Land and Environment Court New South Wales Medium Neutral Citation: Croghan v Blacktown City Council (No 2) [2019] NSWLEC 9 Hearing dates: 23 January 2019 Date of orders: 07 February 2019 Decision date: 07 February 2019 Jurisdiction: Class 3 Before: Molesworth AJ Decision: See orders at [66] Catchwords: COMPULSORY ACQUISITION OF LAND - quantum of market value based on Court's determination in substantive judgment - inadvertent error in Respondent's submissions - agreement between parties on quantum COSTS - compulsory acquisition of land - principles on costs in class 3 compulsory acquisition proceedings - respondent made offer of compromise per r 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR) more than four months prior to hearing - offer not accepted - respondent presses for order that it pay the applicant's costs to the date of offer and thereafter that the applicant pay the respondent's costs on an indemnity basis - whether UCPR r 42.15 applicable - whether the Court ought to "order otherwise" - not appropriate to order otherwise - offer of compromise substantially more than Valuer‑General's determination, amount pressed by respondent, and the Court's determination on quantum - costs in accordance with UCPR r 42.15(2) Legislation Cited: Civil Procedure Act 2005, s 98 Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979, s 19 Uniform Civil Procedure Rules 2005, rr 20.26, 42.15 Cases Cited: Brock v Roads and Maritime Services (2012) 191 LGERA 267; [2012] NSWCA 404 Croghan v Blacktown City Council [2019] NSWLEC 2 Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2012] NSWLEC 266 Halley v Minister Administering the Environmental Planning and Assessment Act 1979 (No 3) [2011] NSWLEC 94 Reysson Pty Ltd v Roads and Maritime Services (No 4) [2016] NSWLEC 159 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 Tempe Recreation Reserve Trust v Sydney Water Corporation (2014) 88 NSWLR 449; [2014] NSWCA 437 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2010] NSWLEC 27 Willis v Roads and Maritime Services [2015] NSWLEC 165 Category: Costs Parties: Alan Croghan (Applicant) Blacktown City Council (Respondent) Representation: Counsel: Mr M Hall SC (Applicant) Mr N Eastman (Respondent) Solicitors: Project Lawyers (Applicant) Matthews Folbigg Lawyers (Respondent) File Number(s): 2016/357169 Publication restriction: No TABLE OF CONTENTS Introduction Quantum Costs Respondent Council's submissions as to costs Applicable principles on costs in Class 3 compulsory acquisition proceedings Applicant's submissions as to costs Decision on the question of costs Orders JUDGMENT Introduction 1. In the judgment in Croghan v Blacktown Council [2019] NSWLEC 2 (Judgment), at [165], the Court provided the parties with an opportunity to provide, by 16 January 2019, in writing, their respective positions on the quantum of compensation for final orders and costs. As was apparent from Order 1 at [163] of the Judgment, a critical reason why this provision was made was due to "the discrepancy in the Respondent Council's position". The expectation of the Court was that final orders could be 'made on the papers' in chambers. 2. It became apparent, from correspondence to the Court from the parties' solicitors, that: 1. the time provided by the Court was inadequate, given the absence of counsel on leave; 2. the parties wished to be heard on their submissions; and 3. critically, there were competing contentions on the final issues. A further hearing was required, which took place on 23 January 2019. 1. At the further hearing, the Respondent Council presented submissions on both its preferred final orders on the quantum of compensation and on the question of costs. Further, the Respondent Council was given leave to file, and to rely upon, an Affidavit of Ms Simone Gaye Brew, sworn 22 January 2019, which addressed matters relevant to the issue of costs. 2. The Applicant, although addressing the Court orally, was not in a position to provide full answering submissions on either issue, nor was he in a position to respond in a considered fashion to the matters raised in Ms Brew's affidavit. Accordingly, the Court agreed that the Applicant could file final submissions and any answering affidavit, should he consider it necessary to do so, by the afternoon of 25 January 2019. Submissions, on both quantum of compensation and costs, were subsequently filed by the Applicant in compliance with the Court's orders. Quantum 1. In paragraph [29] of the Respondent Council's closing submissions to the primary hearing (dated 20 February 2018) (RCS) the Respondent Council set out the summary of competing positions being: Head of compensation VG's determination Applicants' position in Points of Claim Respondent's position in Points of Defence Market value (s 55(a)) $4,446,54.00 $5,975,000.00 $3,915,000.00 Decrease in value of other land by reason of the acquisition/public purpose (s 55(c) or 55(f)) $343,300.00 $5,150,000.00 Nil Disturbance (s 55(d)): $11,000.00 $32,314.98.00 $32,314 98.00 Total monetary compensation payable $4,802,000.00 $11,157,314.98.00 $3,947,314.98 1. Detailed submissions were made in the RCS, particularly at [121] and [122], that the area of flood-liable land determined by the Respondent Council's expert hydrologist, Dr Martens, ought be adopted and that, based on certain concessions made during oral evidence and in submissions, the rate to apply to that land was not the $250 per square metre initially contended for by Mr Lunney, but instead $270 per square metre. Detailed calculations were provided, which led to a market value of $4,195,000.00 (expressly set out at RCS [122]). The Court identified that the figure at RCS [140] was inconsistent with the Respondent Council's preceding submissions (a number appearing in a summary that came from calculations based on the Applicant's, rather than the Respondent Council's expert). It is the final figure at RCS [122] that was correct. The figure at [140] is accepted by the Court as being an error, having regard to the Respondent Council's submissions. 2. In the Judgment, at [136], the Court identified the error at RCS [140] as being the incorrect amount of compensation based on the evidence of the Applicant's expert, Mr Bewsher, and not on that of Dr Martens' calculations. It was clear to the Court that the final figure sought in the RCS did not reflect the position contended for by the Respondent Council. 3. The final recalculated figure the Court adopted was set out at Judgment [135]. 4. This is also a figure that was provided to the Court by the Respondent Council at RCS [121] and [122]. It is therefore accepted by the Court that RCS [140] was simply an incorrect carry-over of the Bewsher numbers (which appear in the second table in [133] of the Judgment), and was inconsistent with the Respondent Council's own approach at RCS [122] and was an incorrect summary as it appeared at RCS [140]. 5. Consequently, the total compensation ought to be the number at Judgment [135] and RCS [122] for market value (being $4,195,000.00) plus the amount the Court determined for disturbance (being $32,314.98 at Judgment [161]). 6. The total of those two numbers is $4,227,314.98. 7. In his submissions filed 25 January 2019, the Applicant accepted the proposition advanced by counsel for the Respondent Council, that the figure included in [140] of the RCS was a slip, and that the Respondent Council intended to contend for an amount of $4,195,000.00 for market value, and $4,227,314.98 for total compensation. The Applicant accepted that the Respondent Council is not estopped, or otherwise prevented, from correcting that slip. 8. The Applicant therefore submitted that on the findings made by the Court in the Judgment, the Court would order compensation for market value of $4,195,000.00. 9. With both parties being in agreement that the Respondent Council's RCS at [140] was simply inadvertently erroneous, and that an order awarding compensation for market value of $4,195,000.00 would be consistent with the Court's reasoning and conclusions, the Court will, accordingly, make that order. Costs 1. In the Judgment at [165], the Court did not expressly give the parties an opportunity to lead evidence on the question of costs. However, the Respondent Council, at the further hearing, filed the Affidavit of Ms Brew, referred to earlier at [3], annexing an offer of compromise which had been made by the Respondent Council to the Applicant. 2. The Applicant did not avail himself of an opportunity to file an answering affidavit, instead simply addressing the matters raised by Ms Brew in submissions. Respondent Council's submissions as to costs 1. As noted at [9] above, annexed to the Affidavit of Ms Brew, an Offer of Compromise dated 27 September 2017, made pursuant to r 20.26 of the Uniform Civil Procedure Rules 2005 (UCPR), offering to resolve the proceedings by the Respondent Council paying to the Applicant $5,246,204.98, plus legal costs as agreed or assessed. The offer was open, in accordance with the rule, for 28 days. 2. The Court has now determined the final figure on compensation for market value in accordance with the figure set out at Judgment [135] (being $4,195,000.00), plus the amount the Court determined for disturbance (being $32,314.98 at Judgment [161]). The total of those two numbers is $4,227,314.98. 3. As is set out in the Judgment at [4], the Valuer-General's determination of compensation ($4,802,000.00) was significantly higher than the Court's ultimate determination by the amount of $574,685.02. The Ofer of Compromise was $1,018,890.00 higher than the ultimate amount obtained in the Judgment. Applicable principles on costs in Class 3 compulsory acquisition proceedings 1. The costs regime in Class 3 compulsory acquisition proceedings (the Court's jurisdiction in such matters arises from s 19 of the Land and Environment Court Act 1979) is conferred by s 98 of the Civil Procedure Act 2005 (Civil Procedure Act). 2. Certain rules in the UCPR do not apply to Class 3 proceedings (for example, r 42.1, which provides that costs follow the event). Schedule 1 of the UCPR makes provision for the application of rules in, inter alia, different classes of the Land and Environment Court. Excluded from application in Class 3 are "Rules 42.1, 42.6, 42.8, 42.9, 42.18, 42.19 and 42.20". 3. Judicial consideration has been given to the determination of costs in Class 3 matters in the context of the specific exclusions applicable to this Court. A summary appears in the judgment of Preston CJ in Reysson Pty Ltd v Roads and Maritime Services (No 4) [2016] NSWLEC 159 (Reysson) at [119]-[123] (noting, in particular, the extract from the decision of the Court of Appeal in Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 (Dillon). Costs 119. In his judgment and orders, Craig J reserved the question of costs. Reysson sought, by the notice of motion, an order that the RMS pay its costs of the proceedings. 120. Reysson noted that the power to award costs in proceedings in Class 3 of the Court's jurisdiction under the Compensation Act is under s 98 of the CP Act. That section provides that "costs are in the discretion of the court" s 98(1 )(a) of the CP Act. The local rule dealing with costs of certain types of proceedings, r 3.7 of the Land and Environment Court Rules 2007, does not apply to proceedings under the Compensation Act UCPR r 42.1 which provides that "the court is to order that costs follow the event unless it appears to the court that some other order should be made", also does not apply as it is an excluded provision in respect of proceedings in Class 1, 2 and 3 of the Court's jurisdiction see r 1.5(2) and Sch 1 Accordingly, the discretion under s 98 of the CP Act to order costs remains unfettered. 121. In Dillon v Gosford City Council (2011) 184 LGERA 179, [2011] NSWCA 328 at [70]-[72], the Court of Appeal held: In other respects, however, the appellants' propositions may be accepted. They support the proposition that a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense. That approach is also consistent with the absence of any general presumption that costs should follow the event the owner who has been compulsorily dispossessed is entitled to take reasonable steps to seek the judgment of the Court in respect of the adequacy of any compensation offered. Whether steps taken in maintaining proceedings are reasonable will depend upon the circumstances of the particular case These may include a comparison between the positions adopted by the parties at the commencement of proceedings and the final outcome. To the extent that a claimant obtains less than the valuation provided by the Valuer-General, the claimant has been unsuccessful in the litigation. That will be a factor to be taken into account, but the weight given to that factor may depend upon the extent of the failure. The Court may also take into account the time and expense incurred in relation to specific items. Beyond such general statements, it is unhelpful to go, lest the very generality of the discretion be thought to be fettered in some way. In short, the purpose of an award of costs must be taken into account, namely to compensate the party for expenditure incurred in the course of litigation; the nature of the litigation and the reasonableness of the conduct of the litigation are central considerations. 122. Reysson submitted that an award of costs in its favour is appropriate as Craig J awarded compensation in an amount ($6,212,369) greater than the amount contended for by RMS in the proceedings ($5,491,468.68): see judgment at [14]. 123. RMS did not dispute that it was appropriate for the Court to order RMS to pay Reysson's costs of the proceedings in the circumstances. [emphasis added] 1. Critically, not listed as excluded from an application in Class 3 proceedings is Div 3 of Pt 42 (rr 42.13 to 42.17) of the UCPR. That is, those provisions do expressly apply. Here, r 42.15 applies and that provides as follows: 42.15 Where offer not accepted and judgment no more favourable to plaintiff (cf SCR Part 52A, rule 22; DCR Part 39A, rule 25; LCR Part 31 A, rule 20) (1) This rule applies if the offer is made by the defendant, but not accepted by the plaintiff, and the plaintiff obtains an order or judgment on the claim no more favourable to the plaintiff than the terms of the offer. (2) Unless the court orders otherwise: (a) the plaintiff is entitled to an order against the defendant for the plaintiffs costs in respect of the claim, to be assessed on the ordinary basis, up to the time from which the defendant becomes entitled to costs under paragraph (b), and (b) the defendant is entitled to an order against the plaintiff for the defendant's costs in respect of the claim, assessed on an indemnity basis: (i) if the offer was made before the first day of the trial, as from the beginning of the day following the day on which the offer was made, and (ii) if the offer was made on or after the first day of the trial, as from 11 am on the day following the day on which the offer was made. 1. The Court of Appeal (per Emmett JA at [92] to [104]), in Tempe Recreation Reserve Trust v Sydney Water Corporation [2014] NSWCA 437; (2014) 88 NSWLR 449 (Tempe), considered this specific provision of the UCPR. 2. At [93]-[94], Emmett JA said: 93. Not all of the Uniform Civil Procedure Rules apply in the exercise of Class 3 jurisdiction by the Land and Environment Court. In particular, the "costs follow the event" starting point in r 42.1 does not apply. However, as the primary judge observed, the rules in Division 3 of Part 42, which relate to offers of compromise, are made applicable to proceedings for compensation: see r 1.5 and Schedule 1 of the rules. 94. Under the regime prescribed by r 42.15, a defendant who makes an offer of compromise which is more favourable than a judgment later obtained by the plaintiff is prima facie entitled to a special costs regime: costs in favour of the plaintiff until and including the day the offer was made, and indemnity costs in favour of the defendant from the day after the offer was made. 1. His Honour then went on to deal with how the trial judge had applied the provision (or not applied it as was the case) and disagreed (at [98]) with the approach of the trial judge. His Honour considered, at [103], that the rule applied and that in that case, noting differences between ordinary proceedings and acquisition proceedings, concluded that the parties ought to bear their own costs (at [104]). 2. The Respondent Council contended that the outcome in this case ought be, as expressed directly in r 42.15(2), as follows: 1. in accordance with r 42.15(2)(a), that the Respondent Council pay the Applicant's costs assessed on the ordinary basis from the time the proceedings were commenced until 27 September 2017; 2. in accordance with r 42.15(2)(b), that the Applicant pay the Respondent Council's costs on an indemnity basis from 28 September 2017. 1. There were three primary bases upon which the Respondent Council relied to justify the making of those orders. 2. First, the direct application of r 42.15 to the proceedings. Parliament has seen fit to confer upon the Court the jurisdiction to deal with acquisition compensation matters in its Class 3 jurisdiction where s 98 of the Civil Procedure Act applies, but some aspects of the other costs rules do not, including the provision that costs do not follow the event per r 42.1 of the UCPR. Unlike some other excluded classes (namely, Classes 1 and 2), r 3.7 of the Land and Environment Court Rules 2007 (the 'fair and reasonable' provisions that apply in Class 1 costs cases) are also not applicable. 3. However, Parliament has expressly decided that the rules in relation to Offers of Compromise do apply. There is no exception to Class 3 proceedings. The Court retains a discretion, but that discretion ought be informed by the nature of the proceedings as well as the nature of the rules which Parliament has expressly determined apply and do not apply. Accordingly, in this case, it was submitted by the Respondent that that rule is not only directly applicable but apt. There should be no "otherwise order", as considered by Emmett JA at [103] of Tempe, for the reasons expressed below. 4. The second primary basis upon which the Respondent Council relied to justify its proposed order at [27] above, and so for the Court not to "otherwise order" from an application of r 42.15, is the fact that the figure for compensation arrived at in the Judgment is $574,685.08 less than the Valuer-General's offer and also significantly less than the amount set out in the Respondent Council's Offer of Compromise (by $1,018,890.00). 5. The third primary basis upon which the Respondent Council relied to justify its proposed order at [27] above, and so for the Court not to "otherwise order" from an application of r 42.15, is the fact that the Applicant relied on the valuation evidence of Mr Phippen, which was described by the Respondent Council to be significantly flawed and unreasonable. Consequently, it was submitted, the Applicant's reliance upon this evidence was unreasonable given its obvious flaws. 6. A summary of these flaws, as contended by the Respondent Council, appeared in the Judgment at [85] and [86]: 85. Counsel for the Respondent Council, noting Makita v Sprowles (2001) 52 NSWLR 705, [2001] NSWCA 305 at [87], Graham Trilby Pty Ltd v Valuer-General [2011] NSWLEC 68 at [22]-[25], Marroun v Roads and Maritime Services [2012] NSWLEC 199 at [195] argued that Mr Phippen's evidence did not set out his reasoning process, which deprived the Court of the opportunity to properly test his evidence (Respondent's closing submissions, [76]-[77]). The Respondent Council criticised Mr Phippen's evidence on a number of other grounds, including (but not limited to) that "he did not properly respond, or respond at all, to the matters raised by Mr Lunney in the joint report", "he did not express the facts, assumptions and basis, in his written material for forming the views that he formed and there were significant omissions in his written material", and that "many things were explained for the first time in the witness box" (Respondent's closing submissions, [81]) 86. The Court has carefully weighed the submissions regarding the reliability of Mr Phippen's evidence, in the context of the approach and methodologies of Mr Lunney. During the course of the hearing, in particular during the course of cross-examination of the valuers, the Court did have a growing concern that Mr Phippen's approach to his evidence lacked much of the reasoning process required for the Court to travel down the same path of analysis to determine whether or not conclusions reached were sustainable There is a very real distinction between a conclusion founded on a confident assertion and a conclusion founded on the rational analysis of propositions regarding available evidence. It is always a regretful position to reach, to observe that an expert has failed to meet the requisite standards. Without drawing the matter out, the Court simply concludes this point by indicating that it found Mr Lunney's approach to be the proper one: his reasoning was clearly apparent and the rationale for each of his conclusions were explained. Where there was a contest between the conclusions reached by the valuers, the Court has decided that Mr Lunney's approach was more persuasive. Unless otherwise indicated later in this judgment with respect to a particular matter, there is force in the criticisms made of Mr Phippen's evidence as listed by counsel for the Respondent Council at [81] of the Respondent's closing submissions. In concluding the current discussion, in the circumstances of this case where Mr Lunney's reasoning and adjustments are transparent and plausible, the "before and after" method is accepted as being the appropriate methodology rather than Mr Phippen's proffered "piecemeal" approach. 1. The above reference to [81] of the Respondent Council's submissions, which the Court accepted, were (footnotes omitted): 81 The respondent has a number of criticisms of Mr Phippen's general approach as follows: a. He did not adhere to the Expert Witness Code of Conduct contained in Schedule 7 to the Uniform Civil Procedure Rules 2005, in particular for two reasons: i. He failed to properly set out his reasoning process (in accordance with Makita as well); ii. His work was not his own product but included the work of others in his firm by his own admission in both oral evidence and his written evidence; b. He did not express the facts assumptions and basis in his written material for forming the views that he formed and there were significant omissions in his written material; c. He did not properly respond, or respond at all, to the matters raised by Mr Lunney in the joint report. For example the analysis in appendices 2 and 3 which set out Mr Lunney's approach to firstly, the quantum for location and secondly, the price appropriate to apply to the flood liable land, gets no meaningful response from Mr Phippen at all; d. The approach the analysing and applying the sales remains opaque. Although specific adjustments are identified, how he reached those conclusions is not transparent (in contradistinction to Mr Lunney's appendices 2 and 2, for example); e. The approach to the before and after method is methodologically incorrect and does not have proper regard to s 56. The engagement of a piecemeal method in this case was simply a device to maximise compensation so that size would not need to be adjusted for; f. The approach he took to the adjustment for size is both logically inconsistent and also inconsistent to the approach he has adopted in another recent matter; g. If it is true that he was able to distinguish the orthodox approach to adjustment for size, he never sought to explain it in his written report; h. Many things were explained for the first time in the witness box (not least, the adjustment for size issue and the reliance on sales evidence to demonstrate its quantum). 1. The Respondent Council submitted that the Court of Appeal authority (which did not consider offers of compromise or r 42.15) that disentitlement to costs for an Applicant may occur in circumstances of an applicant unreasonably conducting the litigation, or pursuing a vexatious, dishonest or grossly exaggerated claim (see, for example, Brock v Roads and Maritime Services [2012] NSWCA 404; (2012) 191 LGERA 267 (Brock)). 2. On the basis of the foregoing analysis, the Respondent Council contended that the approach of Mr Phippen, and therefore the Applicant's evidence, was unreasonable as well as grossly exaggerated. The Respondent Council relied on this unreasonableness as justification to not otherwise depart (and "otherwise order") from an application of r 42.15. Applicant's submissions as to costs 1. The Applicant submitted that the starting position in any consideration of costs in a Class 3 compensation claim is that an applicant who has been dispossessed of an interest in land is entitled to have the value of that interest assessed by the Court and to receive a favourable costs order when that is done. In this respect, the Applicant cited Leeming JA at [103] in Tempe. After pointing out that the "costs follow the event" principle does not apply in this field, Leeming JA continued in the same paragraph: Because the starting point is different, it is necessary to consider whether a different approach ought to be taken to effectuate the purpose of an offer of compromise. For it would distort the ordinary operation of offers of compromise to permit the acquiring authority to make a low offer of compromise and cause the Applicant to have to run the risk of a large adverse costs order ... 1. Similarly, the Applicant relied upon Biscoe J at [35] in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2010] NSWLEC 27 (Walker Corporation) whereat his Honour warned against dispossessed applicants being deterred from exercising the right to present an arguable case for a higher award by being ordered to pay costs if that case proves unpersuasive. There are many dicta to the same effect in this Court and in the Court of Appeal, many of which are collected in Dillon at [60]-[64]. 2. Mr Michael Hall SC, senior counsel for the Applicant, submitted that he did not know of any case (and noted that the Respondent Council did not identify any case in its submissions) in which the Court did not order "otherwise" (per r 42.15(2) of the UCPR) when an offer of compromise had been made in compensation proceedings. The debate, the Applicant said, in the decided cases has not been over whether to "order otherwise", but as to what the alternative order should be. In Tempe, for example, the court awarded the Applicant its costs up to the date of the offer and made no order as to costs thereafter. The Applicant noted Halley v Minister Administering the Environmental Planning and Assessment Act 1979 (No 3) [2011] NSWLEC 94 (Halley), which, the Applicant said, "appears to be the strongest sanction against an unsuccessful applicant the courts have imposed". However, the Applicant observed that the Court of Appeal, in Dillon, held that Halley had been wrongly decided, and Pepper J, herself (her Honour having been the judge in that case), later described Halley as "incorrect" and "premised on [an] entirely erroneous assumption" in El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2012] NSWLEC 266 at [156]. 3. The Applicant submitted that the situation in this case is very different to that in Tempe. There, the Applicant said, both parties were emanations of the Crown, the land was public land, and the point in dispute was not valuation but statutory construction. The Applicant submitted that the Court would more readily use costs provisions to encourage settlement of litigation of that type, than to force a private landowner to give up his entitlement to access the Court. 4. It was submitted that the case for a favourable costs order in these proceedings, notwithstanding that the final amount of compensation falls short of the Offer of Compromise, is significantly strengthened by the circumstances in which the offer was made and received. 5. The offer was made on 27 September 2017, and was expressed to be open for 28 days. It therefore expired on 25 October 2017, having not been accepted. At that time, the Applicant said, the Respondent Council had served no expert evidence in the proceedings. The Applicant contended that he did not learn that the Respondent Council would rely upon Mr Lunney's analysis and conclusions at the hearing until the filing of the Valuers' Joint Report on 7 February 2018, four months after the offer had closed. It was said that that it cannot be unreasonable for the Applicant to have preferred the reasoned opinion of his own expert over an unsupported offer of compromise. 6. The Applicant argued that there was also, at the time of the Offer of Compromise, considerable uncertainty over other critical factors that fed into the ultimate assessment of market value. The Applicant's lawyers, he said, had been pressing the Respondent Council and Roads and Maritime Services (RMS) to take a position on the likelihood of access being permitted to Windsor Road. Despite a series of letters and reminders, which were annexed to the Affidavit of Mr Anthony Perkins dated 5 February 2018, it was said the Respondent Council, the Applicant said, refused to commit to the sought access (Affidavit of Perkins, Annexure B, Court Book, folio 146) and it was not until 23 November 2017 that "the Department" replied saying they would "give consideration to granting concurrence to a temporary access for Windsor Road" (Court Book, folio 168). Even then, the Applicant contended, RMS added a series of disclaimers to emphasise that it would not be bound by that opinion. Mr Perkins' letter of 7 August 2017 (Court Book, folio 143) describes this issue as one of the main points in dispute. Therefore, it was submitted, at the date the Offer of Compromise was made and expired, the Applicant did not have any comfort that access would be allowed. 7. In the context of the foregoing, it was submitted that the Court's finding that such temporary access would be reasonably achievable was critical to its decision not to award any significant sum for the diminution in value of the residue land caused by the loss of access except via Windsor Road. Therefore, it was said, it could not be reasonable to expect the Applicant to accept an offer which was posited on the availability of such access until there was some reasonable clarification of the likelihood of that access being obtained. It was said that the November 2017 letter from RMS was the earliest indication that access was likely to be available; which was followed eventually by the opinion of a traffic expert relied upon by the Council, which did not come until February 2018 (Court Book, Tab 13). 8. Similarly the Hydrology Joint Report was not prepared until early 2018, after the offer expired. Again, it was submitted, the Applicant did not act unreasonably in relying upon the opinion of a leading hydrology expert in forming his view as to how much of his land would be treated as flood-affected. 9. Further, the Applicant argued that he has not been entirely unsuccessful, having obtained an award which is $280,000 higher that the amount contended for in the Points of Defence and the Respondent Council's opening submissions. 10. It was submitted that, far from acting unreasonably in the course of the proceedings, the Applicant actively sought to limit or reduce the costs of the proceedings by, for example, dispensing with individual expert reports and proceedings straight to joint conferencing where possible (see the note written by the valuers at Court Book, folio 78[4]). 11. It was said that it was only the failure of Mr Phippen, the Applicant's valuer, to persuade the Court to accept his approach and analysis that has caused the Applicant to fall short of the Valuer-General's offer or of the Offer of Compromise. The Applicant submitted that the Court should accept that Mr Phippen is an eminently qualified and experienced expert, and that there was no challenge to his expertise. What the Respondent Council described as "flaws" in his approach, the Applicant said, could not have been apparent to the Applicant until (at least) joint conferencing was complete. A lay party, the Applicant contended, cannot be expected to second guess their own expert and to substitute their own opinion for that of the expert. 12. With respect to the three bases relied upon by the Respondent Council as summarised earlier at [28]-[32], the Applicant's counsel argued that the first is merely an application of r 42.15 of the UCPR, and gives insufficient weight to the special considerations in Class 3 compensation cases. Conceding that the second argument, being the failure to better the Valuer-General's offer, is a factor to be given weight. It was submitted Basten JA made it clear, in Dillon at [72], that this is far from being determinative. It is also relevant here, it was said, that the Respondent Council had filed a statement rejecting the Valuer‑General's position and contended for a lower amount. The third basis was said to be reliance on Mr Phippen but, the Applicant argued, as already set out, by the time of the hearing the Offer of Compromise had long expired and the Applicant had no choice but to rely on Mr Phippen and trust to his expertise and experience. It was submitted that all of the criticisms made by the Respondent Council (and those accepted by the Court) related to matters which emerged in joint conferencing several months later. 13. The Applicant submitted that in a significant number of cases the Court has ordered "otherwise" in compensation cases where an Applicant has fallen short of the Valuer-General's statutory offer, or an offer of compromise, or both, to nonetheless award the applicant his or her costs. Examples cited were Brock and Willis v Roads and Maritime Services [2015] NSWLEC 165 (Willis). It was said that this was the correct order in the current case. 14. The Applicant argued that the danger of the approach advocated for by the Respondent Council is that it requires an applicant, at a relatively early stage in the course of evidence, to give up "once and for all" their entitlement to have compensation assessed by the Court, and to take the respondent's word for it that the evidence when prepared and tested will support the reasonableness of the offer made. That, the Applicant said, is exactly the type of deterrence or disincentive to exercise the rights given by the Land Acquisition (Just Terms Compensation) Act 1991 that courts warned against in Walker Corporation and other cases. It was said that to deny the Applicant his costs (and still more, to accede to the submission that he pay any part of the Respondent Council's costs) necessarily erodes the compensation he will receive and means he has not had just compensation for the compulsory acquisition of his land. Accordingly, it was submitted that the order of the Court should be that the Respondent Council pay the Applicant's costs assessed on the ordinary basis if not agreed. Decision on the question of costs 1. Earlier, at [48], the Court summarised the stress placed by the Applicant's counsel on the fact that his client was a "lay party" who could not have been expected to second guess his expert's advice. The Court observes that the difficulty with this proposition is that, at the time of the Offer of Compromise, the "lay party", the Applicant, was not self-represented and had not been so for over 14 months. It cannot be ignored that, in the course of litigation, especially in Class 3 matters, an applicant is not usually an isolated individual facing the world alone; rather, there is a collective, a team, comprising the party and their advisers, both legal and persons with other expertise, such as in valuation. Is the Court to presume naiveté on the part of a party, presuming their legal and expert team has deserted them at each point of strategic decision-making, with the professional team thereby absolving themselves of any input or responsibility in the course of litigation? Or is the Court to presume, as in this case, that, over a period of at least 20 months, the legal and professional team contributed something worthwhile to the process, at least by way of considered advice? Surely the latter scenario should be the expectation, otherwise what is the point of retaining lawyers and other professional advisers? 2. The Applicant was represented by an experienced firm of solicitors, Project Lawyers, from at least July 2016, some 14 months prior to the receipt of the Offer of Compromise. Further, it is evident that Mr Phippen had also been retained since at least July 2016, probably providing valuation input into the preparation of the Claim for Compensation. These facts are to be gleaned from the s 39 Claim for Compensation dated 22 July 2016 (Tender Bundle, pages 6-10), in which Annexure A sets out in items 7 and 10, respectively, claims for legal and valuation fees from Project Lawyers and Mr Phippen for work completed prior to that date. 3. Further, it is to be noted that the Claim for Compensation dated 22 July 2016, obviously prepared on the advice of both Project Lawyers and the "eminently qualified and experienced expert", as the Applicant's counsel described Mr Phippen, sought all of $11,157,251.88. The Claim for Compensation, of course, was followed by the Valuer-General's Determination of Compensation of $4,802,000.00, dated 13 October 2016. Surely a differential of some $6,355,251.00 should have conveyed some uncertainty to the Applicant and his team? Late in the piece, by the time of the Valuers' Joint Report, just four days prior to the commencement of the primary hearing, on valuation advice from Mr Phippen, the Applicant's claim was revised down to $8,405,752.00. The Court is not impressed by the Applicant's argument that it was not until the February 2018 joint conferencing with Mr Lunney, some 16 months after the Valuer-General's determination, and some four months after the Offer of Compromise had expired, that the Applicant should have been alerted to the prospect that he might not succeed in reaching his original ambitious target. With Mr Phippen having been retained by the Applicant prior to the drafting of the claim, it is to be expected he had an input. 4. Further, the submission, on the Applicant's behalf that it was only from the date of the involvement of Mr Lunney that the Applicant would have been capable of giving careful consideration to the Offer of Compromise, ignores the fact that he had had the Valuer-General's determination for 16 months. Materially, it is to be noted that the preparation of the Valuer-General's Determination of Compensation is assisted by the retention of an independent valuation expert, in this case Mr Stephen Venter of International Valuation & Property Services, who prepared a 42-page valuation report dated 7 October 2016 (Tender Bundle, pages 13-55). This valuation report accompanied the Valuer-General's Determination of Compensation dated 13 October 2016, which was available to the Applicant and his legal and valuation teams for a whole year prior to expiry of the Offer of Compromise. Is the Court to accept that the considered input of Mr Venter added nothing to the process and is to be ignored, accepting that only Mr Lunney's involvement might give reason for the Applicant to question Mr Phippen's approach? That thought is to be rejected. 5. With respect to the Applicant's expressed uncertainty (above at [43]-[44]) regarding access to Windsor Road, asserting that a November 2017 letter was being "the earliest indication that access was likely to be available" [to Windsor Road], the Court rejects this proposition. As Mr Venter set out in his report (Tender Bundle, pages 38-39): In an email to Chris Johansen (Blacktown Council) dated 11 February 2015, Angela Malloch (RMS) stated the following: As discussed last week Roads and Maritime Services has supported numerous applications along Windsor Road to have temporary access to Windsor Road until such time as the local roads are constructed to [provide permanent access to the sites. In relation to your inquiry for 1568 Windsor Road, Vineyard, Roads and Maritime Services would give consideration to granting concurrence to a temporary vehicle access from Windsor Road to access the site until the local roads are constructed. For development applications we have received previously, Roads and Maritime Services has asked Council place a condition that the temporary access from Windsor Road be removed once the future local road connections are available. Some sites along Windsor Road place the temporary road connection over one residential unit block and when the access roads are available the temporary road is removed and a dwelling constructed on the site. As such, it is considered that access to the retained portion of the site is available and would only require an application to Blacktown Council and Roads and Maritime Services. 1. Materially, Mr Venter then concluded: To reflect the impact of the loss of the rear access, and the resultant impact on marketability, we have applied a 5% discount in the adopted rate in the 'after scenario'. (Tender Bundle, page 39). It is to be recalled that this is the same 5% discount the Court adopted in the Judgment (at [152]), accepting the evidence of Mr Lunney. It is also to be recalled that despite the Applicant and his advisers, in particular Mr Phippen, being forewarned of this assessment and the modest 5% diminution in value due to the access issue as early as October 2016, 12 months later, in October 2017, the Offer of Compromise was not accepted, and four months later still, in February 2018, in the course of the primary hearing, Mr Phippen was still maintaining his preference for a tenfold greater 50% discount due to this access issue, but was prepared to come back to a 20% discount due to his understanding of the finding in Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 (see the discussion in the Judgment at [142]). 1. With respect to the Applicant's argument that it was relevant that the joint hydrology report was not available until after the offer of compromise expired, the Court considers the analysis within the Venter report (Tender Bundle, p 29-30), made available at the time of the Valuer-General's Determination in October 2016, regarding the implications of flood-prone land, gave the Applicant fair warning of the significance of that issue, a full year before the offer of compromise expired. 2. Why, the Court rhetorically asks, was the Valuer-General's assessment and the independent assessment of Mr Venter to be apparently disregarded or given little or no weight, whereas the participation of Mr Lunney during the February 2018 joint conferencing, nearly four months after the expiry of the Offer of Compromise, might have given rise to the thought, on the part of the Applicant, that the offer of compromise should have been seriously considered? For the Applicant's counsel to propose that it was unreasonable to think the Offer of Compromise should have been accepted prior to Mr Lunney becoming involved, is without merit. To make the submission, summarised above at [42], that it "cannot be unreasonable for the Applicant to prefer the reasoned opinion of his own expert over an unsupported offer of compromise", is to ignore the fact that the Offer of Compromise was offering all of $444,204.98 more than the well-supported Valuer-General's Determination of Compensation a full year earlier. Again the Court rhetorically asks: have the enticements of litigation in Class 3 matters led to a propensity for well-reasoned independent expert valuation reports supporting Valuer-General's determinations being ignored? I reject that thought. 3. The Court concludes that this is not an instance where the warning of Leeming JA in Tempe is apposite (see earlier at [37]) where there is a danger of the distortion of the ordinary operation of offers of compromise to permit the acquiring authority to make a low offer of compromise thereby causing the Applicant to have to run the risk of a large adverse costs order. Rather, this is an instance where a patently inflated or exaggerated claim had been lodged, subsequently met with a Valuer-General's Determination of Compensation supported by a well-reasoned independent expert valuation assessment, which was bettered a whole year later by an Offer of Compromise offering almost half a million dollars more (if one adds in the offer to cover 14 months' extra legal and professional costs since the July 2016 Claim for Compensation). In short, I find that the Respondent Council's Offer of Compromise in this case could not be characterised as a 'low offer of compromise' of the kind described by Leeming JA. 4. Finally, based on an analysis of case law regarding Class 3 matters, the cases referred to by the Applicant have not convinced the Court that this is an instance where it is appropriate that the Court should "order otherwise", referring back to the discussion earlier at [23], pursuant to r 42.15 of the UCPR. In this case, the Notice of Claim originally sought $11,157,252.00 and was maintained until the joint conferencing just four days before the primary hearing when the claim was reduced on the basis of Mr Phippen's revision of the figure to $8,405,752.00. It is well to be reminded that the Valuer-General's Determination of Compensation was $4,802,000.00, the Offer of Compromise was $5,246,205.00, and the Court's final award was $4,227,314.98. The most relevant focus in the Court's opinion should be on the Offer of Compromise. Here the Applicant has secured an award substantially less than the Offer of Compromise which could not, in the Court's opinion, be considered low. 5. With respect to the Applicant's argument, summarised earlier at [46], that the Court should favourably consider the implications of the Applicant securing an outcome $280,000.00 higher than the Respondent Council's final compensation figure stated in its Points of Defence, being $3,947,314.98, I am of the view that a highly relevant consideration is that the Points of Defence was filed on the afternoon of Friday 9 February 2018, being the last working day before the commencement of the primary hearing on the morning of Monday 12 February 2018. Therefore, effectively until the very last moment before the hearing, the context of the Applicant's strategic thinking regarding his prospects in this case should have been the Valuer-General's determination of $4,802,000.00, albeit formally not accepted by the Respondent Council (pursuant to the requisite statement filed with the Court on 3 February 2017), and an Offer of Compromise of $5,246,205.00, which the Applicant had allowed to lapse four months earlier. At that point in time, with the Valuers' Joint Report having been filed just the day before, on 8 February 2018, the Applicant was maintaining a claim for $8,405,752.00 (having come down from his original claim of $11,157,252.00). However, by that stage, all of 19 months had passed since the Claim for Compensation had been made in July 2016, for what the Court considered to be a highly exaggerated claim. The Applicant had a professional team of lawyers and Mr Phippen, his valuer, advising him from before July 2016 and they, without a doubt, would have advised on the making of that claim. 6. The Court has already dismissed the proposition that the Valuer-General's determination, supported by a well-reasoned independent expert valuation report, and provided to the Applicant and his professional team in October 2016, three months after the Claim for Compensation, should be ignored or given little weight. It was highly material. A whole year then passed before the Offer of Compromise was made, during which time the first directions were given by this Court in February 2017 and then, between 21 April and 17 July 2017, a s 34 conciliation was pursued with no less than five conferences attended by counsel, the Applicant at all times being represented. If it is accepted that the underlying concept of an offer of compromise is to discourage the cost and delays of prolonged litigation, especially litigation pursuing a claim founded on ill-conceived and exaggerated arguments, I am of view that the relevant yardstick to determine the reasonableness of the conduct of the Applicant in pursuing his claim is not the figure appearing in the Points of Defence filed a mere working-day before the primary hearing commenced, rather it is the Offer of Compromise which the Applicant chose to allow to lapse, which was for a figure nearly half a million dollars greater than the Valuer‑General's Determination and more than a million dollars greater than the Court's final determination of compensation payable. 7. Finally, a further point in considering the implications of the figure of $3,947,315.00 in the Points of Defence. It is highly relevant to note that, despite the Points in Defence being filed on the effective eve of the hearing, when the hearing actually proceeded the Respondent Council's final position was for the Court to award the sum that it finally decided should be awarded. In other words, with the sum in the Points of Defence not being pressed at the hearing, it is hardly relevant to give much regard to a figure that was 'live' for little more than a weekend. So, in the context of the proposition put by the Applicant's senior counsel, in [11] of his submissions, that the Applicant was not 'entirely unsuccessful' in the context of the Points of Defence, the Court disagrees, as the relevant comparator is the figure that the Respondent Council actually pressed for during the hearing. 8. With respect to the costs incurred as a consequence of the further hearing on 23 January 2019, together with the associated submissions, the Court considers that the necessity for this hearing largely arose as a consequence of the error in the Respondent Council's RCS and oral submissions (referred to earlier at [6] and [7]). Were it not for that error, the determination of the quantum of market value compensation would have appeared in the Judgment and the parties would have simply been instructed to lodge written submissions on costs, which question would have been determined in chambers on the papers. Accordingly, it would be unjust for the Applicant to have to contribute anything to the costs of the Respondent Council incurred in relation to the 23 January 2019 hearing. Orders 1. The Court orders: 1. The compensation for market value payable by the Respondent Council to the Applicant is assessed at $4,195,000.00. 2. In accordance with UCPR r 42.15(2)(a), the Respondent Council shall pay the Applicant's costs assessed on the ordinary basis from the time the proceedings were commenced until 27 September 2017. 3. Subject to Order 4, in accordance with UCPR r 42.15(2)(b), the Applicant shall pay the Respondent Council's costs on an indemnity basis from 28 September 2017, excluding any costs incurred in relation to the inadvertent listing error on 15 December 2017. 4. With respect to the 23 January 2019 hearing and associated written submissions and attendances, each party shall pay their own costs. 5. Should either party wish to retrieve the exhibits respectively tendered on their behalf in the proceedings, those exhibits may be returned. ******** 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: 08 February 2019