Tempe Recreation Reserve Trust v Sydney Water Corporation (No 2)  NSWLEC 23Sydney Water acquired four easements over Crown land known Tempe Reserve. The Tempe Trust was the trustee of the Reserve. The State and Sydney Water reached agreement as to the compensation payable for the acquisition of an interest in land from the State. However, Sydney Water and the Trust were unable to reach agreement. The Trust commenced class 3 proceedings, seeking compensation in the amount of $1,790,000, later increased to around $5,000,000, which was wholly disputed, save for $6,000 for disturbance. The Court determined compensation in the amount of $106,000, and ordered Sydney Water to pay the Trust’s costs of the proceedings. Sydney Water subsequently applied for a costs order in its favour, in light of an offer of compromise it had made under the UCPR some 10 months prior to the hearing, in the amount of $268,000, being a sum significantly higher than ultimately awarded by the Court. Sydney Water relied upon rule 42.15 of the UCPR, which applies in circumstances where a defendant (or respondent) makes an offer, which is rejected by the plaintiff (or applicant), and the plaintiff thereafter obtains a judgment no more favourable to the plaintiff than the terms of the offer. Rule 42.15(2) goes on to provide that, in these circumstances, unless the court “orders otherwise”, the plaintiff is entitled to an order for costs up to the date of the offer, but thereafter the defendant becomes entitled to a costs order in its favour on an indemnity basis. The primary judge dismissed Sydney Water’s application for costs, contending that rule 42.15 of the UCPR was not engaged in the circumstances, concluding that the Applicant obtained something more valuable than the dollar figure of the judgment.
 … The main question was whether or not the easement permitted SW to place a large water pipeline above the surface of Tempe Reserve. If so, then the public enjoyment of Tempe Reserve would be greatly diminished and the compensation payable to Tempe could well have been millions of dollars (as Tempe contended). SW contended for nil compensation on the interpretation that I adopted. If Tempe had accepted the offer it would have received $268,000 but without resolution of the interpretation question. In contrast, under my decision Tempe is entitled to $106,000 plus the antecedent findings that SW’s rights under the easement do not permit works above the surface of Tempe Reserve. That result is, in my view, much more valuable than the mere dollar amount offered by SW…In the alternative, if rule 42.15(2) was engaged, the Court was persuaded to “order otherwise” in the circumstances. The Court set out a number of reasons why that should be so. The primary reason being that the “exceptional costs principle” that guides the exercise of the Court’s discretion when deciding whether to award costs to an applicant in class 3 proceedings also guides the exercise of the Court’s discretion to make an “otherwise order” under rule 42.15(2). The exceptional costs principle is 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 the manner which gives rise to unnecessary delay or expense”: Dillon v Gosford City Council  NSWCA 328. The Court observed that the Applicant acted reasonably in pursuing the proceedings and did not conduct them in a manner that gave rise to unnecessary delay or expense. “It conducted its case efficiently and economically.” Other findings were made by the Court in support of the justification to “order otherwise” in the circumstances, which had the effect of nullifying any consequence of the offer of compromise.
Tempe Recreation Reserve Trust v Sydney Water Corporation  NSWCA 437Contrary to the findings of the primary judge, the Court of Appeal found that rule 42.15 was engaged as a consequence of the offer of compromise. Any additional “value” or “advantages” that the Applicant may have obtained out of the judgment, separate to the issue of the monetary compensation award, were “not separate advantages to displace the operation of the rules.” Turning to the alternative basis of the primary judge’s reasons, the Court of Appeal accepted Sydney Water’s argument that the test set out in Dillon v Gosford City Council  NSWCA 328, upon which the primary judge ostensibly relied, was the applicable test for a favourable costs order where there had been “no offer of compromise”. It was not, Sydney Water contended, the applicable test in the current circumstances, to which the Court of Appeal agreed. However, while accepting that rule 42.15 was engaged, the Court of Appeal also determined that it was appropriate to “order otherwise”, the terms of which differed from that of the primary judge. In doing so, the Court acknowledged the difficulties of applying offers of compromise in compensation proceedings (involving, as they do, the compulsory seizure of land or interests in land from applicants).
 … The ordinary rule that costs follow the event, which underlies the making and acceptance of offers of compromise in most proceedings, does not apply. Instead, an applicant will have been dispossessed of an interest in land, and ordinarily, if he, she or it acts reasonably, is entitled to a favourable costs order. 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.The Court of Appeal held that the appropriate way to “give force to the evident purpose of an offer of compromise”, in a jurisdiction where the dispossessed applicant who litigates reasonably is ordinarily entitled to costs, is in the present case for the Applicant to obtain its costs of the proceedings up to and including the date of the offer, with each party to bear their own costs thereafter.