Arcus Shopfitters Pty Ltd v Western Australian Planning Commission
[2002] WASC 174
•28 JUNE 2002
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ARCUS SHOPFITTERS PTY LTD -v- WESTERN AUSTRALIAN PLANNING COMMISSION [2002] WASC 174
CORAM: PULLIN J
HEARD: 2, 3, 6-10, 13-17, 20-24, 27-29 MAY 2002
DELIVERED : 28 JUNE 2002
FILE NO/S: CIV 1377 of 1998
BETWEEN: ARCUS SHOPFITTERS PTY LTD
Applicant
AND
WESTERN AUSTRALIAN PLANNING COMMISSION
Respondent
Catchwords:
Resumption or acquisition of land - Compensation - Valuation of land - Comparable sales method - Special value to owner - Whether "special circumstances" existed
Evidence - Expert valuers - Whether Court obliged to accept evidence of valuer
Evidence - Expert - Basis for expert opinion must be explained
Legislation:
Land Acquisition and Public Works Act 1902, s 35 and s 63
Metropolitan Region Town Planning Scheme Act 1959, s 36 and s 37
Result:
Compensation awarded
Category: B
Representation:
Counsel:
Applicant: Mrs L E Rowley
Respondent: Mr C B Edmonds SC & Ms L E Christian
Solicitors:
Applicant: McLeods
Respondent: State Crown Solicitor
Case(s) referred to in judgment(s):
Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209
Bronzel v State Planning Authority (1979) 21 SASR 513
Commissioner of Highways v Tynan (1982) 53 LGRA 1
Commonwealth v Milledge (1953) 90 CLR 157
Cook & Edwards v City of Stirling (1991) 4 WAR 469
Crisp & Gunn Co‑operative Ltd v Hobart City Corporation (1963) 110 CLR 538
D'Amico v Shire of Swan‑Guildford [1969] WAR 183
In the Marriage of Borriello (1989) 97 FLR 211
In the Marriage of Goodwin (1990) 101 FLR 386
Kerry v State Transport Authority (1985) 38 SASR 502
Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409
Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705
Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426
Minister for Army v Parbury Henty & Co (1945) 70 CLR 459
Pastoral Finance Association Ltd v The Minister [1914] AC 1083
Phosphate Co‑operative Co of Australia Ltd v Shears (No 3) [1989] VR 665
Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369
Pollock v Wellington (1996) 15 WAR 1
Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370
R v Compensation Court of Western Australia (1990) 2 WAR 242
River Bank Pty Ltd v The Commonwealth (1974) 48 ALJR 483
Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373
Spencer v Commonwealth (1907) 5 CLR 418
St John Ambulance Association of Western Australia Inc v East Perth Redevelopment Authority [2001] WASC 85
Yates Property Corp Pty Ltd (in liq) v Darling Harbour Authority (1991) 27 NSWLR 156
Case(s) also cited:
Abigroup Contractors Pty Ltd v Peninsula Balmain Pty Ltd (No 2) [2001] NSWSC 1016
Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410
Albany v Commonwealth (1976) 12 ALR 201
Balquhidder Pty Ltd v Minister for Environment & Planning (1986) 40 SASR 63
Brewarrana Pty Ltd v Commissioner of Highways (No 1) (1973) 32 LGRA 170
Britton v Minister for Education (1986-87) 29 The Valuer 224
Brown Bros (Marine) Holdings Pty Ltd v New South Wales Land & Housing Corporation (1991) 72 LGRA 50
CC Auto Port Pty Ltd v Minister for Works [1965] WAR 148
Celtic Agencies Pty Ltd v South Australian Land Commission (1978) 20 SASR 176
Cerini v Minister for Transport [2001] WASC 309
Cienda Pty Ltd v South Australian Urban Land Trust (1988) 65 LGRA 419
Collins v Ottawa Water Commission (1878) 42 UCQB 378
Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd (1947) 74 CLR 358
Commonwealth v Arklay (1952) 87 CLR 159
Commonwealth v Morison (1972) 127 CLR 32
Crompton v Commissioner of Highways (1973) 5 SASR 301
De Campo v Shire of Chittering, unreported; SCt of WA; Library No 4856; 15 April 1983
De Ieso v Commissioner of Highways (1981) 27 SASR 248
Director of Buildings and Lands v Shun Fung Ironworks Ltd [1995] 1 All ER 846
Eagle v The Charing-Cross Railway Company (1867) 16 LTR 593
Fenton Nominees Pty Ltd v Valuer-General (1981) 27 SASR 258
Gregory v Federal Commissioner of Taxation (1971) 123 CLR 547
Hazel v Minister for Lands & Works (1977) 23 The Valuer 504
Housing Commission (NSW) v Falconer [1981] 1 NSWLR 547
In re an Arbitration between Lucas and Chesterfield Gas & Water Board [1909] 1 KB 16
Inglewood Pulp and Paper Co Ltd v New Brunswick Electric Power Commission [1928] AC 492
King v Minister for Planning & Housing (1991) 76 LGRA 288
Konowalow v Minister for Works [1961] WAR 40
Lake Erie & Northern Railway Co v Brantford Golf and Country Club (1917) 32 DLR 219
Latimer v North Coast National Agricultural & Industrial Society (1938) 14 LGR (NSW) 30
March v City of Frankston [1969] VR 350
Mario Piraino Pty Ltd v Roads Corporation (1990) 76 LGRA 263
Marshall v Director-General, Department of Transport (2001) 180 ALR 351
McGlynn & Co Pty Ltd v Municipality of Parkes (1939) 5 The Valuer 308
Merivale Motel Investments v Brisbane Expo Authority (1987) 64 LGRA 108
Minister of Environment v Petroccia (1982) 30 SASR 383
Minister of State for Home Affairs v Rostron (1914) 18 CLR 634
Minister of Transport v Edwards [1964] 1 All ER 483
Moad v Orange City Council (1957) 2 LGRA 171
Nap Nap Station Pty Ltd v Valuer-General (1989) 72 LGRA 275
Pamalco Pty Ltd v Minister Administering National Parks & Wildlife Act 1974 (No 3) (1991) 71 LGRA 441
Permanent Trustee Australia Ltd v City of Wanneroo (1994) 11 SR (WA) 1
Pointe Gourde Quarrying & Transport Ltd v Sub-Intendent of Crown Land [1947] AC 565
Prasad v Wolverhampton Borough Council [1983] 1 Ch 333
R K Morgan Holdings Pty Ltd v Melbourne & Metropolitan Board of Works (1992) 77 LGRA 102
Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer, Vizagapatam [1939] AC 302
Re Schooley and Lake Erie & Northern Railway Co (1915) 25 DLR 537
Redeam Pty Ltd v South Australian Land Commission (1977) 40 LGRA 151
Robinson & Co Ltd v Collector of Land Revenue, Singapore [1980] 1 WLR 1614
Royal Sydney Golf Club v Federal Commissioner of Taxation (1957) 97 CLR 379
Sharp v Western Australian Planning Commission [1999] WASC 223
Sheffield Development Corporation v Glossop Sectional Buildings Ltd [1994] 1 WLR 1676
Sisters of Charity of Rockingham v The King [1922] 2 AC 315
Turner v Minister of Public Instruction (1956) 95 CLR 245
University of Western Australia v City of Subiaco (1980) 52 LGRA 360
Wilson v Liverpool Corporation [1971] 1 WLR 302
Wong v Minister of Water Resources (1985) 55 LGRA 431
Woollams v Minister (1957) 75 WN (NSW) 103
Yates Property Corp Pty Ltd v Darling Harbour Authority (1990) 70 LGRA 187
TABLE OF CONTENTS
Definitions
History of the Subject Land and the Businesses Conducted on It
The Claim for Compensation
Town Planning
The Northbridge Study 1991
Perth Central Area Policy's Review 1993
City Living Report 1992
Inner City Residential Manual 1995
CPS2
Development Approvals Granted by the City of Perth Since 1990
Other Planning Considerations
Value to Owner
The Determination of Value When Valuer Witnesses Differ
Basis for Expert Opinion Must be Explained
Valuation Method
Valuation Evidence
Mr McMahon
Mr Dix
Lot Y104 James Street
Food Hall Land
"On the Park" Land
56 Francis Street
Land Outside of Northbridge
Adjustments for Time
Mr Spencer
Geoffrey Robert Elliott
Conclusions to the Valuers' Evidence
Findings – Concerning Valuation Issues
Area of Land to be Valued
Highest and Best Use of the Land
Assumed Zoning
Valuation Method
Does the Suburban Area Provide Comparable Sales?
Should Comparable Sales Evidence be Drawn from Northbridge?
Is There a Particular Area of Northbridge which Affords More Satisfactory Comparable Sales Evidence?
Sales of Improved Land – Are they as Reliable as Sales of Vacant Land?
Which is the Most Important Comparable Sale?
245‑249 James Street
Discount for Magnitude
Adjustment of Comparable Sales for Increase in Value over Time
Value of the Subject Land
Value of Improvements
Deduction under s 37(5)(b) of the MRTPS Act
Stamp Duty Conveyancing and Other Fees to Purchase a Replacement Property
Injurious Affection to the Business
The Claim for a Proportion of Rates and Taxes from 6 May 1982 to 30 June 1996
Solatium
Amount of Award
PULLIN J: The applicant ("Arcus Shopfitters") claims compensation for the resumption of the subject land on 27 October 1995. As at the date of resumption, the improvements on the subject land consisted of a substantial factory warehouse with detached brick offices and a brick and iron storeroom. These improvements covered approximately 3,200 square metres of the site. The land is situated in Northbridge, wholly within the district of the City of Perth.
The applicant called two valuers, who offered opinions that the value of the subject land and buildings was about $6.9 million. The respondents called two other valuers, who offered opinions that the value of the subject land and buildings was only about $3.6 million. My task is therefore to analyse the evidence of the four valuers, and other witnesses, and reach a conclusion about the value.
In the first half of my reasons, I deal with the history of the subject land and the business which was conducted on it. Usually it would be unnecessary to do this, but I am obliged to do so in this case because the applicant contends that its business was adversely affected by the CNBR (defined below), and that this amounted to a "special circumstance" warranting an award of compensation under the proviso to s 63(c) of the PWA (defined below).
Definitions
Arcus Shopfitters – Arcus Shopfitters Pty Ltd, the applicant, which was incorporated in 1975 and a subsidiary of Arcus Pty Ltd.
Arcus Glass – Arcus Glass Pty Ltd, incorporated in 1975 and a subsidiary of Arcus Pty Ltd.
Dr Arcus - Dr Albert Lawrence Arcus.
Ray Arcus – Raymond Walter Arcus.
Northbridge – The area bounded by the CNBR in the north, Beaufort Street in the east, Roe Street in the south, and Fitzgerald Street in the west.
East Northbridge – That part of Northbridge to the east of Lake Street.
West Northbridge – That part of Northbridge to the west of Lake Street.
MRTPS Act – The Metropolitan Region Town Planning Scheme Act 1959.
MRPA – Metropolitan Region Planning Authority – the respondent authority created under the MRTPS Act and the predecessor of the respondent.
MRS – Metropolitan Region Scheme.
PWA – Public Works Act 1902 and in 1995 renamed the Land Acquisition and Public Works Act 1902.
CNBR – Central Northern By‑Pass Reserve.
CPS1 – City of Perth Town Planning Scheme No 1, which came into force in 1985 and which was still in force in 1995.
CPS2 – City of Perth Draft Town Planning Scheme No 2, which the PCC resolved to adopt as a draft on 9 August 1994 but which had not received final approval of the Minister in 1995.
PCC – City of Perth.
Subject land – The land with the street address 138 Aberdeen Street, Perth, located on the north east corner of the intersection of Palmerston Street and Aberdeen Street, and more particularly described as estate in fee simple in all that piece of land consisting of 4,553 square metres of land and being portion of each of Perth Town Lots Y166 and Y167, being part of the land on Diagram 7009 and part of the land comprised in Certificate of Title Vol 923 Folio 16. The applicant is the registered proprietor.
History of the Subject Land and the Businesses Conducted on It
The subject land was acquired on 1 June 1927 by Arcus Ltd.
On 6 August 1949, Arcus Ltd was privatised and became Arcus Pty Ltd. There were several buildings on the land, and from those buildings first Arcus Ltd and then Arcus Pty Ltd carried on at different times, the business of manufacturing shop and office fittings, metalwork, glass manufacturing, floor tiling, store boards, painting and polishing materials, together with associated work and installations.
In 1959, the MRTPS Act was passed. This created the MRPA. Section 30 required the MRPA to make the MRS with respect to the whole or any part of the land within the metropolitan region.
The MRS was made and published in the Government Gazette of 9 August 1963. The MRS applied to all land within the metropolitan region. The subject land was within the metropolitan region. Provision was made in the MRS for land to be reserved for public purposes, one of which was for "controlled access highways". Land was reserved for "controlled access highways" in a strip to the north of the Perth city centre. The strip runs west from the Swan River until it meets up with the Mitchell Freeway. This reserved strip of land to the north of Perth became known as the CNBR. It ran between Newcastle and Aberdeen Streets. What is now known as the Northbridge Tunnel runs within, and under, the CNBR. The location of the CNBR between Newcastle and Aberdeen Streets did not alter between 1963 and today.
The MRS provided that no provisions of the part of the MRS dealing with reserved land should prevent the continued use of land for the purpose for which it was being lawfully used immediately before the MRS had the force of law. Clause 18 of the MRS provided that no person should commence or carry out any development on reserved land that was not owned by, or vested in, a public authority, without the written approval of the MRPA.
Section 36(3) of the MRTPS Act provided that where, under the MRS, any land was reserved for a public purpose, compensation was not payable for injurious affection until, inter alia, the land was sold.
In December 1972, Ray Arcus and Dr Arcus staged what Dr Arcus called a "palace revolution", meaning that they gained control of Arcus Pty Ltd.
Some time before June 1973, manufacturers of glass which supplied Arcus Pty Ltd began supplying much larger sheets of glass, and this created a difficulty when it came to handling and manoeuvring the packs of these sheets into the glass factory on the subject premises.
The minutes of the board meeting of Arcus Pty Ltd dated 6 June 1973 recorded the following information:
"Mr. Barwood briefly outlined the need for both new buildings and submitted an estimate by Halpern Glick and Lewis of $120,000 together with a breakup of the cost showing separate figures for the Glass Shop and the Amenities Building.
Until the attitude of the M.R.P.A. is known regarding new buildings nothing could be done and in any case capital expenditure proposals are to be referred to Dr. Arcus.
Mr. Barwood advised that all glass would, in the near future, be consigned in large containers which cannot be handled with the present equipment. Glass will be supplied in a limited number of sizes and the local importer and distributor will be required to cut to sizes required when selling smaller quantities to other companies.
Mr. Barwood said that the alternative to re‑building the glass shop and installing a crane capable of handling the large containers would be for the Company to cease importing direct and purchase it's own requirements from some other importer at a much higher price. It would then only be able to handle small jobs and one consequence, he said, would be the loss of highly experienced tradesmen who would not wish to continue with the Company doing 'two bob' jobs and would seek employment elsewhere.
…
Work on the glass handling facilities was not urgent, although it would have to be undertaken if the Company wished to carry on as a large glass merchant.
The Board members then examined the drawings for the proposed buildings and inspected the existing buildings and lay‑out."
Dr Arcus was appointed managing director of Arcus Pty Ltd on 27 August 1973. Dr Arcus then examined the way in which the company Arcus Pty Ltd could cope with the problems associated with the supply of larger sized sheets of glass. One option considered by Arcus Pty Ltd was to "lift" the roof. It was not fully explained how this would solve the problem, and neither Dr Arcus nor Ray Arcus could explain it to me. It seemed to have been the idea of Mr Barwood and Halpern Glick and Lewis. The other option was work which did not involve "lifting" the roof or carrying out the work which was the subject of the Halpern Glick and Lewis estimate. This option involved installing a new crane between two of the buildings on the site to handle the unloading of the new packs of glass. There was an issue raised about why the work was not carried out to "lift" the roof. The applicant, through Ray Arcus, said that the reason was because of concern that the MRPA would not approve the carrying out of such work. The minutes of the 6 June 1973 board meeting also mention that concern.
The subsequent minutes of meetings of directors of Arcus Pty Ltd, however, do not continue to show any such concern. The minutes reveal that Dr Arcus began to play a significant role in deciding what would happen about the method of handling the new large packs of glass. The minutes of the meeting of directors of Arcus Pty Ltd of 3 July 1973 contained the following:
"Mr. Barwood reported that the [MRPA], the Perth City Council, and the Main Roads Department, approved a sketch plan and it is now for Arcus Pty. Ltd. to submit complete plans and specifications and structural details and on acceptance of these a building licence could be issued.
The M.R.P.A. approval means that the cost of the extensions would be re‑imbursed when the land is required by it for the 'Ring Road'. The prospects of early resumption of the land appear to be remote. The proposals have been referred to Dr. Arcus who expressed the view that the shareholders should consider the long term future of the Company before it commits itself to the expenditure.
The Board agreed that an early decision is necessary and Dr. Arcus is to be advised to this effect and asked if he is likely to visit Perth within the next six to eight weeks."
Dr Arcus could not recall what was shown in the sketch plan referred to by Mr Barwood, and he did not know whether they related to the Halpern Glick and Lewis proposals. It seems likely that they did. Dr Arcus said that he made contact on many occasions with officers of the MRPA, who led him to believe that developments exceeding a cost of $10,000 would not be approved and that developments where the expenditure would be less than $10,000 would be approved. Dr Arcus does not know to whom he spoke, and it was not about any specific proposal.
Dr Arcus' conversation with the unknown officer of the MRPA may have been after those two directors' meetings on 6 June and 3 July 1973, and after he became managing director, but, if so, the subsequent minutes do not say that the attitude of the MRPA was relevant to the decision which was ultimately taken by Arcus Pty Ltd, which was to install the outside crane to handle the new glass packs rather than the other option of lifting the roof. This decision can be seen from the next minutes of the meeting of directors of Arcus Pty Ltd on 27 August 1973. This was the meeting where Dr Arcus was appointed managing director. The minutes record details of a long report from Dr Arcus, who stated that he examined the company as a whole and that the plans for the new building submitted by Halpern Glick and Lewis had convinced him that there should be no decision to carry out proposed alterations to the present glass shop and store to provide further permanent store space, or to provide for the future handling of bulk consignments of glass, pending further study by him. The minutes then go on to record the fact that Dr Arcus believed that:
"… more efficient and economical alternatives could be found than the investment of $120,000 estimated by Halpern Glick and Lewis, to be needed for alterations and additions to existing buildings and a travelling crane of higher lifting capability than the existing crane."
The minutes also record a number of ideas put forward by Dr Arcus to deal with the need for further storage space. One of his ideas was:
"The provision of a new travelling crane to unload and move glass in the future should be examined and possibly the cranes at present dismantled and lying between the old brick house and Aberdeen Street could be restored and used."
It was probably after this, and some time in 1973, that Dr Arcus spoke to the unknown officer in the MRPA. No subsequent minutes suggest that the conversation Dr Arcus had with a MRPA officer ever influenced the board of Arcus Pty Ltd in its decision to build the external crane to cope with the problem of the glass. The minutes of 5 March 1974 reveal that the external crane was, as at that date, in use. This outside gantry crane was designed by Dr Arcus.
I find that the decision to construct the outside gantry crane was because it was a more cost‑effective solution than the $120,000 rebuilding works proposed by Halpern Glick and Lewis. I find that the main reason Arcus Pty Ltd decided to erect the outside gantry crane rather than carry out the works proposed by Halpern Glick and Lewis (and rather than the raising of the roof if that were a different proposal from the Halpern Glick and Lewis proposal) was because of economic reasons, and not because there was a concern that the MRPA would not approve of the work to raise the roof. This is not to say that the directors did not consider that there may have been problems associated with the gaining of MRPA approval if ever it had proved necessary to make an application in relation to this work. In fact, it is clear that they did perceive the existence of the reserve would prevent any major development being approved on the site. Dr Arcus said so in a letter to Bond Corporation Pty Ltd, dated 12 September 1982. The fact is, however, that neither Arcus Pty Ltd nor the applicant ever considered that they had to carry out any major development work which required an application to the MRPA in relation to the subject land which might have been rejected.
In 1975, Arcus Glass and Arcus Shopfitters were incorporated. Arcus Glass was the company which was involved in glass manufacturing work until 1977, when the activities were transferred to Arcus Shopfitters.
In September 1981, the members of Arcus Pty Ltd sought advice from Robinson Cox about the members' voluntary liquidation of Arcus Pty Ltd.
The result was that on 29 March 1982, Arcus Pty Ltd went into voluntary liquidation and the subject land was sold to Arcus Shopfitters.
By that date, enquiries of the MRPA had indicated to Dr Arcus and Ray Arcus that the land would not be required for the reserved purpose until at least 1993.
The sale of the subject land to Arcus Shopfitters by Arcus Pty Ltd triggered the payment of compensation for injurious affection under s 36(3) of the MRTPS Act.
On 6 May 1982, a deed of discharge was signed, the parties to that deed being Arcus Pty Ltd and the MRPA. The recitals to the deed refer to the fact that the land had been reserved under the MRS, that Arcus Pty Ltd was at the time of the reservation the registered proprietor, and that after the affected land was reserved, notice had been given to the MRPA of its intention to sell the affected land. The recitals read:
"The Owner has sold the affected land at a price less than that which it might reasonably have expected to receive had the affected land not been reserved under the Scheme as aforesaid and the Owner therefore claims that the affected land was injuriously affected by the said reservation.
The Authority has agreed with the Owner that the value of the land had it not been affected by the reservation was the sum of … ($725,000.00) and considers that by reason of the said reservation a fair and reasonable valuation of the affected land is the sum of … ($543,750.00).
The Authority has elected and agreed to pay the owner as compensation the said injurious affection the sum of … ($181,250.00) being the difference between the said sum of … ($725,000) and the said sum of … ($543,750.00).
The Owner transferred the affected land to ARCUS SHOPFITTERS PTY LIMITED of 138 Aberdeen Street Perth by transfer registered in the Office of Titles …"
The operative clauses of the Deed read:
"1.THAT the Authority shall pay to the Owner the said sum of … ($181,250.00) upon the acceptance that the Office of Titles at Perth of a Caveat lodged by the Authority against the affected land and such Caveat shall be lodged as soon as practicable after the execution of this Deed by the Owner.
2.THAT in consideration of the said sum of … ($181,250.00) to be paid by the Authority to the Owner as hereinbefore provided the Owner HEREBY ACKNOWLEDGES AND DECLARES that such payment constitutes compensation in full satisfaction and discharge of its claim for compensation under the provisions of the said Acts and all other claims or rights of claim by it or any other person or persons claiming by through or under it by reason of the reservation of the affected land under the Scheme and the loss or damage caused thereby and of all other claims or rights of claim which it now has or but for the execution of these presents could or might have had in respect of the injurious affection of the affected land by the said reservation and for all loss or damage suffered thereby."
Very soon after the compensation was received, Arcus Shopfitters began making enquiries to see whether a buyer could be found for the business. Hence, on 12 September 1982, Dr Arcus wrote to the chairman of Bond Corporation Pty Ltd, asking whether that company would be interested in "taking under your corporate wing the Arcus clan's 59 year old business …". The letter continued:
"The founding generation has passed on; the second generation's interest is waning; and the third generation shows no interest in continuing the business as a family concern. The consensus is to take soundings for the sale of the company as a going concern."
The letter also continued:
"As you know, the company's premises are on land reserved for a future freeway to be constructed 'not before 1994'. No significant further improvement of the site is therefore possible. Some of our buildings and equipment are quite ancient. However, our 42 employees – many of whom have been with us for decades – are competent and dedicated and have earned us (and them) a good reputation…"
This letter did not result in any sale, and the business continued to operate. It operated profitably until the end of the 1980s. By the end of the 1980s, the business became less successful. Indeed, in the last six years of its existence as a business operating from the subject land, the company did not make a trading profit. Dr Arcus gave evidence that he thought the trading losses which were recorded for each year from 1989 until 1995 had to be adjusted to take account of interest which was paid to shareholders in relation to debentures which had been issued to support the acquisition of the subject land. He said that, for example, although there was a trading loss of $58,997 for the financial year ending 30 June 1989, that $107,000 debenture interest was paid to shareholders in that year. Dr Arcus also expressed the view that adjustments should be made to take into account the fact that director's fees were paid. In my view, there is no basis for making such adjustments. The money had to be borrowed by Arcus Shopfitters to acquire the subject land from Arcus Pty Ltd, from someone. The fact that the money was borrowed from shareholders does not alter the fact that, when looked at as a trading entity, Arcus Shopfitters did not trade at a profit for the last six years.
On several occasions, reference was made to the effects of recession, the reduction in building activity, and the pressure from competitors. For example, in the minutes of the director's meeting of 7 November 1991 of Arcus Shopfitters, it was recorded that the greatest loss ever had been suffered to 30 June 1991, attributable to the severe recession, reduction in building activity and its effect on selling prices. There was also an unprofitable involvement in a contract for the Myers Forrest Chase project. This was recorded as being the "most disastrous episode in the Company's trading history" in the minutes of the director's meeting for 15 March 1989. In the letter to Bond Corporation Pty Ltd, there was a reference to 42 employees, but the minutes of the directors of Arcus Shopfitters on 20 June 1989, reveal that there were, by then, only 18 men employed. A decision was made to cease trading and to terminate the employees' employment in the minutes of 26 August 1993, which decision was later deferred to March 1994. That decision was made by the directors on 7 September 1993, and the reason for deferring the closure of the business was to "avoid the high cost of having to use other firms to undertake our obligations of maintenance under existing completed contracts".
In the last two years of the existence of the business, Arcus Shopfitters tried its hand at manufacturing coffins for sale, but that business proved to be unsuccessful.
Then, on 27 October 1995, the resumption of 138 Aberdeen Street, Perth, occurred, as a result of which, at a meeting of directors of Arcus Shopfitters on 31 October 1995, it was resolved that because of the resumption, and because of the uncertain future trading conditions, the company's operations should cease, the plant and equipment should be sold, and the company should close the site on 21 December 1995.
There was no resolution, and never any discussion at board level, about shifting the business to another site so that the company's business could continue to be carried on. Dr Arcus said that this was because the company could not continue to carry on business at a location other than 138 Aberdeen Street. He said that this location made it ideally placed to carry out contracts in the central business district of Perth, and that this closeness to the central business district gave it an advantage over competitors. If location was an advantage over the other companies which competed with Arcus Shopfitters, then this advantage did not show itself up in the profit and loss account. The references in the minutes, at different stages, to the greater efficiency of competitors, suggests that the business of Arcus Shopfitters had become moribund. I find that the business closed down rather than shift to other premises, because it had become unprofitable. In my opinion, this unprofitability was not caused by the existence of the CNBR.
Evidence was given that the reservation had a blighting effect on the properties within the CNBR, and it is clear enough that in general terms this is so. Buildings within the CNBR showed signs of becoming run down, and it seems reasonable to conclude that owners within the CNBR were generally inclined not to expend moneys on redevelopment. Speaking generally, owners of properties probably had the view that applications to redevelop land within the reservation area would be refused if they sought approval for large‑scale redevelopment. I find, however, that this does not explain the run down in the business of Arcus Shopfitters. If the business of Arcus Shopfitters had been successful and the business had thrived, then either the current owners or some other interested party would have carried it on. Several efforts were made to sell the business, and advertisements were placed in 1988 in the financial press seeking expressions of interest from those who might buy the business. No sale ever resulted from these advertisements.
The Claim for Compensation
On 14 November 1995, Arcus Shopfitters made a claim for compensation. The claim has been amended so that it now includes a claim for $6,900,000 for the land and buildings.
In addition to the claim for compensation for the resumption of the subject land and buildings, the applicant also claims compensation as follows:
(a)stamp duty, conveyancing and fees to purchase a replacement investment. Alternatively under the proviso to s 63(c) of the PWA, such sums as would place the applicant in the position it would have been in had the respondent not compulsorily purchased the land - $345,000.
(b)a proportion of rates and taxes paid by the applicant after giving up possession of the subject land pursuant to s 63A of the PWA ‑ $14,422.72.
(c)25 per cent of rates and taxes paid by the applicant from 6 May 1982 to 18 January 1996 - $88,340.83.
(d)An award under the proviso to s 63(c) of the PWA for injurious affection to the applicant's business – amount unspecified.
(e)Solatium at 10 per cent pursuant to s 63(3) of PWA.
(f)Interest on the foregoing.
(g)Interest in relation to costs and disbursements incurred prior to the issue of proceedings pursuant to s 32 or s 142 of the Supreme Court Act 1935.
Mr Elliott, a valuer retained by the respondent, valued the subject land at $3,642,000 as at the date of resumption. Mr Spencer, another valuer retained by the respondent, valued the resumed land at $3,670,000 on that date.
Town Planning
The MRS is the general plan for the metropolitan region. The MRS created a "central city area" zone, which included the area from the central city north to the CNBR.
The CPS1, like any other local authority town planning scheme incorporates all the MRS reserves. The CPS1 scheme map therefore incorporates the CNBR. CPS1 embodies a central city area called the "Central Area". The northern boundary of the Central Area is the southern boundary of the CNBR. The Central Area takes in all of Northbridge. The remaining area of land zoned in CPS1 is defined as "Suburban Area". The area to the north of the CNBR is in the Suburban Area. In general, under CPS1 the intensity of development permitted within the Central Area exceeds that of the Suburban Area. For example, CPS1 required residential developments in the Central Area to comply with the R160 Code; in the Suburban Areas it was R80. In the Suburban Area, developers were required to provide a minimum amount of car parking on site. In the Central Area, car parking is subject to a maximum, not to a minimum. The differences in development potential between the Central Area and the Suburban Area have an effect on property values.
Two of the zonings under CPS1 in the Central Area (and therefore Northbridge) were as follows. South of Aberdeen Street to James Street and west of Lake Street, the zoning was "Industrial" and shown as zone "CI" (meaning "Central Industrial") on the CPS1 Scheme map. South of Aberdeen Street to Roe Street but to the east of Lake Street, the zone was "General Commercial". This was shown as "CC" (meaning "Central General Commercial") on the City of Perth Town Planning Scheme map. The CC zone also covered the area between James and Roe Streets.
Within the Central Area, a wide range of uses were permitted under both the CI and the CC zones. Two use classes which were of importance in the case were "attached house, grouped dwelling" and "office building". In the CI zone, "attached house, grouped dwelling" was a "prohibited" purpose, but not so in the CC zone.
In the case of "office building", this use was "permitted" if it was an incidental purpose in the CI zone but a "permitted" use in the CC zone. Under CPS1, the CC zone is more favourable to a full range of developments than the CI zone.
In the CC and CI zones in the Central Area, developments with a plot ratio of 2.0 west of Lake Street and 3.0 east of Lake Street, were permitted. In the Suburban Area, plot ratios range from 2 down to .5. The land to the east of Lake Street therefore had more development potential than land to the west of Lake Street. Clause 138 of CPS1 allowed the PCC to grant a bonus plot ratio of up to 20 per cent if, in the opinion of the council, the proposed development included a community or other facility or amenity, constituting a significant improvement to the amenities or environment of the Central Area. This provision applied to both the CI and the CC zone.
Within the CI and CC zones in the Central Area, there were no specific requirements in CPS1 for setbacks, open space, or landscaping. On the other hand, within the Suburban Area zones, CPS1 required a minimum setback of 4.5 metres to the street, required landscaping in space equivalent in area to 3 metres multiplied by the street frontage and 1.5 metres multiplied by a secondary street frontage, and in the C3 zone required residential development to be subject to the R code provisions, which include significant street and other setbacks and a 50 per cent open space requirement.
The requirements applying in the Suburban Area meant that land could not be as intensively developed as land in the Central Area.
Finally, I should mention at this point the important cl 48 in CPS1, which provided that if a development did not comply with the standard or requirement prescribed by CPS1 with respect to that development, then the PCC had a discretion, notwithstanding that non‑compliance, to approve the application for development unconditionally or subject to such conditions as the PCC deemed fit. Up until 1991, this very wide restriction was limited in one important respect, and that is that cl 48 did not empower the PCC to grant town planning approval or a building licence for any residential development, the density of which would exceed a rate of 160 dwellings per hectare (R160). In 1991, this restriction on the PCC's discretion was removed. In other words, after 1991, the PCC could exercise its discretion under cl 48 to allow a development with a density of greater than R160. The evidence revealed that the PCC did frequently approve developments with a density of greater than R160 in west Northbridge.
The evidence satisfies me, and I find, that cl 48 was frequently invoked by the PCC within the Central Area between 1991 and 1995. Clause 48 created a discretion which allowed the PCC to treat each application on its individual merits, unconstrained by the standards set out in CPS1 and constrained only by the need for an absolute majority vote of the council in favour of relaxation. As a result, it is not possible to refer only to CPS1 to determine what developments might have been permitted within the Central Area in 1995. Guidance has to be obtained by observing how the PCC exercised its discretion under cl 48 and from studies commissioned to determine what developments were permitted within the Central Area.
In 1994, the Town of Vincent was created. The land within that municipality was taken from the City of Perth. The boundary between the two local authorities was at Newcastle Street. Although the Town of Vincent therefore dealt with development applications in land to the north of Newcastle Street after 1994, CPS1 continued to apply until December 1998, when a Town of Vincent town planning scheme was gazetted.
The Northbridge Study 1991
The Northbridge Study was commissioned by the State government and the PCC, with the intention of setting out objectives and policies for the future development of Northbridge to "guide decision making by the council, land owners and developers and other". The final report was adopted by the PCC by resolution on 21 October 1991, and it adopted ch 3 as its policy for the future development of Northbridge and the balance of the study as guidelines for the implementation of that policy. The Northbridge Study revealed that the objectives were to develop mixed uses, preferably with shops and restaurants at ground level and offices and apartments above, increased opportunities for residential development, and the upgrading of Russell Square to "provide a visual and community focus for housing in Northbridge". Russell Square was upgraded by the PCC in 1994.
The study noted that the CNBR, combined with industrial zoning to the north, had resulted in severe "blighting of Newcastle Street", and that "the uncertainty surrounding the by‑pass severely limits planning for Newcastle Street", which had the potential to be "rebuilt" to become an integral part of the study area with a high degree of pedestrian and driver amenities. Another specific policy suggested that Newcastle Street should be developed to reinforce the importance of the road as an arterial road and as an edge to Northbridge.
Perth Central Area Policy's Review 1993
This review was a joint State government and PCC project. It dealt extensively with the Central Area and was stated to be a review with the aim of providing a basis for the review of the central area section of the City Planning Scheme. It was released for public comment in 1994. It envisaged a continuation of the expansion of Northbridge, which was described as "Australia's most successful entertainment district" and Russell Square as "the focus of the Northbridge area".
City Living Report 1992
The Perth inner city housing taskforce was established by the Commonwealth and State governments and the PCC. The taskforce was charged with recommending ways to encourage residential development in the inner city areas of Perth. This report led to the PCC resolving, on 28 April 1995, to prepare an inner city housing‑residential strategy with a 5 year action programme.
Inner City Residential Manual 1995
This was published in February 1995. The manual was under preparation at the time of finalisation of CPS2, and it was expressly intended to provide the basis for residential development control under CPS2.
CPS2
On 9 August 1994, the PCC resolved to adopt the draft CPS2. After that adoption, other steps had to be taken before it became law. The adopted draft had to go to the State Planning Commission for examination and consent to advertise. Consent to advertise was received in September 1994. It had not in 1995, and still had not at the date of trial, received the final approval of the Minister. Nevertheless, as at October 1995, it had to be regarded as a seriously entertained planning proposal.
Significant changes from CPS1 were as follows. Plot ratio calculations required the inclusion of the thickness of external walls for reduction in the allowable plot ratio east of Lake Street from 3 to 2; a deletion of the 20 per cent plot ratio bonus; a reduction in building heights in Northbridge; a deletion of the distinction between the Central Area and the Suburban Area; and a provision for the application of the R Code to apply to all residential development. The policy manual which forms part of the draft CPS2, stated that only low rise developments of no more than two to three stories were to be allowed, in keeping with the existing distinctive low scale character of the area.
The draft CPS2 contains cl 47, which is the equivalent of the existing cl 48 of CPS1, and which therefore conferred a significant discretion upon the PCC to approve development outside the constraints of CPS2.
Development Approvals Granted by the City of Perth Since 1990
The existence of cl 48, giving the general power to the PCC to ignore restrictions containing CPS1, meant that it was important, in deciding what developments might or might not be approved in 1995, to examine how the PCC had acted up until then. It is clear that cl 48 has been employed on many occasions. In relation to developments in Northbridge, plot ratio restrictions in CPS1 had been ignored, R Code restrictions had been ignored, and use restrictions had been ignored.
Insofar as CPS2 could be regarded by the City of Perth as a seriously entertained planning proposal, there was no evidence that the City of Perth had ever refused a development application on the grounds that it infringed restrictions contained in CPS2. Mr Adam (the town planning expert called by the applicant) examined the minutes of council meetings between 1989 and 1995. He summarised the characteristics of these development approvals in a table, which indicated (see par 123 of his report) that, for self‑contained residential units, it was normal for the PCC to permit developments with a density of R200 to R350 with a plot ratio of 1.8 to 2.5 and a building of over five to six storeys above ground level. Hotel/serviced apartments with a unit density of R600 and plot ratio of 2.0 to 2.5 over five to six storeys were also approved.
Other Planning Considerations
Section 37(5)(a) of the MRTPS Act as at 27 October 1995, provided that notwithstanding anything contained in the PWA, the value of land or improvements compulsorily acquired should, for the purposes of assessing the amount of compensation to be paid, be assessed without regard to any increase or decrease in value attributed wholly or in part to the operation or effect of the MRS, but, in assessing the amount of compensation, regard should be had to any amounts of compensation already paid or payable in respect of the land under s 36. The section therefore applies the Pointe Gourde principle. This principle and the section just quoted recognise that a reservation will, or may, influence land affected by the reservation. The phenomenon of urban blight arising out of uncertainty surrounding planning proposals is well known, according to Mr Adam. I accept his evidence on this point. He said it is most clearly demonstrated in cases where land is reserved for a purpose which has an unknown time frame. In the present case, the land between Aberdeen and Newcastle Streets was reserved for over 30 years before a final decision was taken on the precise form and timing of the construction of the Northbridge Tunnel. It was then a further two years before the land was actually resumed. Given that long time frame, it is a difficult task for the experts to identify the decrease in value attributable wholly or in part to the provisions contained in, or the operation or effect of, the MRS. As Mr Adam says, it is a matter of careful professional informed speculation to arrive at conclusions about what conditions would have been relevant to the development of the subject land on the date when the resumption occurred had there been no MRS reservation for the CNBR.
The MRS had its origins in the plan for the Metropolitan Region Perth and Fremantle 1955, which was called the Stephenson plan. This plan provided for an inner ring of roads circling the central area of Perth, which was then defined as being south of the railway line. The northern by‑pass element of this system followed the alignment of Roe Street.
In 1963, the MRS made two significant departures from this concept. The first was to significantly upgrade the engineering standards of the ring‑road to freeway standard. The second change was to shift the northern by‑pass further north, from Roe Street to an alignment between Aberdeen and Newcastle Streets. This became the CNBR. The CNBR became the subject of public debate from the late 1980s and throughout the 1990s. The options were to sink the freeway in the CNBR in a trench or to bury it in a tunnel. Eventually the tunnel option was favoured, and the Northbridge Tunnel, as it became known, aroused public controversy and public opposition until 1995, when the government announced its decision to start work on the tunnel the following year.
The history reveals that there was uncertainty over a period of 30 years about the timing of the resumption of land in the CNBR. The MRPA did, however, inform inquirers that the land would not be required until 1993.
This situation had the practical effect of preventing informed long‑term capital investment decisions. According to Mr Adam, whose evidence I accept, the blighting effect extended to discouraging relatively minor improvements and even, ultimately, relatively routine maintenance. The effect was seen in the lack of new, permanent buildings and in the deteriorating quality of existing buildings within the CNBR.
The question then arises as to what would have happened had there been no MRS reservation for the CNBR. In other words, would the Central Area of the CPS1 have been extended north of Newcastle Street, thereby taking in the CNBR and therefore the subject land, or would the subject land have been included in the Suburban Area? This is important, not only because planning controls relating to plot ratios and car parking and residential densities are more advantageous to developers in the Central Area, but also because cl 48 of CPS1 was frequently employed by the City of Perth in the Central Area to approve applications for development unconditionally, notwithstanding that they did not comply with standards or requirements of CPS1.
Mr Adam, Mr Ednie‑Brown and Mr Higham were all of the opinion, and I find, that if there had been no CNBR, then the land between Aberdeen Street and Newcastle Streets (and therefore including the subject land) would have been within the Central Area and zoned C1.
Mr Adam considered that development around Russell Square would have tended towards high density, residential development, including boutique hotels, serviced apartments, hostels and home unit apartments in buildings four to six storeys in height. He considered that there would have been an odd mixture of compatible commercial developments, notably restaurants or cafes, and the possibility of an office building of similar dimensions.
In Mr Adam's opinion, the subject site was in a prime position overlooking Russell Square, at the heart of Northbridge and with good transport connections. It is a large site, comparatively rare in Northbridge. In his opinion, the site would have been in great demand as a site for a significant hotel or apartment building with accompanying facilities, such as café, restaurant, function and perhaps conference facilities. In his opinion, it would likely also to be in demand for mixed commercial or residential development, with commercial uses at ground floor level and apartments above.
In his opinion, such a development would have translated into a six or seven storey building with a plot ratio of 3, or very close to it.
Value to Owner
The usual method of determining the value of land is to determine the market value, applying the test in Spencer v Commonwealth (1907) 5 CLR 418.
Land may also have a special value to the owner over and above the market value: Pastoral Finance Association Ltd v The Minister [1914] AC 1083. The dispossessed owner is entitled to the market value of the land under the Spencer principle or its value to the owner, whichever is the greater: St John Ambulance Association of Western Australia Inc v East Perth Redevelopment Authority [2001] WASC 85.
A person whose land is resumed and which has a "special value", is to be compensated by asking what the dispossessed owner would pay if he or she were the hypothetical purchaser: Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 at [353].
In Boland's case at [354] Callinan J said:
"… The concept of a price that a dispossessed owner would pay over and above the market price (if he or she were the purchaser) rather than lose the land may not be an entirely reliable guide to what the special value to the dispossessed owner is. In theory all that the notional purchaser need pay is a dollar more than the next available purchaser (without a special interest in the matter) would pay. In the highly artificial construct that the law requires in resumption cases, the formulation of the Privy Council in Pastoral Finance may only become workable if the dispossessed owner as notional investor be regarded as having a right to bid or fix a price which included special value. Another way of viewing the formulation of the Privy Council in Pastoral Finance is to regard it as a means of ascertaining the value of the property to the owner. Part of the difficulty arises from a need or desire to ensure that an owner is compensated for the loss of value of the property to the owner, a value which may not always be the same as the value which the unqualified application of Spencer's case, an exchange value or sale in the marketplace, would yield. Sometimes such a need will involve a calculation of what might properly be called special value. The requirement, and I would regard it as a requirement now long accepted by the courts, of the various statutes providing for compensation on resumption, that an owner be paid the value to him or her, may mean that in some cases the direct and exclusive operation of Spencer's case may not be possible."
Special value must be something objective and ascertainable, derived from the land or some attributable property of it, and cannot be recognised if it rests in mere subjective affection or emotional involvement: Bronzel v State Planning Authority (1979) 21 SASR 513; Kerry v State Transport Authority (1985) 38 SASR 502 at 505‑506.
As a general practical proposition, a special value may be found in a positive advantage, or in an exemption from disadvantage, which the retention of the subject land would have directly conferred. Where a positive advantage is taken away by the acquisition, the claim is likely to be represented by the loss of profits or of other recurrent pecuniary gain derivable from the use and occupation of the retained land as part of the whole: Commissioner of Highways v Tynan (1982) 53 LGRA 1 at 7.
Special value to the owner is not to be ascertained by reckoning out savings and additional profits to be derived for the land and then capitalising those savings and additional profits: Yates Property Corp Pty Ltd (in liq) v Darling Harbour Authority (1991) 27 NSWLR 156 at 176.
The Determination of Value When Valuer Witnesses Differ
It is clear that a trial Judge is not obliged to accept one out of several competing valuations: In the Marriage of Borriello (1989) 97 FLR 211; In the Marriage of Goodwin (1990) 101 FLR 386 at 394. The trial Judge, however, must never allow himself to be cast in the role of the third valuer: Players Pty Ltd v Corporation of the City of Adelaide [2001] SASC 369 at [81]. The court may make such adjustments as are required by the evidence and arrive at a figure between two values offered by valuation witnesses, provided it is not merely an average or a mean (see Goodwin's case (supra) at p 394). Commonwealth v Milledge (1953) 90 CLR 157 is not to the contrary (see Borriello's case (supra) at 221). The trial Judge is not obliged to accept the evidence of a particular valuer. Rather, the task is for the court to be satisfied by the means of the application of proper principles, that the value of the property on the relevant date has been arrived at. If the value happens to be different to the value subscribed to the relevant property by the valuers called in evidence, this in itself does not affect the validity of the trial Judge's finding, providing that proper principles have been applied: Commonwealth v Milledge (supra) 160‑161 Borriello (supra) at 221.
Basis for Expert Opinion Must be Explained
It is not always possible to ask of a valuer, his or her exact exposition of reasons for the conclusions arrived at. In all valuations there must be room for inferences and inclinations of opinion which, being more or less conjectural, are difficult to reduce to exact reasoning or to explain to others: Secretary of State for Foreign Affairs v Charlesworth, Pilling & Co [1901] AC 373 at 391. However, the valuer should, as far as possible, expose his reasoning in his report or evidence. On the other hand, it is the prime duty of experts in giving opinion evidence, to furnish the trier of fact with criteria enabling evaluation of the validity of the experts' conclusions: Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at par [59] per Heydon JA. Opinions expressed by expert valuers must be comprehensible, and they must reach conclusions that are rationally based. The process of inference that leads to the conclusions must be stated or revealed in a way that enables the conclusions to be tested and a judgment made about the reliability of them: Pownall v Conlan Management Pty Ltd (1995) 12 WAR 370 at 390. A court should not act on an opinion, the basis for which is not explained by the witness expressing it. Unless the process of inference by which an opinion is reached is expressed in a manner which permits the conclusions to be scrutinised and a judgment made as to its reliability, the opinion can carry no weight: Pollock v Wellington (1996) 15 WAR 1 at 3 per Anderson J.
It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method, to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.
In this case, some valuers rely upon sales after the date of resumption. The enquiry is, of course, about the value of the property as at the date of resumption. Section 37(5)(a) of the MRTPS Act requires compensation to be assessed having regard to values current at the time of acquisition, but the amount of compensation, being a matter of assessment, can, like damages, be calculated in the light of any subsequent facts to the extent to which they can throw light upon the value of the subject land at the date of acquisition: Minister for Army v Parbury Henty & Co (1945) 70 CLR 459 at 514; Melwood Units Pty Ltd v Commissioner of Main Roads [1979] AC 426 at 436. Adjustments may have to be made to reflect increases or decreases in the market after the resumption date.
Valuation Method
Putting aside any premium which the plaintiff claims by way of special value to the owner, the parties agree that the value of the subject land is to be ascertained by the comparable sales methods. The difficulty is that two valuers have been called on each side, and out of the many sales identified by each valuer as comparable sales, there is very little agreement between them.
In River Bank Pty Ltd v The Commonwealth (1974) 48 ALJR 483 at 484 Stephen J noted:
" … even the first step of selecting sales of properties thought to be sufficiently comparable is attended with difficulty. But all this is the stuff of valuation, the reason why it is an art, not a science, and, once recognized, it nevertheless does not detract from the character of this method of valuation as a proper one for use in determining … 'the value of the land at the date of acquisition' …"
It is clear that valuers and the court may be compelled to make adjustments in prices achieved for comparable property. Factors may include the difference in timing, differences in market conditions, distance from the subject site, the nature of improvements, zoning, and the prospect of any alteration in zoning, to name just a few. The making of adjustments does not preclude the court from relying upon the sales as comparable: Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (1981) 48 LGRA 409 at 434.
The differences may be adjusted in some cases, but in other cases the differences may be so great that the land subject to the sale cannot be regarded as comparable. This will be a question of fact and degree. The differences may be so great that a court may be constrained to hold that the land is in no sense comparable and that the adjustments which have been made are so great that the sale can provide no evidence of the value to be determined and no basis upon which the value can be assessed: Leichhardt Municipal Council v Seatainer Terminals Pty Ltd (supra) at 435.
Valuation Evidence
Four experienced valuers were called in the case. Mr Stephen Barry McMahon and Mr Terrence Roy Dix were called by the applicant. Mr Geoffrey Robert Elliott and Mr Jeffrey Allen Spencer were called by the respondent. All valuers appealed to me as witnesses endeavouring to give an unbiased opinion as to the value of the subject land. This is not to say that I am not critical of some of the expert evidence. However, the criticism is not to be taken as any indication that the experts were acting other than in an attempt to discharge their professional duties. All four valuers agreed that the comparable sales method was the correct valuation method to adopt in this case.
Mr McMahon
Since 1994, Mr McMahon has been acting as valuer and negotiator for a number of landowners (including the applicant) who have had land resumed by the respondent for the Northbridge Tunnel project. As a result, he has developed detailed knowledge of the area. Mr McMahon considered a large number of sales in the Central Area from 1985 to 1997 and then from those, selected 12 sales which occurred between 1993 and 1997. All 12 are located within the Central Area. He said that he selected these 12 sales as being comparable sales which, subject to adjustment, provided guidance to him to allow him to form an opinion as to the value of the subject land. Mr McMahon valued the subject land at $6.8 million and the improvements at $100,000.
The 12 sales selected by Mr McMahon are as follows:
No
Date
Description
Address
Sale Price Converted to Rate per Square Metre
1
October 1993
Administration Office
Cnr Roe and Milligan Streets
$1,243.00
2
23 June 1995
Backpackers Lodge
Cnr Fitzgerald and Aberdeen Streets
$1,392.00
3
November 1994
Vacant Land
James Street near Parker Street
$1,311.76
4
17 March 1997
Food Hall (Vacant)
Parker Street opposite Russell Square
$2,352.00
5
May 1997
Perth Clothing Co
86‑88 Francis Street
$1,074.00
6
January 1994
Marco Polo Buildings
Francis Street
$1,644.74
7
27 October 1995
Fermanis House
93‑95 Lake Street
$1,214.00
8
June 1997
House (Vacant)
45 Shenton Street
$1,372.50
9
May 1994
Vacant Land
56 Francis Street
$1,061.50
10
August 1990
Australian Tax Office
Cnr William and Francis Streets
$1,183.00
10A
12 October 1993
Australian Tax Office
Cnr William and Francis Streets
$2,366.00
11
30 November 1995
Aberdeen Hotel
82‑84 Aberdeen Street
$3,289.00
Mr McMahon was asked to identify the most important of these comparable sales. He considered that sales 1, 2, 3, 4, 7 and 8 were the most important and ranked them in that order. In other words, the Administration Office the most comparable and number 8 the least important of the six.
He regarded sales 5, 6, 9, 10, 10A and 11 as "not so important".
To show how Mr McMahon proceeded, I refer to his sale number 9, which related to 56 Francis Street. I refer to this one in particular, because it is the only sale which Mr McMahon, Mr Elliott and Mr Spencer agreed was a comparable sale. In the case of this sale and the case of all the other sales, Mr McMahon presented an assessment sheet which provided details about the land and then identified various factors which might require an adjustment between the sale identified as comparable and the subject land. For example, the sale of 56 Francis Street occurred in May 1994, whereas the resumption occurred on 27 October 1995. In the opinion of Mr McMahon, this required an adjustment of 15 per cent to the sale price of 56 Francis Street to make it a comparable sale. Other adjustments were made. For example, the subject land was assumed by all valuers to have been in the CI zone, whereas 56 Francis Street was in the CC zone. The plot ratio in relation to the subject land was 2.0, and in relation to 56 Francis Street the plot ratio was 3.0. That led Mr McMahon to adjust the sale of 56 Francis Street down by 30 per cent, because he considered this factor made 56 Francis Street more desirable than the subject land. The area of 56 Francis Street was 683 square metres, as opposed to 4,554 square metres in the case of the subject land. He therefore adjusted the sale of 56 Francis Street by 10 per cent in favour of the subject land. He did this because he considered that the larger sized property attracted a premium.
After making the various percentage adjustments, he then netted them off and arrived at a net adjustment of 25 per cent. That is, he considered that he would have to increase the rate per square metre derived from the sale of 56 Francis Street by 25 per cent if it was to provide evidence of value in relation to the subject land in October 1995. This resulted in an adjustment from the price per square metre of $1,061.50 to $1,327.00. When that sum was multiplied by the square metreage of the subject land, it suggested the value for the subject land of $6,043,158.00.
Mr McMahon was criticised by Mr Elliott and Mr Spencer for making the percentage adjustments which appeared on his adjustment sheet. They said they had never seen a valuer making adjustments in that way.
I have already quoted authorities which make it clear that both valuers and the court are often compelled to make adjustments in the prices achieved for comparable properties. For my part, I do not see why the adjustments which are made should not be disclosed in percentage terms. It is true that adjustments are often made by a valuer in dollar terms and without stating what the adjustment is in percentage terms. Mr Spencer and Mr Elliott used that method. Mr McMahon says that setting forth his percentage adjustment in each case exposes his reasoning, and, in my view, it is no criticism that he has used the method which I set out above, providing he applies his mind to the appropriate adjustment in each case and does not mechanically apply the percentage adjustment to each comparable sale, and providing the percentage adjustment is properly explained and supported by some evidence.
Mr McMahon was criticised for the fact that in another case before this Court, he gave evidence about adjustments inconsistent with his evidence in this case. In that case, he had been retained by, and gave evidence for, the owner whose land had been resumed on the same date as the subject land in this case. The land (called the "Duffy land") was in Newcastle Street to the east of Lake Street, whereas the subject land in this case is in Aberdeen Street to the west of Lake Street. That means, of course, that the Duffy land was in an area where it was assumed that the plot ratio is 3, whereas the subject land is in an area where it is assumed that the plot ratio is 2. In the Duffy case, Mr McMahon gave evidence and used the same comparable sales as he uses in this case (save for one). In the Duffy case, he gave evidence that where there was sales evidence in the Central Area to the west of Lake Street, he considered that he should adjust those prices upward by 50 per cent because he was of the opinion that land to the east of Lake Street was 50 per cent more valuable than land to the west of Lake Street. He made this adjustment on the basis that the change in "locality" warranted the adjustment. He also adjusted such sales evidence by adjusting the prices by 33 per cent because of the fact that a comparable sale to the west of Lake Street was of land with a plot ratio of 2, compared with the plot ratio of 3 in the subject land to the east. All else being equal, he would take a sale to the west of Lake Street and adjust the price upward by 83 per cent (ie 50 per cent plus 33 per cent) and then use that adjusted price as information to arrive at the value of the Duffy land.
In this case, however, the subject land is to the west of Lake Street, and where he used sales evidence from the east of Lake Street, Mr McMahon made no adjustment for the difference in "locality" and made a 30 per cent (or in one case a 35 per cent) adjustment downwards to the comparable sale to the east of Lake Street. If he had been consistent in his treatment of these sales in both cases, then in this case he would have adjusted the comparable sale to the east of Lake Street by downward by 45.3 per cent. This can be illustrated in the following way by reference to two hypothetical sales.
If in the Duffy case, he identified a sale of land at, say, $1,000 per square metre to the west of Lake Street, he would adjust that sale by increasing it by 83 per cent (ie 50 per cent plus 33 per cent) to $1,830 per square metre. If in this case, he found a sale of land at $1,830 per square metre to the east of Lake Street and wished to use it as comparable in relation to the subject land (to the west of Lake Street), he should, if he were to act consistently, have reduced that price by 45.3 per cent to bring it back to $1,000 per square metre.
That would take account of his evidence that land to the east of Lake Street was 50 per cent more valuable by reason of its location, and 33 per cent more valuable because of the plot ratio difference. Instead, in this case, he has made only an adjustment of minus 30 per cent (or 35 per cent in one case) when adjusting comparable sales east of Lake Street.
Mr McMahon attempted to explain this away by saying that he was making an assessment in relation to different resumed land, and that was the reason why there was a difference in his adjustment in the Duffy case from the present case. I was not convinced by that explanation. In his adjustment sheets, the adjustments for "location" and "plot ratio" apply generally. It is the other adjustments which result in a recognition of the particular features of an individual piece of land; for example, adjustments for the size of the land, for what he called "exposure", and for the shape of the land.
It was submitted by the respondent that this was an attempt to produce a high result in the Duffy case and a high result in this case, by deliberately manipulating the figures. I do not consider that Mr McMahon did make such a deliberate attempt. In my view, Mr McMahon failed to notice the inconsistency in approach when he prepared his report for this case. The inconsistency, however, does point up the unreliability of the adjustments which have been made by him in relation to locality and plot ratio.
Mr McMahon was also cross‑examined by counsel for the respondent with the stated intention of showing that because he worked as a negotiator for the applicant, and because he spent so long in that work and in preparing to give evidence, that his evidence should be disregarded, or alternatively treated as having little weight, because he was biased in favour of the applicant. It is true that he did work as a negotiator and that he spent 227 hours on the tasks. It is also true that if an expert witness becomes too closely associated with the party which calls the expert, it may lead to an allegation of bias: Phosphate Co‑operative Co of Australia Ltd v Shears (No 3) [1989] VR 665, where Brooking J, at 681, pointed to the danger of a client engaging experts who act in a partisan capacity and who become involved as a member of a "team which is being paid very large sums of money to achieve a certain result".
However, in most, if not all, resumption cases, negotiations are based on valuation issues. The resuming authority will not settle out of court unless the settlement can be justified by valuers. Thus, there is not much point sending a negotiator to deal with the resuming authority unless the negotiator has valuation expertise. It would seem unreasonable to require a person whose land was resumed, to retain a valuer to value the land and to give evidence at the trial if negotiations did not result in a settlement, and then to employ another valuer to become acquainted with the first valuer's work and then to act as negotiator. That would seem to result in an unnecessary increase in costs. The applicant tendered a copy of the Australian Property Institute's exposure draft of Practice Standard 21, which, if adopted, will recognise that it is acceptable for a valuer to act as the owner's advocate and as a valuer, providing the valuation is prepared in accordance with proper valuation principles. All this is not to say, however, that in a particular case it might be shown that an expert has become biased in favour of the client and the bias has affected his or her objectivity. In my opinion, there was no material which led me to the conclusion that Mr McMahon was biased. In my opinion, he attempted at all times to maintain his professionalism.
I now turn to the comparable sales that Mr McMahon put forward.
In my view, the Administration Office is not sufficiently close to Russell Square to make it valuable as a comparable sale. The same applies to the Backpackers Lodge.
Mr McMahon's sale number 3 is a sale of Lot Y104 James Street. The sale occurred on 25 November 1994. I consider that this is the most important of the comparable sales identified by the valuers. I discuss the evidence concerning this sale in much greater detail later in these reasons for decision. Sale number 4 (the Food Hall land) was a sale on 17 March 1997, which Mr Dix also used as a sale and which afforded evidence which could be used to verify the value of the subject land back in 1995. I say more about this sale later in my reasons. It is important because of the location of the land opposite Russell Square. In my opinion, the sale of the Fermanis House (which is Mr McMahon's sale number 7) is not comparable, because the land is not so well placed as the subject land. The existence of this sale, however, is relevant when it comes to the consideration of the evidence of Mr Elliott and Mr Spencer. I deal with that later. Mr McMahon's sale number 8 is a sale no other valuer was prepared to rely upon. Mr Dix considered the subject land to be better situated. I accept the evidence of all the other valuers that this was not a comparable sale.
Mr McMahon also referred to the sale of the Australian Taxation Office land at the corner of William and Francis Streets (sale numbers 10 and 10A). This was a complicated transaction involving the acquisition of land and then the construction of a purpose‑built office building for the Australian Taxation Office. In my view, the complications associated with the special dealings between the vendor and the Australian Taxation Office make it unreliable as a comparable sale. None of the other valuers was prepared to use that transaction as a comparable sale.
In my opinion, the sale of the Aberdeen Hotel (sale number 11) should be disregarded. The adjusted price of that sale arrived at by Mr McMahon would suggest a value for the subject land of over $14,000,000. This is more than double the value placed on the subject land by any of the valuers, including Mr McMahon himself. In his own report he says: "I have to a large degree discounted it when weighed against the body of contemporary sales evidence". Furthermore, he ranked it number 11 out of the eleven comparable sales. He said that it was one of the five sales that was "not so important". Mr Dix would not use it as a comparable sale because of the difficulty of separating out the value of improvements. Neither Mr Elliott nor Mr Spencer used it as a comparable sale. All of those factors lead me to the conclusion that the sale of the Aberdeen Hotel is not a comparable sale.
Mr McMahon was also criticised by the respondent for the adjustments he made to comparable sales which were too far removed in time to rely upon the sales without adjustment.
In Mr McMahon's report, he said under the heading "Rising and Falling Market":
"…
There appears to have been a substantial increase on (sic) the value of land in western Northbridge between 1990 and 1995 which I attribute to the change in attitude of the City of Perth to inner city living and its desire to exercise its discretionary powers to promote development.
The assessment shown in attachment number 17 annexed hereto, shows an annual % increase of 11% to 59% in the relevant period of 1990‑1995 for properties purchased and re‑sold during that period. A similar increase in value appears to continue into and past 1997. Although the assessment is a simple mathematical calculation it is intended to be merely indicative of the increases which were occurring.
I have discounted the rate of increase back to 10% per annum as a conservative measure to allow for unknown factors such as capital improvements between sales and to reflect the imprecise nature of the exercise."
The evidence derived from sales in relation to the eleven properties that he selected do indeed show substantial increases in value. The anecdotal evidence has then been converted by Mr McMahon into a formula which requires adjustment of 10 per cent per year for sales before the date of resumption of the subject land.
Finally, I comment on Mr McMahon's adjustment which he made in each case in relation to the land area. In each case where a comparable sale was smaller than the subject land, he would adjust the comparable sale price upwards, on the basis that he considered larger areas of land to be more valuable than smaller areas of land and on the basis that a willing purchaser would pay a premium and a willing vendor would demand a premium for a large area of land, as the subject land was. In the case of his sale number 1, Mr McMahon adjusted the sale price of this land, which was an area of 1,206 square metres, upward by 10 per cent because the subject land was nearly four times larger. In the case of sale number 2, which related to a piece of land 790 square metres in size, he once again adjusted that price upward by 10 per cent. In the case of sale number 7, which was a piece of land 438 square metres in size, he again adjusted by 10 per cent. I am aware that valuation is not a scientific process, but this does strike me as an adjustment with no logic or reasoning to support it. More importantly, there was no evidence to support the adjustments Mr McMahon made for size. Mr Dix did not make any adjustment to sales of smaller lots to add a premium for the larger size of the subject land; nor did Mr Elliott or Mr Spencer do so. Mr Elliott and Mr Spencer made an adjustment the other way, but I will deal with that issue later. In my opinion, no upward adjustment should be made to the sale of a piece of land smaller than the subject land merely because of the smaller size of the piece of land.
Mr Dix
Mr Dix was retained by the applicant in 1999 to prepare a valuation for the applicant. He valued the subject land at $6,829,500 and the improvements at $280,000. He had never been retained to act as a negotiator by the applicants. Mr Dix expressed the opinion that, based on his experience of the Northbridge area, decisions are made about the purchase of land in the Northbridge area on the basis of economic considerations. He said that, in his opinion, the development controls which applied in Northbridge were unique in Western Australia. He observed that the PCC was attempting to encourage residential and commercial development in the one area. He was of the opinion that Russell Square, which is important recreation land in the Northbridge area, would see residential development carried out all around it. He said that the reason why there had not been extensive development before 1995 was because of the blighting effect of the CNBR. He considered that the blighting effect extended to the whole of Northbridge, but he did not – and nor did any other witness – attempt to generally adjust comparable sales upward to take account of the effect of the blight.
He employed the comparable sales method. Mr Dix pointed out that there were no comparable sales on the relevant date. He expressed the opinion that it was therefore necessary to identify land with similar attributes and to try and find sales of that land as close as possible in time to the relevant date, namely 27 October 1995. There was no dispute among the valuers that that was the objective.
Mr Dix said that the refurbishment of Russell Square by the PCC, which commenced in 1994 and was completed in 1995, had largely cleared up the problem of vagrancy in Russell Square. He noted that the problem had been widespread in Northbridge before then and it continued to be a problem in Northbridge, but in Russell Square the problem had largely been solved by 1995. I accept Mr Dix's evidence on that point.
Mr Dix was also firmly of the view that larger areas of land should not be discounted in value compared with smaller areas of land. He said that because the purchase price of land in Northbridge is driven by economic considerations, that there is no discount for magnitude. He disagreed with the evidence of Mr Elliott and Mr Spencer on that point. He pointed out that the purchasers of small areas of land would be different from the purchasers of large areas of land. He said that the purchasers of large areas of land would be the substantial developers and that they were desperate for stock. Mr Dix was of the opinion that while they would buy at the best possible price, they were in competition with other developers seeking to secure large areas of land to carry out developments.
In Cook & Edwards v City of Stirling (1991) 4 WAR 469 at 476 Anderson J stated that even: "if the basic yardstick to compensation may now be departed from, the court's jurisdiction to do so may not be exercised unless the court concludes that there are special circumstances." In that case, Anderson J held that the fact that loss may have been occasioned to the plaintiffs by the threat (or certainty) of future resumption, was not a "special circumstance". His Honour concluded that the uncertainty created by a notice of intention to resume, and the inhibiting effect of such notice upon use, development or enjoyment of land, was a common feature of compulsory land acquisition and for that reason not a special circumstance. Those comments also apply to a case where there is a reservation of land followed by a resumption.
There are a number of other reasons why this claim should be dismissed.
First, the compensation payable pursuant to s 63 of the PWA is for the taking of land, not for the injurious affection of a business by reason of a reserve. Even though the proviso to s 63(c) is general in its terms, it is a provision which must relate to compensation for the taking of land as provided for in s 63. This claim by the applicant is not a claim for compensation for the taking of the land. It is a claim for the alleged injurious effects of the CNBR. Compensation for injurious affection for the effect of the reserve is dealt with in s 36 of the MRTPS Act.
Secondly, it is my finding that the rundown in the applicant's business was due to competitive forces. This had nothing to do with the existence of the CNBR.
Thirdly, no amount has been claimed. The applicant's counsel in closing said that it was not possible to place a dollar figure on the claim. If the applicant cannot quantify its claim, I do not see how the Court could do so.
As a result, I dismiss this aspect of the claim.
The Claim for a Proportion of Rates and Taxes from 6 May 1982 to 30 June 1996
6 May 1982 is the date of the deed of discharge, pursuant to which the MRPA paid compensation to Arcus Pty Ltd for the injurious affection to the land pursuant to s 36 of the MRTPS Act, as a result of the sale by Arcus Pty Ltd to the applicant. The applicant contends that the deduction which has to be made under s 37(5)(b), in effect, gives the respondent an "equity stake" in the subject property. The applicant's written closing submissions contain the submission that:
"The Court should … find that such deduction is analogous to an equity stake in the property thus carrying with it the attendant obligations in respect of rent, rates and land tax as a consequence of having the benefit of an appreciating interest in the land. In those circumstances, the Applicant … submits that the Respondent should reimburse the Applicant for a 25 % proportion of the amounts the Applicant has paid from 6 May 1982 to the date of taking in respect of general and water rates and land tax."
This is a claim made pursuant to the proviso in s 63(c) of the PWA. In my opinion, there is no justification for an award of this amount under any provision of the PWA or the MRTPS Act.
The payment of compensation, and the adjustment required under s 37(5)(b) when land is resumed, does not give the respondent something "analogous to an equity stake in the property". If a purchaser purchases land at a reduced price because of the existence of a reserve, and if later the land is resumed and valued at its unaffected value, then, were it not for the reduction required under s 35(5)(b), the purchaser would gain a windfall profit when compensation for the taking of the land was paid. If the purchaser purchases the land for three‑quarters of the unaffected value of the land, then s 35(5)(b) provides that it should be paid compensation in an amount of three‑quarters of the unaffected value of the land when resumed. Another method of dealing with the circumstances would have been for the legislature to require compensation for resumption of the land to be reduced by the amount paid by way of compensation for injurious affection under s 36 of the MRTPS Act, plus an amount being calculated by reference to the difference between the CPI at the time s 36 compensation was paid and the date of resumption. That method was not chosen by the legislature, and such a method would cause injustice in some cases. The deduction required under s 37(5)(b) applies in every case, and so it cannot be a "special circumstance" within the meaning of the proviso to s 63(c) of the PWA. See Cook & Edwards v City of Stirling (supra).
I dismiss this aspect of the claim.
Solatium
Under s 63(c)(ii) of the PWA, the court is granted discretion to "include in the award such amount, not exceeding 10 per cent of the amount of compensation determined under this section, as the court deems proper for compulsory taking". The statement of claim in the prayer for relief, claims "solatium at 10 per cent". No written, opening or closing submissions concerning solatium were made by the applicant. The respondent's opening submissions say only "the practice of the resuming authority (as here) is to allow the maximum of 10 per cent provided for under s 63(c)(ii) of the PWA". I called for further written submissions concerning solatium and was advised by the solicitors for the respondent that if no award was made by me under the proviso to s 63(c) of the PWA, then solatium should be awarded at 10 per cent of the amount of compensation determined under s 63. I have not made any award of compensation under the proviso, and as a result I award solatium at 10 per cent.
Amount of Award
Item
Amount Claimed
Amount of Determination
1. Land
$6,800,000.00
$6,570,890.00
2. Improvements
$ 100,000.00
Nil
3. Subtotal for land and improvements
and deduction under s 37(5)(b) of MRTPS Act
$6,900,000.00
$6,570,890.00
(Deduct 25 per cent pursuant to s 37(5)(b) of MRTPS Act ie deduct
$1,642,722.00)
4. Subtotal after s 37(5)(b) deduction
$4,928,168.00
5. Stamp duty conveyancing and LTO Fees for replacement property
$ 345,000.00
Nil
6. Adjustment of rates and taxes in resumption year (Agreed)
$ 14,422.72
$14,422.72
7. 25 per cent of rates and taxes from 6 May 1982 to 18 January 1996
$ 88,340.83
Nil
8. Claim under proviso to s 63(c) of PWA
$ (unspecified)
Nil
9. Solatium at 10 per cent on total of 4 and 6 ie on $4,942.590.00
$494,259.00
10. Total of items 4, 6 and 9
$5,436,849.72
11. Deduct advance payment made by respondent
($3,218,350.66)
12. Total compensation award (excluding interest)
$2,218,499.06
My total award of compensation is therefore $5,436,849.72, from which must be deducted the advance payment of $3,218,350.66 made by the respondent. The balance due to the applicant is $2,218,499.06. To that sum must be added interest. The parties have asked that I allow them to confer to agree the interest, and only if agreement cannot be reached will I have to make a ruling about the rate and amount of interest.
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: ARCUS SHOPFITTERS PTY LTD -v- WESTERN AUSTRALIAN PLANNING COMMISSION [2002] WASC 174 (S)
CORAM: PULLIN J
HEARD: 2, 3, 610, 1317, 2024, 2729 MAY, 23 & 29 AUGUST 2002
DELIVERED : 28 JUNE 2002
SUPPLEMENTARY
DECISION :11 OCTOBER 2002
FILE NO/S: CIV 1377 of 1998
BETWEEN: ARCUS SHOPFITTERS PTY LTD
Applicant
AND
WESTERN AUSTRALIAN PLANNING COMMISSION
Respondent
Catchwords:
Interest on compensation - Compound interest or simple interest
Legislation:
Land Administration and Public Works Act 1902, s 63(d), s 63(e)
Supreme Court Act 1935, s 142
Result:
Interest awarded
Category: D
Representation:
Counsel:
Applicant: Mrs L E Rowley
Respondent: Mr C B Edmonds SC & Ms L E Christian
Solicitors:
Applicant: McLeods
Respondent: State Crown Solicitor
Case(s) referred to in judgment(s):
Bond v Barrow Haematite Steel Co [1902] 1 Ch 353
Case(s) also cited:
Marshall v Director-General, Department of Transport (2001) 205 CLR 603
Re Kearney; Ex parte Jurlama (1984) 52 ALR 24
Zangzinchai v Milanta (1994) 125 ALR 265
PULLIN J: I earlier delivered reasons for decision in which I determined that the balance of the compensation which should be paid after taking into account advance payments was $2,218,499.06.
I must now decide an issue concerning the interest to be paid on that sum.
The applicant's prayer for relief in relation to interest read:
"The applicant claims
25.1.8Interest on the aggregate of the foregoing amounts inclusive calculated at 8% ie the rate provided by the Act or at such other rate or rates or for such other period or periods as the court may allow whether pursuant to s. 32 of (sic) s. 142 of the Supreme Court Act 1935 or otherwise adjusted in respect of the advance payment already made for a period from 14 November 1995 to the date of payment of the amount awarded by the Court."
Counsel for the applicant contends that interest should be awarded under s 63(e) of the Land Acquisition and Public Works Act 1902 (the "Act") and that interest should be at the rate ruling at the date of resumption (ie 8 per cent) and that interest should be compounded.
The respondent contends that interest should be awarded under s 63(d) of the Act. The respondent agrees that if that is the section which applies, then the discretion of the Court should be exercised to allow interest at the rates provided for under s 142 of the Supreme Court Act. The respondent does not agree that compound interest should be awarded.
Before I deal with the main issues, I should deal with the applicant's submission that the respondent had conceded that s 63(e) of the Act applied. In my view, negotiations between the parties concerning interest involved no concession of any kind by the respondent, other than those announced by counsel for the respondent in open court. No concession was made that s 63(e) applied. However, the question at hand involves a jurisdictional question which has to be decided before I can make any orders. That question requires me to first decide whether or not the land resumed "produced any rents or profits". If it did, s 63(d) applies. If not, then s 63(e) applies.
Did the Land Produce any Rent?
The only evidence on the point, according to the submissions of counsel, was the evidence of Dr Arcus at pages 371 and 400 to 402 and the minutes of a meeting of the directors of Arcus Shopfitters Pty Ltd on 25 October 1995. At page 371‑372 of the transcript, Dr Arcus was cross‑examined by counsel for the respondent. The passage of cross‑examination was as follows:
"Yes. I need to ask you this, and I'm afraid I'm jumping around in time but at the end – that is to say you closed the business or closed the factory in the end of December 1995 and you gave up possession some 5 or 6 months later. Do you recall that? I think it was ?---Gave up possession?
Yes?---I think we gave up possession – it was either in January or February. Anyway, the date is on record.
Yes. I think it may have been a little later. My recollection might be wrong too but I think ?---I will hazard a guess that it was January 18.
Right. Can you assist us with this: at that time in December 95 part of the premises were being leased, were they not, under some arrangement with a tenant who was using part of the premises for – I can't remember, was it carparking, or something of that order?---That 's right.
Do you remember the name of the tenant?---Yes, I do.
Who was that?---Bob Maher.
All right?---He was the gentleman who owned and operated what was then a restaurant or nightclub occupying what was the old post office on Aberdeen Street, almost opposite us.
Can you assist us with a date? From about when was he renting the property and when did he have to vacate? Did he vacate at the same time that you gave up possession?---No. I think Main Roads allowed him to stay for some time.
All right, thank you?---As for when he started, no, I can't remember. I can't put a date on that but it was, I would say, a year or so before we had to quit.
Could I have document number 1 and page 108, thank you?
This is minutes of the directors in October 95, 25 October.
Do you see it on your screen, Dr Arcus?---Yes. I may have it here.
You appear to be present? There seems to be a reference there to Boss Entertainment?---That's it.
Is that the same as Mr Maher?---That's right.
Is Mr Maher Boss Entertainment?---He is the major domo of that institution, yes.
I take it then that he was there from 25 October 1995 until, as you understand it, after the date that you gave up possession of the premises?---That's right.
Very well, thank you. Dr Arcus, was that on 138 Aberdeen Street or on 154 Aberdeen Street?---With respect to the parking arrangement?"
In re‑examination, at pages 400 and 401, there were the following questions and answers:
"Dr Arcus, do you remember the questions this morning concerning the arrangement with Boss Entertainment, Mr Maher?---Bob Maher?
Yes?---Yes.
Can you see it on the screen there, opposite Parking?---Yes, Boss Entertainment, that's him.
Is that an accurate representation of the arrangement with Mr Maher?---Just a minute, I'll read it.
Thank you.
PULLIN J: It's apparently not an exhibit yet, Mrs Rowley.
ROWLEY, MS: No. I did note that, thank you, your Honour?‑‑‑I can't swear to the exact numbers there, my memory is not that good, but the general purport of this is correct.
It says, 'suggested details of an agreement.' Was that arrangement in place at the date of these minutes?---Would you say that again?
Was that arrangement, the suggested details of the agreement, in place at the date of these minutes, and perhaps we could scroll up to the top of the page to check the date of the minutes.
Do you see the date of the minutes, 25 October?---Yes.
Yes. Have you any idea when that arrangement was put into place?---No, but I would say very soon after.
Very soon after?---It might even have started before that meeting.
Well, it doesn't seem to be suggestive. 'The suggested details of an agreement'
EDMONDS, MR: That's leading again, with respect, your Honour.
ROWLEY, MS: The rental obtained by Arcus in respect of that arrangement, would that appear in their annual turnover for that year?---Would it appear in the annual?
Turnover for 1995?---In the accounts you mean. Would it appear in the accounts?
Yes?---Yes.
It would. It would be treated like that, would it, as part of the income?---It wouldn't be shown in the annual accounts under Boss Entertainment or anything like that.
No, but it would be part ?---No, you wouldn't find it there. It would be lumped in with a whole host of miscellaneous income.
I tender that page, your Honour.
PULLIN J: What document is this in, Mrs Rowley?
ROWLEY, MS: This is document number 1, your Honour, so it's 1.108.
PULLIN J: All right. So page 108 in document 1 will be exhibit 1.108.
EXHIBIT 1.108 Plaintiff Arcus Shopfitters Pty Ltd minute book 1975‑1997 – page 108."
Exhibit 1.108 was a set of minutes of a meeting of directors of Arcus Shopfitters Pty Ltd on 25 October 1995. Arcus personnel attended the meeting. Mr Maher did not attend. No‑one else from Boss Entertainment attended the meeting. The item in the exhibit relevant to this issue was as follows:
"PARKING. Boss Entertainment, the operators of a nightclub soon to open in the old post office on the corner of Parker Street, have requested the use of our yard for their staff for parking of up to 10 cars during the day, and night parking for nightclub clients. They have suggested $200 per month for day parking and $1/car/night payable to Arcus.
Suggested details of an agreement were submitted by R. Arcus and were accepted, but it was to be put to Boss that a flat fee of $1000/month be paid instead of the day fee plus $1/night/car for night parking."
The meeting therefore took place two days before the resumption notice was published in the Government Gazette. The minutes of the meeting record the fact that Boss Entertainment had requested the use of the yard for parking, and they had "suggested" a rental per month for day parking and an amount per car per night. The minutes record that the details of "an agreement" were submitted by R Arcus "and were accepted" but it was to be put to Boss that a flat fee of $1000 per month be paid instead of the day fee plus a rate per vehicle for night parking. In my opinion, that reveals that negotiations were still under way and had not been concluded. No agreement had been reached concerning rent. The cross‑examination at pages 371 to 372 proceeds on the assumption that there was an arrangement of some kind in place, but it is clear that Dr Arcus has a faulty memory about the details. At page 400, Dr Arcus was asked in re‑examination whether he had any idea when the "arrangement" was put into place, and his answer was "no". He speculates that it was soon after 25 October 1995, and he speculates also that it might have started before the meeting. Ignoring the speculation, and accepting Dr Arcus' evidence that he had no idea when the arrangement was put into place, means that the minutes of meeting provide the only certainty about the situation concerning rent.
In my view, the minutes (Ex 1.108) show only that negotiations were taking place and that Boss Entertainment had made a proposal and that Arcus Shopfitters Pty Ltd was to make a counter proposal. Even if I am wrong and the minutes of the meeting should be read as stating that the Boss Entertainment "suggestion" was an offer which was "accepted", there is no evidence that such acceptance was communicated to Boss Entertainment.
I find that the resumed land was not producing any rent on 27 October 1995 or between that date and January 1996 when the applicant vacated the premises. There is no suggestion that the land produced any rent after January 1996.
Was the Land Producing Profits?
There was a debate about the meaning of the word "profits". The applicant pointed to the fact that Arcus Shopfitters Pty Ltd did not make a trading profit in the last six years of its existence as a business operating from the subject land.
The respondent, however, argues that the word "profits" in s 63(d) is not to be read as a reference to a "trading profit", or to an "accounting profit", or to a "gross profit" or "net profit". The respondent's submission was that the word "profits" means simply a reference to revenue earned as a result of the use of the property.
The ordinary meaning of the word "profit" can vary, depending on the context.
It may mean:
"1.… pecuniary gain resulting from the employment of capital in any transaction …
2.… returns, proceeds, or revenue, as from property or investments.
3.Econ. the surplus left to the producer or employer after deducting wages, rent, cost of raw materials, etc.
4.… such additional benefits as interest on capital, insurance, etc.
5.advantage; benefit; gain …" (Macquarie Dictionary).
Neither party has cited any authority to me in relation to the meaning of the word.
In Bond v Barrow Haematite Steel Co [1902] 1 Ch 353, it was noted that no single definition of the term "profit" will fit all cases.
If the word "profits" was here intended to mean "trading profit" or an "accounting profit", ie a net or gross profit, then it would not fit very well with s 63(d)(i), because from the amount of "profits" must be deducted the reasonable cost of "collection". If "profits" meant "net profit", then the cost of collection would already be reflected in the "net profit".
The word "collection" also gives a hint as to the meaning of the word. The word "collection" can refer to the gathering of money, ie revenue.
In my opinion, the word "profits" is to be equated with "revenue".
On 27 October 1995 and for some weeks after 27 October 1995 until the factory was shut in December 1995, Arcus Shopfitters Pty Ltd earned revenue from the factory that operated on the land, even though it was revenue which, when added to revenue for the rest of the year and expenses for the year deducted, made no accounting profit for Arcus Shopfitters Pty Ltd for the relevant financial year.
Arcus Shopfitters Pty Ltd earned revenue from its business. The business was conducted on the land. The question is whether the land "produced" profits. This was not a question raised by the parties, but in my view it must be considered. The word "produce" can mean to cause or "cause to accrue" (see Macquarie Dictionary), and in my view that is the meaning here. The factory was on the land, and work was done in the factory on the land. Revenue was earned from the work done in the factory on the land. In my view, the land produced revenue, and therefore "profits".
Were Rents or Profits Received by the Respondent?
There is no suggestion that the respondent received any rent or profits from the day when the land was resumed.
The land ceased to produce profits when the factory was closed in December 1995.
As a result, interest has to be paid by the respondent as though the respondent had exercised the option provided in s 63(d)(ii): see s 63(d)(iii). Section 63(d)(ii) provides that interest shall be paid on the amount of compensation at the rate of 6 per cent per annum "or such higher rate as the respondent or the court considers adequate having regard to the circumstances of each case".
The respondent agrees that there should be a higher rate. It proposes interest as provided for in s 142 of the Supreme Court Act, namely interest at 8 per cent and later at 6 per cent.
The applicant suggests that I should exercise my discretion and increase the rate to 8 per cent through the whole period until payment is made in full.
I see no basis for departing from the rates prescribed for the purpose of s 142 of the Supreme Court Act 1935. That rate is struck with an eye on the movement of interest rates generally. I therefore determine that interest should be paid from the date in December 1995 when the factory was closed at the rates provided for under s 142 of the Supreme Court Act 1935.
Compound Interest
Section 63(d) authorises the Court to order the payment of interest "on the amount of compensation". No authority is given to the Court to award interest on interest. An award of compound interest necessarily involves an award of interest on interest. As a result, the claim for compound interest is dismissed. In any event, the prayer for relief did not claim compound interest, and there would have to be proper particularisation of such a claim to specify whether compounding would occur annually or at some other interval. There were no such particulars.
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