Alex Gow Pty Ltd v Brisbane City Council
[2001] QLAC 51
•5 June 2001
|
Re: A99-44
Appeals from decisions of the Land Court in the matter of determination of compensation payable consequent upon the resumption of land for road purposes and an Order for payment of costs - Acquisition of Land Act 1967.
BETWEEN:
ALEX GOW PTY LTD
Appellant
AND:
BRISBANE CITY COUNCIL
Respondent
J U D G M E N T
Delivered at Brisbane this Fifth day of June 2001
Background
By Notification of Resumption published in the Government Gazette on 25 July 1987 the Brisbane City Council ("the respondent") took, for road purposes, land described as Lot 3 on Plan 212543, Parish of North Brisbane, containing an area of 609 m², being part of a parcel of land owned by Alex Gow Pty Ltd ("the appellant"), situated at the south-western corner of Breakfast Creek Road and Dunlop Terrace, Newstead.
The purpose of the resumption was to effect the widening of Breakfast Creek Road. There had previously been registered (7 May 1957) a Notice of Realignment affecting a narrower strip containing 296 m².
The parent parcel contained an area of 5,881 m² before resumption, the balance area being 5,272 m². The land was zoned "Residential B" at the date of resumption, then rezoned in September 1987 to "Particular Development (Undertakers Establishment)".
Development of the land as a funeral parlour had taken place in 1963 with the consent of the respondent. As at the date of resumption, the complex comprised the main funeral parlour structure containing a floor area of 453 m², two ancillary workshop buildings, paved driveways and car-parking areas with a grassed, retained and landscaped frontage to Breakfast Creek Road.
The land taken accommodated the forward sloping street frontage landscaped area, part of a paved driveway and assemblage area adjacent to the eastern elevation of the principal funeral parlour structure, together with some advertising signage.
Subsequent to the resumption, the street frontage alignment was retained by a high concrete retaining wall.
The works associated with the resumption were carried out between 24 August 1987 and 31 May 1988.
A claim for compensation was first served on the respondent in September 1995 then filed in the Land Court in September 1999.
The amount finally claimed by the appellant in the Land Court, excluding interest, is summarised as follows:Land $210,000.00 Improvements $62,782.00 Severance (loss of profit) $247,731.00 Injurious affection (professional fees) $54,457.70 10.
Total
The amount of the valuation finally put in evidence by the
$574,970.70
respondent was in
the amount of $90,608 including professional fees.
On 5 October 2000 the Land Court awarded compensation in the amount of
$133,137 together with interest as calculated.
The award was particularised as follows:
· Loss of land $12,000
· Loss of improvements:
Re-erection of illuminated sign $1,335 Loss of 50 ft sign $1,680 Loss of 4 golden cypress pines $3,300 Cost of brick fence on top of retaining wall $47,409 Architect's fees for front fence $2,600 Engineering fees for front fence $800 Brisbane City Council fees $398 $57,522
· Injurious affection -
Loss of profits 1987-1988 $27,229
· Disturbance
Valuer's fees $7,000 Counsel's fees $ 6,400 Legal fees
Total disturbance
$ 22,986 $36,386
TOTAL $133,137
Interest as ordered to 2 May 2000 amounted to $70,317.82.
After the handing down of the decision, both parties made submissions on the matter of the costs of the hearing and determination of the compensation. The decision on the applications for costs was given on 20 February 2001. The appellant was ordered to pay an amount equal to 50% of the respondent's costs of and incidental to the hearing and the determination of the claim for compensation.
Grounds of Appeal
The appellant appealed to this Court from the decision of the Land Court on compensation on 13 grounds. The appellant also appealed from the decision on costs. Both appeals were heard together.
The principal issues were identified by Mr Lyons, QC, who appeared with Mr Howe of Counsel on behalf of the appellant in his written and oral submissions before us, as being:
(1)the award for loss of land;
(2)the order for payment of interest;
(3)the order for payment of 50% of the respondent's costs.
We will consider the issues in that order.
Loss of Land
Capitalisation Approach - Before and After Resumption
Mr KP Walsh, the appellant's valuer, valued the property as a going concern in the amount of $1,350,000 before resumption and $1,140,000 after resumption, the resultant loss, exclusive of disturbance items, being assessed as $210,000.
Net maintainable profit was adopted by Mr Walsh, on accountancy advice, as being $120,000 per annum at the date of resumption. Yields of 9% and 10.5% were adopted before and after respectively, the difference in yield being Mr Walsh's assessment of the difference in risk of maintaining the estimated profit.
There had been a sale to the one purchaser of three funeral parlours in Brisbane in 1986, the sale prices reportedly based on a yield of 11%. No financial details were available to Mr Walsh to allow confirmation of the yield. He accepted the reported information as being reliable. His industry-related inquiries indicated that later acquisitions which commenced in the 1989-1990 period were based on yields of 9%.
Mr Walsh considered the subject property, after resumption, to be superior in location and exposure to the 1986 sale properties. For reasons associated with the larger site area, easier management, greater separation of the key building from the traffic on Breakfast Creek Road, more aesthetically attractive presentation and considerations relative to greater market share potential, Mr Walsh believed a differential in yield of 1.5% reflected the relative risk of maintaining the estimated profit before and after the resumption. Furthermore it was of concern to him that before resumption constraints on development had been occasioned by the original Notice of Realignment.
Mr Slater, the respondent's valuer, agreed that the before and after valuation approach was the preferred method in assessment of compensation in circumstances where a partial resumption of land was involved. It was his evidence that funeral parlour businesses were "sold on the cash flow and it's the risk to the cash flow that determines the capitalisation rate". However he had made no attempt to conduct an assessment on the before and after basis. He said he had not been sufficiently confident to strike a capitalisation rate either before or after resumption due to the lack of detailed market information available. In terms of assessment of difference in yield before and after resumption, his oral evidence was that he could not see justification "for much movement at all, if any".
The learned Member accepted, in the absence of any industry evidence to the contrary, "Mr Walsh's figure of 11% for 1986" (the reported yield relative to the sales), but, in view of the lack of any in-depth analysis of the 1986 sales, despite Mr Walsh's opinion as to the superiority of the subject property, in comparison with the sale properties, adopted 11% "as the appropriate capitalisation rate for the subject land in the 'after' situation".
On his interpretation of evidence as to market forces operating subsequent to the date of resumption, the learned Member had concluded that a trend had commenced in 1986 and would have been influential at the date of resumption, whereby in 1993 and 1994, the long-term bond rate was more closely reflecting the appropriate capitalisation rate for funeral parlour businesses.
The learned Member could see "no correlation between the later industry capitalisation rate of 9% (1994)" (when the long-term bond rate was said to have averaged 9%) "and Mr Walsh's concluded capitalisation rate of 9% in the 'before' situation in 1987" (when the long-term bond rate was said to have averaged 13%).
On Mr Walsh's evidence that turnover in ownership in the funeral industry had been largely non-existent, the learned Member agreed with the opinion of Mr Slater "that it is not possible to arrive at a meaningful conclusion as to the difference in the critical nature of the capitalisation rate" and was only able to accept a similar capitalisation rate of 11% in both the before and after resumption scenarios.
The learned Member concluded that valuation by capitalisation of net maintainable profits failed to identify loss and rejected that methodology accordingly. There was no alternative valuation methodology presented to allow compensation to be assessed on a before and after resumption basis.
It was the appellant's submission that the learned Member's reasoning by which he rejected Mr Walsh's evidence as to appropriate capitalisation rates was flawed in that he had given no consideration to Mr Walsh's professional opinion as to the degree of superiority of the subject property before and after resumption, in comparison with the 1986 sale properties.
It was further submitted that the learned Member misinterpreted Mr Walsh's evidence as to the timing and measure of subsequent market capitalisation rates within the industry and that there was no evidence which indicated, at the date of resumption, a trend between long-term bond rates and appropriate capitalisation rates for funeral parlour businesses.
The respondent through the submissions of Mr Hinson SC, suggested that adoption by the learned Member of a capitalisation rate higher than that used by Mr Walsh in the "after" resumption scenario, would have resulted in a lower capital value and accordingly favoured the appellant. There is no substance in that argument because the learned Member had found no difference in capitalisation rates, before or after resumption.
The respondent submitted then, that it was open to the learned Member to prefer the opinion of Mr Slater to the effect that there would have been no measurable difference in the capitalisation rates before or after the resumption
Findings - Capitalisation Approach - Before and After Resumption
This Court suggested in its judgment in Queensland Railways v. Somerville Funerals (unreported), delivered 3 March 1995, at p.5 -
"… the traditional test of 'before' and 'after' valuations might have better identified the veracity of the claim for compensation - or the constructing authority's valuation … Expert accountancy consideration of the difference in 'yield' (or capitalisation rate) which the industry (and
market) would have demanded in recognition of the risks introduced by the resumption … would have, in our opinion, made the picture much clearer for all involved."
The lack of precise analysis of the market evidence in relation to the actual transactions within the funeral parlour industry weakened the evidential basis for adoption of capitalisation of maintainable profits as a single, or even primary, method of valuation in this matter. However, if it was to be accepted, as both valuers suggested, that this type of business was marketed on the basis of its "cash flow" then that valuation methodology should not have been excluded from cogent reasoning simply because the task was made difficult through lack of direct proof.
While we accept that there was no evidence before the Land Court to allow interpretation of a long-term bond rate/capitalisation rate correlation in the period between 1986 and 1989-90, Mr Walsh's evidence could, arguably, have been interpreted as indicative of some correlation in 1994.
We have found the capital value "before" and "after" approach taken by Mr Walsh to be of assistance in the circumstances as a check against the veracity of the quantum of claim.
The Piecemeal Approach
In our opinion, Mr Walsh's assessment of loss, in the amount of $210,000 should not be interpreted as representing "loss of land". His valuation, and one of the advantages of the before and after methodology, assessed loss under all headings, with the possible exception of temporary loss of profit and disturbance items. Mr Walsh agreed that if mitigating works had reduced part of the risk in maintaining profit, his assessment of loss could be reviewed relative to the cost of mitigation.
In his valuation report, Mr Walsh provided the opinion, based on evidence of sales of land in the immediate locality, that, as at July 1987, the subject land when considered in isolation would have possessed market value in the range of $180-
$200/m² (emphasis added). That opinion went unchallenged.
That statement suggests that the land, if vacant, had market value in the range of $180-$200/m².
Mr Walsh did not dispute the suggestion put to him that any further development of the site, assuming the buildings were in their position as existed at the date of resumption, would logically have been to the rear of the site rather than close to the noisy road frontage. However, it was his opinion that the site had equal pro-
rata value overall, because "the site area controls things like plot ratios and car- parking requirements and those sorts of things".
It was Mr Slater's opinion that "In the context of existing use, the site is fully improved" and leaving aside severance, "the loss of land area does not result in a loss in value of the improved property as it has no apparent impact on the trading of the business conducted on the land". He recognised that "there may be argument that the original development of the land was restricted by the need to set aside the area of the future requirement". However, he thought that if this had been a factor in the siting of improvements, it "would be fairly marginal considering the setback requirements and the slope of the land". He found no monetary loss through the reduction of the site area of the land.
When pressed in cross-examination as to what he meant by "fairly marginal" his initial response was "There may be an effect there but it's so small that it's impossible to quantify".
In the same general context as to his perception of the meaning of "marginal", a discussion took place as to an acceptable margin of error in the valuation of the "whole lock, stock and barrel, the funeral parlour" or the real property alone. Mr Slater responded that as a matter of practice he did not have regard to an acceptable margin of error "But I think, having said that, if you were within 5% you'd probably be comfortable".
The learned Member interpreted that comment as a concession by Mr Slater that any impact of the Notice of Realignment would have been "fairly marginal" upon the value of the land subject of the resumption, "reflecting perhaps a factor of about 5% in the value in the before resumption situation". He then said that if he accepted Mr Walsh's suggestion that, from sales evidence, the land value was "about $180 to
$200 per m²", then an impact of 5% would have allowed a conclusion that a "marginal loss" for the 609 m² lost would be $6,090. He formed the opinion then, that $6,090 "could reflect any loss of the land in isolation, and without the benefit of a 'before' and 'after' analysis". However, in order to provide any benefit of doubt in the claimant's favour he said he would "allow 10% for any marginal impact in the "after" situation or say $12,000 for the loss of land."
The appellant submitted that the resumed land was a not unimportant part of the total site providing the "public face" of the business, accommodating attractive landscaping and important signage; extending the physical separation of the chapel from Breakfast Creek Road; and part of the lost land was of operational significance
being used for vehicular parking and access strategic to the management of the business. It was submitted that there was no sensible basis for finding that the value of the resumed land should be determined at a rate less than the average value of the land as a whole.
It followed, in the appellant's submission, that the process by which the learned Member reached his conclusion as to the loss in land value, was markedly flawed in that he failed to appreciate the effect of that part of the evidence of Mr Slater, which was directed not to the value of the land lost, but to the effect of the Notice of Realignment having a marginal effect on the value of the property and not a 5% or 10% effect on the value of the resumed land.
The respondent suggested that it was in an arguably different context that Mr Slater referred to an acceptable margin of error being 5%, because the effect of his evidence was that the loss of land did not result in any loss of value of the whole property, however, there may have been a fairly marginal effect on value if the development of the land had been restricted by the need to keep the set-aside area (for road widening) free of improvements. It was submitted on behalf of the respondent that the learned Member plainly preferred the evidence of Mr Slater to that of Mr Walsh, although arriving at a figure of $12,000 to resolve any doubts in the appellant's favour.
Findings - Loss of Land
There was no challenge to the evidence of Mr Walsh as to the value of the land, in isolation, being in the range of $180-$200/m² at the date of resumption. For the purpose of our considerations we will adopt the median $190/m².
As land in isolation we would accept that the loss of 609 m² would have equated a diminution in value of a rounded $116,000.
The land did not stand in isolation however. It was developed for use for funeral parlour purposes. It was not disputed that such use represented the highest and best use of the land.
Mr Walsh's valuation of the improved property as a going concern was, after generous rounding, $1,350,000 before resumption. It would follow that if the yield he adopted was too low then the capital value would be lower.
The value of the land before resumption was in isolation, at $190/m²,
$1,117,500 in rounded figures.
The buildings and infrastructure, plant and machinery and the goodwill of the business would on those figures add $232,500 to the value of the land, in isolation.
There is no evidence as to the depreciated replacement value of the buildings, infrastructure, plant and machinery or the goodwill attributable to the business, but it would seem a remarkable result for those items (having regard to the extent of them) not to have significantly greater value than $232,500 as part of a going concern representing the highest and best use of the land.
Mr Walsh's valuation as a going concern after the resumption was $1,140,000. On a yield of 11%, as adopted by the learned Member, the capital value would reduce to a rounded $1,090,000. The land value at $190/m² would then be a rounded
$1,000,000.
The added value of the buildings, infrastructure, plant and machinery and business goodwill would be $140,000 on Mr Walsh's figures, or $90,000, if a capitalisation rate of 11% was adopted. In the circumstances, that would provide just as remarkable a result as in the before situation.
It seems to us to be obvious that, on the figures above, regardless of the evidence that funeral parlour development represented highest and best use, as developed, the land component did not equate its worth in isolation. There is, however, no evidence as to a realistic apportionment of the components of the capital value of the property.
We find the suggestion illogical, that the loss of land had no effect on the improved value of the property before resumption. However, we are not persuaded by the appellant's submission that the improved property had suffered the loss of the value of the land in isolation, as well as effect on the value of the balance area as developed. In our view an element of double dipping would result if loss of land, as a component of total loss, was calculated on the basis of its worth in isolation.
We are persuaded however that the approach taken by the learned Member in assessing compensation for "loss of land" was based on a misinterpretation of Mr Slater's explanation of the "fairly marginal" effect of the restriction on the original development.
If Mr Slater's explanation was to be construed as a suggestion that "fairly marginal" effect could be equated to a deleterious effect of 5%, then that is interpreted by us to have meant an effect on the improved value of the property as developed.
It is clear that Mr Slater did not accept that any loss in land value had been caused by the resumption. It is observed that he had not inspected the property until
1996 when mitigation works had been effected. As had Mr Walsh, he relied on photography of the before resumption situation in forming his opinions.
This was not the type of case where the overall effects of the resumption were clear cut or capable of assessment with strong evidential support. Mr Slater took the final view that loss had been contained through the beneficial effects of the construction of a brick wall screen. We have given close consideration to his evidence both written and oral in the Court below. His overall approach seemed to have been one of defence of the assertions of the appellant, rather than an attempt to resolve doubt, (and it must reasonably have existed), in favour of the dispossessed owner.
The original development of the site had been constrained by the Notice of Realignment. Such Notice was a step in the process of resumption and its effect on the value of the land as at the date of resumption is to be ignored (see Housing Commission of New South Wales v. San Sebastian Pty Ltd (1978) 140 CLR 196). The physical use of the road frontage land would have been constrained by normal building-setback requirements, but that does not alter the fact that such land forms an integral part of the full development potential of a site. The additional land resumed then formed an integral part of the development which was permitted subsequent to the Notice of Realignment. The whole of the resumed land was utilised to enhance the external street presentation of the development and its advertising exposure through landscaping and signage. The resumed land separated the chapel and assemblage area from the original road carriageway.
While it was not the intended thrust of Mr Slater's evidence as to "fairly marginal" effect, we have come to the conclusion that the loss of the "public face" of the development with its specialised highest and best use, through the resumption of the frontage land, could be reflected in a deleterious effect of 5% of the capital value of the property before resumption. We have been assisted, to a degree, by Mr Walsh's evidence as to the capital value of the property, in reaching the conclusion that the learned Member's determination of compensation under the specific heading of "Loss of Land" is inadequate and should be set aside. We will substitute an allowance of
$65,000.
Severance - Injurious Affection
The evidence was that the brick screen wall had been constructed by the claimant in 1994, above the concrete wall retaining the balance land. This wall
assisted in improving the visual amenity of the area in proximity to the chapel and vehicle assemblage area, and mitigated against the internal visual effects of the reduced separation of that area from the Breakfast Creek Road traffic. There was evidence before the Land Court to the effect that no increase in noise levels, at the façade of the chapel building, had resulted directly from the widening of the road and the brick wall had reduced the pre-existing traffic noise level. The learned Member had noted the probability of an increase in fumes from the heavy vehicles using the road carriageway which was now closer to the subject development.
Mr Slater found the screen wall as being "not unattractive" and was of the opinion "that the appearance of the wall and the reduction in traffic noise more than offsets the loss of amenity caused by the taking of the landscaped area". Allowance of the full cost of the wall "for the loss of amenity in isolation" would, in his opinion, "over compensate the claimant company because of the reduction in traffic noise". However he thought it would be reasonable to regard the extra benefit as offsetting any loss arising from the interference to the vehicular parking and access in the assemblage area. We accept that the beneficial effect of the screen wall in reducing traffic noise could reasonably offset the loss of part of the assemblage and access facilities. We also accept that the screen wall was necessary to improve the visual amenity of the chapel and assemblage area, in mitigation of the injurious affection to that area as a direct result of the resumption. We do not accept that the construction of that wall mitigates against the injurious affection to the balance area caused by the loss of land area, and consequences relative to pre-resumption development potential, street presentation and advertising exposure.
The learned Member's findings of loss under the headings of improvements, injurious affection and disturbance were not challenged and we see no reason to disturb the quantum resulting from those findings. We will allow the cost of the construction of the brick wall as mitigation against injurious affection to the balance area, other than loss of land.
Summary of Determination of Compensation
| 67. | We determine compensation as follows: |
| Loss of land | $65,000 |
| Loss of improvements Injurious affection - | $6,315 |
Cost of brick wall, including professional
and Brisbane City Council fees $51,207
Loss of profits 1987-1988 $27,229 $78,436
Disturbance - professional fees $36,386
Total $186,137
The appeal from the decision of the Land Court with regard to the quantum of compensation should be allowed on the basis of grounds of appeal 1 and 6. Compensation under all headings for the taking of the land is determined in the amount of One Hundred and Eighty-six Thousand One Hundred and Thirty-seven Dollars ($186,137).
Interest
The learned Member awarded interest on compensation payable from the date of resumption to the date the claim for compensation was served on the respondent, 4 September 1995, then for half the period from that date until the date of commencement of the hearing, 2 May 2000, and from then until the date that final payment of compensation is made.
The appellant contended that interest should have been allowed for the whole period, while the respondent argued that the learned Member's award should stand.
The Reasons of the Learned Member
The learned Member noted that some 30 years had elapsed since the first notice of realignment of Breakfast Creek Road, plus a further 12 years from the date of resumption to the date the claim for compensation was referred to the Land Court. He also noted that as far as interest was concerned, he was restricted to the period from the date of resumption.
In the Land Court, counsel for the respondent argued in his submission with respect to interest that the claimant had been less than diligent in pursuing its claim for compensation and requested the learned Member to exercise his discretion and apportion responsibility for interest on a 50%/50% basis. The learned Member observed that the usual practice of the Land Court was to award interest, except where the dispossessed owner had remained in possession or derived some other benefit from the resumed land after the date of resumption; I Small and Another v. Brisbane City Council (1968) 35 CLLR 239.
In considering the conduct of the parties, the learned Member concluded that the decision of the claimant to delay lodging a claim with the respondent from July 1987 until September 1995, was reasonable, as the claimant was "… seeking to
identify whether any losses had in fact been incurred …". However, he noted that throughout that extended period, the respondent had not made any advance payments and that as a consequence the claimant had been at a financial disadvantage in terms of loss of interest.
In seeking guidance on the impact of the behaviour of the parties, the learned Member turned to the decision of the Land Appeal Court in Moyses and Others v. Townsville City Council (1979) 6 QLCR 271. In that case, the Land Appeal Court had thought it relevant to enquire into the conduct of the claimant, when considering the Court's discretion with regard to costs.
The learned Member expressed his opinion that the principle of reasonable behaviour was also a relevant consideration for the Court in the exercise of its discretion with regard to an award of interest. He found that neither party had acted unreasonably: the respondent could not be accused of unreasonably extending the process of resumption and construction, while the delay by the appellant was attributed to Mr Gow's very careful and thorough approach to ensure that his claims were correct and supportable in the changing nature of the industry.
Having found that neither party had behaved unreasonably up until the time the claim was lodged with the respondent in September 1995, a finding not challenged by the respondent, the learned Member then found that "… there may have been some contribution by both parties in delaying settlement of the issue", as once the claim was lodged, it would have been open to either party to have brought the matter before the Court at an earlier date.
In accordance with that reasoning and the piecemeal assessment approach adopted, the learned Member found that interest should be paid to the appellant on compensation for loss of land, profits and some improvements, from the date of resumption until 4 September 1995 when the claim was lodged with the respondent and then for half the period from September 1995, until the date of hearing of the claim on 2 May 2000. He calculated the midway point between those dates to be 2 January 1998. He did not allow interest from that date to 2 May 2000, the date of commencement of the hearing. However, he awarded interest from that date until the date compensation is paid. He then allowed interest on other compensation heads, such as costs associated with mitigating works and items of disturbance, from the date of actual expenditure through to 2 January 1998, then from 2 May 2000 until the date compensation is paid.
The learned Member said that he found some guidance for that approach in the unreported decision of the Land Court in Marshall v. Director-General, Department of Transport (A92-77) 20 February 1998. In that case the Court found that the claimant had been dilatory in not lodging his claim from 1986 to 1993, and awarded interest from the date of resumption until the date the matter was referred to the Court, and from the date of hearing until final settlement.
The Relevant Legislation
The power of the Land Court to award interest is contained in s.28 of the
Acquisition of Land Act 1967, which relevantly provides:
"28 (1) Subject to subsection (2), in respect of the period or any part of the period commenced on and including the date on and from which any land is taken and ending on and including the day immediately preceding the date on which payment of compensation is made the Land Court or, upon appeal, the Land Appeal Court may order that interest be paid upon the amount of compensation determined by it.
(1A) Such interest shall be at such rate per centum per annum as the Land Court or, on appeal, the Land Appeal Court, deeming reasonable, fixes by the order.
(1B) Interest so ordered to be paid shall be payable as if it were part of the compensation in question and shall be added to the amount thereof and be payable by the constructing authority accordingly."
Under s.12(5) when land is taken, the estate and interest of the claimant is converted into a right to claim compensation. Under s.20(2) compensation is to be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.
Since compensation must be determined at the value of the land at the date of resumption, rather than the date payment by the resuming authority is made, any delay would cause economic disadvantage to the claimant, unless there was some adjustment to the amount of compensation for the loss of earning power. One author of a text on the subject has explained it thus:
"The purpose of awarding interest is to compensate the landowner for waiting for the award to be paid. It compensates him or her for the period when he or she is due to receive the compensation for the loss of the land and when he or she is actually paid. It acts as a spur upon the authority to make payment of compensation without undue delay." Douglas Brown: "Land Acquisition", 4th Ed., Butterworths, 1996, page 158.
The Usual Practice of the Land Court
The usual practice of the Land Court has been to order that interest be paid on compensation from the date of resumption until compensation has been paid by the resuming authority. However, as discussed in VH Cox v. Water Resources Commission (1996-97) 16 QLCR 266, that long established practice has been subject to two exceptions:
· Where there has been unreasonable delay in lodging the claim for compensation and/or in pursuing that claim; and
· Where a dispossessed owner remains in possession of the land. (16 QLCR 273).
The second of those exceptions is not relevant in the present case, construction of the works having commenced shortly after the date of resumption, but in terms of the first exception, could there have been "unreasonable delay"? There has certainly been considerable delay, both between the date of resumption (25 July 1987) and the serving of the claim for compensation on the constructing authority (4 September 1995) and between that date and the date the matter was referred to the Land Court (1 September 1999).
The Practice in Other Courts
Counsel for the appellant submitted that there is some broad analogy with the power of the Land Court to award interest and the power of the Supreme Court to award interest under s.47 of the Supreme Court Act 1995, but with important differences. For example, in a claim for personal injuries, an award for pain and suffering and loss of amenities is fixed by reference to the value of money at the date of judgment, not the value at the date when the cause of action arose. However, damage is often suffered over an extended period of time, which has consequences for how interest is awarded. In such cases it has been said that the reason for awarding interest is to compensate the plaintiff for having been kept out of money which theoretically was due to the plaintiff at the date of the accident: Parker v. Guardian Fire Sprinkler Co (Qld) Pty Ltd [1982] Qd.R.709 at 710; Thompson v. Faraomio (1979) 54 ALJR 231. In Hadzigeorgiou v. O'Sullivan [1983] 1 Qd.R. 55 at 57, Andrews SPJ, with whom Thomas and Connolly JJ agreed, said that the proper approach to an exercise of discretion as to the granting of interest is that it ought to be granted unless there are proper reasons for withholding it.
Interest may not be allowed from the date of loss where the plaintiff has been guilty of unreasonable delay in prosecuting the claim: Serisier Investments Pty Ltd v. English [1989] 1 Qd.R.678. In that case, the Court of Appeal said at 679:
"A far more common case in which interest is not allowed from the date of the loss is where the plaintiff has been guilty of unreasonable delay in prosecuting the claim. The public policy of having claims brought and determined promptly seems to underlie this approach. Goff J thought that 'this may be to encourage plaintiffs to prosecute their claims with diligence, and also because such conduct may lull a defendant into a false sense of security, leaving him to think that the claim will not be pursued against him'. (BP Exploration (Libya) Co Ltd v. Hunt (No 2) [1979] 1 WLR 783 at 847).
These examples are however exceptions to the normal position that in order to remove the advantage that the wrongdoer has had from money that ought to have been in the pocket of the plaintiff interest is awarded from the date of loss. "
It would seem then that in such cases, while recognising that the award of interest is in the absolute discretion of the Court, the general rule is that interest should be granted unless there are proper reasons for withholding it. One of those reasons would be where there was unreasonable delay on the part of the plaintiff in prosecuting the plaintiff's claim.
However, mere delay should not disqualify the plaintiff from an award of interest. In Bennett v. Jones [1977] 2 NSWLR 355, the New South Wales Court of Appeal considered the period in which interest should be awarded in cases of damages for personal injury. In considering how the Court should exercise its discretion in this regard, Moffitt P at p.367, emphasised that the power to award interest is compensatory and should not be used punitively; the delay in the conduct of a party is relevant only so far as by reason of it there is, or may be, economic disadvantage to the opposing party by awarding interest, or not awarding it.
Then his Honour said at p.370:
"I see no reason why the simple fact that a defendant does not have to pay money when his liability arises, and has the benefit of non payment for a period, should not provide a basis to make a discretionary order for payment of interest for the whole period. One has the money, and the other not."
He continued at p.371:
"Unless it can be seen that there is likely to have been some relevant detriment to the defendant, it will be irrelevant if the plaintiff has not proceeded with complete promptness, or … has not promptly and fully complied with all court procedures. Such cases … are to be
distinguished from cases of deliberate delaying tactics of a plaintiff or defendant, where it appears there is likely to be financial detriment to the other party. In these cases the conduct of the parties is relevant, because of its detriment to the opposing party. Delay of the plaintiff in this context is of particular significance where the delay is in commencing proceedings. Delay thereafter will normally be of less significance, because the defendant has some opportunity to prevent delay once proceedings are instituted."
In the same case when commenting on the conduct of the parties, Hutley JA said at p.375:
"I am by no means convinced that the conduct of the parties should ordinarily affect the award of interest. If the fault is that of the defendant, the plaintiff is adequately compensated by the award of interest…"
The Respondent's Submissions
On the other hand, counsel for the respondent submitted that the learned Member's order with respect to interest should stand. He argued that the award of interest until 2 January 1998 gives the appellant the earning power of money into which its interest in the resumed land was converted. The fact that interest was not awarded from that date to the date of commencement of the hearing, simply reflects as a matter of discretionary justice, that the contribution to the delay of the appellant and the respondent should be apportioned equally.
He went on to submit that s.28 confers a discretion to award interest for the whole period or any part of it. It was also submitted that the underlying intention of the section is to encourage claimants to prosecute their claims with diligence; if they do not and they are guilty of unreasonable delay in either lodging or pursuing the claim, they cannot expect to be awarded interest for the entire period.
In the present case, the learned Member expressly found that there was no unreasonable delay on the part of either party in the period between the date of resumption and the date of lodgment of the claim with the constructing authority. But he found that with respect to the delay between that date and the date of referral to the Court "… there may have been some contribution by both parties …".
Counsel for the appellant submitted that if this amounts to a finding of equal fault, then the ordinary rules should apply and interest should be payable for the whole of the period. The respondent has had the benefit of the use of the lands since the date of resumption, yet compensation is payable by reference to values at that time; the respondent also has had the benefit of the use of the money since the date of
resumption. If the fault is equal, then it is wrong in principle to make one party bear the burden of it; the appellant is penalised but the respondent suffers no loss; if the respondent's fault is to be ignored, so should the fault of the appellant. If that is so, the usual rule should apply, the appellant has had possession of the property and of the money.
Counsel for the respondent submitted that in the present case little assistance can be derived from cases from courts of general jurisdiction. While it is true that there are differences between those cases and the present situation, cases like Bennett
v. Jones in our view, do provide some guidance. The underlying principle with regard to the award of interest is the same: interest should be awarded unless there are good reasons for not awarding it. One of those reasons is where there was unreasonable delay, but mere delay will not be sufficient for withholding an award of interest. Whether delay is reasonable or unreasonable will depend on the circumstances of each case.
The authorities from the courts of general jurisdiction emphasise that the purpose of an award of interest is compensatory; not to award interest is punitive. The purpose of s.28 of the Acquisition of Land Act 1967 has been discussed in a number of cases, including that of I Small. It is to compensate the claimant for the loss of earning power of money from the date of resumption to the date of payment. Not to award interest would be to reduce the total amount of compensation that a claimant would otherwise receive. There must, in our view, be good reason for the claimant to be punished by withholding an award of interest for any of the period.
The Marshall Case
The learned Member said that he found some guidance for the approach that he adopted in the unreported decision of the Land Court in Marshall v. Director- General, Department of Transport (A92-77) 20 February 1998. In that case, the Court considered a number of decisions of the Land Court and this Court, including the decision of the Land Court in Ogle v. Director-General, Department of Transport (1992) 14 QLCR 197, where the Land Court had considered earlier decisions before concluding at 199:
"The common thread in these cases is that the respondent should not be required to pay interest on compensation for a lengthy period where a claimant has been dilatory in pursuing his statutory rights to the claim."
The learned Member in Marshall agreed with that statement of principle. Applying that test to the facts in Marshall, he found that a delay of 10 years in commencing a hearing was not justified; he rejected the claimant's arguments that he was awaiting the provision of flood study reports requested from the respondent; he found that the claimant had been dilatory in pursuing his claim and that it would not be just for the constructing authority to be required to pay interest for the full period. However, he found that the claimant should not suffer a loss of interest for the period between the commencement of the hearing and the date of payment of the balance of the compensation due.
In our opinion, the present case can be distinguished from Marshall. There the learned Member rejected the claimant's excuses for the delay. In the present case the learned Member accepted the claimant's excuses for the delay up until the date the claim was served on the Council, but held both the claimant and the respondent to be equally at fault for the delay from then until the commencement of the hearing.
Conclusion
Counsel for the appellant submitted that as the learned Member apportioned blame equally between the claimant and the respondent with regard to the lack of diligence in lodging the claim for compensation in the Land Court, then to withhold interest would be to punish the claimant for delay for which the respondent was found to be equally at fault. We agree with that submission.
Therefore, we consider that in endeavouring to do justice between the parties the learned Member's exercise of discretion has miscarried in not awarding interest for the entire period when interest became payable in respect of each item of claim. In our view, interest should be awarded at the appropriate rate from the dates identified by the learned Member until the date of final payment.
There was no appeal against the rate of interest awarded by the learned Member in respect of the various items of claim, or against the appropriateness of the various disturbance items, which seem to have been agreed. We therefore feel that we should not comment on those matters, except to say that we do not endorse the approach taken by the appellant in calculating the additional interest from 2 January 1998 (Exhibit 3). We accept that this was merely to indicate the amount of interest that would accrue if interest was awarded at 6% on the amounts in the learned Member's determination of compensation from 2 January 1998 to 22 March 2001, the date of hearing of this appeal.
Costs
The grounds for appealing against the order for costs are directed at the manner of the exercise of the discretion of the learned Member and, in particular, the failure of the learned Member to have any adequate regard to the relevant evidence including:
(a)that it was necessary for the appellant to proceed to court and fully litigate the matter in order for the appellant to recover a sum which was above previous offers made by the respondent and was significantly above what the respondent submitted in court was the appropriate sum;
(b)the appellant's stance in pursuing the matter in the Land Court was reasonable;
(c)that the appellant relied on evidence of experts who were highly regarded and well known to the court;
(d)the chronology of events and the substance of the correspondence which passed between the parties during 4 September 1995 and 21 August 1998.
In both written and oral submissions the focus of the appellant's attack on the learned Member's decision in relation to costs was an error of principle which it was submitted was based on a misunderstanding of the decision in Moyses in respect of the exercise of the discretion to award costs pursuant to s27(2) of the Acquisition of Land Act 1967. Although no ground of appeal specifically raised that error of principle, no objection was taken by the respondent to the argument based on that error of principle. That was presumably because the appellant's argument then proceeded to the effect that the learned Member's exercise of discretion miscarried as a result of this error of principle identified by the appellant. That made the lack of a ground of appeal specifically relying on that error of principle of no consequence.
The result of our reasons in relation to the compensation for loss of land is to increase the overall amount of compensation. The amount of compensation determined at $186,137 remains nearer to the amount of $90,608 finally put in evidence by the respondent rather than the amount finally put in evidence by the appellant of $574,970.70. During the argument on the hearing of the appeal Mr Lyons QC made the point that if this Court increased the amount of compensation so that it was closer to the appellant's claim, that would be relevant in the exercise of the discretion to award costs in respect of the hearing in the Land Court. The increase in compensation determined on the appeal is not so great, however, to affect the
underlying principles and factors relevant to the exercise of the discretion to award costs.
Sections 27(1) and (2) of the Acquisition of Land Act 1967 provide:
"27.(1) Subject to this section, the costs of and incidental to the hearing and determination by the Land Court of a claim for compensation under this Act shall be in the discretion of that court.
(2) If the amount of compensation as determined is the amount finally claimed by the claimant in the proceedings or is nearer to that amount than to the amount of the valuation finally put in evidence by the constructing authority, costs (if any) shall be awarded to the claimant, otherwise costs (if any) shall be awarded to the constructing authority."
The learned Member referred to the summary form of propositions taken from judgments relevant to s27 of the Acquisition of Land Act 1967 set out in Yalgan Investments Pty Ltd v Albert Shire Council (1997) 17 QLCR 401 at 406-408. Paragraphs (j) and (k) of that summary set out at 408 are particularly relevant:
"(j)Section 27(2) of the Acquisition of Land Act 1967 should not be regarded as a legislative suggestion that, where the claim is substantially more than the amount awarded, and the amount put in evidence by the constructing authority is not substantially less than the amount awarded, the Court should not merely refrain from awarding any costs to the claimant but should award costs to the authority (Moyses at p. 274).
(k)Where the Land Court is considering whether it should award costs to a constructing authority, it could be wrong to have regard merely to the amounts of the claim and of the award and of the value put in evidence by the authority. Usually it would be more relevant to enquire whether the conduct of the claimant (such as, for example, making an exorbitant claim) has been such as to force the authority, unreasonably and unnecessarily, into litigation (Moyses at p. 274) or whether the claimant has pursued a vexatious, dishonest or grossly exaggerated claim or presented his case in such a way as to impose unnecessary burdens on the constructing authority or the Court (Banno at p. 53)."
The learned Member had regard to Yalgan in determining the key issues relevant to the issue of costs as being the quantum of the amounts claimed; the actions of the parties in seeking resolution of the matter; and the reasonableness of the claim. Although the appellant described that as "a gloss on those principles" found in Yalgan, it is apparent that the learned Member was identifying the relevant issues in summary form. It is not suggested that what the learned Member identified were not relevant issues.
The learned Member's reasons for the decision on costs then proceeded under three headings which reflect the key issues identified by him.
In dealing with the first issue of the quantum of the claims, the learned Member stated:
"However, I note particularly the directions of the Land Appeal Court in Moyses at page 274, where it directed that costs should be awarded to the authority where the claim substantially exceeds the award, and where the amount put in evidence by the authority is not substantially less than the amount ordered. In the current matter the conditioning influence in exercising discretion to the authority, in my opinion, is likely then to rely upon an understanding of the words 'substantially less than the amount awarded'."
We accept the submission of Mr Lyons QC that this passage reflects the submission that was rejected in Moyses, rather than the view of the Land Appeal Court in that case. The statement by the Land Appeal Court at p274 of Moyses was in the following terms:
"Second, where the Court is considering whether it should award costs to an authority, it could be wrong to have regard merely to the amounts of the claim and of the award and of the value put in evidence by the authority. We would think that usually it would be more relevant to enquire whether the conduct of the claimant, including his making of an exorbitant claim, if he has made one, has been such as to force the authority; unreasonably and unnecessarily, into litigation."
Mr Hinson SC conceded that the passage of the learned Member's reasons set out above which is relied on by the appellant for its submission that the learned Member acted on a wrong principle was suggestive of a misunderstanding of what was said in Moyses. Mr Hinson SC submitted, however, that the passage must be considered in the context of the whole decision and it was then capable of being understood as reflecting a proper understanding of the approach for which Moyses is authority.
We accept that the earlier part of the learned Member's reasons did reflect a correct appreciation of the nature of the discretion, but this passage occurs in the critical part of the analysis of the relevance of the amount of compensation claimed by the appellant and the amount put forward by the respondent.
In addition the appellant relies on the conclusion of the learned Member found after he had completed his analysis of the other two issues. The learned Member stated:
"On the balance of evidence, I believe it was inevitable that the matter would eventually come to hearing. The actions of either party do not, in
my opinion, lead me to move away from the normal conclusion that costs should follow the event."
Mr Lyons QC submitted that this showed that the learned Member started from the position that he should award costs to the respondent, rather then exercising the discretion as to whether or not costs should be awarded to the respondent, because the amount of the compensation determined was nearer to that contended for by the respondent. Mr Hinson SC submitted that "the event" being referred to by the learned Member was the fact that the compensation had been determined at an amount nearer to that put in evidence by the respondent than the appellant's claim. Even if that were accepted, the approach taken by the learned Member in the conclusion set out above and in the passage which misstates the effect of Moyses reflects an assumption that if the amount which is awarded is closer to the amount for which the respondent finally contends than to the claim, prima facie an order for costs should be made in its favour. That does not accord with the principle set out in Moyses at 274 and which was restated in Yalgan at paragraphs (j) and (k) at 408.
We therefore accept that the learned Member's decision in relation to costs proceeded on a wrong principle. It is apparent from the statement made by the learned Member by way of conclusion that application of the wrong principle has affected the requisite exercise of the discretion in relation to costs. The matters which were relevant to the exercise of discretion such as the conduct of the appellant in the making and pursuit of the claim and the corresponding conduct of the respondent in responding to the claim were not considered by the learned Member in the context of whether or not an award for costs should be made to the respondent.
The learned Member made a number of findings about the conduct of both parties which are not challenged and are relevant to the exercise of the discretion in respect of the costs of the hearing. They were:
(a)there was no evidence to discredit the reasonableness of the actions of either party;
(b)there was some contribution by both parties in delaying settlement after the claim was first lodged with the respondent in September 1995 until it was finally filed in the Land Court in September 1999;
(c)it was inevitable that the claim would need final resolution by the Court both as a result of the extent of the claims made by the appellant and the reluctance of the respondent to deal with the matter.
There was no finding that the appellant's conduct had been such as to force the respondent unreasonably and unnecessarily into litigation.
When costs were argued before the learned Member, the appellant submitted that it was entitled to its costs. The respondent argued that the appellant should pay three-quarters of the respondent's costs of the hearing. When submissions were made in this Court on what was the appropriate order for costs of the hearing in the Land Court, if it were concluded that the discretion of the learned Member as to costs had miscarried, the appellant submitted that there should be no order as to costs of the hearing of the claim and the respondent submitted that the appellant should be ordered to pay half of the respondent's costs.
The respondent submitted that what was said in Kabale Holdings Pty Ltd v Chief Executive, Department of Transport (1997) 18 QLCR 166 at 200 was relevant to the exercise of the discretion on costs. That was an extreme case in that the claimant elected to argue issues which the constructing authority had correctly said were not supported by the law. Of the claim for disturbance of $7,578,117.44 only the costs of preparing the compensation claim assessed at $74,878 were allowed. Most of that claim was for damages for delay which the court had no jurisdiction to consider. The circumstances in which the claimant in that case was ordered to pay 80% of the costs of the constructing authority can be distinguished from this matter where the appellant put forward a case on a proper basis.
Even though the ultimate determination of compensation has been for an amount which is nearer to that contended for by the respondent rather than that contended for by the appellant, the appellant had to pursue its claim in the Land Court to recover a sum significantly greater than that for which the respondent finally contended. In fact the respondent's position that compensation should be determined at an amount of $51,207 plus disturbance items and interest did not emerge until the hearing. There was nothing in the history of the dealings between the parties to support the position that the appellant could recover the amount that has ultimately been determined as compensation by any means other than a hearing in the Land Court.
On the basis of the findings made by the learned Member about the conduct of both parties and that there was no finding that the appellant's conduct had forced the respondent unreasonably and unnecessarily into litigation, we have concluded that there should be no order as to costs of the hearing and determination in the Land Court.
Orders
We therefore make the following orders:
(i)The appeals are allowed.
(ii)The determination and orders made by the Land Court on 5 October 2000 are set aside.
(iii)The orders made by the Land Court on 20 February 2001 are set aside.
(iv)Compensation is determined in the sum of $186,137 and the respondent is ordered to pay the appellant that amount.
(v)It is further ordered that the respondent pay interest to the appellant on each item of the claim included in the determination of the compensation from the dates and at the rates identified by the learned Member in the reasons for judgment dated 5 October 2000 until the date of final payment of each item of claim in accordance with these reasons.
(vi)It is further ordered that each party have liberty to apply on 5 days' notice in writing to the other in respect of the calculation of interest, if the parties are unable to agree on the calculation required in accordance with these reasons.
(vii)It is further ordered that there be no order as to costs in respect of the hearing and determination of this claim for compensation in the Land Court.
It will be necessary to determine the issue of the costs of the appeals to this Court. Subject to any submissions from the parties on the question of these costs, because of the success of the appellant on the appeals, it would follow that the appellant should have its costs of the appeals.
(Mullins J) JUSTICE OF THE SUPREME COURT
(JJ Trickett) PRESIDENT OF THE LAND COURT
(RE Wenck) MEMBER OF THE LAND COURT
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