AMP Capital Investors Ltd v Transport Infrastructure Development Corporation
[2008] NSWCA 325
•27 November 2008
New South Wales
Court of Appeal
CITATION: AMP Capital Investors Limited v Transport Infrastructure Development Corporation [2008] NSWCA 325 HEARING DATE(S): 12-13 September 2008
JUDGMENT DATE:
27 November 2008JUDGMENT OF: Hodgson JA at 1; Bell JA at 110; Gyles AJA at 113 DECISION: (1) Appeal dismissed with costs.
(2) Cross-appeal dismissed with costs.CATCHWORDS: REAL PROPERTY – Valuation of land – Compulsory acquisition – Betterment of other land by reason of the public purpose – Whether there was probative evidence of value of betterment – Identification of the public purpose – Market value – Highest and best use – Valuation techniques available where no comparable sales –Construction of ss 55 and 56 of Land Acquisition (Just Terms Compensation) Act 1991 – Whether market value under s 55(a) is the minimum compensation. - PROCEDURE – Appeal – Question of law – Point not taken at first instance – Whether point should be considered on appeal. LEGISLATION CITED: Land Acquisition (Just Terms Compensation) Act 1991 ss 3, 4, 10, 37, 54, 55 and 56.
Land and Environment Court Act 1979 ss 38, 57CATEGORY: Principal judgment CASES CITED: ASIC v Rich [2005] NSWCA 152; (2005) 218 ALR 764
B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187
Balenzuela v De Gail (1959) 101 CLR 226
Banno v The Commonwealth (1993) 81 LGERA 34
Brell v Penrith City Council (1965) 11 LGRA 156
Bruce v Cole (1998) 45 NSWLR 163
Coulton v Holcombe (1986) 162 CLR 1
Hornsby Shire Council v Roads and Traffic Authority of New South Wales (1998) 100 LGERA 105
Leichhardt Municipal Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353, 149 LGERA 439
Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Maurici v Chief Commission of State Revenue [2003] HCA 8, (2003) 212 CLR 111
Mir Bros Unit Constructions Pty Ltd v Road and Traffic Authority of New South Wales [2006] NSWCA 314
Morison v Commonwealth of Australia (1971) 34 LGRA 273
Overton Investments Pty Limited v The Minister [2001] NSWCA 137; 133 LGERA 439
Pastrello v Road and Traffic Authority of New South Wales [2000] NSWLEC 209; (2000) 110 LGERA 223
Prince Alfred Reserve Trust v State Rail Authority of New South Wales (1997) 96 LGERA 75
Roads and Traffic Authority of New South Wales v Perry [2001] NSWCA 251; (2001) 52 NSWLR 222
South Western Sydney Area Health Service v Edmonds [2007] NSWCA 16
Stead v State Government Insurance Commission (1986) 161 CLR 141
Thaina Town (on Goulburn) Pty Limited v City of Sydney Limited [2007] NSWCA 300
Toll Pty Ltd v Craig Morrissey [2008] NSWCA 197
Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 82 ALJR 489
Woollams v The Minister (1957) 2 LGRA 338PARTIES: AMP CAPITAL INVESTORS LIMITED (First Appellant/First Cross-respondent)
AMP MACQUARIE PTY LTD (Second Appellant/ Second Cross-Respondent)
TRANSPORT INFRASTRUCTURE DEVELOPMENT CORPORATION (Respondent/ Cross-Appellant)FILE NUMBER(S): CA 40484/07 COUNSEL: M G CRAIG QC/ S DUGGAN (Appellants/ Cross-Respondents)
T S HALE SC/ J B MASTON (Respondent/ Cross-Appellant)SOLICITORS: Mallesons Stephen Jaques (Appellants/ Cross-Respondents)
Australian Government Solicitor (Respondent/ Cross-Appellant)LOWER COURT JURISDICTION: Land & Environment Court LOWER COURT FILE NUMBER(S): NSWLEC 30966/03 LOWER COURT JUDICIAL OFFICER: Pain J LOWER COURT DATE OF DECISION: 2 July 2007, 30 July 2007, 2 November 2007 LOWER COURT MEDIUM NEUTRAL CITATION: AMP Capital Investors Limited v Transport Infrastructure Development Corporation [2007] NSWLEC 397,
AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation (No 2) [2007] NSWLEC 465,
AMP Capital Investors Limited and Anor v Transport Infrastructure Development Corporation (No 3) [2007] NSWLEC 724
CA 40484/07
NSWLEC 30966/0327 NOVEMBER 2008HODGSON JA
BELL JA
GYLES JA
Facts
In 2002, approval was given to the Parramatta Rail Link (‘PRL’), linking Parramatta to Chatswood, via Epping. As part of the project, the State Rail Authority, of which the respondent, Transport, is relevantly the successor, decided to acquire leasehold interests in part of AMP’s premises, the Macquarie Shopping Centre (‘Macquarie Centre’). In March 2003, a deed was entered into, with the amount of compensation to be determined at a later date.
In April 2003, Transport acquired a leasehold interest in two lots forming part of the Macquarie Centre. The purpose of the acquisition was the construction of a railway station next to the Macquarie Centre. On 20 May 2003, a Notice of Determination of Compensation was served on AMP, providing for $683,150 in compensation.
AMP disputed the amount of compensation and commenced proceedings in the Land and Environment Court. AMP claimed approximately $21.46 million under the Land Acquisition (Just Terms Compensation) Act . This was made up of: $2.34 million market value, $5.74 million for disturbance, and $13.37 million for the decrease in value of other land due to injurious affection. In reply, Transport argued that there would be a substantial betterment as a result of the public purpose behind the project, so that no compensation would be payable.
The primary judge held that the betterment figure, $15 million, exceeded the sum of the market value and disturbance figure ($5.74 million). Accordingly, nil compensation was ordered. Each party was ordered to pay its own costs. AMP appealed, and Transport cross-appealed.
Issues arising on appeal and cross-appeal were:Issues
(i) Whether the primary judge erred in finding a betterment of $15 million.
(ii) Whether the primary judge erred in determining a nil diminution in value by reason of the controlled parking.
(iii) Whether there was a failure to apply to s 54 of the Just Terms Act.
(iv) Whether the primary judge erred in coming to the market value figure.
(v) The identification of the public purpose.
(vi) Costs of the trial proceedings.
HELD (dismissing the appeal and cross-appeal):
(Per Hodgson JA, Bell JA and Gyles AJA agreeing)In relation to (i) – Betterment:
(2) However, if there is some material capable of rationally supporting a decision as to an increase or decrease in the value of land, the court has to do its best to determine that increase or decrease. In the present case, there was some such material.(1) There must be material capable of rationally supporting a conclusion, and the absence of probative evidence is equivalent to no evidence.
(Per Hodgson JA, Bell JA and Gyles AJA agreeing)
In relation to (ii) – Nil determination and controlled parking:
- (3) The report prepared for AMP on a controlled parking proposal was a sufficient basis for the finding that there would be income from controlled parking such that there should be no allowance for operating costs; and there was material capable of supporting the determination of nil diminution in value from controlled parking.
(Per Gyles AJA, Bell JA agreeing)
In relation to (iii) – Application of s 54:
- (4) AMP’s arguments should not be considered on appeal. If they had been relied upon below, the case would have been conducted differently: Coulton v Holcombe (1986) 162 CLR 1.
(Per Hodgson JA, Bell JA and Gyles AJA not deciding)
- (5) Where land is compulsorily acquired, the acquiring authority must pay compensation of at least the market value of that land, even if the person from whom the land is acquired owns adjoining land which is increased in value by the proposal, and even if this increase is greater than the market value of the acquired land.
(Per Hodgson JA, Bell JA and Gyles AJA agreeing)
In relation to (iv) – Market value figure:
- (6) Section 56 requires consideration of the market value of the interest being acquired, not solely the freehold.
(Per Hodgson JA, Bell JA agreeing, Gyles AJA disagreeing)
- (7) However, the decision of the primary judge was not vitiated by any incorrect construction of s 56(1).
(Per Hodgson JA, Bell JA and Gyles AJA agreeing)
In relation to (v) – Identification of public purpose:
- (8) There was no error of law in disregarding planning changes for the purposes of s 55(f). The fact that the PRL was a contributing factor to changes that affect value is not necessarily sufficient, particularly when the changes depend on discretionary decisions by other authorities.
(Per Hodgson JA, Bell JA and Gyles AJA agreeing)
In relation to (v) – Costs of the trial:
- (9) No basis has been shown for appellate intervention. The primary judge had regard to relevant factors and did not fetter her discretion.
CA 40484/07
NSWLEC 30966/03
27 NOVEMBER 2008HODGSON JA
BELL JA
GYLES JA
1 HODGSON JA: This appeal arises out of proceedings in the Land and Environment Court of New South Wales in which the appellants (AMP) claimed compensation from the respondent (Transport) under the Land Acquisition (Just Terms Compensation) Act 1991 (Just Terms Act) in respect of land in the Ryde Local Government Area acquired by Transport.
2 On 30 July 2007, pursuant to reasons given on 2 July 2007 and 30 July 2007, Pain J determined the amount of compensation to which AMP was entitled under the Just Terms Act as Nil. On 2 November 2007, Pain J ordered that each party was to pay its own costs of the proceedings, and that Transport was to pay AMP’s costs of the motion pursuant to which the costs question was decided.
3 AMP appeals from the determination of compensation. Transport cross-appeals in respect of certain aspects of the primary judge’s judgment of 2 July 2007 (in the event that AMP’s appeal is allowed) and against the decision as to costs.
4 Under s 57(1) of the Land and Environment Court Act 1979 (LEC Act), the appeal to this Court is only “on a question of law”.
Circumstances
5 The acquired land is part of the Macquarie Shopping Centre (the Macquarie Centre) which is owned by AMP. The Macquarie Centre is within the Local Government Area of the Ryde City Council and is zoned 3(a) Business General under the Ryde Planning Scheme Ordinance 1979. It is classified by the Property Council of Australia as a regional shopping centre. It has a net lettable area of 95,129 square metres and contains 4,100 car-parking spaces. Car-parking is not controlled on the site. The shopping centre contains seven “major” chain-stores, seven “mini-major” chain-stores and 215 specialty shops. It has an annual turnover of $500 million, with approximately 12.2 million persons visiting the centre per annum.
6 It has operated on this site for about 25 years. The most recent additions and alterations were approved in 1998.
7 Following public exhibition of an Environmental Impact Study, on 26 February 2002 the Minister gave approval, subject to conditions, to the Parramatta Rail Link (PRL), a new suburban rail line to link Parramatta and Chatswood via Epping.
8 On 30 April 2002, Ryde City Council resolved that the Macquarie Park Corridor Structure Plan and a Transport Management and Accessibility Plan be endorsed for the purposes of exhibition.
9 On 8 January 2003, construction of the PRL commenced.
10 On 23 March 2003, a deed was entered into between the State Rail Authority of New South Wales (of which Transport is relevantly the successor) and AMP. The deed contained the following recitals:
- A. The Land Owner, that is, AMP Life Limited and AMP Henderson Global Investors Limited, owns the Land as tenants in common in equal shares. The Premises, including the Station Premises, form part of the Land.
B. The Authority has indicated to the Land Owner the Authority's desire to take a leasehold interest in the Premises and freehold title to the Station Premises in connection with the construction and operation of the Parramatta Rail Link. The Authority and the Land Owner have been negotiating the terms on which the Authority will acquire those interests. As at the date of this Deed, the parties have not agreed those terms, in particular the amount of compensation that will be payable by the Authority to the Land Owner for the acquisition of those interests in the Land.
C. The parties acknowledge that the acquisition of the interests in the Land by the Authority, as referred to in Recital B, among other things will require the Land Owner to construct the Ramp and that the costs of constructing the Ramp must be taken into consideration in determining the compensation payable by the Authority to the Land Owner for the acquisition of the interests in the Land.
D. The parties agree that, given the Authority's intention to acquire the interests in the Land, construction of the Ramp is desirable and will commence as soon as practicable. Accordingly, notwithstanding that the aggregate compensation payable for the acquisition by the Authority from the Land Owner of the interests in the Land, as referred to in Recital B, has not been agreed between the parties, the Land Owner has agreed to construct the Ramp provided the Authority, as an interim measure, contributes $4,000,000 to the costs of constructing the Ramp. This Deed sets out the arrangements agreed between the parties in relation to construction of the Ramp and the interim compensation payment.
11 Clause 3 of the Deed provided:
Negotiation of Compensation
(a) The parties acknowledge that, as at the date of this Deed, the parties have not agreed the compensation payable to the Land Owner for the acquisition by the Authority of a leasehold interest in the Premises and freehold title to the Station Premises.
(c) The parties acknowledge that the amount of $4,313,956 incurred by the Land Owner in constructing the Ramp will be taken into consideration in determining the compensation payable by the Authority to the Land Owner for the acquisition of the interests referred to in clause 3(a). The Land Owner agrees that any amount it receives from the Authority pursuant to clause 2 will be considered to be part of the final compensation payable for the acquisition of those interests referred to in clause 3(a), whether that compensation is payable by way of agreement between the parties or pursuant to the Land Owner's rights under the Just Terms Act. For example (excluding consideration of GST treatment):(b) The parties agree to negotiate in good faith to determine the compensation payable by the Authority to the Land Owner for the acquisition of the interests referred to in clause 3(a).
(ii) if the aggregate compensation for these interests is determined to be $3,000,000 and $4,000,000 has been paid in accordance with clause 2, the Land Owner will be required to reimburse to the Authority an amount of $1,000,000.(i) if the aggregate compensation for these interests is determined to be $6,000,000 and $4,000,000 has been paid in accordance with clause 2, the additional amount payable by the Authority to the Land Owner will be $2,000,000; and
(e) If the parties are not able to agree the compensation payable for the acquisition of the relevant interests in the Land by 31 March 2003 in accordance with this clause 3, the parties agree that nothing in this Deed derogates from either the Land Owner's rights under the Just Terms Act to seek compensation in relation to any compulsory acquisition of any interest in the Land by the Authority or the Authority's rights under the Just Terms Act to compulsorily acquire any interest in the Land, except that:
(d) The parties agree to use all reasonable endeavours to determine the compensation payable by the Authority to the Land Owner for the acquisition of the interests referred to in clause 3(a) on or before 31 March 2003.
(ii) the amount paid by the Authority under clause 2 will be considered to be part of the amount of compensation payable under the Just Terms Act in relation to the compulsory acquisition of the relevant interests in the manner contemplated by clause 3(c).(i) the parties agree that the compensation payable in relation to those items set out in Schedule 1 is the aggregate of the amounts set out next to each of those items (whilst recognising that the amounts agreed for other compensation items could result in the total compensation figure being higher or lower than that amount); and
12 The construction of the ramp referred to in the Deed then proceeded, the ultimate total cost being $5,745,352.
13 On 11 April 2003, by an Acquisition Notice published in the New South Wales Government Gazette, Transport acquired a leasehold interest in the lands identified as Lot 3 and Lot 12 in Deposited Plan 1047085. These two lots, and the leasehold interest in them, were created by the Acquisition Notice. The leasehold interests were for a term of six years, with no rent payable. The notice stated that the acquisition was for the PRL. The two leasehold interests were of land part of the Macquarie Shopping Centre; and the specific purpose of the acquisition was the construction of a railway station next to the Macquarie Centre, part of which extended on to Lot 12.
14 Lot 12 is 1,797 square metres in area, and at the time of the acquisition there were fourteen car-parking spaces and landscaping located on it. Lot 3 is 528 square metres in area, and is a stratum extending from three metres above an existing slab, above part of the emergency exits from the cinemas at Macquarie Centre.
15 On 20 May 2003, a Notice of Determination of Compensation by the Valuer-General was served on AMP. The Valuer-General assessed compensation at $683,150, comprising market value $675,000 and disturbance $8,150.
16 On 3 June 2003, Ryde City Council resolved to adopt a Draft Macquarie Park Master Plan and draft Local Environmental Plan 2003, providing for increased capacity for development in the area.
17 These proceedings were commenced on 15 August 2003.
18 On 21 August 2003, AMP was told that the PRL would not extend to Parramatta but would be limited to the route between Epping and Chatswood.
Statutory provisions
19 The statutory provisions relevant to this appeal are the definition of “land” in s 4 of the Just Terms Act, and ss 3, 10, 37, 54, 55 and 56 of that Act. Those provisions are as follows:
(1) The objects of this Act are:3 Objects of Act
(a) to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will be not less than the market value of the land (unaffected by the proposal) at the date of acquisition, and
(b) to ensure compensation on just terms for the owners of land that is acquired by an authority of the State when the land is not available for public sale, and
(c) to establish new procedures for the compulsory acquisition of land by authorities of the State to simplify and expedite the acquisition process, and
(d) to require an authority of the State to acquire land designated for acquisition for a public purpose where hardship is demonstrated, and
(e) to encourage the acquisition of land by agreement instead of compulsory process.
(2) Nothing in this section gives rise to, or can be taken into account in, any civil cause of action.
(1) When, on request by or on behalf of an owner or prospective purchaser of land, an authority of the State gives a person written notice to the effect that the land is affected by a proposal for acquisition by the authority, the notice must contain the following:10 Statement of guaranteed acquisition at market value
(a) a statement that the Land Acquisition (Just Terms Compensation) Act 1991 guarantees that, if and when the land is acquired by (insert name of authority) under that Act, the amount of compensation will not be less than market value (assessed under that Act) unaffected by the proposal,
(b) such other information as the regulations may require.
(2) This section does not apply to a proposal to acquire an easement, or right to use land, under the surface for the construction and maintenance of works.
(3) Nothing in this section or in a statement made in a notice pursuant to this section gives rise to, or can be taken into account in, any civil cause of action.
37 Right to compensation if land compulsorily acquired
An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.
(1) The amount of compensation to which a person is entitled under this Part is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land.54 Entitlement to just compensation
(2) If the compensation that is payable under this Part to a person from whom native title rights and interests in relation to land have been acquired does not amount to compensation on just terms within the meaning of the Commonwealth Native Title Act, the person concerned is entitled to such additional compensation as is necessary to ensure that the compensation is paid on that basis.
55 Relevant matters to be considered in determining amount of compensation
(a) the market value of the land on the date of its acquisition,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):
(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.
(1) In this Act:56 Market value
"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.
Decision of primary judge
20 In its Amended Points of Claim, AMP claimed a total of $21,465,352. This was made up of the following elements:
- (a) Market value (s 55(a) of the Just Terms Act ): $2,345,000
(b) Disturbance (s 55(d)): $5,745,352
(c) Decrease in value of other land due to injurious affection (s 55(f)): $13,375,000
21 In its defence, Transport alleged among other things that there would be substantial betterment as a result of the public purpose, so that no compensation should be payable.
22 The primary judge first considered the question of market value under s 55(a). She noted arguments of the parties, including an argument by AMP that the definition of market value in s 56(1) was concerned with the sale of physical (freehold) land, not the sale of any particular interest in land. She noted the evidence of town planners Mr Harrison (for AMP) and Mr Rowen (for Transport), and valuers Mr Davis (for AMP) and Mr Wood (for Transport). In general terms, she preferred the evidence of AMP’s witnesses, and reached approximate figures of $1,053,461 for Lot 12 and $61,901 for Lot 3 (to be finalised by detailed calculation, if necessary).
23 Next, the primary judge considered the question of increase or decrease in the value of other land (s 55(f)). The primary judge identified the three areas of dispute as follows:
- [63] The areas of dispute for the purposes of applying s 55(f) are:
- (i) what is the public purpose of the acquisition?
(ii) betterment — will there be increased patronage to the Macquarie Centre as a result of the PRL and, if so, what is the increase in value of other land of AMP?
(iii) decrease in value — is there a need for controlled parking when the PRL is built and if so what is the cost of an appropriate system?
24 On the first question, the primary judge noted the submissions of the parties, and she concluded that the public purpose was the PRL, and did not extend to planning changes mooted for the Macquarie Park area.
25 On the second question, the primary judge noted evidence of the same experts, and also that of Mr Smith (Consultant Retail Expert/Adviser to Investors) for AMP and Mr Hack (Land Economist and Planner) for Transport; of Mr Hynes, AMP Divisional Manager; and of Mr Masson (Traffic Expert) for AMP and Mr Hallam (Traffic Consultant/Engineer) for Transport.
26 The primary judge was satisfied from the evidence of Mr Hack that there would be additional patronage of the Macquarie Centre by reason of the PRL, and that this would be considered by a prudent hypothetical purchaser as likely to add value to the Macquarie Centre; and she accepted evidence of Mr Wood that the hypothetical purchaser would be prepared to pay more for the Macquarie Centre. The primary judge adopted a betterment figure of $15 million.
27 On the third question, the primary judge found that a prudent hypothetical purchaser was likely to consider there would be a need for some form of controlled parking when the PRL opened; but not that this would impact on patronage of the Macquarie Centre. The primary judge accepted that the potential cost of installing such system was $3 million. The primary judge made no allowance for operating costs, as income might be derived from the operation of controlled parking.
28 As regards the affect of this on value, the primary judge noted that the agreed value of the Macquarie Centre was $750 million; and she considered that the $3 million cost was likely to be considered negligible by a prudent hypothetical purchaser. Accordingly, she did not consider the claim under s 55(f) for a decrease in value should succeed.
29 The primary judge then noted that the betterment of $15 million clearly exceeded the sum of the market value and the agreed disturbance figure of $5,745,352; and she held that Nil compensation was payable.
30 In a separate judgment, the primary judge gave reasons for holding the appropriate costs order was that each party pay its own costs.
Issues
31 AMP relied on the following grounds from its original Notice of Appeal:
3 Pain J erred in law in attributing as a nil value to the decrease in value of other land of the appellant at the date of acquisition an amount of $3 million:1 Pain J erred in law in determining an increase in the value of other land of the appellant at the date of acquisition which adjoins the acquired land by reason of the carrying out of the public purpose for which the land was acquired without any evidentiary basis.
(b) in the circumstances of her Honour's findings on other aspects of the increase or decrease of other land of the appellant at the date of acquisition.(a) in the absence of evidence; or alternatively
4 Pain J erred in law in rejecting as a cost of the introduction of paid parking maintenance costs on the ground that income may well be derived from its operation without any evidentiary basis.
32 It also sought to rely on a further ground, set out in a proposed amended Notice of Appeal:
7. Her Honour erred in law by failing to apply the provisions of s.54 to the assessment of compensation in that:
(b) she determined that compensation should be assessed by use only of a mathematical application of addition and subtraction applied to the individual sums determined by reference to each of the heads of consideration identified in s.55(a)-(f).(a) she failed to determine the amount that would justly compensate the person for the acquisition of the land,
33 Transport relied on the following grounds in its cross appeal:
1. Her Honour:Grounds of Appeal – Judgment 2 July 2007
(a) In the circumstances of these proceedings in which the interest in land acquired under the Act is a leasehold interest her Honour erred in construing s 55(a) and s 56(1) of the Act as referring to the market value of the freehold interest in the land.(a) Erred in not construing the words “ market value of land ” in s 55(a) and s 56(i) in the Land Acquisition (Just Terms Compensation) Act 1991 (“ the Act ”) as meaning the market value of the interest in land acquired under the Act .
2. Her Honour erred in law in determining the compensation to which the appellants were entitled under the Act upon the assumption that the land acquired was a separate lot.
3. Her Honour erred in law in rejecting or not adopting or alternatively failing to give reasons for rejecting or not adopting the “ before and after ” value approach to determine the market value of the acquired leasehold interest in the land.
4. Her Honour erred in law in construing the words " public purpose ” in s 55(f) of the Act as being limited to a public purpose for which the acquiring authority had responsibility or power.
5. In ordering that each party pay its own costs and in not ordering that appellant pay the whole or part of the respondent’s costs her Honour erred in law in that she applied a presumptive rule that in proceedings under the Act for the determination of compensation under s 54 and s 55 to which a person is entitled that person will not be required to pay costs.Grounds of Appeal – Judgment 2 November 2007
34 I will consider in turn the following issues:
- (1) The question of betterment of $15 million.
(2) The question of Nil diminution by reason of controlled parking.
(3) The alleged failure to apply s 54.
(4) The primary judge’s market value figure.
(5) The identification of the public purpose.
(6) Costs.
Betterment of $15 million(7) The orders to be made on appeal.
35 The primary judge concluded her consideration of this issue as follows:
[120] I am satisfied that on any reasonable assessment regardless of particular expert opinion a shopping centre with the potential for a railway station next to it would be considered more valuable by a hypothetical purchaser than a shopping centre without that potential. Mr Smith and Mr Hynes both stated that this is the first time they are aware that a railway station has been built next to a successful shopping centre in NSW rather than vice versa and considered this was likely to be negative rather than positive. Mr Hynes final evidence was that the impact of the PRL would be negligible as the Macquarie Shopping Centre is already operating very successfully as a car-based shopping centre. As a starting point the opposite conclusion that there would be positive economic impacts is just as open, as reflected in the evidence of TIDC’s experts which I have accepted.
[122] One reason why a prudent hypothetical purchaser would take a conservative approach is that the PRL had obviously not been built at the date of acquisition. While it had been given development consent by the relevant Minister in 2002 and construction had started on part of it, suggesting completion was likely, there must be uncertainty with such a large project as to when it would be completed. In August 2003 for example, the NSW government announced that the project was only funded to Epping, at that stage, not to Parramatta. This is obviously not a matter of which a prudent hypothetical purchaser could be aware and is clearly a matter which occurred after the date of acquisition and not a matter which can be taken into account. It does however demonstrate why the caution expressed by Mr Smith and Mr Davis is likely to be part of the advice given to a prudent hypothetical purchaser in relation to the timing of larger government infrastructure projects. While I have not accepted that such cautious advice would lead to there being no allowance for value a conservative approach to the increase in value is warranted, as I have identified in the previous paragraph.[121] It is difficult to estimate precisely the likely increase in value of the Macquarie Centre for which a prudent hypothetical purchaser would be likely to pay. There is no specific evidence from either party about the precise numbers of people using the railway station at the Macquarie Centre becoming shoppers. I have accepted Mr Hack’s evidence that the percentage will be substantial. I consider that a hypothetical purchaser is likely to consider there would be an increase in value as a result of the PRL being built which will bring greater patronage to the Macquarie Centre. The lower estimate of Mr Hack of a five per cent increase in value results in an annual increase in turnover of $25 million calculated in relation to an annual turnover of $500 million. Mr Wood valuer agreed with that figure also. Mr Hack considered this was due to the increase in value due to more rent paid by tenants based on more turnover and therefore more income for the owner of the Macquarie Centre. Given the analysis of the Annex B tables by Mr Hack and his acknowledgment of the many variables that contribute to the performance of a shopping centre, as is self evidently the case, a more conservative estimate of the likely increase due to increased patronage is justified. A prudent hypothetical purchaser would consider that there is likely to be an increase in value of the Macquarie Centre as a result of the PRL being built and that this should be considered to be in the range of $15 to $25 million. Because of the uncertainty about when the PRL is likely to be completed, which I refer to next, and the many variables that contribute to the successful performance of a shopping centre, a conservative approach to the value is warranted. I therefore adopt $15 million as the amount of value for which a prudent hypothetical purchaser is likely pay.
36 Mr Craig QC for AMP submitted that, while there was scope for a judge as a judicial valuer to exercise judgment, there had to be a basis for this in the evidence and in accordance with valuation principles. Here, while there was a basis in Mr Hack’s evidence for finding that patronage would increase by five per cent, and perhaps for a finding that this would translate to a five per cent increase in turnover, there was no proper basis for finding that this in turn would result in a five per cent increase in value.
37 Mr Craig submitted that this was a case in which there was no relevant probative evidence, and that this was equivalent to no evidence: Bruce v Cole (1998) 45 NSWLR 163 at 188B. Thus, the primary judge’s finding involved an error of law. He submitted that, although the Land and Environment Court was not bound by rules of evidence (LEC Act s38(2)), still there had to be material capable of rationally supporting a conclusion: South Western Sydney Area Health Service v Edmonds [2007] NSWCA 16 at [127]-[129].
38 Mr Craig submitted that, although Mr Hack said that five per cent increase in patronage translated to five per cent increase in value, Mr Hack had no valuation expertise and did not support this assertion by reference to any recognised valuation methodology. Transport’s valuer Mr Wood said nothing in his report which assigned an increase in value by reason of increased patronage. Although in oral evidence (2 Black 525) Mr Wood said “Increased patronage … means increased sales, increased turnover, increased rent and increased value of that centre, in the order of five to ten per cent” (and confirmed this at 2 Black 579), this was not in accordance with his written reports and Mr Wood did not base this assertion on any reasoning or any valuation principles.
39 Mr Craig submitted that the primary judge’s reasons showed she was not acting on probative evidence or valuation principles, in that she apparently applied five per cent to $500 million, that is, to turnover, in order to arrive at a figure of $25 million, which she then reduced to $15 million. The reasons displayed error of valuation principle, and therefore an error of law: Maurici v Chief Commissioner of State Revenue [2003] HCA 8; (2003) 212 CLR 111 at [8].
40 I accept Mr Craig’s submission that there must be material capable of rationally supporting a conclusion (Edmonds), that the absence of probative evidence is equivalent to no evidence (Bruce), and that an error of valuation principle is or may be an error of law (Maurici).
41 However, s 55(f) requires the court to have regard to any increase or decrease in the value of land by reason of the carrying out of or the proposal to carry out the public purpose; and if there is some material capable of rationally supporting a decision as to such an increase or decrease in value, the court has to do its best to determine that increase or decrease: cf Hornsby Shire Council v Roads and Traffic Authority of New South Wales (1998) 100 LGERA 105 at 108-9, per Stein JA (Priestley JA and Sheppard AJA agreeing).
42 In this case, there plainly was some such material. There was Mr Hack’s evidence as to increased patronage, and Mr Wood’s evidence that this meant increased value in the order of five to ten per cent. Mr Wood did not back this up with any discussion of valuation principle or other reasoning, and this impacts on the weight and cogency of his evidence: Makita (Australia) Pty Limited v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705; ASIC v Rich [2005] NSWCA 152; (2005) 218 ALR 764 at [106]-[110]. However, Mr Wood was an expert valuer, and in my opinion his opinion was admissible; and although the weight of the evidence may be considered slight because of the lack of reasons, it was nevertheless material capable of rationally supporting a conclusion.
43 In my opinion also, it was open to the primary judge to reduce the figures suggested by Mr Wood because of uncertainty and because of many variables affecting the performance of a shopping centre. It appears she may have made an error in applying 5 per cent to the turnover of $500 million instead of the value of $750 million: but this was an error of fact, and in any event it was favourable to AMP.
44 Accordingly, in my opinion no error of law has been shown.
45 I note that there was also an argument by Mr Hale SC for Transport that the primary judge’s decision can be upheld on the basis that she did not reason directly from valuation evidence to value, but rather herself considered the question posed by s 56(1), that is, what a hypothetical purchaser would be willing to pay (and by implication, what a hypothetical seller would be willing to accept); and she treated the evidence before her as indicative of the expert advice that such persons would receive. Mr Hale submitted that this was in accordance with the approach adopted by Stephen J in Morison v Commonwealth of Australia (1971) 34 LGRA 273.
46 In my opinion, this is an alternative way in which the material before the primary judge can be seen as rationally supporting her conclusion.
Controlled Parking
47 Mr Craig submitted that there was no evidentiary basis for the primary judge to hold that there would be income from controlled parking such that there should be no allowance for operating costs of controlled parking; and that there was no evidentiary basis for the primary judge to hold it was likely that a hypothetical purchaser would consider the $3 million cost of installing controlled parking negligible.
48 However, there was in evidence a report prepared in 1999 for AMP by Barry Smallwood on a proposal to introduce controlled parking into Macquarie Centre.
49 This report proposed free parking up to three hours, and a scale for fees for longer periods. It gave feasibility calculations showing income exceeding expenses (6 Blue 1921-1923). In my opinion, that was a sufficient basis for the first of the challenged conclusions of the primary judge.
50 The report also reported research showing that 38 per cent of the 4,100 parking spaces were actually used by persons other than customers. The report referred to expected results from controlled parking, including more parking for customers and more security for customers. The primary judge referred to Mr Wood’s evidence that there would be an increase in the capital value of Macquarie Centre as a result of the installation of controlled parking. In my opinion, those matters were a sufficient basis for the second of the challenged conclusions of the primary judge.
Failure to apply s 54
51 There is an initial question whether leave should be given to rely on this ground at all.
52 Mr Hale submitted that the amendment should not be allowed, because the point was not raised below and because the case may have been conducted differently if it had been. However, he did not contend that Transport was prejudiced by the amendment, as compared with the position it would have been in if this ground had been included in the original Notice of Appeal.
53 My usual practice, and, as I understand it, the usual practice of this Court, is to approach the question of amendment of a notice of appeal by considering how the position of the respondent is different from that which the respondent would have been if the original notice of appeal had included the amendment; and then to consider arguments based on Coulton v Holcombe (1986) 162 CLR 1 as part of the argument on the appeal.
54 It is true that Coulton v Holcombe itself was a case in which an amendment was sought and refused; and I accept that, if there are good reasons for holding that a new ground could not succeed because of the way the case was conducted below, and if refusal of an amendment would save time and costs, then it is appropriate to refuse an amendment.
55 In this case, the appeal proceeded on the basis that an amendment may be permitted, and full argument was heard on the new ground, including Coulton v Holcombe arguments. In those circumstances, in my opinion it is appropriate to allow the amendment, and to deal with Coulton v Holcombe arguments as part of the argument as to whether the new ground can succeed.
56 In her judgment, having made findings in respect of s 55(a) and s 55(f), the primary judge concluded:
[165] I have held that there is betterment to the Macquarie Centre in the amount of $15 million under s 55(f). I have also held that the introduction of controlled parking would not give rise to a reduction in value of the Macquarie Centre, also under s 55(f). I have held that market value is approximately $1,115,000 under s 55(a). I would ask that the parties provide an exact figure shortly. As betterment clearly exceeds the market value and disturbance agreed of $5,745,352 there is no compensation payable to AMP under the provisions of the Just Terms Act for this compulsory acquisition claim. I will reserve costs.[164] As argued by TIDC, cases such as Brell v Penrith City Council (1965) 11 LGRA 156 confirm that where betterment exceeds other heads of compensation then nil compensation is payable. This was also considered in Mir Bros Unit Constructions Pty Ltd v Roads and Traffic Authority of New South Wales (2004) NSWLEC 612 where compensation was reduced downwards due to the beneficial effect on the area in which the resumed land was located as a result of the M7 motorway being built.
57 Mr Craig submitted that this approach gave no work to s 54(1). He submitted that the case of Brell v Penrith City Council (1965) 11 LGRA 156 was distinguishable, because the applicable legislative provision there was that “the court … shall … give effect to, by way of set-off or abatement, any enhancement in the value” of the other land. He submitted that the decision of the Court of Appeal in Mir Bros Unit Constructions Pty Ltd v Road and Traffic Authority of New South Wales [2006] NSWCA 314, given after the decision of the primary judge, although it dismissed an appeal from the decision referred to by the primary judge, supported a more flexible approach. Such an approach was also supported by Leichhardt Municipal Council v Roads and Traffic Authority of New South Wales [2006] NSWCA 353, 149 LGERA 439 at [37]-[41]. Mr Craig also referred to Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 82 ALJR 489 at [29], [35].
58 Mr Craig submitted, in circumstances where AMP was compelled to spend over $5.7 million in constructing ramps, it could not be considered as justly compensating AMP that it receive nothing, because of an extremely uncertain benefit which it might receive sometime in the future. Also, because of s 3(1)(a) and s 10(1)(a) of the Just Terms Act, the market value of the acquired land must be seen as the bare minimum that AMP should receive. Mr Craig submitted that there was an error by the primary judge in failing to address these considerations.
59 Mr Craig also submitted that there was no reasonable possibility that the case would have been conducted differently below, had this point been taken. It was open on the pleadings, and questions of uncertainty and futurity of the betterment were fully explored in the evidence.
60 Mr Hale submitted that AMP was bound by its conduct of the hearing, and that Coulton v Holcombe applied. Had this matter been in issue, Transport may not have consented to assessment of disturbance at the $5.7 million figure, and may have raised the question of whether the expenditure produced ramps which increased the value of the property, as compared with the previous ramps. Further, had AMP sought to have the increased value under s 55(f) disregarded or discounted because of uncertainty and/or futurity, that issue could have been squarely addressed, and it was not.
61 Mr Hale submitted that it could not be said there was an error of law, where the question had not been raised below. In any event, there was no error of law. Although Mir did not endorse a purely mathematical approach to the various elements of s 55, it accepted the so-called “before and after” approach, which would have the same effect in the present case.
62 In my opinion, s 3(a) of the Just Terms Act is important here. One object of the Just Terms Act is to guarantee that compensation be not less than the market value of the acquired land (unaffected by the proposal), that is, the element of compensation provided by s 55(a). Section 10(1)(a) authorises the giving of a notice, stating that the Just Terms Act does guarantee this. Although this notice is not given in connection with actual negotiations for compensation or proceedings in which compensation is assessed, and although it cannot give rise to a civil cause of action (s 10(3)), it is plainly intended that the notice be truthful and not misleading. In my opinion, these provisions disclose a clear legislative intention that compensation be no less than that provided by s 55(a), even if there is “betterment” under s 55(f) that exceeds the other elements in s 55.
63 I see this as consistent with and supported by s 54(1). Where land is compulsorily acquired, it seems to me just that the acquiring authority pay at least the market value of that land (unaffected by the proposal), even if the person from whom the land is acquired owns adjoining land which is increased in value by the proposal, and even if this increase is greater than the market value of the acquired land. Other persons owning land in the area may benefit equally or more from the proposal; so it seems to me unjust that the acquiring authority should get the acquired land for nothing, and that the person whose land is acquired should get nothing for it, just because of a benefit that may be shared by others. Thus a lower limit of the market value (unaffected by the proposal) seems just; and this is what s 3(a) and s 10 indicate is to be guaranteed.
64 In my opinion, this is not inconsistent with Brell. Whereas s 55 merely requires the Court to have regard only to six matters, including “betterment” under s 55(f), the provision applicable in Brell explicitly required that betterment be given effect to by way of set-off for abatement.
65 There is tension between the view I am suggesting and the “before and after” method of ascertaining compensation, which is sometimes adopted when what is resumed is part of a larger parcel of land owned by the person entitled to compensation. This method takes the value of the whole parcel immediately prior to acquisition (unaffected by the proposal) and subtracts the value, immediately after the acquisition, of what the person is left with (affected by the proposal); and this gives a figure which takes account of the elements of s 55(a), s 55(c) and s 55(f). If it so happens that the “after” value is more than the “before” value, because of “betterment”, then the compensation so calculated will be Nil.
66 The “before and after” method was adopted in Mir, and approved by the Court of Appeal in that case. However, Mir did not suggest that the “before and after” method is to be adopted in all cases; and there is no authority to that effect.
67 Mir itself was a case where the approach I am considering could have been adopted, with possibly a more favourable result to the claimant. In Mir, the resumed land had an area of 1.844 hectares, and originally formed part of a larger parcel with a total area of 4.07 hectares. The valuer for the claimant and the valuer for the acquiring authority both agreed that the “before and after” method was appropriate; but the valuer for the acquiring authority expressed the opinion that the value per unit area of the 2.253 hectares with which the claimant was left was, by reason of its smaller area, five per cent more than that of the original 4.097 hectares, and the trial judge accepted that evidence. In the result, compensation for the land acquired turned out to be at a rate per unit area even lower than that of the original parcel, although on evidence accepted by the primary judge it would have been about five per cent more if it had been valued separately.
68 In his judgment in Mir ([2006] NSWCA 314 at [58]-[60]) Spigelman CJ (with whom Handley JA agreed and Tobias JA generally agreed) said this:
[58] By its nature the method encompasses a number of the matters expressly listed in s 55 including market value, loss attributable to severance and the increase or decrease due to the carrying out or proposal to carry out the public purpose. The before and after method is particularly useful in circumstances where the acquired land is difficult to value directly by reason, for example, that it is a non-marketable parcel. It may be preferable, where acquired land can be directly valued, as appears to have been the case in the present proceedings, to do so rather than to adopt the before and after method. Nevertheless, that was not the approach adopted in the present proceedings by either party. It is not appropriate for this Court to reject a methodology that may or may not have been chosen deliberately because of some synergy amongst the different heads of compensation in s 55.
[60] It may seem somewhat counter intuitive to value the same area of land in a different way when a component of a larger area of land and when considered separately. Nevertheless, that is what the before and after method involves. It produces an amount of compensation that is rational and fair. It cannot be objected to, in the context of an appeal limited to questions of law, on the basis that some other approach, not adopted by the parties, and not urged upon the judicial valuer, may have produced a result that was more “fair”.[59] I choose as an example of the effects of the interconnection, the very proposition upon which the Appellant placed great emphasis, namely, the subdivisibility of the land, being residual land which had a street frontage but which could be subdivided in different ways. If it was subdivided vertically then each of the lots had a direct access to the street but they would each be narrow and long. If the subdivision were to occur horizontally then one of the blocks would require other choices as to matters which could have impinged upon a number of the matters identified in s 55 including market value, loss from severance and increased value of severed lots. These are matters involving computation which were not necessary to be explored because of the adoption of the before and after method.
69 Spigelman CJ thereby, in my opinion, left it open that if valuation had been addressed to the acquired land as a separate parcel, compensation would have been no less than that value. He certainly did not endorse the “before and after” method as one to be adopted in all cases.
70 In the preceding paragraphs [55]-[57] in that case, Spigelman CJ had noted that a number of paragraphs of s 55 could overlap; and that this counted against an automatic arithmetical process in dealing with these paragraphs.
71 In Leichhardt at [35]-[41], Spigelman CJ (with whom Beazley, Bryson, Basten and Campbell JJA agreed) said this:
[35] Matters of valuation turn in large measure on the precise statutory scheme. These schemes differ from one area of discourse to another. It is always important to commence with the precise words of the statute. There appears to be a tendency to take a judgment about one statutory regime and classify its conclusion as a “valuation principle” which is applied to any process of valuation, no matter how different the statutory regime may be.
[36] The need to determine the value of assets arises in many different legal contexts. It is the context which determines the relevant principles of valuation to be applied. An assumption that there is in existence some abstract body of “valuation principles” applicable in all contexts, irrespective of the statutory scheme or contractual provision, is liable to lead to error. Judgments in one context may prove instructive by way of analogy when dealing with another context. Nevertheless, statutory differences must be borne in mind. The ultimate task must always come back to the application of the principles in the particular context, relevantly in the present case, to a statutory formulation that is expressed to be exhaustive. (See Sydney Harbour Foreshore Authority v Walker Corp Pty Ltd (2005) 63 NSWLR 407 at [23], [32].)
[37] The context in which, relevantly, s 56(1) falls to be interpreted, is as one of the matters identified in s 55, which constitutes an exhaustive list to which regard must be had when determining the amount of compensation under s 54. These matters do not, however, constitute a mathematical formula. They are matters which the valuer must take into account. The dominant test is contained in s 54, that is, the task is to determine the amount that will “justly compensate the person for the acquisition of the land”. This carries into effect the object of the Act set out in s 3(1)(b) “to ensure compensation on just terms for the owner of land that is acquired …”.
[38] The statutory context of “compensation” is reinforced by s 37 which creates the basic entitlement as a right “to be paid compensation”. As Dixon J said in Nelungaloo Pty Ltd v The Commonwealth (1948) 75 CLR 495 at 571: “Compensation prima facie means recompense for loss …”.
[39] A focus on what will “justly compensate” for an “acquisition” encompasses the loss of the property. Indeed, by s 37 the entitlement to compensation is conferred upon a person who has been deprived of an interest in land. However, the use of the word “acquisition” in s 54(1) and “acquired” in s 3(1)(b), rather than a word of deprivation like “loss”, does suggest a slightly different focus than that which has traditionally been applied. The use of language of “acquisition”, rather than language of deprivation, involves a difference in focus that may be subtle, but that is not immaterial.
[41] Significantly for present purposes s 3(1)(a) states that one of the objects of the Act is to “guarantee” that “compensation will not be less than … market value”. The Court should be slow to interpret the definition of market value in s 56(1) as permitting regard to be had to a matter which necessarily means that the owner will not receive market value. With respect to a restraint on alienation applicable only to the particular owner whose land is being acquired, that is what the application of the principle in Corrie v MacDermott to a prohibition on alienation must mean. The Court should not adopt such an interpretation in the absence of express words or necessary intendment.[40] This focus, together with the fact that the legislative scheme to a substantial, but not exact, extent applies to the acquisition of land by agreement as well as to compulsory acquisitions, indicates that it is one of the objects of the Act to ensure proper conduct on the part of State authorities acquiring land.
72 Those views in my opinion support an approach that recognises s 55(a) as providing a minimum figure. On that approach, which I adopt, there was an error of law by the primary judge in deciding that wherever betterment exceeds other heads of compensation, nil compensation is payable, and in awarding nil compensation in this case; and no different conduct of the case below could have altered this. It is true that this point was not taken, and that may affect costs; but the result arrived at by the primary judge is one that cannot be justified on what I consider to be the correct construction of the Just Terms Act; and in my opinion that is an error of law justifying appellate intervention.
73 It remains to consider whether there should also be appellate intervention on the basis that there is a wider discretion; so that (for example) it would be open, as Mr Craig submits, to hold that the compensation to AMP should be at least $5.7 million, because AMP has been compelled to pay out that amount; and because that amount should not be reduced by reason of a highly uncertain benefit that may come about some time in the future.
74 My tentative view is that there is not such a wide discretion. It is plainly appropriate to have regard to the possibility of overlapping of the various paragraphs of s 55, and to adjust the regard had to the various paragraphs to ensure there is no double counting. Further, insofar as an increase or decrease in value within par (f) is uncertain and/or some way in the future, it is appropriate to arrive at a lesser value to take account of the uncertainty and/or futurity. Indeed, in the present case, it would have been open to the primary judge to say there is such uncertainty about an alleged increase in value that it should not be given any value at all. However, once a value is arrived at, which fully takes into account uncertainty and futurity, I do not see any basis on which it should be further discounted or disregarded. Subject to what I have said concerning s 55(a) as a minimum figure and possible overlapping of the various elements, I do not see any principled way in which regard can be had to a decrease in value under par (f) otherwise than by treating it as justifying a pro tanto reduction of compensation.
75 In any event, even if there were such a wide discretion, reliance on the point should not be permitted on appeal, having regard to Coulton v Holcombe. There is a reasonable possibility that, had the point been raised below, the case would have been conducted differently and there would have been further evidence relevant to how such a discretion should be exercised.
Market value of acquired land
76 The primary judge noted the following submissions by AMP:
- [18] AMP argued that market value is defined by s 56(1) which is concerned with the sale of physical (freehold) land, not the sale of any particular interest in land. The Spencer test ( Spencer v The Commonwealth [1907] 5 CLR 418) requires the determination of the price that would be paid by a prudent hypothetical purchaser to a prudent hypothetical vendor in a willing but not anxious sale of that land. Lots 12 and 3 have been created as separate lots as a result of the acquisition. The capital/freehold value must be determined first. The second step is the determination of the amount of compensation to which AMP is entitled under s 55(a). At this step the leasehold interest acquired by the resuming authority is considered.
77 She considered planning evidence as to the highest and best use of the acquired land, including evidence from Mr Davis that it would be to include them as part of the shopping centre. Mr Davis’ evidence was that the appropriate valuation procedure was to ask what a small site adjacent to a larger shopping centre would bring on the market, when acquired to amalgamate with that centre or to capitalise on the trade-draw of that centre. On that basis, Mr Davis worked out a rate per square metre, calculated an appropriate rate of return to rent the land, and calculated the market value of a six-year lease using a capitalisation rate of 7.5 per cent.
78 The primary judge also considered other evidence as to the highest and best use, and as to market value, including evidence from Mr Wood adopting a car-park rental approach: that is, Mr Wood treated the highest and best use as use for car-parking, and in the case of Lot 12 calculated the market value of a six-year lease of fourteen car spaces.
79 The primary judge referred to rival arguments in par [42]:
- [42] The basis of TIDC’s argument is that when s 55(a) refers to the market value of the land on the date of the acquisition, in this case a leasehold interest in land, that interest is key to determining the market value of land under s 56(1). AMP argued the opposite, that is, that market value in s 56(1) must first be considered and then compensation under s 55(a) for the interest in that land assessed, based on market value. The acquisition created two separate lots of land and Lot 12 in particular could be sold separately.
80 She referred to Prince Alfred Reserve Trust v State Rail Authority of New South Wales (1997) 96 LGERA 75, and other cases; and she continued:
- [46] I consider the capital value of the freehold land of Lot 12 calculated on the basis of its highest and best use must be determined as that lot has been created separately as a result of the acquisition. The capital value of Lot 3 should be calculated as a percentage of that value. The rental value is then determined. This approach is supported by the application of s 56(1) of the Just Terms Act and as applied in cases such as Prince Alfred Park .
81 The primary judge then proceeded to apply Mr Davis’ method as “the correct approach” (Judgment [51]), with some variation. At [54], she said “the rental value must be determined next by adopting the appropriate rate of rental return on the freehold capital value”.
82 Mr Hale submitted that the primary judge erred in law in adopting AMP’s submission that s 56(1) required consideration of the market value of freehold, rather than of the limited interest being acquired. He submitted that this was confirmed by evidence of Mr Davis, which the primary judge accepted, that he had to first of all have regard to the capital value of the land (2 Black 459).
83 Mr Hale referred to the definition of “Land” in s 4 of the Just Terms Act as including “any interest in land”; and submitted that the definition of “market value of land” in s 56(1) was the definition of the market value of any interest in land; and that where what was acquired was an interest in land, so that s 55(a) applied to that interest, s 56(1) defined how the market value of that interest was to be understood.
84 I accept Mr Hale’s submission that s 56(1) defines the meaning of market value for interests in land as well as for the freehold in land; and that accordingly it gives content to s 55(a) in its application to an interest in land that has been acquired and in respect of which compensation is to be assessed.
85 In my opinion, this view is not affected by s 56(2), in which a distinction is drawn between the values of interests in land and the value of the freehold of the land; and in which, in the last line, “the market value of the land” has to be understood in the latter sense.
86 However, this does not necessarily mean that the primary judge made an error of law or, if she did, that it was material.
87 It can happen, as in this case, that what is acquired is an interest in land such that there is no reasonable possibility that there would be available for comparison sales of interests that are truly comparable; so that, as a matter of valuation technique, an acceptable method is to look for some different interest in respect of which there are comparable sales, and to extrapolate from those sales.
88 In this case, if a judgment is correctly made that the highest and best use of the land is as part of a regional shopping centre site, it would be reasonable to conclude that the most realistic comparisons would be of acquisitions for amalgamation with such sites; and it is unlikely in the extreme that there would be acquisitions of that kind which would be acquisitions of a leasehold interest for six years. If one limits the comparable sales to sales of leasehold interests, one would not be dealing with comparable sales in respect of which the highest and best use of the land is given effect to.
89 That this was the approach of the primary judge is suggested by her reliance on the Prince Alfred Park decision:
- [44] In determining compensation in Prince Alfred Park Pearlman J considered the amount which a hypothetical willing but not anxious lessor would require and a hypothetical lessee would pay. Her Honour assessed compensation at a premium rental determined at six per cent of the land value capitalised for the term of the lease at ten per cent. Her Honour held the lease terms were relevant but not determinative of the market value of the resumed land. She considered that a hypothetical lessor at the time of acquisition of the resumed land would have proceeded on the basis that the land was to be reinstated, after considering the EIS and the development consent for the proposal. In relation to highest and best use her Honour adopted the approach of the valuer who had regard to the highest and best use of the resumed land, not the approach of the potential loss of revenue to the applicant for the lease term. That approach while expressed differently in some respects supports the approach argued for by AMP and is the approach of the valuer Mr Davis relied on by AMP. The approach she rejected is similar to that argued for by TIDC, that is, that the market value is the loss of revenue of leasing 14 car parking spaces for six years.
90 It is true that AMP did argue for an incorrect construction of s 56(1), that the primary judge did not reject that construction, and that what she said in par [46] and perhaps par [54] could be read as suggesting she adopted it. However, in my opinion, a fair reading of her judgment indicates that she accepted the approach of Mr Davis as a matter of preferable valuation technique, rather than because of any incorrect construction of s 56(1).
91 For those reasons, in my opinion no error of law is shown in this respect.
Identification of public purpose
92 The primary judge said this at par [71]:
- [71] Section 55(f) refers to “… by reason of the carrying out of … the public purpose for which the land was acquired ”. The land was acquired by the State Rail Authority (now TIDC) under the Transport Administration Act. I consider that given those specific words in the section there is a short answer to TIDC’s submission that the public purpose for which the land was acquired includes the planning changes mooted for Macquarie Park in the EIS for the PRL. TIDC, the acquiring authority, is not responsible for, and indeed has no power to effect, rezoning of land. The proposed planning changes referred to in the EIS relied on by TIDC simply cannot therefore be within the public purpose contemplated by TIDC in undertaking this compulsory acquisition. I agree with and adopt all of AMP’s written submissions at para 6 on that issue.
93 Mr Hale submitted that the evidence showed there would be substantially increased capacity for development in the area surrounding the Macquarie Centre as a result of the PRL, which would increase the value of the Macquarie Centre; and that the primary judge erred in law in excluding this from her consideration under s 55(f).
94 Mr Hale referred to Woollams v The Minister (1957) 2 LGRA 338. That case dealt with the acquisition of land which was to be flooded as the result of the establishment of the Warragamba Storage Dam. The material provision was s 124 of the Public Works Act 1912, under which the value of the acquired land was to be determined “without reference to any alteration in such value arising from the establishment of … public words upon or for which such land was resumed”. Hardie J held that the value of the acquired land was to be determined on the assumption that the amenities and other economic and social conditions in the subject area did not deteriorate following upon and by reason of the decision of the Board to proceed with the Warragamba Dam Project, the acquisition by the Board of a number of properties in the area before the relevant date, and other events and circumstances associated with or consequential upon such acquisition; and on the assumption that those amenities and conditions would have improved during the period under consideration as they did in other areas.
95 Mr Hale submitted that, just as a blight on an area by reason of the relevant public purpose was disregarded in Woollams, so also intensification of use would be disregarded for the purposes of s 56(1) of the Just Terms Act and taken into account for the purposes of s 55(f).
96 In my opinion, in determining what increase or decrease in value occurs “by reason of” or is “caused by” the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, it is first necessary to identify the public purpose and its relevant scope or generality. This may be a matter of some difficulty, as illustrated by Roads and Traffic Authority of New South Wales v Perry [2001] NSWCA 251; (2001) 52 NSWLR 222.
97 That case concerned the acquisition of land on which a road was to be constructed, and the result was greatly affected by the determination of whether the relevant public purpose was the construction of that particular stretch of road or a larger stretch of road of which this was to be part, or even the overall scheme of upgrading the Pacific Highway from Sydney to the Queensland border. I expressed the following view at [100]:
- [100] I do not think there are any clear rules determining how the relevant purpose or the appropriate level of generality is to be determined. Factors to be taken into account would, in my opinion, include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority. In the present case, I think it unlikely that the relevant public purpose could be as wide as the upgrading of the Pacific Highway between Sydney and the Queensland boarder; while on the other hand, assuming there have been a number of versions of the Perry's Hill extension, I think it unlikely that the public purpose could be as narrow as just the last of those versions. The public purpose could be as wide as the Raleigh Deviation generally, encompassing all the variations of that project including all versions of the Perry's Hill extension, or it could be somewhat narrower.
98 Once the public purpose is thus identified, it may then be necessary to identify what is comprehended by “the proposal” to carry it out and/or “the carrying out of” the purpose. Then it may be necessary to identify the scope of what occurs “by reason of” or is “caused by” these things. In these steps also, I do not think there are clear rules, but there may need to be judgments of degree which take into account considerations of reasonableness and fairness.
99 The mere circumstance that the public purpose is a contributing factor to changes which in turn affect value is not necessarily sufficient, particularly if the changes depend also on discretionary decisions made by other authorities.
100 The primary judge made the judgment that planning changes, to which the PRL was a contributing factor but which also involved discretionary decisions by other authorities, should be disregarded for the purposes of s 55(f). In my opinion, there was no error of law in that decision.
Costs
101 The primary judge refused Transport’s application for costs, for reasons summarised by her as follows:
- 27] In my view a costs order in favour of the Respondent is not appropriate taking into account that these are compulsory acquisition proceedings and the Applicants were successful on several issues. There is no “disentitling” conduct by the Applicants … suggesting that such an order ought not be made.
102 Mr Hale accepted that the circumstance that there had been a compulsory acquisition was a factor that the primary judge could take into account: see Banno v The Commonwealth (1993) 81 LGERA 34 at [53]; Pastrello v Road and Traffic Authority of New South Wales [2000] NSWLEC 209; (2000) 110 LGERA 223 at [17]; Overton Investments Pty Limited v The Minister [2001] NSWCA 137; 133 LGERA 439 at [72].
103 However, he submitted that the primary judge failed to take account of important matters, especially that there had been an expensive twelve day hearing, in which AMP had lost completely. He submitted that the primary judge treated the factor that there had been a compulsory acquisition as determinative or presumptive, and impermissibly fettered her discretion: cf Thaina Town (on Goulburn) Pty Limited v City of Sydney Limited [2007] NSWCA 300 at [45].
104 In my opinion, the judgment of the primary judge showed she did have regard to these relevant matters, and did exercise a discretion. No basis is shown for appellate intervention.
105 I note that in any event, my opinion is that, as a result of the appeal, AMP should have succeeded to the extent of something over $1 million. Normally, this would carry costs at first instance. However, the basis on which AMP should have succeeded was not raised below; and my tentative view is that, even if AMP were to succeed to this extent, the costs order below should not be disturbed.
ORDERS
106 It follows that the cross-appeal should be dismissed with costs.
107 The appeal in my opinion should be allowed. The precise amount of the market value was left by the primary judge for calculation, but there is no reason why this cannot now be done. I see no reason why this Court cannot give effect to its decision, without any need to refer the matter back to the Land and Environment Court, since there are no additional facts to be found or discretions to be exercised.
108 Since the matter on which the appeal succeeded was introduced by a late amendment, and the appellant’s success was only partial, my tentative view is that each party should bear its own costs of the appeal. I would direct AMP to bring in agreed short minutes within 21 days; and if there is not agreement, to submit its proposed short minutes with any submissions concerning costs or other matters within that time. In that event, Transport is to respond with its proposed short minutes and submissions within a further 14 days.
109 Bell JA and Gyles AJA are of the view that the appeal should be dismissed with costs. Bell JA is of the view that the cross-appeal (including the cross-appeal as to costs) should be dismissed with costs. Accordingly, the following orders are by majority to be made.
- (1) Appeal dismissed with costs.
(2) Cross-appeal dismissed with costs.
110 BELL JA: I have had the benefit of reading the judgments in draft of Hodgson JA and Gyles AJA. I also agree with Hodgson JA’s reasons with respect to the disposition of grounds 1, 3 and 4, being the only grounds in the notice of appeal that were pressed on the hearing. I agree with Gyles AJA that in the result this should lead to the dismissal of the appeal with costs. I agree with Gyles AJA’s reasons both for holding that the amendment should not be allowed and for not permitting the claim to be recast on appeal to take up the statutory construction point. I note with reference to the nature of the appeal under s 57 of the Land and Environment Court Act 1979 (NSW) the recent discussion in B & L Linings Pty Ltd v Chief Commissioner of State Revenue [2008] NSWCA 187 per Allsop P (Giles JA agreeing) at [57]-[70].
111 I agree with Hodgson JA concerning the grounds raised by the cross-appeal and with the orders that his Honour proposes, namely that it should be dismissed with costs.
112 I agree with Hodgson JA with respect to the respondent’s appeal from the primary judge’s costs orders made on 2 November 2007. I agree with Gyles AJA that the respondent should pay the costs of the costs appeal.
113 GYLES AJA: Hodgson JA has outlined how the issues arise. I agree with his Honour’s conclusions as to those of the original grounds of appeal that are pressed, namely grounds 1, 3 and 4. In my respectful opinion that should lead to dismissal of the appeal with costs. I would not permit the amendment of the grounds of appeal to include proposed ground 7.
114 That ground is based upon the proposition that there is a wide discretion to adjust the application of the factors set out in s 55 of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act) to arrive at the just compensation provided for by s 54(1). In the present case that would mean that the discretion would be exercised on the basis that the factor in s 55(f) would effectively be ignored or substantially discounted. It is accepted on the part of the appellant, AMP Capital Investors Limited (AMP), that the case in the Land and Environment Court was not put in that way. That being so, it cannot be said that the Land and Environment Court judgment is subject to appeal on a question of law as required by s 57 of the Land and Environment Court Act 1979 (NSW). This is not a general appeal, and, in particular, is not appeal by way of re-hearing.
115 If that problem is overlooked, the next problem is the Coulton v Holcombe line of authority ((1986) 162 CLR 1). It is obvious that if the point had been relied upon in the Land and Environment Court the case would have been differently conducted on both sides. It would have been a very different case. Indeed it would have been a novel case. We have not been referred to any other case in the Land and Environment Court that has considered the issue since the Act came into force. Dicta in this Court in Leichhardt Municipal Council v Roads & Traffic Authority of NSW [2006] NSWCA 353, (2006) 149 LGERA 439 and Mir Bros Unit Constructions Pty Limited v Roads & Traffic Authority of NSW [2006] NSWCA 314 were relied upon by counsel for AMP, but the present argument did not fall for decision in either case.
116 Allowing such a point to be raised on appeal seriously disturbs the principal of finality of litigation. The case in the Land and Environment Court was commenced in 2003 and after, no doubt, extensive preparation, came on for hearing on 13 November 2006 and ran for 13 days between then and 30 March 2007 with written submissions before and after the final day. A judgment of 165 paragraphs was delivered on 2 July 2007. Thereafter 2 subsequent judgments dealing with other aspects of the case were given.
117 In my view it is neither necessary nor appropriate to enter upon discussion of the merits of the argument. The result of doing so would be that an important issue of compensation law would be dealt with without the benefit of consideration by the specialist court charged with the responsibility of deciding such cases and with the case having been presented and conducted at trial without the point in mind. There are, of course, occasions where it is convenient to hear the substance of the argument as to the merits of a new point proposed on appeal. But, in my view, this was not one of them, as the point is precluded regardless of merit.
118 There is a separate issue in relation to the opinion of Hodgson JA that there was appealable error by the Land and Environment Court in awarding nil compensation in that the amount of compensation should have been not less than the market value of the “land” acquired (unaffected by the proposal) at the date of acquisition assessed in accordance with s 56. That argument was not put to or considered by the Land and Environment Court, is not reflected in any ground of appeal or proposed ground of appeal, and was not put in AMP’s submissions prior to the hearing of the appeal. It arose in the course of argument on the appeal. It appears to be novel. We were not referred to any case in which it has been considered or any commentary that refers to it, notwithstanding that the Act has been in force for some 17 years.
119 It would be unusual to permit a money claim by a well resourced party to be recast on appeal after a substantial trial simply because an argument as to statutory construction emerges on the hearing of an appeal even if the appeal were a re-hearing. The problem is even more acute in the case of an appeal from a specialist Court limited to questions of law.
120 There is a particular difficulty here, as the award of nil compensation would have to be set aside and the amount attributed to market value awarded if Hodgson JA is correct as to the point of statutory construction. In my opinion that follows from the fact that Hodgson JA has demonstrated in considering the first cross claim that the respondent was correct in contending that, in fixing market value, the Land and Environment Court proceeded upon an erroneous construction of the legislation as to a fundamental question – the nature of that which is to be valued. That was obviously an error on a question of law. Such an error would require the finding based upon it to be set aside unless it is clear that the result would not change in the event of reconsideration. It is not sufficient that some basis may exist for upholding the decision. (cf. Balenzuela v De Gail (1959) 101 CLR 226; Stead v State Government Insurance Commission (1986) 161 CLR 141; Toll Pty Ltd v Craig Morrissey [2008] NSWCA 197 per Beazley JA at [10]). In my opinion the difference between valuing freehold on the one hand and a short-term leasehold on the other is so radical as to require re-hearing if the issue remains live. The issue would be live if the point of statutory construction were permitted to be raised and if it were to succeed. The fact that a re-hearing on this point would or may be necessary is a further reason to decline to enter upon the issue.
121 Thus I would simply dismiss the appeal with costs.
Cross-appeal
122 Grounds 1 to 3 of the cross-appeal relate to the market value of the “land” acquired. Once the appeal is dismissed, success on those grounds could have no effect upon the result, which is nil compensation. In that sense the grounds are moot. The first point, concerning the construction of “land” in s 55(a) and s 56, is of some general importance. It has been dealt with by Hodgson JA and I agree with his conclusion and reasons on that point, although, as indicated above, I do not agree that the error can be overlooked.
123 Ground 4 relates to s 55(f). Whilst it, too, is moot in the sense discussed, it is of some general importance. I agree with Hodgson JA’s reasons for rejecting that ground.
124 On my view, each party would have had some measure of success on the substance of the cross-appeal. Given that the respondent should have the general costs of the appeal, I would make no order as to the costs of the cross-appeal.
Costs appeal
125 The remaining issue is the respondent’s appeal against the order for costs which was made in the Land and Environment Court. I agree with Hodgson JA that that appeal should be dismissed. The respondent should pay the costs of that appeal.
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