Chief Executive, Department of Transport v Nadco Pty Ltd [1998] QLAC 23 (1997-1998) 18 QLCR 408

IN THE LAND APPEAL COURT No. A96-05 HELD AT BRISBANE In the matter of an appeal to the Land Appeal Court by the Chief Executive, Department of Transport, from the decision of the Land Court in the matter of the determination of compensation payable consequent upon the resumption by the Director-General, Department of Transport, for future road purposes under the provisions of the Acquisition of Land Act 1967 and the Transport Infrastructure Act 1994 of an area of approximately 7843 square metres being Lot 1 on RP 32951, County of Stanley, Parish of Tingalpa. and In the matter of an appeal to the Land Appeal Court by the Chief Executive, Department of Transport from the decision of the Land Court in the matter of an application for costs of, and incidental to, the hearing of the claim for compensation. BETWEEN CHIEF EXECUTIVE, DEPARTMENT OF TRANSPORT AND NADCO PTY LTD Appellant Respondent JUDGMENT Judgment delivered at Brisbane this Twenty-third day of February 1998 There are two appeals before this Court from decisions of the Land Court in this matter. The first, dated 28 April 1997, was a determination of a claim for compensation under Part 4 of the Acquisition of Land Act 1967 arising from the resumption of land owned by the claimant at 20 Brand Street, Hemmant for “future road purposes”. The second decision, dated 18 July 1997, concerned the costs of the compensation hearing. The constructing authority is the appellant in both instances. The land, which is freehold having an area of 7,841 square metres, is described as Lot 1 on Registered Plan 32951, Certificate of Title Volume 4377, Folio 49, in the County of Stanley, [1998] QLAC 23 -- 1 of 10 -- 2 Parish of Tingalpa. It is near a number of factories. The Brisbane-Cleveland railway line runs beside the southern boundary. It was zoned “Residential A”. At the time of the resumption the Brisbane City Council had given its consent to its use as “R1 Density Villa Units”. The claimant purchased the land in May 1991 and had begun construction of twenty residential villa units on it. Sewerage and stormwater drainage works had been carried out, the land had been filled, piling had been completed, six concrete slabs had been poured, and an acoustic barrier fence had been partly built. The claimant had intended to complete the construction of the units and later to sell or let them. It was agreed that, had the work not been brought to a halt, construction would have been completed by the date of resumption. The claimant ceased construction in early October 1993 in response to a request from the constructing authority dated 30 September 1993. Before receiving that request a letter dated 28 September 1993 had been written on behalf of the claimant to the constructing authority offering to sell the land for $1,300,000.00. That offer was not accepted, and on 29 March 1994 the constructing authority wrote to the claimant giving a statement of reasons for the proposed resumption. On 14 April 1994 the claimant agreed to the taking of the land, and the resumption was proclaimed in the Queensland Government Gazette of 13 May 1994. The claimant served a claim for compensation dated 17 May 1994 on the constructing authority in which it sought $1,113,262.50. On 24 June 1994 the constructing authority paid $598,000.00 to the claimant by way of advance against compensation pursuant to s.23 of the Acquisition of Land Act. On 25 January 1996 the claimant referred the determination of the amount of compensation payable in respect of resumption to the Land Court. The total sum then claimed was $1,193,593.63. At the hearing before the learned member, which began on 1 August 1996 and continued on 2 and 5 August 1996 and 26 and 27 September 1996, the constructing authority contended for $483,500.00. On the final day of the hearing the claimant, with the leave of the Court and without opposition from the constructing authority, amended its claim to $892,000.00. Before the member two disturbance items, valuation and legal fees, were agreed between the -- 2 of 10 -- 3 parties at $8,575.00. The member determined that compensation of $718,611.00 should be paid: $710,036.00 as the value of the land, together with the $8,575.00. The constructing authority was ordered to pay interest at the rate of 8.75 per cent. per annum on the $710,036.00 from 13 May 1994 up to and including 24 June 1994, and on the sum of $112,036.00 from 24 June 1994 up to and including the day immediately preceding the day on which payment of compensation was made. There was a further order for interest on the $8,575.00. The member ordered the constructing authority to pay the claimant’s costs of and incidental to the compensation hearing. The member arrived at the figure of $710,036.00 by adopting the same method as that used by the valuers who gave evidence before her. They were unable to find sales of comparable properties and so they assessed the value of the land by estimating the gross returns on the sales of the units and then making appropriate adjustments to that figure. She assessed the gross realization of the twenty proposed units at $2,060,000.00 from which she deducted selling costs of $77,250.00, a figure for “Profit/Risk of Realization 15%” of $258,620.00, development costs remaining of $936,700.00, interest of $27,476.00 for half the development and a selling period of eight months at 8.8 per cent., holding costs of $23,292.00, and acquisition costs of $26,626.00. The first issue raised by the constructing authority on these appeals concerned the member’s determination of the development cost at $936,700.00, which was made up of $927,260.00 as the cost of completing construction and $9,440.00 for title and registration fees. Mr Gibson Q.C., on behalf of the constructing authority, submitted that the member had erred in her conclusion as to the cost of completion of the development. The member had arrived at the $927,260.00 after she had assessed the total construction cost at $1,285,942.00 to which she added $181,318.00 (14.1 per cent. for preliminaries, professional fees, and the builder’s margin), and from which she subtracted $540,000.00 as the cost of the work completed. Mr Gibson argued that the member had erred in two respects in those assessments: first, -- 3 of 10 -- 4 by concluding that the claimant intended a standard finish for the units, as assumed by Mr Stephen Baird, a building estimator called by the claimant, rather than a medium finish as assumed in an estimate prepared by Mr Robert Popplewell, a quantity surveyor called by the constructing authority; and secondly, by failing to include an allowance for contingencies in the estimate of the costs of construction of the development. Mr Baird’s estimate of the cost of construction of the units as adjusted to rectify errors, was $886,238.00 and Mr Popplewell’s corresponding figure $979,265.00. The member adopted Mr Baird’s estimate, as adjusted, because she was satisfied that the difference between the two estimates, $93,027.00, resulted from the different assumptions made as to the finish which was to be used for the units. The member concluded that the finish intended was standard and for that reason preferred Mr Baird’s estimate. To the $886,238.00 she added $399,704.00, derived from Mr Popplewell’s evidence, for the cost of external works and services, thus reaching her figure for total construction cost of $1,285,942.00. Mr Gibson argued that there was no evidence before the member upon which she could have concluded that the units were to have a standard finish rather than a medium finish. He pointed to the evidence of Mr Peter Griep, a director and shareholder of the claimant, that the finish for the units was to be the same as that of another unit development of the claimant called Hemmant Village, which was south of the resumed land across the railway line, and to the evidence of Mr Popplewell that he assessed the finish of Hemmant Village as “medium”. If that had been the only evidence on this subject the claimant’s argument before us would have been a sound one. There was, however, other evidence - in particular that of Mr Douglas Merritt, the managing director of Peter Kurts Properties Limited, who was called by the constructing authority, to the effect that the finish of Hemmant Village was only standard. He was asked in cross-examination for his assessment of the building standard and replied that it was “in the bottom end”. Furthermore, Mr Stephen Austin, registered builder and director of Austin Constructions Pty Ltd, gave evidence that Austin Constructions Pty Ltd entered into a -- 4 of 10 -- 5 cost-plus building contract dated 2 June 1993 with the claimant to construct the twenty units which left to the claimant the right to specify the fittings as the work progressed. That a standard finish was intended for the buildings on the land seems probable when one considers Mr Merritt’s overall assessment of the site. In a letter dated 15 July 1996 to the constructing authority (Exhibit 16) he recorded that, at the request of the constructing authority and in his capacity as an “on-going developer”, he visited the site with a view to forming a “market opinion”, which he gave as follows: “The site is an inferior low grade property adjoining a railway line and existing older homes in the lower end of Hemmant. It has obviously been filled for re- development purposes. The general area is of a lower standard and if the property was offered to our Company we would not be interested in purchasing it raw, or marketing the proposed units on behalf of another developer. There is no value in the site, and in my opinion the proposed development will produce an inferior product. The only market available would be to investors and it would require professional marketers to sell it, at a very high fee. It would probably present difficulties even in this market as the proposed plans do not actually suit a stylish rental market as there is only one bathroom configuration, and the two and three bedroom units are almost of equivalent size. As far as I can ascertain, there will be no amenities available on site, such as swimming pool, barbecue cabana or common area, which further devalues a site that has little appeal and no marketing attraction.” In the light of that assessment, which appears on the evidence to be a reasonable one, it would seem unlikely that the claimant would have intended to spend more in developing the site than was absolutely necessary and so would have been likely to use a standard finish on the buildings. Before the member it was submitted on behalf of the constructing authority that a further sum for contingencies should be added to the estimates of Messrs Baird and Popplewell. Mr Popplewell said he would allow five per cent. on the value on the structural work. Mr Baird said, however, that he saw no reason to allow for contingencies for “what is a straightforward construction”. The member concluded that since she was adopting Mr Baird’s detailed estimate -- 5 of 10 -- 6 of costs, and since the development had reached the stage it had, she would not allow any sum for contingencies. While it may be thought that as a matter of ordinary experience in matters of this kind it is prudent to allow something for contingencies, it must be observed that not all contingencies are adverse. It may also be accepted that there is not an inflexible rule that contingencies must always be provided for. No doubt in many cases of this sort there will be an allowance for adverse contingencies, but the conclusion that no such allowance should be made cannot be rejected out of hand. Making no allowance will be justified if the likelihood of increases in costs is so remote as to justify their being ignored, or if, after the possibilities of adverse and favourable contingencies are weighed up, they are found to cancel each other out. The member’s conclusion was based on the former assessment since she regarded Mr Baird’s detailed estimate as sufficiently certain. She noted that Mr Baird’s evidence was independently verified. We are not persuaded that it has been demonstrated that the member erred in rejecting Mr Popplewell’s evidence and in accepting Mr Baird’s concerning contingencies. The constructing authority therefore fails on that issue. In the second appeal the constructing authority contended that the member had erred in making the order for costs in favour of the claimant. It was asserted that the member should have made no order as to costs, or alternatively should have ordered that the parties bear their own costs. The constructing authority relied chiefly upon the claimant’s eleventh-hour amendment of its claim, the effect of which was, by operation of s.27(2) of the Acquisition of Land Act, to turn the tables on the constructing authority on the matter of costs. Had the claim remained at $1,193,593.63 until the member’s determination of compensation the constructing authority could have applied for an order for costs in his favour and the claimant could not have applied for an order for costs in its favour because the amount of compensation as determined would have been neither the amount finally claimed by the claimant in the proceedings nor would it -- 6 of 10 -- 7 have been nearer to that amount than to the amount of the valuation finally put in evidence by the constructing authority. The member, in giving her reasons for her decision on costs, referred to two matters that she said may be relevant to the exercise of the Land Court’s discretion in appropriate cases: first, that a successful claimant is entitled to recover the costs of obtaining compensation in the absence of any special circumstances, and secondly that the Court “can inquire whether the conduct of the parties has been such as to force unreasonable and unnecessary litigation”. Mr Gibson did not challenge the second proposition, authority for which may be found in Moyses v. The Townsville City Council (1979) 6 Q.L.C.R. 271 at p.274. He did, however, challenge the first proposition. But authority for it may be found in the often-cited decision in Minister for the Environment v. Florence (1980-81) 45 L.G.R.A. 127 to which the learned member referred. That case was a disputed claim referred to the Supreme Court of South Australia for the assessment of compensation under the Land Acquisition Act 1969 (S.A.). Wells J. made these general observations concerning costs: “Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s.18 of the Act, a claim to compensation which he could hardly be expected to renounce. Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who had already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won. But costs are, as always, discretionary, and no hard and fast rule will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sort of cases.” (pp.149-150) We see no reason to question the authority of that passage which is well accepted in cases of this kind as a general statement of principle. We should add, however, that in the recently decided -- 7 of 10 -- 8 case of Yalgan Investments Pty Ltd v. Council of the Shire of Albert (unreported, 11 December 1997, A94-94) this Court discussed in some detail the legislative provisions and general principles relevant to a decision on costs. We shall not repeat that discussion here. The late amendment of the claim resulted from the claimant’s abandoning during the hearing what the learned member referred to as “significant parts of its claim”: an item for injurious affection and another arising from the builder’s claim to compensation. The member observed that the parties were a considerable distance apart in their estimates of compensation and that the $1,193,593.63 was “significantly higher” than the sum claimed on the final day of the hearing. She was not satisfied, however, that the course of events would have been different had the claim been reduced sooner. She noted the payment of the $598,000.00 and the low valuation finally put in evidence by the constructing authority. She concluded: “While the claimant was not ‘wholly successful’, the facts available to me indicate that the claimant would not have obtained full compensation had it not proceeded with the litigation. I am not, therefore, prepared to find that the claimant acted unreasonably in pursuing its claim and I have decided that, in all the circumstances, the claimant should be awarded costs.” As appears from what we have said already, the member treated the relevant sums relied on by the parties as those finally advanced at the hearing. In doing so she was correct in our view. She applied the construction of s.27(2) adopted by McPherson J.A. in Commissioner for Railways v. Buckler [1996] 1 Qd.R. 18: “Stated in general terms, what the court is now required to do in fixing the incidence of costs under this rule is look to the final positions taken up by the parties. In the case of the claimant, it is the quantum of compensation last claimed. Theoretically at least, its amount might not be known until the final address of counsel for the claimant. In practice, however, s.24(2A) furnishes a disincentive against conduct like that. It does so by restricting the right to amend a claim once it has been filed in accordance with s.24(2A) of the Act. Thereafter an amendment may be allowed; but on terms including payment of costs: see s.24(3). On the other hand, there seems to be no comparable restriction preventing the constructing authority from deferring disclosure of its final position until a late stage of the proceedings. It will be discoverable only from ‘the amount of the -- 8 of 10 -- 9 valuation finally put in evidence by the constructing authority’, which means that it cannot with confidence be known what the amount of it is until the constructing authority closes its case.” (p.23-24) That construction accords with the natural meaning of the words of the subsection whereas that adopted in Arcpoint Pty Ltd v. Director-General, Department of Transport (1992) 14 QLCR 115 does not. In that case the learned member construed the word “finally”, where it appears in s.27(2), as referring to “the point where the ‘battle lines’ have been drawn”, that is, after an exchange of valuations and all supporting data either before or on the first day of the hearing. In his opinion, following that whatever is done by a party during the hearing is done at his peril as to costs (p.119). In this case, the member clearly did not ignore the lateness of the amendment to the claim. The complaint that is made is rather that she failed to give it sufficient weight in deciding how her discretion should be exercised. A number of considerations support the proposition that no error was made on costs. The amendment was not opposed, and no order for costs was sought or made under s.24(2A). There is no reason to doubt the member’s conclusion that the claimant would not have obtained full compensation had it not proceeded with the claim. The terms of the Act, particularly the word “finally”, indicate after all that late amendments will be permitted - by leave in the case of a claimant - in the course of proceedings. It would be strange if the Land Court’s discretion to award costs were to be regarded as automatically circumscribed once a turn of events obviously contemplated by the subsection has occurred. Giving all of those matters their full weight we nonetheless conclude that the member’s discretion on costs miscarried. A clear intention evident in s.27(2) is to discourage exhorbitant claims in compensation cases. It would not be unreasonable to describe the claim to $1,193,593.63 as exhorbitant since it exceeded the sum arrived at by the member by such a large amount. It remained the claim until nearly all of the costs of the hearing had been incurred. With hindsight it can be seen that the claimant was permitted the substantial advantage of -- 9 of 10 -- 10 avoiding any possibility of an order for costs against it by its late amendment; to add to that an order for costs in its favour went far too far we think. In the result we conclude that the member’s discretion on the matter of costs miscarried and that she should have made no order as to costs. The constructing authority’s appeal against the decision of the Land Court of 28 April 1997 will therefore be dismissed, and his appeal against the costs decision of 18 July 1997 will be allowed. The order for costs made by the member will be rescinded and no order will be made as to the costs of the compensation hearing in the Land Court. We shall invite further submissions on the costs of the appeals. HELMAN J JUSTICE OF THE SUPREME COURT GJ NEATE MEMBER OF THE LAND COURT CH CARTER MEMBER OF THE LAND COURT -- 10 of 10 --