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The reluctance to award costs to resuming authorities.

19/01/2015

Courts have the power (under s.98 of the Civil Procedure Act 2005) to determine by whom, to whom and to what extent the costs of litigation are to be paid.  That power is regulated by the UCPR r42.1 which requires that costs should follow the event unless it appears to the court that some other order should be madeThat discretion should only be exercised “according to rules of reason and justice, not according to private opinion … or even benevolence … or sympathy”: Williams v Lewer [1974] 2 NSWLR 91 at 95.  Usually, resort is had to that discretion only where the successful litigant has provoked or protracted the proceedings.

In Dillon v Gosford City Council, the Court of Appeal observed that the rule is excluded in the case of class 3 proceedings before the Land and Environment Court.   In that event, there is no presumption that costs should follow the event.  Instead,  a claimant for compensation who pursues a judicial determination of compensation without unnecessary delay or expense should recover its costs of the proceedings.  That approach may be justified by the observation that compulsory acquisition cases involve the confiscation of citizens’ proprietary rights by government and a statutory entitlement to “just compensation“.  In the Court’s opinion, a dispossessed landholder ought have the benefit of a costs order against the resuming authority, even if compensation is ultimately determined at not much more than the constructing authority’s offer.

However, the provisions of the UCPR about offers of compromise are not excluded in the same way.  A defendant who makes an offer of compromise which is more favourable than the judgment later obtained by the plaintiff is prima facie entitled to a special costs regime, namely; the plaintiff should get its costs on the ordinary basis until the offer was made and the defendant should get indemnity costs from then on.

However, the Land and Environment Court is easily persuaded to depart from that regime.

In  Brock v RTA of New South Wales (No.2),  the RTA offered $550,000 for lost market value and disturbance, then increased the offer to $600,000. The dispossessed landowner made counter-offers in excess of $1.118 million, but was ultimately awarded just $480,020.25.  Clearly, Mrs Brock’s claim was not successful and she would have been better off accepting any of the RTA’s offers of compromise,  The Court found her claim to be arguable, but unrealistic.  In the result, each party was left to bear its own costs.

In Tempe Recreation Reserve Trust v Sydney Water Corporation (No 2), following the acquisition of pipeline easements by Sydney Water, the trustee claimed $1,790,000 then brought proceedings to determine compensation.  Sydney Water offered $268,000 in accordance with the rules. Compensation was subsequently determined at just $106,000.  Nevertheless, Sydney Water was ordered at first instance to pay the costs of the proceedings.   In the opinion of Biscoe J, his judicial interpretation of the acquired easement added value in excess of Sydney Water’s monetary offer.  In any event, he was not inclined to deny the trustee its costs given that it had not brought the proceedings unreasonably nor conducted them improperly.

Although the Court of Appeal noted that approach undermines the rules about offers of compromise, it remained reluctant to expose the dispossessed applicant to a costs order where the outcome depended on a fine point of fact or law.  It would rather favour applicants with costs orders, so long as claims are prosecuted reasonably.  It ordered that Sydney Water ought pay the Trust’s costs up to the offer of compromise, that the parties bear their own costs subsequently incurred  and that the Trust should pay Sydney Water’s costs of the appeal.

Most would think those judicial interpretations strain the letter and intent of the UCPR.  Arguably, the decisions owe more to some sacred law of justice guarding property and possessions (Adam Smith, “Theory of Moral Sentiments” 1859),  Conventional jurisprudence suggests that the successful respondent should not be refused indemnity costs of further defending an class 3 application unless the offer does not meet the statutory requirements or the offeree demonstrates some “exceptional circumstance”.

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