeframes for Mr Preston to provide his response, and for the expert conference previously ordered. 53 It is submitted that as a consequence of Messrs Reed, Holt and Large going beyond the factual material they were entitled to refer to pursuant to order made 3 May 2006 the RTA was put to additional and unnecessary expense in: - 9.1 Reviewing the reports of Messrs Reed, Holt and Large to understand the opinions that went to methodology, as opposed to purely factual material; 9.2 Conferring with Mr Preston and counsel with respect to such opinions; 9.3 Writing to Collex formally objecting to the reports of Messrs Reed, Holt and Large; 9.4 Relisting the matter for directions; and 9.5 Attending the directions hearing, including by counsel. 54 Order 1 made on 3 May 2006 was in the following terms: - By 12 May 2006: a. Mr Reed and Mr Holt provide Report in Reply to Mr Preston on the "DCF issues" b Mr Large provide a Report in Reply to Mr Preston on the other issues. Report in Reply means a document referring to documentary evidence that discloses a contrary fact to an assumption made by Mr Preston and including a copy of relevant documents. It shall not include any new methodology. 55 During argument on 26 May 2006, when the matter was relisted at the request of the respondent, Mr Webster SC expressly conceded that the reports provided were "reports in reply in the normal form". 56 The relief that the respondent sought on 26 May 2006 was in effect that the applicant, with one exception, not be entitled to rely on the reports filed and served because they were served contrary to the directions made on 3 May 2006. 57 Ultimately, after I took a pragmatic approach to recognising that it was preferable for the material upon which the applicant's valuers relied to be fully disclosed before the joint conferencing process took place, I decided the prejudice to the respondent as a consequence of the failure to comply with the 3 May 2006 direction would be resolved by allowing the respondent's expert witness adequate time to deal with the additional material. Technically therefore the respondent's notice of motion was dismissed but as it was the applicant's clear transgression of the order made on 3 May 2006 that caused the respondent to apply for a special listing, the costs order should reflect that fact. 58 Accordingly, the applicant will be ordered to pay the respondent's costs in relation to the preparation for and the hearing on 26 May 2006. Orders 1. The respondent is ordered to pay the applicant's costs of the proceedings with the exception of costs incurred in respect of the hearing of 26 May 2006. 2. The applicant is ordered to pay the respondent's costs of the hearing on 26 May 2006. 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.