Land and Environment Court New South Wales Medium Neutral Citation: St Marys Land Limited v Valuer-General of New South Wales [2011] NSWLEC 2 Hearing dates: 18,19, 20 and 21 January 2011 Decision date: 21 January 2011 Before: Pepper J Decision: 1. Subpoenas and notice to produce set aside in part. 2. No order as to costs. Catchwords: PROCEDURE - Class 3 valuation proceedings - application to set aside notice to produce and subpoenas on the grounds of prematurity, oppression and fishing - one of subpoenas issued to a third party - subpoenas and notice to produce set aside in part - costs - whether fair and reasonable to order costs in favour of party seeking to set aside subpoenas and notice to produce, especially in favour of third party - applicable principles - no costs ordered Legislation Cited: Civil Procedure Act 2005 s 56 Land Acquisition (Just Terms Compensation) Act 1991 Valuation of Land Act 1916 Land and Environment Court Rules 2007 r 3.7 Uniform Civil Procedure Rules 2005 rr 21.10, 33.4 Cases Cited: Agonic Holdings Pty Ltd v Lithgow City Council [2009] NSWLEC 34 Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224 Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110 Collex Pty Ltd v Roads and Traffic Authority [2006] NSWLEC 579; (2006) 149 LGERA 234 Commonwealth of Australia v Randwick City Council [2000] NSWLEC 171; (2000) 109 LGERA 297 Hodgson v The Minister Administering the Water Management Act 2000 [2007] NSWLEC 193 Jacobson & McMillian v Ballina Shire Council [2006] NSWLEC 375 Palace Group of Hotels trading as Beach Palace Hotel v Randwick City Council [2007] NSWLEC 406 Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 Roads and Traffic Authority v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419 Taylor v Port Macquarie [2009] NSWLEC 1233 Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230 Yates v Darling Harbour Authority (1990) 70 LGRA 187 Category: Procedural and other rulings Parties: St Marys Land Limited (Applicant) Valuer-General of New South Wales (Respondent) Representation: Solicitors: Allens Arthur Robinson (Applicant) NSW Crown Solicitors Office (Respondent) Counsel: Ms A Pearman (Applicant) Mr J Maston (Respondent) File Number(s): 30438 of 2010 ex tempore Judgment introduction 1This is an application by St Marys Land Limited ("St Marys"), the applicant to the substantive proceedings, and Lend Lease Development Pty Ltd ("Lend Lease"), a third party, to set aside two subpoenas dated 9 December 2010 ("the subpoenas") and a notice to produce dated 18 October 2010, all relevantly in identical terms, for the production of the following documents: 1. Documents referring to actual and/or estimated: (a) Construction costs; and (b) Engineering costs, obtained and provided to Russell McKinnon for the preparation of the report he signed on 28 September 2009. 2. The Land and Joint Venture Interest Sale Agreement between ADI Ltd and the applicant dated 1 October 1999. 3. All agreements and transfers for the sale of shares in St Marys Land Ltd for the period from 1 October 1999 to 1 July 2006. 4. The share register of St Marys Land Ltd for the period from 1 October 1999 to 1 July 2006. 2One subpoena and the notice to produce was issued to St Marys, the other subpoena was issued to Lend Lease. 3The substantive proceedings concern an appeal made pursuant to the Valuation of Land Act 1916 ("the Act") against the Valuer-General's determination on 15 April 2010, that the land value of Lot 2 DP 1132380 ("the Land") as at 1 July 2006 is $62,750,000. St Marys claims that the value of the Land as at the base date is $48,500,000. 4Because of the intervention of the end of year holiday season and the unavailability of the parties' legal representatives, the application to set aside has only recently been able to be heard. As a consequence of the imminent hearing date, the resolution of this application by me, as the vacation duty judge, is urgent because the expert valuation evidence cannot be finalised until the application has been determined. background 5The total area of the Land is 972.9 ha. The Land represents part of the land comprised in the former Australian Defence Industry site ("the ADI site"). Part of the ADI site lies in the local government area of Blacktown Council ("the Blacktown Council land"), the other part lies in the local government area of Penrith Council. It is the latter part which is the subject of these proceedings. It appears from the evidence that ADI Limited ("ADI") transferred the Land to St Marys on 1 October 1999. 6The Valuer-General informed the Court (which was not disputed by St Marys) that in early 2004 Lend Lease bought all the shares in ComLand Limited ("ComLand"), which involved the acquisition of all or all remaining shares in St Marys (all of St Marys' shares were held by ComLand, a wholly Commonwealth owned corporation). As at the 2006 base date, all of the shares in St Marys were owned or controlled by Lend Lease. 7The statement of basic facts filed 13 August 2010, describes the zoning of the Land as follows: Part "Urban" (Western Precinct) - 223.1ha Part "Urban" (Central Precinct) - 94.11ha Part "Employment" (Central Precinct) - 38.91ha Part "Road & Road Widening" - 2.919ha Part "Drainage" - 19.95ha Part "Regional Open Space" - 40.53ha Part "Regional Park" - 552.98ha 8The same document describes the relevant applicable planning instruments to be: Sydney Regional Environmental Plan No. 30 - St. Marys (Amendment 2) (SREP 30) St Marys Environmental Planning Strategy 2000 St. Marys Development Agreement (dated December 2002) St. Marys Penrith Planning Agreement (dated December 2008) Western Precinct Plan (exhibited 2008 and adopted March 2009) Central Precinct Plan (exhibited 2008 and adopted March 2009) The original Development Agreement covers the whole of the original ADI site within both the Penrith and Blacktown Council areas, with the newer Planning Agreement covering only that land in the Penrith Council area (and itself being an amendment of the original Blacktown Planning Agreement covering land in the Blacktown Council area). 9Suffice to say that the applicable planning framework can be described as complex. 10Whilst the majority of the Land is to be set aside as regional park and/or regional open space, the proposed development of the subject land is for approximately 3,600 dwelling lots of various configurations together with land for retail/town centre purposes. Development is a multi-stage process with a long term horizon of approximately 15 to 20 years dependant on market conditions. Some development applications have been lodged and approved and further applications are to be lodged. 11Initially the 'as made' valuation of the Land was $70,000,000 (expressed as $7.20/m 2 overall or $20/m 2 for "Urban" zoned land and $25/m 2 for "Employment" zoned land). The 'as amended' valuation of the Land (by objection review dated 12 January 2010) is $62,750,000 (expressed as $6.45/m 2 overall or $17.50/m 2 for "Urban" zoned land and $25/m 2 for "Employment" zoned land). Procedural History 12The hearing of the appeal is set down for four days commencing 15 February 2011. This date was allocated on 24 September 2010. 13On 22 December 2010, the following relevant directions were made by the Court: (a) by 25 January 2011 the parties are to file and serve their respective individual expert valuation reports; and (b) by 1 February 2011 the parties' expert valuers are to confer and file and serve a joint report, which is to include any evidence in reply. 14These directions amended earlier directions made by the Court on 24 September 2010, providing for the filing and serving of individual expert valuation reports by 3 December 2010 and the filing and service of a joint report by 17 December 2010. The reason for the variation of the timetable is not known, but it is noted that at the time the variation was made the matter had already been set down for hearing. The late variation has understandably put pressure on both parties who are engaged in final preparation for the hearing and has rendered this application all the more pressing. 15At the hearing of the application St Marys informed the Court that on 25 January 2010 it is envisaged that Mr Russell McKinnon, its expert valuer, will serve a report ("the second McKinnon report") that will render otiose an earlier report by him dated 28 September 2009 ("the first McKinnon Report"). That is to say, St Marys will not be relying on the first McKinnon Report. 16Thus the primary submission of St Marys is that the subpoenas and notice to produce are premature and that the Valuer-General should wait until the second McKinnon report is served to determine what, if any, additional documents are required. 17The Valuer-General, conversely, states that given the immediacy of the hearing date and the relevance of the documents to any determination of the value of the Land, the documents should be produced. 18St Marys relied on an affidavit of Mr Thomas Cregan, a solicitor employed by Allens Arthur Robinson, who are the solicitors for St Marys. His affidavit sets out correspondence passing between the parties dated 26 October 2010 to 21 December 2010. This correspondence discusses concerns St Marys had about the scope and relevance of the documents called for in the subpoenas and notice to produce. 19In addition, St Marys relied on a bundle of documents which included: (a) a map depicting the location of the Land; (b) a land tax notice of assessment for the 2007 tax year in the amount of $1,117,418.20. The assessment was based on 70 parcels of land owned by St Marys as at 31 December 2006. The total aggregate land value set out in the assessment notice was $66,076,600. The assessment notice revealed that while the Land the subject of the proceedings was a significant holding of St Marys, it was one of several land holdings with an average land value in excess of $1,000,000; (c) a confidentiality undertaking in respect of the production of the documents called for in relation to paragraph 1 of the subpoenas and notice to produce. Ultimately, however, no confidentiality undertaking was agreed to; and (d) the first McKinnon report by Mr Russell McKinnon of Colliers International Consultancy and Valuation Pty Limited. 20The Valuer-General relied on an affidavit of Mr Bradley Row affirmed 24 December 2010, and documents referred to in that affidavit tendered by way of exhibit. 21In addition to duplicates of documents contained in St Marys' bundle, the documents relevantly included an ASIC search of St Marys revealing that the ultimate holding company for St Marys was Lend Lease and that previously it has been ComLand; a transfer in respect of the Land to St Marys from ADI with the consideration described as "the amount described in cl 4.1 of the Land and Joint Venture Interest Sale Agreement dated 1 October 1999 between the Transferor and the Transferee" ("the sale agreement"), and a media release by Senator Nick Minchin (the then Federal Minister for Finance and Administration) dated 22 January 2004. 22The media release relevantly stated: ComLand is an Australian Government-owned company established in July 1999 to take over former munitions manufacturing and storage sites from ADI Limited. The sites, Edgewater and Waterford Green at Maribyrnong in Melbourne and St Marys in western Sydney, have been designated for property development. Through its subsidiaries, ComLand is a 50% joint venture partner with Lend Lease Development Pty Limited in the development projects at these sites. As ComLand's existing joint venture partner, Lend Lease was given the opportunity to bid for the Australian Government's interest in the remainder of the development projects. "With Waterford Green having been developed and sold, sales progressing at Edgewater and the planning approval process at St Marys now entering an advanced stage, the Australian Government considered that it was an opportune time to realise its invest in ComLand and remove its protracted exposure to property market risks", Senator Minchin said. 23In his affidavit, Mr Row deposed to the following (at paragraph 24) in respect of the documents sought at paragraph 2 of the subpoenas and notice to produce: 24. Mr Watt informs me, and I believe, that by indicating the then value of the ADI site this consideration paid either provides guidance about the land value of the subject land, or, at least, enables the respondent to pursue a train of inquiry by which that land value may be more reliably ascertained. Further it enables Mr Watt to verify information that inquiry at the time would have revealed. 24In respect of the documents sought at paragraph 3 and 4 he stated: 28. Mr Watt informs me, and I believe, that: (a) as a result of this disposition share interests in the applicant were transferred from ComLand to Lend Lease (b) by this disposition Lend Lease effectively acquired ComLand's interests in the ADI site and the Maribyrnong sites; (c) although this would have been presumably done by way of share transfers, the price paid for those shares would have reflected the value of the underlying assets, ie: the ADI site and the Maribyrnong site; (d) by: (i) verification of the share sale price; (ii) examining the various agreements and transfers; and (iii) using the share sale transaction and other information which is publicly available; he will be able to analyse the value of the Maribyrnong sites out of the sale price, ie: $165,000,000, and thereby infer the price effectively paid for the subject land in early 2004; and (e) this task is not precluded by reason of the fact that the Blacktown Council land has been substantially subdivided and partially sold at the present time. This is because these subdivisions had not taken place in early 2004. 25During the hearing of the application a resolution, save as to costs, was reached between the parties in relation to paragraph 1 of the subpoenas and notice to produce. This resolution involved deleting the words "obtained and provided to" and substituting in their place, "relied upon and/or referred to by". 26As a consequence of this compromise, determination of whether or not paragraph 1 ought to be set aside was not necessary and the application was not pressed any further in respect of this paragraph. legal principles 27Rule 21.10 of the Uniform Civil Procedure Rules 2005 ("UCPR") in respect of a notice to produce states as follows: 21.10 Notice to produce for inspection by parties (1) Party A may, by notice served on party B, require party B to produce for inspection by party A: (a) any document or thing that is referred to in any originating process, pleading, affidavit or witness statement filed or served by party B, and (b) any other specific document or thing that is clearly identified in the notice and is relevant to a fact in issue. 28Rule 33.4 of the UCPR provides that: 33.4Setting aside or other relief (1) The court may, on the application of a party or any person having a sufficient interest, set aside a subpoena in whole or in part, or grant other relief in respect of it. 29Recently, in Azar Building and Construction Services Pty Ltd v Transport Infrastructure Development Corporation [2010] NSWLEC 110 Craig J set out a number of the legal principles applicable to this application (at [20]-[21]): 20 A consideration of the arguments advanced before me on 28 May indicated that the Subpoenas and Notice were framed in terms that did not enable it to be positively established that a legitimate forensic purpose was served by the Subpoenas and the Notice ( Commissioner for Railways v Small (1938) 38 SR(NSW) 564; NSW Commissioner of Police v Tuxford [2002] NSWCA 139; Travel Compensation Fund v Blair [2002] NSWSC 1228). Whether such purpose is met in a given case will turn upon the connection between the issues raised in the proceedings and documents which are the subject of a subpoena or notice to produce. The requisite connection to be established has been variously described. Without intending to be exhaustive, it is apparent that a subpoena or notice to produce will be liable to be set aside where the party seeking production of documents cannot establish: (i) that it is "on the cards" that the documents will materially assist on an identified issue: Alister v The Queen (1984) 154 CLR 404 at 414; R v Saleam [1999] NSWCCA 86 at [11]; Attorney-General for NSW v Chidgey [2008] NSW CCA 65; 182 A Crim R 536 at [58] - [69]; (ii) that the material sought could reasonably be expected to throw light on some of the issues in the principal proceedings: Trade Practices Commission v Arnotts Limited (No 2) (1989) 21 FCR 306; 88 ALR 90 at 103; Cosco Holdings Pty Ltd v Federal Commissioner of Taxation [1997] FCA 1504; (1997) 37 ATR 432; (iii) that there is a reasonable basis for supposing that the material called for will likely add to the relevant evidence in the case: A v Z (2007) 212 FLR 255 at [4]; (iv) that it is likely the documents will materially assist on an identified issue or there is a reasonable basis beyond speculation that it is likely the document will do so: Air Canada v Secretary of State for Trade (No 2) [1983] 2 AC 394; [1983] 2 WLR 494; ICAP Australia Pty Ltd v Moebes [2009] NSWSC 306; ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd [2009] NSWCA 307. 21 The principle was extensively discussed in ICAP Australia Pty Ltd v BGC Partners (Australia) Pty Ltd . Tobias JA (in whose judgment Basten JA and Handley AJA agreed) considered at [22] the requirement for it to be shown that it is "likely" that the documentation sought will materially assist on an identified issue or the alternative requirement that there be a reasonable basis beyond speculation that it is likely the documentation will so assist was not relevantly different to a requirement that it be "on the cards" that the documents would materially assist on an identified issue. Importantly, all the tests, however stated, require identification of an issue or issues in the proceedings with some modicum of particularity which then becomes the measure against which the forensic purpose of the documents can be determined. It is that identification which must inform the requirement to produce the documents sought. 30Thus to summarise, if it is "on the cards" that a document will "materially assist on an identified issue" a subpoena (or notice to produce) will not be liable, on this basis at least, to be set aside. 31Azar involved the setting aside of subpoenas and a notice to produce in proceedings concerning the compulsory acquisition of land pursuant to the Land Acquisition (Just Terms Compensation) Act 1991. His Honour stated in the context of that statutory framework that (at [38]): ... the legitimate forensic purpose which informed the requirement for compulsory production of documents can only be considered in the context of an understanding of the issue or issues to which the documents are potentially directed. ...In the context of a claim for compensation, a wide ranging requirement for production of documents that might inform an understanding of transactions pertaining to development upon adjoining land, without first identifying the statutory foundation for such a claim, cannot be sustained. 32A similar, if not identical, observation may be made with respect to appeals under the Act. 33Of course, in valuation proceedings in Class 3 of the Court's jurisdiction, no pleadings exist. Instead the issues are, hopefully, contained in documents such as Grounds of Objection and the Agreed Facts and Legal Assumptions. st marys' contentions 34In relation to paragraphs 2, 3 and 4 of the subpoenas and notice to produce St Mary's submissions may be summarised as follows: (a) the demand for documents is premature in the absence of the second McKinnon report; (b) the documents demanded have no connection with any of the identified issues, and therefore, constitute an abuse of process; (c) the sale agreement referred to in paragraph 2 captures not only the Land but other parcels of land, approximating 1,500 ha, as well as two Melbourne sites; (d) the sale in 1999 was not an arms length sale inasmuch as at the time of the sale St Marys was owned by ComLand and it was from one government instrumentality to another. The 2004 transaction was not at arms length because it was to a 50% two way joint venture partner; (e) both the 1999 and 2004 sales are too remote from the 2006 base date. Both sales require a number of steps to be carried out before the value of the Land can be ascertained as at 1999 and 2004, that is to say, prior to substantial subdivision which has now occurred and before any inference of the 2006 value. The number of steps or adjustments renders incapable the production of a reliable valuation; (f) the production of documents in circumstances where the material requested has no connection to the identified issues amounts to a fishing expedition; (g) the production of documents would be oppressive insofar as an excessive number would be required to be produced which would, particularly this close to the hearing, divert critical resources away from preparation thereby resulting in increased costs; and (h) in all these circumstances, the production of the documents would be contrary to the "just, quick and cheap" resolution of the real issues for determination in the proceedings in accordance with s 56 of the Civil Procedure Act 2005 ("CPA"). 35Because no evidence was put before the Court either as to the amount of documents that would be required to be produced in answer to paragraphs 2, 3 and 4 or as to the likely cost of producing this material, limited weight was given to the penultimate submission that the subpoenas and notice to produce should be set aside on the ground of oppression. the valuer-general's contentions 36The Valuer-General's submissions in response were, in summary: (a) in respect of the documents sought in paragraph 2, the 1999 sale agreement in respect of (at least in part) the Land was specifically referred to in the memorandum of transfer. It is only having regard to this agreement that the consideration for, and the terms of, the transfer of the Land can be ascertained. This evidence, namely, the sale price of the Land as at 1999, is relevant for the purpose of determining any present value. While adjustments would undeniably have to be made to the sale price to extrapolate a base date value, this did not preclude the relevance of this evidence to the extent that the agreement ought not be produced; (b) the fact that the Land transferred comprises land in addition to the Land the subject of this appeal was, for similar reasons, a matter that went to weight only and not to relevance; (c) the documents sought in paragraph 3 were agreements and transfers with respect to the acquisition of the remaining one half of the share capital of St Marys on or about 22 October 2004, as a result of the takeover of ComLand by Lend Lease. The sole significant asset of St Marys was the ADI site land of which the Land the subject of these proceedings formed a part. The price paid in 2004 attributable to the acquisition of ownership or control of the shares in St Marys reflected, in the presumed opinion of both the Valuer-General and the Valuer-General's expert valuer, albeit with appropriate adjustments, the price attributable to the Land. In addition, it could likely be inferred that the contracts or agreements for sale in the shares in ComLand made in 2004 between the Commonwealth, as vendor, and Lend Lease, as purchaser, stipulated the part of the total consideration of the $165,000,000 that was attributable to the shares in St Marys. The Valuer-General's expert valuer considered that he would be able to apportion or separate the value of the Land from other parcels of the ADI site currently held by Lend Lease because, at least for accounting or stamp duty purposes, the parties were likely to have stipulated the total price paid which was attributable to the half share of the capital of St Marys. consideration 37In respect of the sale agreement sought in paragraph 2 of the subpoenas and notice to produce, this document ought to, in my view, be produced. Ascertainment of the terms and amount of the sale of the Land, even if it comprised additional parcels of land, will clearly materially assist the determination of the value of the Land. While adjustments will have to be made to account for the earlier sale date, the additional parcels of land and whatever planning changes have been effected to the Land between 1999 and 2006, these adjustments are routine and are capable of being undertaken by a valuer. They are, in any event, matters that go to weight. Moreover, given that only one document is being sought, production could in no way be described as oppressive. 38In respect of the documents sought in paragraph 3, I accept the general proposition put forward by the Valuer-General that take-overs of shares in a company which owns land may provide evidence of the company's landholding (as authority, the Court was referred to Collex Pty Ltd v Roads and Traffic Authority [2006] NSWLEC 579; (2006) 149 LGERA 234 at [99] and [113], affirmed by the Court of Appeal in Roads and Traffic Authority v Collex Pty Ltd [2009] NSWCA 101; (2009) 165 LGERA 419 and Yates v Darling Harbour Authority (1990) 70 LGRA 187 at 213). 39While I accept the evidence contained in Mr Row's affidavit in respect of the theoretical utility of obtaining the agreements and transfers for the sale of shares in St Marys when share interests were transferred from ComLand to Lend Lease in 2004, the documents sought in paragraph 3 reach well beyond this transaction both in terms of scope and time. 40Furthermore, while the Land is a significant asset of St Marys, as the 2007 land tax assessment notice demonstrates, it is not the only land asset the company holds, there being 69 other parcels of land within its portfolio. 41In my opinion, to permit the Valuer-General to have access to all share sale agreements and land transfers in the period specified would not (unlike the 1999 sale), particularly given the innumerable adjustments that would be required to be made in these circumstances to extrapolate a value to the Land consequent upon each sale and transfer of shares in St Marys, materially assist in determining the value of the Land as at the base date. 42This view is all the more acute when consideration is given to the fact that, for example, the 2004 sale included, according to Senator Minchin's media release, one site in Melbourne. 43While the Valuer-General is correct in his submission that the question of the reasonableness of any adjustments to be made in ascertaining the value of the Land from the sale and transfer agreements is a matter generally reserved for the trial judge, in my view the information hoped or presumed to be obtained from the material sought is sufficiently conjectural and remote that St Marys ought not be compelled to produce it. That is to say, claims by the Valuer-General that these documents may, or even were "likely" to ascribe an apportioned value to the Land are, without more, speculative. 44Accordingly, I find that the material sought in paragraph 3 of the subpoenas and notice to produce would not be likely to materially assist on an identified issue in the proceedings and as such, this paragraph must be set aside. 45In respect of the documents sought in paragraph 4, it follows from the reasoning expressed immediately above that I am of the opinion that the information that may be gleaned from the share register is even more remote and would be even less likely to materially assist in the valuation of the Land as at the base date. The subpoenas and notice to produce ought therefore also be set aside in this regard. 46Having come to this conclusion it is unnecessary for me to determine whether the seeking of these documents was, absent having received the second McKinnon Report, premature. Had I been required to do so, however, I would have been extremely reticent to accept this argument given the content of the first McKinnon report and the immediacy of the hearing to the finalisation of the second McKinnon report. costs 47St Marys sought its costs of the application, on a solicitor-client basis, because: (a) it had largely been successful; (b) the issuing of the subpoenas and notice to produce was premature; (c) the processes amounting to a fishing expedition by the Valuer-General; (d) the breadth and scope of the paragraphs of the subpoenas and notice to produce made them oppressive; and (e) the Valuer-General had, by reason of its tardy disclosure of the forensic purpose for which it sought the documents had acted unreasonably and unfairly in its conduct. 48The Valuer-General submitted that these proceedings, being an appeal under s 37 of the Act in Class 3 of the Court's jurisdiction, meant that the Court could not make an order for the payment of costs unless it considered that the making of the order as to the whole or any part of costs was fair and reasonable in the circumstances (r 3.7(1) and (2) of the Land and Environment Court Rules 2007 ("the Rules")). The Valuer-General further submitted that none of the considerations described in r 3.7(3) of the Rules applied to his conduct and nor had he engaged in any other conduct that would permit the Court to be satisfied that it was fair and reasonable in all the circumstances that he be required to pay the whole or any part of St Marys' costs. 49In response, St Marys submitted, first, that r 3.7 did not lay down a presumptive rule that fettered the broad discretion the Court had with respect to costs, and second, that the character of the litigation was a relevant factor the Court ought have regard to in determining any application for costs under this rule and the present application had the character of ordinary litigation where typically costs follow the event. 50Shortly after the hearing was adjourned to facilitate the preparation of the delivery of an ex tempore judgment St Marys sought leave of the Court to make further submissions on the issue of costs. The application was not initially opposed by the Valuer-General, provided that he had a reasonable opportunity to respond to the submissions. The Court granted leave. Regrettably, but through no fault of the Valuer-General, this necessitated the matter returning to the Court for further oral argument due to the unavailability of the Valuer-General's counsel. 51Upon resumption the next day, the Valuer-General sought to oppose the leave already granted by the Court. No real reason was provided to the Court warranting its vacation of its earlier order. Suffice it to say it was not vacated. That more of the parties' and Court's time and resources have been devoted to the issue of costs than to the substantive application is, to say the least, highly regrettable. 52Counsel for St Marys took the Court to a number of authorities dealing with costs in Classes 1, 2 and 3 of the Court's jurisdiction in which the Court had demonstrated a willingness to order costs notwithstanding the terms of r 3.7 (or its predecessor, Pt 16 r 4 of the Land and Environment Court Rules 1996). 53That the Court can order costs in respect of applications to set aside subpoenas in Class 3 of its jurisdiction attracting r 3.7 is an unremarkable proposition and one with which I do not cavil. But this does not mean, as was in effect suggested by St Marys, that whenever the Valuer-General seeks to obtain materially relevant evidence by way of compulsion, costs should follow the event because the litigation transmogrifies into so-called ordinary litigation. To do so would subvert the plain and unambiguous text of r 3.7. 54I do not accept the interpretation given to the operation of r 3.7 by St Marys. As identified by Biscoe J in Agonic Holdings Pty Ltd v Lithgow City Council [2009] NSWLEC 34 and Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103; (2008) 158 LGERA 224, the rule may properly be characterised as a presumptive rule to the effect that ordinarily costs will lie where they fall (see also Port Stephens Council v Sansom [2007] NSWCA 299; (2007) 156 LGERA 125 at [50] where similar language was employed by Spigelman CJ). This is not to say that the Court does not retain a broad discretion to determine that an award of costs is appropriate if the circumstances are fair and reasonable. Once the Court's jurisdiction to award costs is enlivened, it clearly does. 55The presumption may be displaced. Some of the factors that might rebut the presumption are set out in r 3.7(3). These are neither prescriptive nor exhaustive. I accept that, for example, the character of the litigation and the conduct of the proceedings by the parties are factors to which the Court may have regard in assessing whether, as a matter of fairness and reasonableness, the presumptive rule ought to be displaced. For the Court to have regard to these factors, including the character of the litigation, be it akin to ordinary litigation or to a merits appeal, is not, as the Court of Appeal in Sansom (at [53]) and Thaina Town (On Goulburn) Pty Ltd v City of Sydney Council [2007] NSWCA 300; (2007) 71 NSWLR 230 (at [68]) cautioned against, to adopt a principle or guideline which of itself is entitled to presumptive or determinative weight. This approach would lead to error. 56In any event, care must also be exercised in identifying the character of the litigation in overly general terms. As was noted in Thaina Town (at [75]), "the very breadth of matters encompassed by so general and wide-ranging a concept leads almost inevitably to a fetter on the discretion because relevant differences in the kinds of matters so classified are not taken into account." 57In Agonic , Biscoe J discussed the effect of the promulgation of the current Rules and, in particular, the enactment of r 3.7 and its operation in these terms (at [4] and [5]): 4 The Land and Environment Court Rules 2007 commenced in January 2008 and replaced the Land and Environment Court Rules 1979. Rule 3.7(2) of the new rules replaced Pt 16 r 4(2) of the old rules which provided that: "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". The essential difference between those two provisions is the absence of the words "in the circumstances of the particular case" in the new rule. In relation to the old provision, Bryson JA in Hunter Development Brokerage Pty Ltd v Cessnock City Council (No 2) [2006] NSWCA 292, (2006) 151 LGERA 46 at [4] said that those words excluded "generalised approaches". By reason of the omission of those words in the new rule, it may be that generalised approaches are permissible, although a specific generalised approach may be insufficient to enliven the discretion or may be displaced by the circumstances of the particular case. The non-exhaustive list of circumstances in rule 3.7(3) directs attention to the circumstances of the particular case. The list is similar to the indicative guidelines formulated under the old rule in Grant v Kiama Municipal Council [2006] NSWLEC 70 at [15] by Preston J and approved by the Court of Appeal in Port Stephens Council v Sansom [2007] NSWCA 299 (2007), 156 LGERA 125 at [56]. 5 The effect of the costs rule is that, in the ordinary case, costs will lie where they fall. This presumptive rule is not displaced unless the Court considers that the making of a costs order is fair and reasonable in the circumstances. The rationale of the presumptive rule was addressed in Arden Anglican School v Hornsby Shire Council [2008] NSWLEC 103, (2008) 158 LGERA 224 at [9] - [10] by me as follows: [9] In the context of the presumptive rule that there will be no order as to costs in planning appeals, the power to make a costs order is in the broadest of terms, that is, what is "fair and reasonable in the circumstances". All rational considerations are relevant to the formulation of that judgment. In the end, the question is whether, in the opinion of the Court, they are of sufficient weight to overcome the presumptive rule. Indicative guidelines for the exercise of the discretion are useful in promoting consistent decisions, but are not entitled to presumptive, let alone determinative, weight. These principles were identified in the context of the former Part 16 r 4 by the Court of Appeal in Port Stephens Council v Sansom at [48], [53] and [54] and Thaina Town (On Goulburn) Pty Ltd v Sydney City Council (2007) 156 LGERA 150 at [33] and [35]. Those judgments were delivered on the same day by an identically constituted Bench of five judges. Spigelman CJ delivered the leading judgment in each case. The presence of the words `in the particular circumstances of the case' in the old rule influenced his Honour to hold that a general characterisation of proceedings such as `merits review' or `capacity', cannot be determinative or, indeed, entitled to presumptive weight: Sansom at [60]. In the present case, there was no suggestion that the absence of these words from the new rule bears on the outcome. [10] One of the purposes of the costs follow the event rule in ordinary civil litigation is to encourage the parties to settle their disputes: Sansom at [26]; Thaina at [65]. In contrast, a no discouragement principle underlies the no costs rule in planning appeals, that is, that persons generally should not be discouraged from exercising their rights of appeal via the prospect of an adverse costs order: Sansom at [22]-[23]. This may be rationalised on the bases that a significant purpose of planning appeals is to improve the decision-making process and that those involved are not adversaries in the same sense as adversaries in conventional civil litigation. ... 58I adopt his Honour's remarks. It may equally be observed that a no discouragement principle underlies the presumptive no costs rule in valuation appeals. That is to say, a person should not be discouraged from exercising his or her right of appeal by reason of fear of an adverse costs order where that person believes that the valuation is incorrect. This includes any exercise of a person's right by interlocutory application, including obtaining documents by compulsion. Having said this, the Court must not give disproportionate or determinative weight to the no discouragement principle. To do so would lead to error. 59Ultimately, each of the cases St Marys referred the Court to in support of its application for costs ( Commonwealth of Australia v Randwick City Council [2000] NSWLEC 171; (2000) 109 LGERA 297, Jacobson & McMillian v Ballina Shire Council [2006] NSWLEC 375, Palace Group of Hotels trading as Beach Palace Hotel v Randwick City Council [2007] NSWLEC 406, Hodgson v The Minister Administering the Water Management Act 2000 [2007] NSWLEC 193 and Taylor v Port Macquarie [2009] NSWLEC 1233) was, in my view, distinguishable and provided marginal assistance. 60In the decision of Taylor v Port Macquarie costs were awarded pursuant to a successful application to set aside a subpoena (at [28]). However, that decision concerned an application for compensation under the Land Acquisition (Just Terms Compensation) Act . Proceedings under that Act do not engage r 3.7(1) of the Rules. Rather, costs follow the event. 61In Commonwealth of Australia v Randwick City Council , while an order for costs was made against the Commonwealth pursuant to the dismissal of notices of motion in Class 1 proceedings seeking to set aside various subpoenas, there was no discussion whatsoever illuminating the basis of the order. 62In Palace Group of Hotels , the subpoenas, issued as they were in the context of a de novo merits appeal in Class 1 of the Court's jurisdiction, wholly lacked any legitimate forensic purpose. That is not the case here. Moreover, in that case there was no opposition by the recipient of the costs order to the order being made. 63In Jacobson & McMillan the challenge was not to the subpoena itself, but to access to documents produced on subpoena. Furthermore, the party seeking access was wholly successful. No discussion of either Sansom or Thaina Town was contained in the judgment because these decisions had not yet been published. 64In my view, it cannot be said that St Marys was wholly successful. The fact remains that it did not set aside paragraph 1 or 2 of the subpoenas or notice to produce. 65St Marys argued that but for the compromise in respect of paragraph 1 it would have been successful in setting aside that paragraph of the subpoenas and notice to produce, a fact reflected by the Valuer-General agreeing to amend the wording of the paragraph to reduce the scope of the documents sought. 66I do not agree. Without descending into the merits of whether or not paragraph 1 would have been set aside (which I would not have been inclined to do because the documents sought were clearly relevant to an issue that will almost certainly be the subject of the second McKinnon report, namely building costs, and could not be oppressive given that they were already in Mr McKinnon's possession), the parties reached a sensible compromise for which neither party ought to be penalised. It could equally be argued that St Marys' change in position, coming as it did after considerable argument, was indicative of a realisation by it that it may not be successful in setting aside this paragraph. This highlights the vice in a court speculating why a party has chosen to resolve a dispute or an issue in a dispute. 67It also cannot be said, in my opinion, that the subpoenas and notice to produce did not on their face disclose a legitimate forensic purpose having regard to the nature of the appeal. Nor can they legitimately be described in their totality as a fishing expedition as that term is properly understood (this is to be contrasted with Palace Group of Hotels at [6] and [7]). 68Furthermore, in my view, when regard is had to the correspondence passing between the parties attached to the affidavit of Mr Cregan and when consideration is given to the evidence contained in the affidavit of Mr Row, in my view, a sufficient explanation was given by the Valuer-General to St Marys and Lend Lease as to the forensic purpose for which the documents were sought. That is to say, an explanation enabling St Marys and Lend Lease to form an opinion as to whether or not it had any basis for setting aside the subpoenas and notice to produce had been issued to them. 69To the extent that the affidavit of Mr Row was filed and served after the notice of motion (it was served on 24 December 2010, that is, two days after the notice of motion was filed), its close proximity in time to the filing of the notice of motion afforded St Marys and Lend Lease an additional opportunity to consider whether or not it wished to pursue the application to set aside. Having read the affidavit they, as they were rightfully entitled to do, elected to pursue this course. But it is not correct to claim, as St Marys and Lend Lease do, that it was wholly uninformed, prior to today, as to the forensic purpose in issuing the subpoenas and notice to produce. 70While undeniably the purpose of seeking production has been elaborated upon in greater detail during the course of today's hearing, it is not the case that no or insufficient explanation was given by the Valuer-General prior to today's hearing as to why he sought the documents referred to in the schedule set out above. 71Finally and to the extent that I need to decide this issue for the purpose of costs, in my opinion, the subpoenas and notice to produce were not issued prematurely. In this regard I repeat my observations above. 72This, together with the fact that both parties have been in part successful in respect of the application to set aside all but compels the Court to conclude, as I do, that to order costs in these circumstances would be neither fair nor reasonable and, therefore, the Court cannot make an order for the payment of costs on behalf of either party. 73There is nothing in Jacobson that mandates any different result in respect of Lend Lease as a third party, which by reason of their ultimate ownership of St Marys, is not, in my view, completely disinterested. 74Finally, although the costs order was sought by St Marys on a solicitor-client basis, no legitimate justification was given for the making of such an order. Departures from costs orders, which are generally made on a part-party basis, are not lightly entertained by a court. The corollary of this is that they should not be lightly sought by a party. Orders 75Consistent with the reasoning above, the order of the Court is as follows: (1) paragraphs 3 and 4 of the subpoenas and notice to produce are set aside. ********** 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. Decision last updated: 25 March 2011