Alexandria Landfill Pty Ltd v Transport for NSW
[2020] NSWCA 165
•04 August 2020
Court of Appeal
Supreme Court
New South Wales
Medium Neutral Citation: Alexandria Landfill Pty Ltd v Transport for NSW [2020] NSWCA 165 Hearing dates: 6 to 8 May 2020 Date of orders: 4 August 2020 Decision date: 04 August 2020 Before: Basten JA at [1];
Macfarlan JA at [173];
Leeming JA at [386]Decision: Appeal dismissed with costs.
Catchwords: JUDGMENTS AND ORDERS – reasons – compulsory acquisition of land – assessment of compensation by Land and Environment Court – allegations of constructive failure to exercise jurisdiction and inadequacy of reasons – highly complex discounted cash flow exercise undertaken in protracted hearing – appeal confined to questions of law – minimum acceptable standard of reasons
CIVIL PROCEDURE – procedural fairness – judge expressed preference for one expert over another allegedly on the basis of material not in evidence – finding held properly based on evidence
CIVIL PROCEDURE – apprehension of bias – apprehension alleged to arise solely from outcome of case and reasons for judgment – impermissible approach
LAND LAW – compulsory acquisition of land – compensation for disturbance – s 59(f) Land Acquisition (Just Terms Compensation) Act – meaning of “other financial costs” – no actual use of the land by claimant – agency relationship not established
LAND LAW – compulsory acquisition of land – compensation for special value – s 57 Land Acquisition (Just Terms Compensation) Act – failure to establish relevant use – agency relationship not established
Legislation Cited: Land Acquisition (Just Terms Compensation) Act 1991 (NSW), ss 4, 37, 55, 56, 57, 59, 61; Pt 3, Div 4
Land and Environment Court Act 1979 (NSW), ss 22, 24, 37, 38, 57
Cases Cited: Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Ltd v Roads and Maritime Services (No 4) [2018] NSWLEC 31
Almona Pty Ltd v Roads and Traffic Authority of NSW [2008] NSWLEC 112; (2008) 160 LGERA 375
Apokis v Transport for NSW [2020] NSWCA 39
Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; [1949] HCA 26
Beale v Government Insurance Office (NSW) (1997) 48 NSWLR 430
Bisley Investment Corporation v Australian Broadcasting Tribunal (1982) 40 ALR 233
Boele v Rinbac Pty Ltd (2014) 88 NSWLR 381; [2014] NSWCA 451
Bronzel v State Planning Authority (1979) 21 SASR 513
Bunnings Group Ltd v Borg [2014] NSWCA 240
Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2
Chen v State of New South Wales [2014] NSWCA 41
Chief Commissioner of State Revenue v Adams Bidco Pty Ltd [2019] NSWCA 34
Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47
Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389; [1996] HCA 36
Cojocaru v British Columbia Women’s Hospital and Health Centre [2013] 2 SCR 357; 2013 SCC 30
Coote v Kelly [2013] NSWCA 357
Croucher v Cachia (2016) 95 NSWLR 117; [2016] NSWCA 132
CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 80 ALJR 458
Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2016) 216 LGERA 285; [2016] NSWLEC 39
Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2017) 94 NSWLR 554; [2017] NSWCA 73
Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26
DZH16 v Minister for Immigration [2020] FCCA 1041
Ebner v Official Trustee in Bankruptcy (2000) 205 CLR 337; [2000] HCA 63
El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33; 199 LGERA 198
EPS Constructions Pty Ltd v Mass Holdings Pty Ltd [2015] NSWCA 317
Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378
Fox v Percy (2003) 214 CLR 118; [2003] HCA 22
G Capital Corporation Pty Ltd v Roads and Maritime Services (2019) 100 NSWLR 771; [2019] NSWCA 234
Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187
Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276
Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352
Housing Commission of New South Wales v Tatmar Pastoral Co Pty Ltd (1983) 3 NSWLR 378
Hoy v Coffs Harbour City Council [2016] NSWCA 257; 218 LGERA 411
Hutchison Construction Services Pty Ltd v Fogg [2016] NSWCA 135
Keech v Sanford (1726) 25 ER 223
Kuligowski v Metrobus (2004) 220 CLR 363; [2004] HCA 34
Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [2010] NSWSC 818
Li v Attorney General for New South Wales [2019] NSWCA 95
LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166; [2012] FCAFC 90
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705; [2001] NSWCA 305
McDonald v Roads and Traffic Authority of NSW [2009] NSWLEC 105
Melino v Roads and Maritime Services (NSW) (2018) 98 NSWLR 625; [2018] NSWCA 251
Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48
Minister for Immigration and Citizenship v Li (2013) 249 CLR 332; [2013] HCA 18
Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48
Minister for Immigration v Yusuf (2001) 206 CLR 323; [2001] HCA 30
Mitchell v Cullingral Pty Ltd [2012] NSWCA 389
Mobbs v Valuer-General (1922) 6 LGR (NSW) 73
Moloney v Roads and Maritime Services (NSW) (2018) 98 NSWLR 651; [2018] NSWCA 252
Moreton Club v Commonwealth (1948) 77 CLR 253; [1948] HCA 21
New South Wales Land and Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231
Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110
Pettitt v Dunkley [1971] 1 NSWLR 376
Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57; [2001] HCA 22
Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33
Roads and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41
Roads and Traffic Authority of NSW v Blacktown City Council [2007] NSWCA 20
Roads and Traffic Authority of NSW v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223
Roads and Traffic Authority of NSW v Peak [2007] NSWCA 66
Robinson Helicopter Co Inc v McDermott [2016] HCA 22; 90 ALJR 679
Salomon v Salomon & Co Ltd [1897] AC 22
Scott v Davis (2000) 204 CLR 333; [2000] HCA 52
Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373
Sharp v Wakefield [1891] AC 173
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247
Spencer v The Commonwealth (1907) 5 CLR 418; [1907] HCA 82
State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In liq) [1999] HCA 3; 73 ALJR 306
State Super SAS Trustee Corporation v Cornes [2013] NSWCA 257
Studholme v Rawson [2020] NSWCA 76
Sydney Water Corporation v Caruso [2009] NSWCA 391; (2009) 170 LGERA 298
The Commonwealth v Milledge (1953) 90 CLR 157; [1953] HCA 6
The King v Connell; Ex parte The Hetton Bellbird Collieries Ltd (1944) 69 CLR 407; [1944] HCA 42
The King v The War Pensions Entitlement Appeal Tribunal; ex parte Bott (1933) 50 CLR 228; [1933] HCA 30
Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367
Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28
Turner v Minister of Public Instruction (1956) 95 CLR 245; [1956] HCA 7
Vakauta v Kelly (1989) 167 CLR 568; [1989] HCA 44
WAFK v Minister for Immigration and Multicultural and Indigenous Affairs (2003) 133 FCR 209; [2003] FCA 1293
Waterways Authority v Fitzgibbon [2005] HCA 57; 79 ALJR 1816
Whisprun Pty Ltd v Dixon [2003] HCA 48; (2003) 77 ALJR 1598
Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156
Category: Principal judgment Parties: Alexandria Landfill Pty Ltd (Appellant)
Transport for NSW (Respondent)Representation: Counsel:
Solicitors:
R McHugh SC / I Hemmings SC / M Seymour (Appellant)
RPL Lancaster SC / NM Eastman / MJ Astill (Respondent)
Addisons Lawyers (Appellant)
Norton Rose Fulbright Australia (Respondent)
File Number(s): 2019/251630 Decision under appeal
- Court or tribunal:
- Land and Environment Court
- Jurisdiction:
- Class 3
- Citation:
[2019] NSWLEC 98
- Date of Decision:
- 18 July 2019
- Before:
- Sheahan J
- File Number(s):
- 2016/155678
HEADNOTE
[This headnote is not to be read as part of the judgment]
In December 2014 the respondent (RMS) compulsorily acquired two parcels of land owned by the appellant (ALF) in St Peters, Sydney, for the purpose of building the WestConnex motorway. One of the parcels (Lot 2), with which this appeal was concerned, was 15.71ha in size and was being used for landfill and waste operations at the time of acquisition. ALF sought compensation for Lot 2 under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (JTC Act). The Land and Environment Court (LEC) determined that ALF was entitled to be paid about $45.7 million in respect of the market value of Lot 2. ALF then appealed on questions of law to this Court, pursuant to s 57 of the Land and Environment Court Act 1979 (NSW).
The principal issues on appeal were:
(1) Whether the primary judge constructively failed to exercise his jurisdiction;
(2) Whether the primary judge’s reasons for findings were inadequate;
(3) Whether there was a lack of procedural fairness arising out of the reasons of the primary judge for preferring the evidence of an expert called by RMS;
(4) Whether the primary judge’s judgment gave rise to an apprehension of bias;
(5) Whether the primary judge erred in assessing compensation for disturbance;
(6) Whether the primary judge erred in assessing special value.
The Court (Basten JA, Macfarlan JA and Leeming JA) dismissed the appeal, determining each of the above issues unfavourably to ALF:
In relation to Issues 1 (constructive failure to exercise jurisdiction) and 2 (adequacy of reasons):
(Per Basten JA, with Leeming JA in substantial agreement at [413]):
The premise underlying a constructive failure to exercise jurisdiction is that there has been an apparent exercise of jurisdiction of the court, but once the underlying issues and materials are teased out, it is demonstrated that a material issue presented for determination has not been resolved: [6]. A “constructive” failure to exercise jurisdiction includes any form of jurisdictional error which is not a mistaken express refusal to exercise the powers of the court, and the terminology has also been used where the adequacy of reasons has been challenged: [12]-[13].
Avon Downs Pty Ltd v Federal Commissioner of Taxation (1949) 78 CLR 353; [1949] HCA 26; Dranichnikov v Minister for Immigration and Multicultural Affairs (2003) 77 ALJR 1088; [2003] HCA 26; Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission (2000) 203 CLR 194; [2000] HCA 47; LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166; [2012] FCAFC 90; Cojocaru v British Columbia Women’s Hospital and Health Centre [2013] 2 SCR 357; 2013 SCC 30, referred to.
Where an appeal is confined to questions of law, the standard of reasons is such that it must be shown that the decision has not been reached capriciously or arbitrarily, but rationally: [29]. The reasons must thus reveal that all material factors have been identified and addressed, and that no prohibited considerations have been operative: [29].
Pettitt v Dunkley [1971] 1 NSWLR 376; Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33; Boele v Rinbac Pty Ltd (2014) 88 NSWLR 381; [2014] NSWCA 451; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Li v Attorney General for New South Wales [2019] NSWCA 95, referred to.
In so far as the complaint alleged a global failure to exercise jurisdiction, relevant factors include: the judge was entitled to reject the highly complex discounted cash flow exercise on which ALF relied; adoption of the submissions of one party on all material issues does not of itself demonstrate legal error; the judge heard the case over 50 days, resolved the ultimate issue and gave structured reasons identifying the key issues, evidence and submissions: [39], [46], [48]. In relation to the specific challenges raised, the primary judge made findings and gave adequate reasons, which were sometimes implicit: [60]-[61], [73], [85], [89].
(Per Macfarlan JA):
The extent of the obligation on courts to give reasons for their conclusions is very much dependent upon the context: [294]. The adequacy of reasons is not to be judged against a standard of perfection, but the question is whether they attained the minimum acceptable standard: [316]. In this case, the minimum standard is relevantly undemanding for several reasons: the LEC has to consider highly sophisticated and technical issues, with as much expedition as possible ([295], [317]); valuation issues often involve substantial subjective elements and need not be determined with mathematical precision ([318]); a pragmatic and functional approach is to be taken ([321]); a level of generality and implicit reasoning is acceptable ([322]-[323]); and the length and complexity of the proceedings is relevant ([324]). The primary judgment gave the essential reasons for his Honour’s decision and reached the minimum acceptable standard: [325]. The primary judge’s reasons were adequate in respect of each of the major issues presented to him for determination: [330]-[341].
Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33; New South Wales Land and Housing Corporation v Orr (2019) 100 NSWLR 578; [2019] NSWCA 231; Apokis v Transport for NSW [2020] NSWCA 39; Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373; Moreton Club v Commonwealth (1948) 77 CLR 253; [1948] HCA 21; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247; Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority (1991) 24 NSWLR 156, referred to. DZH16 v Minister for Immigration [2020] FCCA 1041; LVR (WA) Pty Ltd v Administrative Appeals Tribunal (2012) 203 FCR 166; [2012] FCAFC 90, distinguished.
(Additional observations of Leeming JA):
The invariable resolution of disputed points in RMS’s favour does not of itself indicate error: [387]-[388]. Although there was scant reasoning, more is required in order that there not merely be an error of fact: [395]-[396]. Although some errors in the fact finding process may amount to errors of law, one cannot safely transplant the principles applicable to appeals confined to questions of law: [403]. In this case, ALF did not establish legal (as opposed to factual) error: [412].
In relation to Issue 3 (lack of procedural fairness):
(Per Basten JA, Leeming JA agreeing at [417]):
The primary judge’s preference for one expert’s experience, being specific to the exercise undertaken in the present case, in circumstances where a different expert’s approach was the subject of cross-examination, provided no basis for a complaint of procedural fairness: [96].
CSR Ltd v Della Maddalena [2006] HCA 1; (2006) 80 ALJR 458, distinguished.
(Per Macfarlan JA):
The primary judge’s observations as to the experts’ relative qualifications and experience were open to be made on the evidence, and there was no need for his Honour to draw his intent to make them to the parties’ attention: [348].
In relation to Issue 4 (apprehended bias):
(Per Basten JA, Macfarlan JA and Leeming JA):
The outcome of a case and the judge’s reasons for judgment will not alone support a claim of reasonable apprehension of bias, based on prejudgment: [99], [353], [413].
Michael Wilson & Partners Ltd v Nicholls (2011) 244 CLR 427; [2011] HCA 48; Studholme v Rawson [2020] NSWCA 76, referred to.
In relation to Issue 5 (disturbance):
(Per Basten JA, Leeming JA agreeing with additional reasons at [414]-[416]):
On its proper construction, s 59(f) only covers financial costs reasonably incurred by a person with an interest in the land acquired: [116]. The best approach to construction is to read the phrase “other financial costs” in s 59(f), being costs relating to the actual use of the land at the date of acquisition, as not encompassing loss of the opportunity to earn future profits: [137].
G Capital Corporation Pty Ltd v Roads and Maritime Services (2019) 100 NSWLR 771; [2019] NSWCA 234; Roads and Maritime Services (NSW) v United Petroleum Pty Ltd (2019) 99 NSWLR 279; [2019] NSWCA 41, referred to. Almona Pty Ltd v Roads and Traffic Authority of NSW [2008] NSWLEC 112; (2008) 160 LGERA 375, distinguished. El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33; 199 LGERA 198; Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352, not followed.
ALF did not actually use Lot 2, and did not establish that the user used it as its agent: [142]. In relation to ALF’s assertion that RMS was estopped from denying that an agency relationship existed, there was no factual finding of the kind apparently relied on by ALF in the course of the previous proceedings: [142], [145].
In regard to the disturbance claim for business disruption, the trial judge was correct to find that ALF failed to establish any causal relationship: [154]. Furthermore, it was patently not a claim in relation to the “actual use” of Lot 2: [154]. With regards to the disturbance claim for relocation costs, the business carried on on Lot 2 was not carried on by ALF and ALF did not incur costs of any relocation: [160].
(Per Macfarlan JA):
The primary judge correctly held that s 59(f) was inapplicable in the absence of ALF establishing that there was an “actual use” of Lot 2 by it at the date of acquisition: [358]-[359]. The mere fact that land is used by a subsidiary of a holding company which is the owner of the land does not establish actual use by the holding company: [361].
G Capital Corporation Pty Ltd v Roads and Maritime Services (2019) 100 NSWLR 771; [2019] NSWCA 234, referred to.
The issue of agency in the present proceedings was not determined in the earlier litigation, in part because in those proceedings the identity of the principals was not determined: [370]-[371]. No estoppel therefore arises: [372]. The agency relationship was not established by the evidence in the present proceedings as ALF did not establish that it (as distinct from a related company) incurred costs or derived revenue in connection with the business on Lot 2: [377].
In relation to Issue 6 (special value):
(Per Basten JA, Leeming JA agreeing at [417], and Macfarlan JA):
The primary judge expressly applied the language of s 57 of the JTC Act and did not apply the Bronzel test in preference: [166]-[168], [380]. Further, the primary judge could not be criticised for assuming the continued relevance of Bronzel: [381] (Macfarlan JA). ALF failed to establish relevant use, as ALF did not use the land itself and its “agency claim” was rejected: [169], [383].
Bronzel v State Planning Authority (1979) 21 SASR 513; Roads and Traffic Authority of NSW v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223, referred to.
Judgment
-
BASTEN JA: In December 2014 the respondent, then known as Roads and Maritime Services, acquired a 15.7 hectare parcel of land, and another small parcel, owned by the appellant, Alexandria Landfill Pty Ltd, for the purposes of the WestConnex project. There was a dispute as to the amount due to the appellant under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (“Land Acquisition Act”). The dispute was resolved by a judgment of the Land and Environment Court in an amount of some $50 million, which included both parcels. [1]
1. Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 6) [2019] NSWLEC 98 (“LEC Judgment”).
-
The appellant, dissatisfied with the judgment, appealed to this Court on a question of law, pursuant to s 57 of the Land and Environment Court Act 1979 (NSW). The notice of appeal set out nine grounds, limited to the payment assessed for the 15.7ha parcel identified as Lot 2. The grounds of appeal were, briefly stated:
constructive failure to exercise jurisdiction;
failure to provide any, or adequate, reasons for findings;
procedural unfairness in preferring a key expert for the respondent;
apprehended bias in finding for the respondent on all material issues;
(5), (6) and (7) errors in assessing claims for loss attributable to disturbance;
(8) and (9) errors in assessing “special value” of the land.
-
Grounds 1 and 2 were primarily directed to the assessment of the market value of Lot 2. Each ground had particulars, some of which overlapped with elements of grounds 3-9, and must be treated as raising an issue in the alternative in so far as the latter grounds all assume that a particular matter was determined and that reasons were disclosed. Thus, ground 2(d) alleged that no reasons, or no adequate reasons, were given for rejecting claims that Dial A Dump Industries Pty Ltd operated the business on Lot 2 on behalf of the appellant; grounds 5 and 6 attacked the reasons given for disposing of that issue.
-
The primary focus of the appellant’s submissions was grounds 1 and 2. However, they were formulated in terms which tended to confuse. It is convenient to address those grounds first and together and to explain their interrelationship.
Grounds 1 and 2
interrelationship of grounds 1 and 2
-
To understand the scope and interrelationship of grounds 1 and 2, it is necessary to set them out in full.
1. The Court erred in respect of a decision on a question of law because it constructively failed to exercise jurisdiction in that it failed to treat with the disputed evidence and competing submissions in a way that produced a rational and reasoned conclusion as to the assessment of the compensation having regard to s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act). The Court:
a. Failed to determine inputs necessary to be determined for the proper use of the discounted cash flow methodology (DCF1) in order to determine the highest and best use of and the market value of the land.
b. Failed to determine the highest and best use of the land and the market value of the land by a critical assessment of the contested issues in dispute. The Court failed to make any critical assessment of the Respondent's case and failed to consider or determine substantial integers of the Appellant's criticism of the Respondent's case.
c. Failed to perform its function with respect to the use of expert evidence:
(i) by failing to examine and engage with the substance of the experts' competing opinion(s) for the purpose of forming the Court's own assessment including by reference to documentary evidence;
(ii) to the extent that the Court rejected the evidence of the experts called in the Appellant's case, by accepting the evidence of the experts called in the Respondent's case in its entirety, by default;
(iii) by concluding that expert evidence from a critical witness, Dr Ferrier, was to be preferred on the basis of alleged experience in Court matters under the Act.
d. Failed to determine the Appellant's claims under ss 59(1)(c) at all; and
e. Failed to determine the Appellant's claims under ss 59(1)(f) on a critical review of the contested evidence including failing to refer to documentary and lay evidence of the Appellant.
2. Further, or in the alternative, the Court erred in respect of a decision on a question of law by failing to provide any, or any adequate reasons, with respect to substantive contested issues involving:
a. The inputs to be determined for use in the DCF;
b. The determination of the highest and best use of the land;
c. The assessment of market value;
d. The existence of a relationship between the Appellant and Dial a Dump Industries Pty Limited (DADI) by which the conduct of, and losses incurred by, DADI ought be attributed to the Appellant; and
e. The Appellant's claims under s 59(1)(c).”
-
The premise underlying a “constructive” failure to exercise jurisdiction is that there has been an apparent exercise of the jurisdiction of the court, but one that has failed in a way which can only be teased out by reference to the underlying issues and the materials presented to the court. It may then be demonstrated that a material issue presented for determination has not been resolved. By contrast, a failure to give adequate reasons implies that the relevant issues have been identified, addressed and resolved, but the reasons for reaching the conclusion have not been adequately expressed.
-
Despite the conceptual difference between the two complaints, they are related in a practical way. Because there is no means of interrogating a judge as to his or her intellectual processes, evidence that issues were not addressed can usually only be demonstrated by reference to the reasons. Thus, on the assumption that the judge addressed in the reasons all material matters, the absence of reference to a particular matter may allow the inference that it was not addressed and determined. [2]
2. Waterways Authority v Fitzgibbon [2005] HCA 57; 79 ALJR 1816 at [129]-[130] (Hayne J).
(a) constructive failure to exercise jurisdiction – principles
-
The phrase “constructive failure to exercise jurisdiction” has been used by the courts in different contexts. It is convenient to start with the process of inference by which error may be identified. As explained by Dixon J in Avon Downs Pty Ltd v Federal Commissioner of Taxation,[3] a case where reasons were not provided:
3. (1949) 78 CLR 353 at 360; [1949] HCA 26.
“The conclusion he has reached may, on a full consideration of the material that was before him, be found to be capable of explanation only on the ground of some such misconception. If the result appears to be unreasonable on the supposition that he addressed himself to the right question, correctly applied the rules of law and took into account all the relevant considerations and no irrelevant considerations, then it may be a proper inference that it is a false supposition. It is not necessary that you should be sure of the precise particular in which he has gone wrong. It is enough that you can see that in some way he must have failed in the discharge of his exact function according to law.”
This reasoning can be applied where the claim that the judge did not address a material part (or the whole) of the case presented by the applicant is derived solely from the reasons for judgment.
-
As to the relevant criterion to be applied, in Dranichnikov v Minister for Immigration and Multicultural Affairs,[4] Gummow and Callinan JJ stated:
4. (2003) 77 ALJR 1088; [2003] HCA 26.
“[24] To fail to respond to a substantial, clearly articulated argument relying upon established facts was at least to fail to accord Mr Dranichnikov natural justice. …
[25] The question remains however whether what occurred, either characterised as a failure to accord natural justice or as that, and more, which we consider it to be, including a constructive failure to exercise jurisdiction, entitles Mr Dranichnikov to relief under s 75(v) of the Constitution.”
Gleeson CJ, dissenting as to the outcome, agreed with the principles expressed in other judgments. [5] Kirby J reasoned to similar effect in the following passage:
5. Dranichnokov at [1].
“[86] The applicant submitted that he was entitled to the issue of constitutional writs under s 75(v) on the basis that the Tribunal had constructively failed to exercise its jurisdiction in the manner contemplated by the Act. [6] This principle of relief has been applied in recent times, including in immigration decisions, where it is shown that the decision-maker "failed to consider the substance of [the application] and could only have failed to do so because he misunderstood what is involved in the Convention definition of 'refugee'". [7]
6. R v Toohey; Ex parte Northern Land Council (1981) 151 CLR 170 at 267-268; cf Ex parte Hebburn Ltd; Re Kearsley Shire Council (1947) 47 SR (NSW) 416 at 422
7. Re Minister for Immigration and Multicultural Affairs; Ex parte Miah (2001) 206 CLR 57 at 82 [81].
…
[88] Obviously, it is not every mistake in understanding the facts, in applying the law or in reasoning to a conclusion that will amount to a constructive failure to exercise jurisdiction. But where, as here, the mistake is essentially definitional, and amounts to a basic misunderstanding of the case brought by an applicant, the resulting flaw is so serious as to undermine the lawfulness of the decision in question in a fundamental way.”
-
The use of the term “constructive failure” in this context may be understood by reference to a passage in the reasoning in Coal and Allied Operations Pty Ltd v Australian Industrial Relations Commission,[8] where Kirby J stated:
8. (2000) 203 CLR 194; [2000] HCA 47.
“[81] The remedies of judicial review invoked in this case are only available to require the correction of a category of legal mistake that goes beyond an ‘error within jurisdiction’ and amounts (relevantly) to a ‘jurisdictional error’. Where a constitutional writ of mandamus is invoked, it will rarely be the case that an officer or authority with the power to decide defiantly refuses to exercise powers or functions conferred by legislation whilst acknowledging their existence and applicability. Ordinarily, in modern circumstances, what is involved is a constructive failure on the part of the officer or authority concerned to exercise such functions and powers. Such constructive failure may be traced to a seriously mistaken view of the facts or an error of law concerning the scope of the decision-maker's functions or powers.”
-
In Re Minister for Immigration and Multicultural Affairs; Ex parte Miah [9] Gaudron J identified statements of jurisdictional error generally as a constructive failure to exercise jurisdiction. [10]
9. (2001) 206 CLR 57; [2001] HCA 22.
10. Miah at [80]-[81].
-
These decisions in the High Court suggest that any form of jurisdictional error which is not a mistaken express refusal to exercise the powers of the court may be described as a constructive failure to exercise jurisdiction. [11] Importantly, there is no suggestion that it involves a novel or expanded category of jurisdictional error.
11. See also The King v The War Pensions Entitlement Appeal Tribunal; ex parte Bott (1933) 50 CLR 228 at 242-243 (Rich, Dixon and McTiernan JJ); [1933] HCA 30.
-
The terminology has also been used where the adequacy of reasons has been challenged. In LVR (WA) Pty Ltd v Administrative Appeals Tribunal,[12] that language was used with respect to detailed reasons given by the Tribunal which constituted an unattributed recitation of the submissions of one party:
12. (2012) 203 FCR 166; [2012] FCAFC 90 (North, Logan and Robertson JJ).
“[5] Although the appeal raises a short and orthodox question, the circumstances in which that question arises are, in our experience, unique. The reasons of the Tribunal extend to 59 paragraphs and, with the exception of a small number of words, phrases and sentences, were taken verbatim and without attribution from the written submissions filed in the Tribunal on behalf of the Commissioner. … Of themselves, these circumstances would give rise to a serious concern that the Tribunal had failed to bring its own mind to bear on the issues before it and thus that it had constructively failed to exercise its jurisdiction. …The position in the present case is not, however, left at that level of generality because of an additional fact. Thus we do not need to decide and do not decide whether or not there has been a constructive failure to exercise jurisdiction.
[6] That additional fact is that the extensive copying, without attribution, of the Commissioner's written submissions filed before the hearing in the Tribunal did not extend to the only paragraphs of those submissions which considered the content of the affidavit of Mr HB Schokker sworn 21 June 2010 (the Schokker affidavit). …”
-
The Full Court referred to the practice of the Refugee Review Tribunal of using “standard paragraphs” to deal with common situations. It distinguished that circumstance, referring to the judgment of French J in WAFK v Minister for Immigration and Multicultural and Indigenous Affairs. [13]
13. (2003) 133 FCR 209; [2003] FCA 1293.
“[85] … In that case the issue arose from the use by the Refugee Review Tribunal of uniform text in some sections of its reasons, including sections in which it made findings about the credibility of the appellant. Counsel for the appellant submitted that the overwhelming majority of the ‘independent information’ which the Tribunal set out in its reasons was copied from previous Tribunal decisions. French J did not consider that, even if a cut and paste technique had been adopted, as seemed likely, that was indicative of a failure by the Tribunal to carry out its statutory function. While French J thought it would be preferable for Tribunal members in drafting their reasons to express their conclusions in their own words rather than those of another decision by another member, failure to do so did not indicate that the Tribunal member had not applied his or her mind to the facts or that the Tribunal member did not in fact hold the view expressed in the reasons given. French J found that no jurisdictional error was disclosed.”
-
The Full Court in LVR (WA) concluded:
“[91] In our view, speaking generally, it is more appropriate to consider these matters by reference to whether or not the tribunal has discharged its statutory role, its jurisdiction to review the decision before it, rather than to approach it by reference to procedural fairness or the inflexible application of policy or acting under dictation. In our view the fundamental question is whether there has been a constructive failure on the part of the decision-maker to perform its allotted task. In a particular case it may also be that adopting submissions has the consequence that the tribunal has failed to disclose its reasoning.”
-
There followed a valuable review of the consideration of similar inadequacies in reasoning in both Australian and North American jurisdictions. In the course of that discussion, the Full Court referred to a matter reserved in the Supreme Court of Canada, judgment in which has since been delivered. In Cojocaru v British Columbia Women’s Hospital and Health Centre [14] the Supreme Court addressed the circumstances in which a trial judge had copied submissions of one party without attribution, which were adopted as his own with the addition of some further reasoning. McLachlin CJ concluded:
14. [2013] 2 SCR 357; 2013 SCC 30.
“[35] The concern about copying in the judicial context is not that the judge is taking credit for someone else’s prose, but rather that it may be evidence that the reasons for judgment do not reflect the judge’s thinking. They are not the judge’s reasons, but those of the person whose prose the judge copied. Avoiding this impression is a good reason for discouraging extensive copying. But it is not the copying per se that renders the process of judgment writing unfair. A judge may copy extensively from the briefs in setting out the facts, the legal principles and the arguments, and still assess all the issues and arguments comprehensively and impartially. No one could reasonably contend that the process has failed in such a case.
[36] To sum up, extensive copying and failure to attribute outside sources are in most situations practices to be discouraged. But lack of originality and failure to attribute sources do not in themselves rebut the presumption of judicial impartiality and integrity. This occurs only if the copying is of such a character that a reasonable person apprised of the circumstances would conclude that the judge did not put her mind to the evidence and the issues and did not render an impartial, independent decision.”
-
While ground 1 referred to a failure to produce “a rational and reasoned conclusion”, there was no submission that the award of compensation was “irrational”; nor was there any ground alleging that it was legally unreasonable in the sense accepted in Minister for Immigration and Citizenship v Li. [15]
15. (2013) 249 CLR 332; [2013] HCA 18.
(b) adequacy of reasons
-
Senior counsel for the appellant articulated his primary argument in language adapted from the reasoning of Asprey JA in Pettitt v Dunkley: [16]
16. [1971] 1 NSWLR 376 at 382C-E.
“… where in a trial without a jury there are real and relevant issues of fact which are necessarily posed for judicial decision, or where there are substantial principles of law relevant to the determination of the case dependent for their application upon findings of fact in contention between the parties, and the mere recording of a verdict for one side or the other leaves an appellate tribunal in doubt as to how those various factual issues or principles have been resolved, then, in the absence of some strong compelling reason, the case is such that the judge's findings of fact and his reasons are essential for the purpose of enabling a proper understanding of the basis upon which the verdict entered has been reached, and the judge has a duty, as part of the exercise of his judicial office, to state the findings and the reasons for his decision adequately for that purpose. If he decides in such a case not to do so, he has made an error in that he has not properly fulfilled the function which the law calls upon him as a judicial person to exercise and such a decision on his part constitutes an error of law.”
-
This principle does not lead to the conclusion that, where the appellant has crafted its case in a particular way, it identifies facts “which are necessarily posed for judicial decision”; nor, where the respondent takes issue with any such fact or facts, is the case therefore dependent upon the “findings of fact in contention between the parties”.
-
On an appeal limited to questions of law, it does not provide a basis for reviewing the judge’s determination of what factual matters are in issue, or the manner in which the judge has determined them. This point was addressed in Resource Pacific Pty Ltd v Wilkinson [17] in the following terms:
17. [2013] NSWCA 33.
“[9] The adoption, on an appeal limited to errors in point of law, of language derived from the supervisory jurisdiction of the court must be undertaken with caution. It is, no doubt, an error of law for the trial court to fail to exercise its constitutional function, which is to resolve a dispute presented to it by the parties by applying the law in accordance with proper procedure. In the present case, that function was almost entirely satisfied by the resolution of disputed factual issues. The term ‘constructive failure to exercise jurisdiction’ is used to describe a situation where the court has purported to resolve the parties' dispute but has not in fact done so. Thus, particularly with a court or tribunal required to provide reasons for its decision, it may become apparent from those reasons that a material issue has simply not been addressed or that material evidence has been overlooked. Examples of circumstances which may properly give rise to a concern on this kind were referred to by Gummow ACJ and Kiefel J in Minister for Immigration and Citizenship v SZMDS [2010] HCA 16; 240 CLR 611 at [23]. On occasion, the function of the decision-maker (which should include a court) has been identified as being to ‘give proper, genuine and realistic consideration to the merits of the case’: Kahn v Minister for Immigration and Ethnic Affairs (1987) 14 ALD 291 (Gummow J). (The language probably derived from its use in equity to describe the proper exercise by a trustee of a discretionary power in relation to the trust.) Although the nature of the exercise, particularly with respect to discretionary powers, involves no bright-line boundary, care must be taken that the statutory mandate of the appellate court, limited to errors of law, is not breached by adopting as a standard inherently value laden language: see Minister for Immigration and Citizenship v SZJSS [2010] HCA 48; 243 CLR 164 at [30].”
-
As further explained in Boele v Rinbac Pty Ltd: [18]
18. (2014) 88 NSWLR 381; [2014] NSWCA 451.
“[54] This approach, followed in Goodwin v Commissioner of Police [2012] NSWCA 379 at [19]–[25], is, perhaps, a preferable conceptual framework than the reference in Dranichnikov to a failure to accord natural justice. The word constructive may not be entirely apt, but it is understood as meaning ‘purported’, in the sense of there being the appearance of an exercise of jurisdiction, but one which does not conform to the requirements of the law. Whatever language is used, such a failure will generally involve jurisdictional error, analogous to a legally erroneous refusal to exercise an available power: cf Public Service Association of South Australia Incorporated v Industrial Relations Commission of South Australia [2012] HCA 25; 249 CLR 398 at [34] (French CJ) and [65] (Gummow, Hayne, Crennan, Kiefel and Bell JJ). It means that the process of decision-making in the tribunal, being the very function vested in the tribunal by statute, has miscarried.”
-
It follows that the relevant grounds in a case alleging error of law are not expanded by reference to a constructive failure to exercise jurisdiction. If there has been jurisdictional error (including with respect to the determination of jurisdictional facts) there will have been error of law which can be addressed on an appeal limited to a question of law. In a case where a court has set out the competing material (thus engaging with an issue) and decides in favour of a particular result, without explaining why, the reasons will fail to meet the criterion of transparency required of judicial decision-makers. Where some reasons are given, expressly or implicitly the element of transparency may well be met, even if an appellate court considering an appeal by way of rehearing would find the reasons flawed.
-
To the extent that the appellant is not able to demonstrate that the trial judge failed to consider any essential element of the claim for compensation, a separate question will arise as to whether the reasons given for the outcome were sufficient in law.
-
If all the material evidence and submissions are identified in the reasons, the basis of challenge becomes a failure to record the process of reasoning from the evidence to a particular finding or outcome. But at what level of detail does the law require the process of reasoning to be recorded? In Pettitt v Dunkley [19] the error was in “the mere recording of a verdict for one side” without any statement of the findings made with respect to essential facts or reasons for decision. [20] In Soulemezis v Dudley (Holdings) Pty Ltd [21] this Court considered a challenge to a judgment in the Compensation Court rejecting a claim for workers’ compensation. The hearing “took place over four days scattered over a period of more than a year”. [22] The judge found that the applicant suffered a work injury, but awarded damages only for a closed period. The applicant sought to challenge the finding as to the termination date of the period. She was limited to an appeal in point of law. The termination date was the date on which a CAT scan had been obtained which showed no disc lesion consistent with her symptoms. The judge’s brief conclusion was:
19. [1971] 1 NSWLR 376, 383C.
20. Ibid at 383C.
21. (1987) 10 NSWLR 247.
22. Soulemezis at 249E (Kirby P).
“I am satisfied on the evidence that the applicant was totally incapacitated from 21 December 1982 to 17 January 1984 and fit for all work thereafter. I am satisfied that at the date of the CAT scan report the applicant was fit for all work.”
-
Mahoney JA described the finding as involving “some incongruity”, [23] but was not satisfied that the reasons were inadequate. He identified the question as “not whether some reasons must be given relevant to the findings of fact which are made, but what reasons are required.” [24] Mahoney JA rejected the idea that there was a “formula the application of which to the instant case will indicate what, in that case, the judge must do.” He regarded it as sufficient that “by his reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he has acted.” [25] In response to the submission that the judge “did not explain, or explain with sufficient clarity, how the CAT scan could and did lead him to the conclusion that after 17 January 1984 the worker’s condition changed”, [26] Mahoney JA noted that conclusions of that kind “are not arrived at by syllogisms”, but rather: [27]
23. Soulemezis at 264G.
24. Soulemezis at 268C.
25. Soulemezis at 273E.
26. Soulemezis at 273F.
27. Soulemezis at 273-274.
“The weight which a judge will give to the evidence of a witness will often be not capable of rationalisation beyond the statement: having heard him, I am not satisfied that I should accept what he says. The weight which a judge gives to a particular fact may be affected by, as it has frequently been put, his experience and, in particular, his experience of the significance of that fact in the order of things. … His reasons, in the particular case, may partake as much of intuition based on experience as on formal and deductive reasoning.”
-
The other member of the majority in Soulemezis, McHugh JA, explained why, historically, the obligation of a judge in a civil case to give reasons had not been given careful consideration until the decline of juries in civil matters and the growth of appeals with respect to factual issues. [28] McHugh JA identified the basis of the rule that a judge must give reasons in the following terms: [29]
28. Soulemezis at 277.
29. Soulemezis at 278-279.
“[A] judicial decision must be a reasoned decision arrived at by finding the relevant facts and then applying the relevant rules or principles. A decision which is made arbitrarily can not be a judicial decision; for the hallmark of a judicial decision is the quality of rationality: cf Lord Denning, Freedom Under the Law (1949) at 91. However, without the articulation of reasons, a judicial decision cannot be distinguished from an arbitrary decision.”
-
The factual assertion in that statement may be doubted: it is only where statute has intervened that administrative decision-makers are required to give reasons, but judicial review has long been available on the basis that a particular decision is arbitrary or capricious. [30] A court might find that a decision was arbitrary or capricious, or the result of some undisclosed error of law, if on the material before the decision-maker the decision actually reached could not be explained on a rational basis. [31] Nevertheless, the statement is clearly correct in identifying the rationale for the requirement that a judge give reasons.
30. The King v Connell; Ex parte The Hetton Bellbird Collieries Ltd (1944) 69 CLR 407 at 430-432 (Latham CJ); [1944] HCA 42, referring to Sharp v Wakefield [1891] AC 173, 179.
31. Avon Downs at 360 (Dixon J).
-
McHugh JA noted that “the present case is concerned with a finding of fact which involves no legal standard and is not subject to appeal.” [32] He continued: [33]
32. Soulemezis at 281F.
33. Soulemezis at 282C.
“It would be quite erroneous to find as a fact that the applicant was fit for work from the date of the CAT scan simply because the CAT scan failed to reveal any evidence of unfitness. However, the question is not whether his Honour's finding that the applicant was ‘fit for all work’ after 17 January 1984 was correct. It is whether his Honour gave reasons, however erroneous, for that finding. While it is true that his Honour did not expressly give any reasons for the finding, his reasons for judgment show quite clearly in my opinion that he held that the applicant was fit for work because the CAT scan did not reveal any abnormality. It is not to the point that his Honour's finding was erroneous or as counsel for the applicant claimed, perverse. … Accordingly there was no failure to give reasons sufficient to constitute an error of law.”
-
Where the process of fact finding is unreviewable except to the extent that it reveals an error of law, the reasons required must be sufficient to demonstrate that the legal limits of the process have not been contravened. Having regard to the purpose of giving reasons, the standard is properly identified negatively: it must be shown that the decision has not been reached capriciously or arbitrarily, but rationally. The reasons must thus reveal that all material factors have been identified and addressed, and that no prohibited considerations have been operative. If there is an available process of reasoning from the evidence to the outcome which has been adopted, either expressly or by implication, the appellate court should be slow to reach the conclusion that the function of the trial court has not been exercised according to law.
-
Despite the suggestion, frequent in recent years, that the reasons should disclose that the judge has “grappled with” the issues to be resolved, this is a metaphor which provides little guidance as to the intensity or nature of the intellectual process required as a matter of law. Further, the description seems directed to reasons as evidence of a failure to exercise jurisdiction, and not as a standard of disclosure of the process in fact adopted.
-
In any event, such language is inapt to impose a particular standard. The standard should not be set at a level which risks an appellate review involving an assessment of the evidence, a function which is conferred exclusively on the trial judge where the appeal is confined to questions of law.
-
So much is clear from the reasoning of the majority in Soulemezis. It is true that McHugh JA stated in Soulemezis that where there was no right of appeal against findings of fact, “a failure to state the basis of or even a crucial finding of fact, if it involves no legal standard, it will only constitute an error of law if the failure can be characterised as a breach of the principle that justice must be seen to be done.” [34] However, the adage that “justice must not only be done, but be seen to be done”, whilst a way of identifying the obligation to give reasons as part of the principle of open justice, provides no further assistance in identifying the standard to be applied.
34. Soulemezis at 281B.
-
In Li v Attorney General for New South Wales,[35] Brereton J (in dissent) stated:
35. [2019] NSWCA 95.
“[131] Although the underlying issue is fundamentally the same – whether the judge has applied his or her independent mind to the evidence and the issues so as to render an independent and impartial decision – the approach adopted by the Canadian Court in Cojocaru gives much greater emphasis to a presumption of judicial integrity and impartiality, and less to the appearance of justice having been done by the bringing to bear of an active, impartial and independent judicial mind, than does the jurisprudence in this country. I would not accept that one commences from the position that there is a presumption to be displaced; the essential issue is not only whether there has been, but whether there is also seen to have been, from the perspective of a reasonable person in the position of the unsuccessful party, an independent and impartial judgment. Moreover, I am unpersuaded that absence of attribution is entirely irrelevant; its danger lies in the appearance of obscuring what is being done, which upon being discovered by the unsuccessful party is calculated to exacerbate a sense of grievance from the appearance that its opponent’s case has been adopted sub silentio, while its own was ignored.
[132] Nonetheless, it is clear that extensive replication, whether or not attributed, of the submissions of one or both parties will not of itself amount to error, so long as the reasons sufficiently reveal that the decision-maker gave independent consideration to the relevant issues. However, this requires that the reasons appear to a reasonable person in the position of the unsuccessful party to demonstrate that the decision-maker has actively engaged with its submissions and contentions, and brought to bear an independent and impartial judgment founded on reason and logic. That requirement will not be satisfied if the reasons leave an impression that arguments have been embraced without serious consideration having been given either to the contrary point of view, or to the application of an independent point of view, as will be the case where reasons which substantially incorporate, reproduce and/or adopt the submissions of one party do not contain indicia, beyond mere formulaic and stylistic changes, that they are the product of the active application of an independent and impartial mind, which has absorbed and analysed the competing submissions to reach a personal conviction on the part of the judge that the orders to be made are just and in accordance with law.”
-
The majority in Li v Attorney General rejected the phrase “justice is not seen to have been done” as a criterion of validity of judicial decision-making, as opposed to a value underlying the obligation to provide reasons. [36] It followed that an assessment of the adequacy of reasons was not to be undertaken by reference to the opinion of a reasonable person in the position of the unsuccessful party.
constructive failure to exercise jurisdiction – application
36. Li at [55]-[67].
-
The argument was in part presented as a global proposition that the trial judge had to resolve the case presented by the parties and failed to do so. In practice that meant the court had to determine the case as presented by the appellant at trial. The appellant submitted that the approach adopted by it was accepted by the respondent as the correct approach; however, that statement concealed important differences between the parties.
-
The function conferred on the Court was that set out in Pt 3, Div 4 of the Land Acquisition Act. The amount of compensation was to be determined having regard to the six matters identified in s 55. The first, market value, was to be determined in accordance with s 56. At the date of acquisition (December 2014) these provisions read as follows:
55 Relevant matters to be considered in determining amount of compensation
In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):
(a) the market value of the land on the date of its acquisition,
(b) any special value of the land to the person on the date of its acquisition,
(c) any loss attributable to severance,
(d) any loss attributable to disturbance,
(e) solatium,
(f) any increase or decrease in the value of any other land of the person at the date of acquisition which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.
56 Market value
(1) In this Act:
market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):
(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and
(b) any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and
(c) any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.
(2) When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.
-
The appellant sought to value its fee simple interest in Lot 2 by proposing a staged mixture of uses as reflecting the highest economic value of the land. It contended that over a period of eight years (years 1-8) the land would be used for a waste processing business, involving some recycling and the use of uncontaminated residue as landfill; once areas were filled and levelled, they would be subdivided and sold for commercial or industrial development. A further scheme was proposed for valuing the land from years 9-29, when recycling and waste transfer would continue.
-
This process inevitably involved elements of risk and uncertainty at each stage of the process. The risks were identified and (at least in theory) built into the DCF model. However, the argument that each of the lines in dispute in the model was to be resolved by the Court was, the appellant accepted, subject to a qualification, namely that the Court could depart from the model proposed, but only in a way supported by the evidence and justified in its reasons. The appellant submitted that the Court below not having taken and justified an alternative approach, it was required to resolve the disputed elements within the DCF model.
-
That reasoning cannot be accepted without qualification; it sought to impose a rigid straightjacket on the Court’s valuation function. That function involves an essentially factual exercise, [37] limited by the requirements of procedural fairness. The valuation exercise involved in assessing the market value of the land required consideration of the likely price to be agreed between a willing but not anxious buyer and a willing but not anxious vendor. The knowledge each would be expected to possess, and how each might be expected to obtain it, was considered in Apokis v Transport for NSW at [36]-[43]. The judge was entitled to reject the highly complex exercise undertaken by the appellant, which sought to reduce a myriad of uncertainties to a set of values which could in turn be subjected to an arithmetical calculation providing a single output. There was expert evidence, which the judge accepted, which expressly dismissed parts of the exercise as implausible and other parts as speculative. The extent to which the reasoning in this regard was adequate will be addressed below.
37. Apokis v Transport for NSW [2020] NSWCA 39 at [45]; Turner v Minister of Public Instruction (1956) 95 CLR 245 at 267-268 (Dixon CJ); [1956] HCA 7.
-
A failure to exercise jurisdiction may be global, or it may be particular. The listing of specific issues in ground 1 suggested that the complaint was addressed only to specific issues. There were in substance three elements to the appellant’s case in the Land and Environment Court, namely claims based upon (i) the market value of the land; (ii) special value to the appellant as owner, and (iii) claims for loss attributable to disturbance. Both grounds focussed on (i) but also addressed (iii) in pars d and e.
-
The appellant’s case at the global level involved three major complaints, namely that:
the parties presented an assessment of value based upon the use of a discounted cash flow (DCF) methodology, which the judge failed to follow;
all disputed issues which were resolved were resolved in favour of the respondent, and
the competing evidence was not examined and assessed.
-
It is helpful to provide some further explanation of each of these challenges, before considering the legal basis upon which a constructive failure to exercise jurisdiction may be demonstrated.
-
First, the use of the DCF methodology was adopted because there were no comparable sites which would allow a valuation of the land on a comparative basis. [38] Rather, the land was to be valued according to its commercial or industrial use. It was largely used as a waste disposal site, with a recycling component and a landfill component. Ultimately the land would be subdivided and sold for industrial or commercial purposes. The landfill exercise was expected to take eight years from the date of acquisition and the DCF methodology was separately applied to years 1-8 and thereafter, years 9-29, as separate exercises. The calculation was broken down into approximately 300 variables, of which it was said 100 were in dispute and required resolution by the trial judge.
38. Comparable sites were relied on to value sales after subdivision: LEC Judgment at [413]ff, [662].
-
The second matter, namely that the disputes were ultimately resolved favourably to the respondent, either raised a claim of partiality, or it challenged the adoption by the judge of the reasoning explained by the respondent’s experts and summarised in the respondent’s submissions.
-
The third limb of the complaint focused on the expert evidence. It was not suggested that there was no sufficient evidence to support the conclusions reached by the judge nor, for the most part, was it said that he did not advert to the evidence, at least by way of setting out the parties’ submissions in respect of it, but rather that he failed to “grapple with” the matters in dispute. The point might also have been described as a failure to give proper, genuine and realistic consideration to the evidence and the submissions. [39]
39. Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48 at [26]-[34].
-
In so far as the appellant alleged a global failure to exercise jurisdiction, it is important to note that a number of factors told against the merit of such a challenge, namely:
the judge did not refuse to hear the case, but presided over a hearing extending over 50 days;
the judge made numerous interlocutory rulings, delivering five interlocutory judgments, only one of which was (indirectly) challenged;
he also made orders which, in their terms, addressed and resolved the ultimate issue, namely the just compensation to be paid for the acquired land;
the judge gave reasons for that outcome covering some 270 pages and 861 paragraphs; and
the reasons were structured, expressly identified the key issues, and outlined the evidence and submissions on the different issues.
It thus becomes necessary to examine the appellant’s submissions as to specific issues to demonstrate that, despite appearances, the judge had not applied his mind to resolving the issues in dispute.
Challenges to findings
-
There is no complaint that the trial judge did not adequately identify the plethora of discrete and interrelated issues raised by the parties. Rather, the complaint is that there were particular issues which were not resolved and other issues which were resolved without adequate reasons for their resolution.
(a) default acceptance of respondent’s case: ground 1(c)(ii)
-
The global complaint was that on all material issues the judge adopted the submissions of the respondent. Assuming that to be so, that fact does not of itself demonstrate legal (or factual) error. For example, a person may only be convicted of a crime if a court or jury is satisfied that every element of the charge has been established, and established beyond reasonable doubt. The fact of conviction is not a ground for challenging its legality of the process. Otherwise, there appears to be an implicit suggestion of partiality. That complaint was explicitly raised by ground 4, where the complaint was particularised. It will be addressed in dealing with ground 4.
-
It was submitted that those parts of the reasons headed “Consideration” in key areas failed to “grapple with” the issues identified in the preceding summaries of the parties’ submissions. However, as noted above, the physical metaphor is of limited assistance in describing an intellectual process. Particularly in circumstances where a choice is required between factors involving evaluative judgment, it may not be necessary or possible to give expansive reasons, if the various competing factors have been identified and addressed. Nor is it necessary that the judge must consider a compromise.
-
In most cases, the judge expressly or implicitly adopted the respondent’s submissions for a particular conclusion. This was not a case of unattributed adoption, as considered in LVR and Cojocaru. No authority was relied upon by the appellant for the proposition that adoption of one party’s submissions was inadequate to satisfy a judicial obligation to give reasons. In a multi-member court, it is common place for one judge to adopt the reasoning of another. To the extent that the setting out of reasons for a decision is conducive to good decision-making, there could be an objection to that practice, but it is not suggested that a judge who agrees with another judge has failed to provide reasons. On the other hand, the adoption of reasons will not provide an adequate compliance with the obligation to give reasons if the reasons adopted are themselves inadequate. Thus, if the reasons of one party adopted by the judge do not adequately engage with the other party’s case, they may not demonstrate that the judge has engaged with that case. Accordingly, it is necessary to look at the content of the adopted submissions in considering a ground of challenge to the adequacy of the reasons and so far as they are relied on to demonstrate a failure to exercise jurisdiction.
(b) specific challenges for inadequate reasoning
(i) discount rate
-
In identifying the approach to the valuation of Lot 2, the trial judge noted that it was necessary to determine whether the “highest and best use” was its existing use or an alternative use for which the land possessed potential and to which it could be advantageously adapted. [40] For that purpose he noted that “the parties agreed to employ DCF methodology …, by which the valuation of Lot 2 is to be calculated by forecasting future revenue, risks and costs, and applying an appropriate discount rate to the cash flow so determined.” [41] Each party called a “business valuation expert”. The appellant called Mr Tony Samuel; the respondent Dr Rodney Ferrier. In addition to providing his own report, Dr Ferrier undertook a joint report with the respondent’s land valuation expert, Mr Lunney. The land and business valuation experts prepared a joint report. A further joint report by Mr Samuel and Dr Ferrier went through several iterations, a final amended report being provided on 9 April 2018, following the last day of the trial. [42] This was not an idle procedural detail; rather it reflected the complexity of the task and the interrelationship between various aspects of the valuation.
40. LEC Judgment at [128].
41. LEC Judgment at [130].
42. LEC Judgment at [434].
-
The trial judge noted that the required exercise had resolved, in the following manner:
“[140] Throughout the proceedings, ALF considered several valuation scenarios for Lot 2, posed by its respective experts. Its suggested valuation scenario, for highest and best use, comprises:
(1) Landfilling for 8 years by importation of waste soils;
(2) Operation of a recycling business (on various parts of the land) in years 1 to 8;
(3) Subdivision of “surplus” land; and
(4) Operation of a new RRWTF building in years 9 to 29.
[141] The Respondent accepted only the first component of that valuation scenario, and disputed the physical, regulatory and/or financial feasibility of the others.”
-
The result was an exercise in extreme artificiality. The possibility that either a willing but not anxious vendor or a willing but not anxious purchaser would have engaged in the exercise proposed by the appellant would seem, in practical terms, to be a remote possibility. Yet, subject to the matters which must be disregarded, that is the assessment required by s 56(1) of the Land Acquisition Act. A commercially plausible exercise would not require the meticulous evaluation of multiple discrete calculations with cascading sets of variables. If the judge in fact made some broad evaluative assessments after hearing all the evidence, it could not be said that he acted otherwise than appropriately in carrying out the function of a “judicial valuer”. Nevertheless, in a passage not criticised by the appellant, the judge noted:
“[435] There are three key issues in relation to business value:
(1) The after-tax discount rate to be applied to business related cash flows;
(2) The after-tax discount rate to be applied to initial stockpile remediation cash flows; and
(3) The valuation of Area E, based on the cash-flow of the future business.”
-
In relation to (1), the judge commenced:
“[436] The main issue between the business valuers related to the appropriate discount to be applied to the business-related cash flows.
[437] In calculating the discount rate, both valuers were required to assess the projected cash flows against inherent business risks.
[438] Generally, the experts adopted different calculation methods to generate a discount rate. In Mr Samuel’s view, the appropriate discount rate is 8.7%for all businesses, for all periods, derived on the basis of the weighted average of the cost of debt and the cost of equity (i.e. the Weighted Average Cost of Capital – ‘WACC’), using the Capital Asset Pricing Model (‘CAPM’) to establish the cost of equity component: CB 65, Appendix E, par 7. He observed (CB 69, p16, par 6.12.) that:
[This approach] establishes the risk free rate and market risk premium by reference to market data, and the cost of debt by reference to ALF’s circumstances. It is only the beta element of the cost of equity that is determined by reference to comparable companies, and a typical industry gearing ratio. ...
(The “beta element” is an allowance made for “volatility” in the relevant industry at a particular time.)
[439] Dr Ferrier observed that it is only appropriate to derive a cash flow for the ‘Year 1-8 option’, on the basis that landfilling will cease by the end of year 8, and further uses will not be ‘inextricably linked’ or ‘uniquely tied’ to the land, and are too uncertain to warrant a DCF calculation: see CB 69, p26, par 6.49(c); CB 128, p8-9, par 2.18.
[440] In relation to the cash flows for the ‘Years 1-8’ option, Dr Ferrier opined that the appropriate methodology to determine the discount rate in this case would have regard to ‘Earnings Before Interest Tax Depreciation and Amortisation’ (EBITDA), and analyse a number of sales of significant assets (principally operating waste disposal businesses) within the landfill industry: CB 60, p47. Although Dr Ferrier originally derived a discount rate of 19.5%, he ultimately arrived at a discount rate of 13.9%, on the basis of reassessing his discount rate without reference to the Bingo Pty Ltd company listing transaction: CB 69, p28, par 6.59.
[441] Noting that the primary position taken by Dr Ferrier and Mr Lunney is that a DCF approach is not appropriate at all from year 9 onwards, Dr Ferrier derives a discount rate of 20.9% (being a 50% increase over 13.9%), if it is relevant, for the years 9 to 29: CB 60, p50, par 150.”
-
What followed from [443]-[471] was a detailed exposition of the differing views of the two experts, including each expert’s critique of the other’s methodology.
-
The judgment identified five elements of the model as to which the experts disagreed, [43] noting that they “primarily disagreed on the applicable risk-free rate” [element 1]. The reasoning continued:
43. LEC Judgment at [446].
“[448] Dr Ferrier disagreed with this approach, and would have adopted a risk-free rate of 4.9%, in accordance with the long term Australian market data published by the Independent Pricing and Regulatory Tribunal of NSW (‘IPART’), this State’s independent statutory pricing regulator, which undertakes independent reviews and investigations into a diverse range of economic markets, including for water, public transport and local government.
[449] In particular, Dr Ferrier observed that, with respect to the IPART document, whether short term or long term, adding the risk free rate with the market risk premium gives approximately the same total risk: CB 69, p30, par 6.63. In explaining this calculation, Dr Ferrier noted (CB 69, p30, par 6.63.):
In February 2015, IPART published its WACC Biannual Update (attached as Annexure A to this joint report). That document reported a long term (10 year) average risk free rate of 4.9% and a long term (10 year) average market risk premium of 6.0%. It also reported a short term (40 day) average risk free rate of 2.7% and a short term (40 day) average market risk premium of 8.3%. Mr Samuel’s risk free rate (which is the risk-free rate which existed on the date of compulsory acquisition) and his market risk premium (which is a long term average rate and not the rate which existed on the date of compulsory acquisition) are not consistent with the parameters reported by IPART.
[450] During cross-examination, Mr Samuel was questioned on his approach to the IPART analysis, and the determination of the 8.3% short term risk rate, and this exchange occurred (Tp2145, LL2-20):
LANCASTER: If you make the assumption that IPART have in table 1 on page 70 correctly identified both risk-free rate and market risk premium as at 40 days and as at 10 years, that does create a situation in which your selection of the market risk premium would not sit at all comfortably with your selection of the risk-free rate, if they are right about it?
WITNESS SAMUEL: If I had to adopt your assumption, I would agree with you, but I don’t know how that figure’s been determined.
LANCASTER: Do you have any reason or basis to doubt the IPART analysis, or you just don’t know how it’s been determined?
WITNESS SAMUEL: The IPART analysis tells us the long-term market risk premium is 6 per cent, and I’m not sure what the 8.3 per cent is purporting to be.”
-
It may be observed that there was close engagement in the opinions expressed by each expert with the counter opinion expressed by the other. The same engagement was to be found in the differing the views as to how one approached the discount rate for the period of 9-29 years after acquisition. [44]
44. LEC Judgment at [463]-[465].
-
Assuming that the judge had no relevant expertise in this area, how was he to resolve the differing views of the experts? One possibility was to state that he found the reasoning of one more persuasive; another was to accept that the experience and credentials of one were of higher quality than those of the other. In fact the judge adopted both. He noted their areas of expertise in the following terms:
“[431] Mr Tony Samuel was the business valuation expert for the Applicant. He is an Accountant, who holds a Bachelor of Commerce and a Diploma in International Commercial Arbitration. He has expertise in the valuation of shares, business entities and intellectual property.
[432] Dr Rodney Ferrier was the business valuation expert for the Respondent. He holds a Diploma in Technology (Commerce), Bachelor of Arts, Master of Economics (Accounting), and is a Doctor of Philosophy. He has approximately 49 years of experience as an accountant, and has expertise in the valuation of shares, business entities (including waste processing and recycling facilities), and other assets.”
-
In making findings (which in this respect he undoubtedly did) the judge noted again the three issues which were to be addressed, [45] summarised the submissions of each party, [46] and then explained his decision in the following terms, shorn of the detail:
“[676] I have several reasons for rejecting Mr Samuel’s DCF discount rate, and accepting Dr Ferrier’s:
(i) Dr Ferrier’s superior qualifications and experience in the assessment of compensation under the JTC Act, in cases involving extinguishment of a business, and his clear understanding and articulation of relevant provisions of the Act, DCF, and related methodology.
(ii) Mr Samuel’s use of comparable businesses and transactions in this case was flawed, and Dr Ferrier’s was correct. Mr Samuel excluded from his list of comparable stock exchange listed corporations the only two which involved Australian (NSW) businesses. Mr Samuel persisted in relying upon business statistics of large to very large US corporations, and large to very large European (French, Finnish, and UK) corporations. These are listed in Mr Samuel’s Appendix F to CB 65. For each company, the relevant currency is given, as well as the market capitalisation (as at 19 December 2014), net debt, enterprise value (EV), EBITDA and the ratio EV/EBITDA.
(iii) In Dr Ferrier’s opinion, which I accept, the information obtained from these corporations is not comparable to the potentialities of carrying on business on Lot 2. …
(iv) Mr Samuel accepted, in cross-examination, that having excluded the Transpacific company, all the large overseas US and European listed companies in Appendix F had market capitalisations in the hundreds of millions, if not billions, of dollars. Mr Samuels had noted that the Betas of Transpacific (1.5) and the Tox Free company (0.18), both of which are Australian, were deliberately excluded by Mr Samuel from his basket of so-called comparable businesses. He agreed that these two Betas were ‘wildly different’ from each other, and from those of the other (overseas) companies he was considering.”
This reasoning, which ended with a further expression of his preference for the reasoning of Dr Ferrier, [47] extended over some seven pages.
45. LEC Judgment at [665].
46. LEC Judgment at [666]-[675].
47. LEC Judgment at [681].
-
There is no doubt that the trial judge made a finding with respect to the appropriate discount rate, at least for the period to which he accepted it was necessary to apply a discount rate, namely Years 1-8; he applied the rate identified by Dr Ferrier.
-
The submission that he did not give any reasons for that finding is patently untenable. The submission that the reasons were in some way “inadequate” is best characterised as a disagreement with the reasons in fact given. Indeed, so much appears from ground 3 which acknowledged that one step in the reasoning process was to accept the experience and qualifications of Dr Ferrier in preference to those of Mr Samuel. (The separate challenge to that reason is addressed in considering ground 3 below.)
-
In so far as the manner in which the judge dealt with the discount rate was an example (indeed a primary example) of the criticisms levelled in grounds 1 and 2, those grounds must be rejected in that respect as untenable.
waste operations
-
The heading “waste operations experts” was used by the trial judge in referring to the evidence of three experts who were experienced in the business of waste management and landfill operations. That was the principal commercial use to which the site was put at the date of acquisition. The expectation was that a purchaser would continue to operate such a business for a period of years until a stable foundation had been achieved and the land could be subdivided and sold for general industrial purposes. Broadly speaking, there were two major variables in the proposals put forward by the respective experts. One was the timeframe within which waste operations would continue. The appellant forecast a 29 year timeframe, though with parcels of land being subdivided and sold off over the period. The respondent’s experts anticipated that a purchaser would likely plan on filling the area within eight years and subdividing and selling at the end of that period.
-
The second variable concerned the potential use of the land for a recycling business. This was described as a use for a “resource recycling and waste transfer facility” (RRWTF). The appellant’s case was that such a use would be commercially viable in years 1-8 and would continue throughout years 9-29. The respondent’s position was that such a business would not be sufficiently profitable to persuade a purchaser to engage in the necessary expenditure, given the associated risks.
-
There were a large number of factors involved in these assessments. The waste operations experts provided their own reports, including reports in reply to each other and a joint report. They engaged in a further joint conference with the business valuation experts and prepared a joint report with them. After the commencement of the hearing each prepared a further supplementary report and conducted a joint conference with contamination and stockpile experts. Finally, and importantly, they prepared a further joint report with respect to the construction of a shed, which was a condition of the existing approval for recycling activity and which had not been constructed. (The Land Acquisition Act, s 56(1)(c) required the court to disregard a use carried out in a manner contrary to law.) Where it was to be constructed was a significant issue, as was the extent to which it would be moved over a period of years to accommodate completion of landfill operations in particular areas and the subdivision and sale (on the appellant’s case) of portions of the land. [48] The judge identified the options outlined by the appellant’s expert (Mr Webster) and the principal expert for the respondent (Mr Berkefeld) in the following passages:
48. LEC Judgment at [213]-[214].
-
To address this ground, it is necessary to refer to Preston CJ’s judgment at first instance in Dial A Dump Industries Pty Ltd v Roads and Maritime Services (2016) 216 LGERA 285; [2016] NSWLEC 39. One of the issues before his Honour was whether DADI was at the DOA carrying on the waste operations business on Lot 2 on its own behalf. If so, its claim that it had an interest in the land and therefore its claim to compensation on resumption of the land had a prospect of success. If it was not carrying on that business on its own behalf, it was not of any particular significance for the purpose of those proceedings to identify the person or persons for whom the business was in fact carried on. It was in this context that Preston CJ referred as follows to the evidence before him concerning the conduct of the business:
“[103] I turn to ALF. ALF was the lessor of Lot 2, having granted leases to Boiling commencing, for the first lease, on 1 July 2007 and for the second lease, on 1 January 2014. At its meeting on 30 June 2008, ALF noted that the Dial A Dump Industries Trust would “cease commercial operations of recycling, waste transfer and collections carried on” by the Trust and instead that DADI would “commence commercial operations of landfilling, recycling, waste transfer and collections, which it will carry on under the name of” DADI. ALF noted that DADI would undertake these commercial operations “for and on behalf of the Alexandria Landfill Consolidated tax group” but that DADI would operate the waste facility “on behalf of the Alexandria landfill group”. ALF noted that EPL 12594, the environment protection licence held by Boiling authorising certain scheduled activities, “will remain with Boiling as trustee for Dial A Dump Industries Trust and the Trust will hold the licence and the lease of the premises on trust for” DADI. The lease referred to was presumably the lease of Lot 2 that ALF had granted to Boiling commencing 1 July 2007.”
-
Later, his Honour said that for ALF to give permission to DADI to “carry on operations on Lot 2 ‘for and on behalf of the ALF Consolidated tax group’ or ‘on behalf of the Alexandria landfill group’” (expressions used in the 30 June 2008 minutes referred to in the above quote) would not be to give permission to DADI to carry on the operations on its own behalf but rather to DADI only as agent (at [110]). His Honour thus did not make any clear finding of agency. He contemplated that an agency might have existed but considered that, if it did, that fact would not assist DADI. Further, the agency which his Honour contemplated was one on behalf of the ALF Consolidated tax group, the precise identity of which his Honour held had not been clearly established “but at least it included ALF and DADI as the wholly owned subsidiary of ALF” (ibid).
-
His Honour referred later to the possibility that DADI was carrying on the business on Lot 2 “for and on behalf of ALF and Boiling” (at [117]). He referred to these two companies because they were the holders of relevant environment protection licences relating to Lot 2 but, by reason of his earlier findings, his Honour should not be taken to have identified ALF and Boiling as the only principals. Rather, it is clear from reading his judgment as a whole that he was of the view that if there was an agency, it was on behalf of all the members of the ALF group, whoever they might be.
-
Beazley P’s decision on appeal should be understood in a similar fashion. Her Honour referred to the 30 June 2008 minutes and later made the observations quoted above concerning agency. In the course of those observations, her Honour referred to the 30 June 2008 resolution speaking of Dial A Dump being deputed “to act on behalf of ALF and Boiling”. The resolution however in fact only referred to DADI acting “for and on behalf of” the ALF group. The distinction was not of consequence to her Honour’s reasoning as it was the fact of agency, rather than the identity of the principals, that was important in that case.
-
The following observations may therefore be made about the DADI proceedings:
To the extent that there was a finding of agency by Beazley P, the identity of the principals in that agency relationship was not of significance. What was of importance to the issues in the proceedings was whether DADI carried on the Lot 2 waste operations business on its own behalf.
To the extent that the principals in the agency relationship were identified in the judgments, they were identified tolerably clearly as the members of the ALF group, which was said to include ALF and Boiling.
Even if this Court should be understood as having decided in the DADI proceedings that ALF and Boiling were the only principals, the nature of the relationship between ALF and Boiling and their entitlements inter se to the revenue of the business and their responsibilities for its expenses were not addressed.
In any event, even if there was a finding that DADI acted as agent for ALF, there was no finding as to the entitlements to revenue and responsibility for expenses of the business as between ALF and DADI.
-
In these circumstances, it is clear, contrary to ALF’s submissions, that the point at issue in the present proceedings was not determined in the DADI litigation. To establish its disturbance and special value claims in the present case, ALF had to demonstrate that it was entitled to the revenue and bore the expenses of DADI’s conduct of the waste operations business on Lot 2. It is only if it did this that ALF would have established that it suffered its claimed disturbance loss and expenses, and suffered loss by reason of its loss of the features of the land that were allegedly of special value to it. Establishment of no more than an “agency” relationship would not have established those matters, the concept of agency being intrinsically amorphous. As Gummow J said in Scott v Davis (2000) 204 CLR 333; [2000] HCA 52 at [268], “[t]o use the term “agent” is to begin but not to end the inquiry” about the applicable legal relations (see also Cassegrain v Gerard Cassegrain & Co Pty Ltd (2015) 254 CLR 425; [2015] HCA 2 at [38]).
-
For these reasons, ALF’s estoppel contention must fail, even if the difference in the identity of the parties as between the DADI proceedings and the present proceedings is disregarded. Further, in the absence of any inconsistency between RMS’s contentions in the present proceedings and findings in the DADI proceedings, ALF failed to establish any abuse of process on the part of RMS (see generally Tomlinson v Ramsey Food Processing Pty Ltd (2015) 256 CLR 507; [2015] HCA 28 at [24]-[26]).
-
In light of these conclusions, it is unnecessary to address RMS’s alternative argument that, as a matter of principle, an estoppel such as ALF alleged could not circumscribe the LEC’s obligation to assess compensation in accordance with the JTC Act. This was not an issue addressed by the primary judge.
Ground 7: Attribution of loss between ALF and DADI
-
Under this ground ALF contends that irrespective of any question of issue estoppel or abuse of process, the primary judge should, on the evidence before him, have found that DADI did in fact conduct the business on Lot 2 as agent for ALF.
-
The primary judge specifically addressed this contention at Judgment [764] (see [271] above). His Honour held that ALF failed to establish that the business income and expenditure was that of ALF’s rather than DADI’s. This was a finding of fact in relation to which no appeal is available to ALF.
-
In any event, at the hearing of the appeal, senior counsel for ALF was invited to refer this Court to evidence that established the proposition for which ALF contended but he was able to do no more than refer the Court to financial accounts of a group of companies. These did not identify earnings and expenditure of ALF individually. There is therefore no reason to think that the primary judge erred in this (unappealable) finding.
-
This ground of appeal as framed refers not only to s 59(f) but also to s 59(c), which is concerned with the financial costs of relocation. ALF complained on appeal, including through Ground 1 (see [193] above), that the primary judge did not determine ALF’s claim under s 59(c). That provision is however concerned with costs reasonably incurred in connection with the relocation of “those persons”. The expression “those persons” is a reference back to the persons referred to in s 59(a), namely, “the persons entitled to compensation in connection with the compulsory acquisition of the land”. It therefore refers to the incurring of costs by the applicant for compensation, in this case ALF. For the various reasons given above in relation to ALF’s disturbance claim, ALF did not establish that it, as distinct from DADI, incurred costs (or derived revenue) in connection with the waste operations business conducted on Lot 2. As that was an obvious answer to ALF’s claim based on s 59(c), there was no error in his Honour not stating that that was the case.
-
For these reasons, Ground 7 should be rejected.
GROUNDS 8 AND 9: SPECIAL VALUE CLAIM
Ground 8: Relevance of observations in Bronzel
-
As noted in [273]-[274] above, the primary judge quoted the observations of Wells J in Bronzel but noted that they were made before the legislative definition of special value in s 57 of the JTC Act was enacted.
-
On appeal, ALF submitted that the observations of Wells J are inconsistent with the statutory definition because the former require special value to be “something objectively ascertainable derived from the land or some attribute or property of it” whilst s 57 refers to a financial advantage to the owner which is “incidental to the person’s use of the land”. The primary judge however made it clear that, to the extent that there was any difference, he was bound to, and would, apply the words of s 57. His Honour did this by prefacing his recitation of ALF’s submission to that effect by the words “As the Applicant’s submissions say …”, indicating his acceptance of the submission (at [828]).
-
ALF also submitted on appeal that the primary judge not only adopted the Bronzel test but also applied it in paragraphs [841] and [846] of his judgment. Judgment paragraph [841] records a submission by RMS, subsequently accepted by his Honour in [846], denying that the matters relied upon by ALF for its special value claim identified “any special feature of the land, or ‘something objectively determined from the land or some attribute or property of it’”. This submission used substantially the same language as the Bronzel test and his Honour’s acceptance of it indicated that he did not see any difference, at least for the purposes of the present case, between it and s 57. His Honour could not however be criticised for taking that approach because this Court did likewise in Roads and Traffic Authority of NSW v Hurstville City Council [2001] NSWCA 11; (2001) 112 LGERA 223 at [46], in assuming the continued relevance of the Bronzel test notwithstanding the enactment of s 57.
-
Even if there were force in ALF’s submissions on this Ground, those submissions would not however avail it as its special value claim was bound to fail for the reason stated below in relation to Ground 9.
Ground 9: Use of Lot 2 by ALF
-
As the definition in s 57 of the JTC Act of “special value” requires that any such value be “incidental to the person’s use of the land”, it was necessary if ALF were to succeed in its special value claim (like its disturbance claim) for it to establish that it, rather than DADI or any other entity, used Lot 2 to conduct the waste operations business. As indicated above, it failed to do this. The consequence is that its special value claim was properly rejected.
Conclusion on special value claim
-
For the reasons set out above, ALF did not establish that the primary judge made any error of law in respect of the special value claim, with the consequence that Grounds 8 and 9 should be rejected.
CONCLUSIONS
-
As each of ALF’s grounds of appeal has been rejected, the appeal should be dismissed with costs.
-
LEEMING JA: I have had the advantage of reading the judgments of the other members of the Court. I agree with them that the appeal should be dismissed with costs. Their reasons enable me to be concise, and what follows presupposes familiarity with the background.
-
The primary grounds advanced on appeal were grounds 1 (constructive failure to exercise jurisdiction) and 2 (inadequacy of reasons). Ground 4 (apprehended bias) overlapped with these grounds. Yet all these grounds were in essence directed to the same feature of the judgment at first instance: very lengthy reasons following a very long trial, which were said not sufficiently to attend to resolving the competing evidence and submissions. In part this was said to follow from an alleged absence of dispositive reasoning, as opposed to the lengthy recitation of competing evidence and submissions. In part it was said to follow from the invariable resolution of disputed points in the respondent’s favour (“the effect of his Honour’s valuation was to accept the respondent’s figure in the respondent’s column for every single one of the disputed items”).
-
I discount the latter point immediately. True it is that there are some keenly contested cases where many points are in issue, and where some are resolved in favour of one side, and others in favour of the other side. But litigation, risky as it is, is quite unlike tossing a coin or betting on black at a casino. Litigators are familiar with cases where one side loses every point in contest. Indeed, a numerous class of civil litigation comprises defendants who deny duty, breach, causation, damages and assert various defences; it could scarcely be suggested that any inference is to be drawn from a plaintiff obtaining a judgment in such a case. It must be borne in mind that most disputes never reach a court, and of those which do, the majority is resolved prior to trial. The self-selecting minority of disputes which go to judgment includes a disproportionate share of unduly uncompromising litigants.
-
Valuation appeals following compulsory acquisitions of land are different from actions for negligence, but once again the phenomenon of one party whose evidence and submissions push the envelope in every respect, while the other propounds reasonable findings, is not unfamiliar. In the present case, the gap between the parties was enormous. The Valuer-General determined the market value of the appellant’s land at $56,900,000 while the appellant initially maintained it was in excess of $275,000,000, rising by the time of its Draft Amended Points of Claim to in excess of $343,000,000. On any view, at least one side (and perhaps both) was tens of millions of dollars away from the true value.
-
Not all of the issues presented in the litigation involved binary choices. The appellant’s counsel illustrated his point by the choice of discount rate, which (obviously) has an enormous effect on the number generated by a discounted cashflow methodology:
“So just taking for example discount rates at line 14 which is recycling and landfill operations post tax nominal, you’ll see the applicant contended for 8.7%, the respondent contended for 13.9%. There was a huge amount of expert evidence about that and it would be open to his Honour to come up with any figure at all whether within that range or indeed outside it, but one would expect that it would be somewhere between 8.7 to 13.9.”
-
I certainly agree that a dispute between 8.7% and 13.9% on something as fundamental as the discount rate for the valuation of a business is a strikingly large dispute. However, I disagree that one would “expect” that the outcome of the curial process would be somewhere in the range. That submission carries with it the unstated premise that both sides’ experts had been unduly ambitious. Contrary to the appellant’s submission, if one knew nothing else about the case, one might readily infer that at least one and perhaps both of the valuers was relying on a faulty assumption or a faulty methodology. If indeed both valuers had used unrealistic assumptions or methodologies, then I would agree that one would expect a finding within the range. But it is perfectly possible that only one opinion will be shown to be faulty, and the other will stand up to such challenges as are made of it. In that case there is no reason for rejecting the opinion of the latter.
-
Accordingly, I turn to the appellant’s submission that there was insufficient engagement by the primary judge with the substance of the competing evidence and submissions.
-
I reject the attack on the reasons provided for accepting Dr Ferrier’s discount rate. To be fair, I did not understand this to be held out as the appellant’s best point. Nonetheless, it is the single largest integer in the methodology, and the result is highly sensitive to the rate selected.
-
The primary judge gave some six pages of reasons for preferring Dr Ferrier’s rate. The appellant complained that what should have been done was to analyse critically the analysis underlying the selection of 13.9%; rather, the primary judge accepted Dr Ferrier’s opinion (“The way in which his Honour reasons is to not accept what Mr Samuel says and then in a sense by default, accept Dr Ferrier for the full 13.9%”). I accept that it would be open to a judicial officer to have resolved this dispute in different ways, including in the way now favoured by the appellant. But I do not accept that there is any error of law in the fact finding process which the primary judge employed to resolve the competing opinions proffered by either side.
-
I do not wish it to be thought that I underestimate the force of the appellant’s submissions. I think it may fairly be said that, to use the two examples highlighted in the appellant’s submissions in reply, there is scant reasoning to explain why the particular gate fees were ultimately selected and why an up-front cost of some $35 million for remediation was chosen. The reasons are long on recitation of the parties’ submissions, but very short on resolving the issues which those submissions gave rise to. It is regrettable that these two items, which also make a large contribution to the discounted cashflow analysis, were not addressed more fully.
-
Nonetheless, there was a determination of those two key inputs. The appellant is dissatisfied that the former is not higher and the latter is not lower. But that is not enough. More is required in order that there not merely be an alleged error of fact which is outside the limited grant of appellate jurisdiction to this Court. This was, I infer, why the appellant contended that the primary judge had not merely erred in fact, but had failed to “grapple” with the submissions.
-
In response to the complaint about failure to grapple, the respondent said that comfort could be drawn from the lengthy recitation of what inevitably was a small minority of the voluminous submissions propounded by both parties (the appeal books contained no fewer than 1101 pages of submissions at first instance, with both sides contributing roughly equal shares). This, so it was said, itself demonstrated that the primary judge had “grappled” with the submissions, insofar as he had exercised judgment in selecting what to include and, more relevantly, the swathes to exclude.
-
Conversely, the appellant submitted that this was doing no more than reproducing the essence of the submissions, and did not disclose the requisite judicial engagement with their resolution. When one reached the sections of the judgment headed “Consideration”, the appellant submitted that even then those sections were substantially directed to a recitation of the parties’ oral submissions, with no reasoning process evident to understand the preference which was given to the respondent’s position, and no suggestion that significant underlying contested issues had been engaged with.
-
I am prepared for present purposes to accept that the task of summarising the parties’ submissions is quite distinct from the task of resolving which is to be accepted and which rejected, even though I am inclined to think that such an assumption is unduly favourable to the appellant. That is to say, I doubt that the appellant is correct to discount the large majority of the reasons which merely record evidence and submissions. In most cases, the parties’ submissions inform a court’s dispositive reasoning. That certainly occurs in cases where the reasons do not give so complete a summary of the evidence and submissions as occurred in this judgment. Not lightly should it be assumed that the process of sifting through the 1101 pages of submissions may not itself reflect an active engagement with the issues, enabling the dispositive paragraphs to be concise. Much may turn on the details. It is one thing to reproduce parties’ submissions verbatim, another to record them in indirect speech, and another thing entirely to summarise them in the judge’s own words.
-
It is perhaps unfortunate that part of the debate focussed about the meaning of “grappled” in this context. The expression is not uncommonly used in determining appeals from the District Court (such as Mitchell v Cullingral Pty Ltd [2012] NSWCA 389 at [116]; Chen v State of New South Wales [2014] NSWCA 41 at [87]), or from a Division of the Supreme Court (for example, EPS Constructions Pty Ltd v Mass Holdings Pty Ltd [2015] NSWCA 317 at [90]; Hutchison Construction Services Pty Ltd v Fogg [2016] NSWCA 135 at [58]-[69]). However, as has been explained, including in Bunnings Group Ltd v Borg [2014] NSWCA 240 at [36], Coote v Kelly [2013] NSWCA 357 at [39] and Croucher v Cachia (2016) 95 NSWLR 117; [2016] NSWCA 132 at [124], what is being inferred in such cases is a failure in the process of fact finding. As McColl JA explained in Pollard v RRR Corporation Pty Ltd [2009] NSWCA 110 at [66]:
“Where it is apparent from a judgment that no analysis was made of evidence competing with evidence apparently accepted and no explanation is given in the judgment for rejecting it, it is apparent that the process of fact finding miscarried.”
-
That echoed Hayne J’s reasoning in Waterways Authority v Fitzgibbon [2005] HCA 57; 79 ALJR 1816 at [130]:
“because the primary judge was bound to state the reasons for arriving at the decision reached, the reasons actually stated are to be understood as recording the steps that were in fact taken in arriving at that result. Understanding the reasons given at first instance in that way, the error identified in this case is revealed as an error in the process of fact finding. In particular, it is revealed as a failure to examine all of the material relevant to the particular issue.”
-
This in turn picks up what was said about findings being made without “a consideration of the real strength of the body of evidence [the losing party] presented”: State Rail Authority (NSW) v Earthline Constructions Pty Ltd (In liq) [1999] HCA 3; 73 ALJR 306 at 321 and indeed, more concisely, the obligation upon an appellate court to undertake a “real review” of the evidence: Fox v Percy (2003) 214 CLR 118; [2003] HCA 22 at [25]; Robinson Helicopter Co Inc v McDermott [2016] HCA 22; 90 ALJR 679 at [43].
-
Where an appeal is confined to questions of law, the considerations summarised above – which are directed to the resolution of competing issues of fact – do not directly arise. While I accept that some errors in the fact finding process may amount to errors of law (actual bias is an example), I also think that one cannot safely transplant the principles applicable to an appeal by way of rehearing to appeals confined to questions of law.
-
The content of the obligation to give adequate reasons must in part turn upon the function performed by the tribunal and the nature of any appeal which is created in respect of its decisions. The reasons for judgment of most Judges of Appeal in the majority of judgments are a single sentence expressing agreement with the more detailed reasons of another member of the Court. My reasons for dealing with grounds 3, 8 and 9 in this appeal are a single sentence. Yet I do not consider that by expressing agreement with the reasons of another judge in rejecting those grounds I have failed to give adequate reasons.
-
It is to be borne in mind that the notion of obtaining reasons for factual determinations from courts is a recent development so far as the common law is concerned. Most determinations of fact at common law were made by juries until the middle of the twentieth century. I respectfully agree with Basten JA’s observation that there has been a tendency for the intensity of scrutiny of the adequacy of reasons to increase over time: Resource Pacific Pty Ltd v Wilkinson [2013] NSWCA 33 at [55], noting that the change is all the more dramatic when the earlier role of juries is borne in mind. This is significant, because appeals on questions of law emerged no later than the nineteenth century, when most facts were determined by juries, without reasons (as to which see Ferella v Chief Commissioner of State Revenue [2014] NSWCA 378 at [3]).
-
True it is that it has been said, in a passage which has been often applied, that it is not sufficient to set out the conflicting evidence and conclude, without analysis, that the judge prefers one body to another: Goodrich Aerospace Pty Ltd v Arsic (2006) 66 NSWLR 186; [2006] NSWCA 187 at [28]. But that is in the context of an appeal by way of rehearing to this Court from the District Court or a Division of the Supreme Court.
-
On rare occasions, these principles have sought to be invoked in applications for judicial review. One example may be seen in Laing O’Rourke Australia Construction Pty Ltd v H&M Engineering and Construction Pty Ltd [2010] NSWSC 818 at [34]. But it was emphasised that the court’s review must not slide into the merits: Goodwin Street Developments Pty Ltd v DSD Builders Pty Ltd (2018) 98 NSWLR 712; [2018] NSWCA 276 at [24]-[25]; see also Minister for Immigration and Citizenship v SZJSS (2010) 243 CLR 164; [2010] HCA 48 at [23]. The same point was made, in the context of an appeal confined to a question of law brought pursuant to s 57 of the Land and Environment Court Act 1979 (NSW), in Hoy v Coffs Harbour City Council [2016] NSWCA 257; 218 LGERA 411 at [18].
-
Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 276 was an appeal following a four day trial before a judge of the Compensation Court. The dispositive reasons were extremely short:
“On the evidence I am satisfied she fell and suffered injury at work on 21 December 1982 and that the boss knew she had suffered injury on that date. I am also satisfied that the applicant suffered injury at work in April [1980] when she fell whilst pushing a box.
… The applicant had X-rays of her left knee and tibia which were normal. She had an X-ray of the lumbar spine on 29 December 1982 which was normal. A myelogram was performed which revealed no abnormality. A CAT scan report of [17] January 1984, stated:
‘No evidence of disc prolapse has been demonstrated, and apophyseal joints are within normal limits. Spinal canal diameters are adequate and there is no evidence of spinal stenosis. Nerve roots show no evidence of compression.’
I am satisfied on the evidence that the applicant was totally incapacitated from 21 December 1982 to 17 January 1984 and fit for all work thereafter. I am satisfied that at the date of the CAT scan report the applicant was fit for all work.”
-
McHugh JA observed that:
“What is decisive is that his Honour’s judgment reveals the ground for, although not the detailed reasoning in support of, his finding of fact. But that is enough in a case where no appeal lies against the finding of fact. Accordingly there was no failure to give reasons sufficient to constitute an error of law.”
-
Mahoney JA agreed that there was no failure to give reasons. His Honour’s reasons contemplated the possibility of an obligation to state reasons which transcended what was required by the establishment of jurisdiction and vindication of a right of appeal (at 273B). But his Honour rejected the need to provide additional details as to the reasoning process – much as the appellant’s submissions invited this Court to hold – because of basal aspects of the judicial process. As his Honour put it at 274:
“A fact is found in a particular case if the judge is satisfied that it is so. ... [I]t would be to misunderstand the basis of a decision and in particular decisions in matters of assessment, weight and the like, to assume that decisions can always, or perhaps ordinarily, be justified by objective rather than subjective considerations. And, if such be true of the reasoning process, it is, in my opinion, a mistake to conclude that a judge should or can set forth the reasoning process he has followed from one fact to another.
It is in my opinion, because of the recognition of factors such as these that the reasons which the law requires a judge to give are not such as have been suggested by the worker in this case.”
-
It follows that the appellant’s submissions insofar as they complain of failing to engage with the evidence and submissions are outside the scope of an appeal confined to questions of law. In reaching that conclusion, I am conscious that the fact/law distinction is scarcely a crisp one. The High Court’s statement in Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389 at 394; [1996] HCA 36 that “no satisfactory test of universal application has yet been formulated” is to be understood not merely of the failure hitherto to do so, but as an acknowledgement of the impossibility of the task. Even so, the limitation imposed by s 57 of the Land and Environment Court Act must be given work to do, and I am satisfied that on its proper construction, the complaints advanced by the appellant do not give rise to legal error.
-
Ultimately the appellant’s submissions, faced with the task of falling within an appeal limited to questions of law, sought to transmute deficiencies in factual findings into deficiencies in the process of making findings or recording reasons. I am unpersuaded that the appellant can in that fashion make out legal error, as opposed to factual error.
-
Insofar as ground 4 turned upon the reasons for judgment, it cannot amount to a reasonable apprehension of bias; the essence of apprehended (as opposed to actual) bias is prejudgment, and the reasons are consequent upon an actual judgment. Insofar as the appellant sought also to incorporate the idea of the primary judge “not engaging with the substance” of the issues, then that is not an aspect of apprehended bias, but rather is addressed under the rubric of a constructive failure to exercise jurisdiction, or an absence of reasons, under grounds 1 and 2. Subject to the foregoing, I agree with what Basten JA has said concerning grounds 1, 2 and 4.
Disturbance (grounds 5, 6 and 7)
-
The question concerning s 59(f) was whether the “actual use of the land” had to be actual use by the person claiming compensation. As recent judgments of this Court have held, the text and structure of the subsection informs the approach to be taken. First, paragraph (f) is the last of six elements of the definition. Secondly, it commences with the words “any other financial costs”, confirming thereby that the list is one comprising various forms of “financial costs” (in argument reference was commonly made to “loss”, which is a much broader concept than “financial costs”) and further that the financial costs were part of the same genus as those in the previous paragraphs. Thirdly, paragraph (a) refers explicitly to the costs incurred “by the persons entitled to compensation” and each of paragraphs (b), (c), (d) and (e) refers to “those persons”, which can only be a reference to the “persons entitled to compensation” referred to in paragraph (a). The principal difficulty faced in this appeal is that if there were costs incurred by Dial A Dump, the only company which was actually using the land, they were, ex hypothesi, not financial costs incurred by the appellant. That might not be so if Dial A Dump were shown to have been the appellant’s agent, or if one could in some way go behind the (quite elaborate) corporate structure which had been put in place in respect of the activities being conducted on the land, but that was elsewhere addressed adversely to the appellant, as Basten JA and Macfarlan JA have explained.
-
Paragraph (f) should not be seen as a tail which wags the dog of the balance of the definition of loss attributable to disturbance. The appellant invited an inference to be drawn from the absence of narrowing words to support a construction which would outflank the rather precisely crafted and internally qualified other heads of such loss. That submission should not be accepted.
-
The more recent decisions of this Court on s 59 should be followed, including insofar as they reject the reasoning in El Boustani v Minister administering the Environmental Planning and Assessment Act 1979 [2014] NSWCA 33; 199 LGERA 198 and Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352. I agree with what Basten JA has said concerning grounds 5, 6 and 7.
Remaining grounds
-
I agree with what Basten JA has said concerning grounds 3 (procedural fairness) and 8 and 9 (special value).
**********
Endnotes
Decision last updated: 04 August 2020
57
0
2