Barilla v Roads Corporation

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

S CI 2015 04697

ROSA AGATA BARILLA SALVATORE FORTUNATO BARILLA	Applicants
v
ROADS CORPORATION	Respondent

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JUDGE:	EMERTON J
WHERE HELD:	Melbourne
DATE OF HEARING:	28 & 29 November 2016
DATE OF JUDGMENT:	1 August 2017
CASE MAY BE CITED AS:	Barilla v Roads Corporation
MEDIUM NEUTRAL CITATION:	[2017] VSC 349

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VALUATION AND COMPENSATION — Amendment to Hume Planning Scheme — Public Acquisition Overlays imposed on Applicants’ property — Applicants entered contract of sale of property — Delay in settlement — Whether costs of sale, capital gains tax advice and the value of lost opportunity in the form of interest foregone on the proceeds of sale constitute financial loss suffered as a natural, direct and reasonable consequence of the reservation — Whether ‘the value of land’ in s 104 of the Planning and Environment Act 1987 means ‘value to the owner’ — Planning and Environment Act 1987 ss 98, 99(b), 101, 104 and 106; Land Acquisition and Compensation Act 1986 ss 35, 37.

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APPEARANCES:	Counsel	Solicitors
For the Applicants	Mr S Morris QC with Mr G Peake	Rennick & Gaynor Solicitors
For the Respondent	Mr S Goubran	Russell Kennedy Lawyers

HER HONOUR:

Until 5 June 2014, Mr and Mrs Barilla were the registered proprietors of 15.26 hectares of land at 15 Gunns Gully Road, Mickleham. They had acquired the land on 11 April 2001 with the intention of developing it as a propagating plant nursery and as a tourist attraction that included an animal nursery, water ponds, an olive grove, a vineyard, maize, visitors’ centre and car-parking. They also intended, ultimately, to live there.

Some, but not all, of these purposes were achieved. Planning and other permits were sought and obtained for the development and use of the land as contemplated, and works were carried out.

On 13 August 2009, Amendment C90 (Part 1) to the Hume Planning Scheme was published in the Victoria Government Gazette. The amendment imposed a Public Acquisition Overlay (‘PAO1’) on the Barillas’ land for the widening of the Hume Highway.

On 6 August 2010, Amendment VC68 to the Victoria Planning Provisions was published in the Victoria Government Gazette. The amendment imposed a further Public Acquisition Overlay (‘PAO3’) on the subject land to facilitate the upgrading of the Hume Highway and the construction of the Outer Metropolitan Ring Road.

Between them PAO1 and PAO3 reserved 6.16 hectares — more than a third of the Barillas’ land — for public purposes.

Following the imposition of PAO3 on 6 August 2010, having received uncertain advice as to when the Roads Corporation (‘Authority’) might acquire the subject land, the Barillas decided to exercise their right to sell the land pursuant to s 106 of the Planning and Environment Act 1987 (Vic) (‘PE Act’).

On 28 September 2013, the Barillas sold the land for $3.2 million. The contract was due to settle on 24 March 2014, but settlement did not take place until 5 June 2014.

On 31 March 2015, the Barillas submitted a claim for compensation in accordance with Part 5 of the PE Act in the sum of $773,077.44 plus reserved items. The claim was articulated as follows:

(a)$750,000 for loss on sale;
(b)replacement property costs — reserved;
(c)costs of planning permit applications, building permit applications and building costs for the property unaffected by PAO1 and PAO3 — reserved;
(d)interest and costs on an amended tax return for Capital Gains Tax (‘CGT’) — reserved;
(e)$23,077.44 for interest on a lost opportunity from 5 June 2014 to 19 March 2015; and
(f)$172,503.78 for legal, valuation or other expenses reasonably incurred in preparing and submitting the claim.

The matter was referred to the Supreme Court for determination on 3 September 2015, following which the Barillas served Particulars of Claim seeking compensation in the sum of $914,258.67 plus reserved amounts. The claim was made up as follows:

(a)$750,000 for loss on sale;
(b)$1,987.10 for the costs of planning permit applications et cetera;
(c)$114,552.18 for the costs of the sale;
(d)replacement property costs — reserved;
(e)$7,414.00 for CGT advice and tax ruling;
(f)$40,305.39 for the value of the lost opportunity calculated from 5 June 2014 to 20 October 2015 and continuing; and
(g)$181,662.83 for legal, valuation or other expenses reasonably incurred in preparing and submitting the claim for compensation pursuant to s 101 of the PE Act.

On 16 December 2015, the Authority served Particulars of Offer in the sum of $662,165.25, made up as follows:

(a)$615,000 for loss on sale pursuant to s 106 of the PE Act;
(b)nil for other claims for financial loss pursuant to s 98 of the PE Act; and
(c)$47,165.25 for expenses incurred in preparing and submitting the claim pursuant to s 101 of the PE Act.

The claim for loss on sale has been settled. On 8 April 2016, the Authority paid the Barillas $615,000 in full and final settlement of their claim for loss on sale. On the same day, the Authority advanced the sum of $41,596.75 in respect of the claim for legal, valuation and other costs pursuant to s 101 of the PE Act.

On 31 October 2016, the Barillas abandoned a number of their claims by filing and serving Further Amended Particulars of Claim.[1] They abandoned claims for the costs of works on the land, the costs of permits and replacement property costs.
[1]Dated 16 September 2016.

The Barillas now seek compensation for three things:

(a)costs of sale in the amount of $114,552.18, along with fees for sale advice of $5,500;
(b)costs in the amount of $7,414 for the CGT advice and tax ruling; and
(c)the value of lost opportunity in the form of interest foregone on the proceeds of sale from 4 February 2014 to 3 September 2015.

In her affidavit made on 23 November 2016, Mrs Barilla detailed the costs of sale as follows:[2]

(a)advertising costs of $2,500;
(b)commission on sale to Zafar Property Group of $102,400 plus GST of $9,600;
(c)legal costs and disbursements associated with the sale paid to Aitken Partners in the amount of $6,452.18.

[2]Affidavit of Rosa Agata Barilla made on 23 November 2016, [21].

In addition, the Barillas claim the amount of $5,500 which they paid to Hay Property Group for advice ‘regarding the process of sale, appropriate sale prices and the like’.[3] Mrs Barilla has deposed that she was informed that Mr Hay spoke extensively with the selling agents and the Barillas’ former solicitor and was involved in the selection of the successful purchaser and the negotiation of the contract of sale.[4]
[3]Ibid [18].
[4]Ibid.

I propose to consider the cost of the valuation advice as part of the claim for the costs of sale.

The CGT advice and tax ruling (which I will refer to simply as the ‘CGT advice’) was obtained in the circumstances explained by Mrs Barilla as follows:[5]

After the sale we sought advice from Mark Bailey of BCA Advisers regarding tax matters arising out of the sale of the land. Mr Bailey advised us that it would be prudent to apply for a private tax ruling regarding the incidence of [capital gains tax] on the sale and regarding ongoing business loss deductions.

[5]Ibid [22].

The lost opportunity claim also requires some explanation. The Barillas contend that had they sold their land for its unaffected value of $3.8 million, they would have received a deposit and then, three to six months later, the balance of the purchase price. However, because of the reservations, they sold the land at a lower price. It was a year or so before they received from the Authority to the difference between the affected and unaffected values of the land. They contend that the net present value of what they received for the affected land was $25,000 less than the net present value they would have received had they sold the land unaffected by the reservations.

In relation to this claim, Mrs Barilla deposed as follows:[6]

Had my husband and I been able to sell the land in the normal course of events, unencumbered by the Public Acquisition Overlay, we would have expected to receive a 10% deposit of $381,500 and at settlement, full payment of the sale price, which I am informed has been agreed with Roads Corporation to be $3,815,000. If a purchaser had sought to delay payment of $615,000 of the purchase price, I would have either wanted the purchaser to pay a higher price for the land or I would have required the purchaser to pay interest on the balance outstanding until payment in full. Had my husband and I received payment of the full value of the land of $3,815,000, in the normal course, we would have initially invested that amount in interest bearing deposits, as we invested the deposit moneys and the balance of the purchase monies when they were received by us.

[6]Ibid [21].

Mrs Barilla went on to specify the rates of interest claimed, based on interest rates that she and her husband were earning from investment accounts between February 2014 and July 2015.

Statutory framework

Under the provisions of the PE Act, an Authority can request the Minister for Planning to designate land as being reserved for public purposes.[7] Upon receiving such a request, the Minister may amend the relevant planning scheme to designate land as reserved for a public purpose by publishing a notice in the Victoria Government Gazette pursuant to s 35 of the PE Act. The Victoria Planning Provisions provide for the imposition of a Public Acquisition Overlay to reserve land for a public purpose.
[7]PE Act s 6(2)(c).

Once land is reserved for a public purpose, the provisions of Part 5 of the PE Act apply to provide for compensation to the owner or occupier of the land. The relevant provisions are ss 98 to 113 of the PE Act.

The regime for compensating for planning blight in the PE Act is somewhat similar to, though in important respects differs from the regime for compensation for compulsory acquisition under the Land Acquisition and Compensation Act 1986 (‘LAC Act’).

Section 98 of the PE Act confers a right to compensation where land has been reserved for a public purpose. Relevantly, it provides:

(1)The owner or occupier of any land may claim compensation from the planning authority for financial loss suffered as the natural, direct and reasonable consequence of —
(a)the land being reserved for a public purpose under a Planning Scheme …

Section 99 specifies when a ‘right to compensation’ and ‘the liability of a planning authority or a responsible authority to pay compensation’ arises under s 98(1)(a). Among other circumstances, the right to compensation and the liability to pay arise upon the sale of the land under s 106.

Relevantly, s 106(1) provides:

The owner of land may claim compensation under section 98 after the sale of the land if —
(a)the owner of the land sold it at a lower price than the owner might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved; and
(b)before selling the land the owner gave the relevant authority not less than 60 days’ notice in writing of the owner’s intention to sell the land.

The compensation payable for financial loss under s 98 is capped. Section 104 provides:

The compensation payable for financial loss under section 98 must not exceed the difference between —
(a)the value of the land at the date on which the liability to pay compensation first arose; and
(b)the value that the land would have had at the date if the land had not been affected by any circumstance set out in section 98(1) or (2) or 107.

Part 5 of the PE Act also provides for the reimbursement of expenses incurred in making a claim for compensation. Section 101 provides:

If compensation is payable under section 98, the owner or occupier of any land may also claim from the planning authority or responsible authority any legal, valuation or other expenses reasonably incurred in preparing and submitting the claim.

Hence, insofar as the Barillas make claims for compensation for financial loss under s 98(1)(a), they must establish that the financial loss was suffered as the ‘natural, direct and reasonable consequence’ of the reservations. Furthermore, by reason of s 104, the compensation payable for such financial loss may not exceed the difference between the value of the land unaffected by the reservations and the value of the land affected by the reservations at the date of the sale of the land.

Insofar as amounts are claimed as expenses under s 101, there is no cap. However, the Barillas must establish that the relevant expenses were reasonably incurred in preparing and submitting their claim for compensation.

The Barillas claim the costs of sale as expenses under s 101. Alternatively, they submit that the costs of sale are recoverable under s 98(1)(a) as financial losses suffered as the natural, direct and reasonable consequence of the reservations.

The Barillas claim compensation for the cost of the CGT advice and the value of the lost opportunity only under s 98(1)(a). They make no claim under s 101 in respect of these costs.[8]
[8]Transcript, 108-9.

The Authority submits that s 104 provides a complete answer to the s 98 claims because the Barillas have been paid an amount representing the difference between the market value of the land affected by the reservations and the market value the land would have had if unaffected by the reservations. If the Authority is correct, it would remain only to consider whether the costs of sale qualified as expenses under s 101.

Section 98 claims

Section 98 confers on the Barillas as the owners of the land a right to compensation for financial loss suffered ‘as the natural, direct and reasonable consequence’ of the land being reserved for public purposes. The Barillas must therefore establish that the costs of sale, the costs of the CGT advice and the value of the lost opportunity were financial losses suffered as the natural, direct and reasonable consequence of the reservations.

All of the Barillas’ claims ultimately arise from the sale of the land, although it is in issue whether the relationship between the losses and the reservations satisfies the statutory test. In Halwood Corp Limited v Roads Corporation,[9] and subsequently in Melbourne Citylink Authority v Tefford,[10] the Court held that ‘natural’ means arising according to the usual course of things; ‘direct’ means without intervening agency or intermediate; and ‘reasonable’ means not going beyond the limit assigned by reason or not extravagant or excessive. The three adjectives, in combination, connote a very close and limited connection between the event giving rise to compensation and the financial loss suffered.[11]
[9][1995] 89 LGERA 280.
[10][2001] VSCA 54.
[11]Ibid [24].

Mrs Barilla has deposed that the existence of the reservations caused the Barillas to sell the land because they considered that a property located at the intersection of two major multi-lane highways having a significantly reduced land area did not suit their future needs. They submit that the financial losses for which they seek compensation were the natural, direct and reasonable consequence of the reservations.

There is a question as to whether the sale of the land was the natural or direct consequence of the reservations. PAO1 and PAO3 did not impose any planning restrictions preventing the Barillas from continuing to use and develop the land as a plant nursery and animal farm. However, at the time of the sale, the Barillas were conducting a business of marginal viability. The land had been rezoned, making it far more valuable than when they acquired it and, on any view, far too valuable to be used for a plant nursery and animal farm. It was inevitable that the Barillas would seek to realise the large increase in the value of the land by selling it. The Barillas had very good reason to sell the land, quite apart from the existence of the reservations.

The Barillas submit that their motive for selling the land is irrelevant: the statutory scheme permitted them to sell the land, having given the required notice to the Authority, and to claim compensation for losses incurred as a result of the reservations, including for the diminution in land value and for the costs of sale.

I do not accept this submission. What caused the Barillas to sell the land is relevant to whether the costs that they claim attended the sale of the land were the natural, direct and reasonable consequence of the reservations. If those costs were incurred in seeking to realise the substantial capital gain on the land, they might not be referrable to the reservations at all.

However, while I do not accept that the Barillas sold the land solely in response to the reservations, I am prepared to accept that, even absent the large capital gain, they would probably have sold the land, because the existence of the reservations made it much less attractive to develop over the longer term as a plant nursery and animal farm. Insofar as the sale of the land was a natural, direct and reasonable consequence of the reservations, the losses represented by the costs of sale would be also be the natural, direct and reasonable consequence of the land being reserved for public purposes.

The costs of the CGT advice fall into a different category. Those costs were incurred by the Barillas in order to establish and secure their personal tax position. They were not financial losses that were naturally or directly related to the sale of the land, let alone to the reservations.

As to the third item of financial loss, the Barillas make this claim as a ‘Hungerfords claim’,[12] that is, as a claim for the loss of use of money that they say they would have received without delay from the sale of the land, absent the reservations. It is based on the Barillas having lost the benefit of the full market value of the land until the Authority paid compensation for loss on sale. This occurred some 10 months after the sale of the land.
[12]Based on Hungerfords v Walker (1990) 171 CLR 125.

This claim is, in substance, a claim for interest for the delay in the payment of compensation by the Authority. The PE Act, unlike the LAC Act, does not make provision for the payment of interest on amounts of compensation. However, in Mario Piraino Pty Ltd v Roads Corporation (No 1),[13] the Court held that s 98 can in an appropriate case properly include an amount for interest. Justice Gobbo observed that even where statutes made no provision for interest in respect of compensation, it had always been open to claimants to argue by resort to equitable principles that interest should run from the taking of the property. Where there was certain loss due to the unavoidable continuance of interest costs and the clear absence of any statutory entitlement to interest, the claimant might recover interest as part of its compensation.[14]
[13][1991] 2 VR 534.
[14]Ibid 538.

However, just over two years later, the Court considered and rejected a Hungerfords claim in the context of s 98 of the PE Act in Roads Corporation v Melbourne Estates and Finance Co Pty Ltd.[15] Justice Gobbo held that a reduction in the market value of land consequent on the refusal of a permit did not result in money being ‘withheld’ from the date of refusal of the permit. While s 98 of the PE Act speaks of a liability to pay arising upon such a refusal, it could not properly be said that the money equivalent of the reduction in the value of the land was withheld.[16]
[15][1993] 2 VR 602.
[16]Ibid 614. Further, his Honour held that the evidence was incapable of sustaining a finding that the loss of a possible alternative investment up to the date of the determination of compensation was a component of value to the owner.

On the other hand, in Roads Corporation v Schembri,[17] Osborn J held that a Hungerfords claim was open to the owners of land that had been compulsorily acquired in circumstances where:
[17][2009] VSC 369.

(a) the claimants had lost their interest in the land by the operation of the LAC Act and had in lieu thereof a right to compensation;

(b) the authority was bound under the LAC Act to make an offer of compensation within 14 days and make an advance when asked to do so;

(c) the authority did not comply with these procedures and there was a consequent delay in the receipt by the claimants of the advance of compensation;

(d) the sum withheld was capable of ascertainment by the authority itself and there was therefore a ‘withholding’ in the relevant sense of the amount ultimately offered;[18]

(e) there was evidence as to payment of interest on existing loans up until the receipt of the advance and of the application of the advance, first in reduction of such loans and, secondly, by way of investment.[19]

[18]Ibid [83].

[19]Ibid [85].

In this case, the land affected by the reservations was sold, triggering an entitlement to be paid compensation. The Barillas made a claim for the difference in the amount that they received upon the sale and what they contended was the unaffected value of the land. The Authority responded with its own valuation of the unaffected value. The difference in opinion was resolved in the normal course. So far as I am aware, the Authority complied with all procedures mandated by the PE Act and, insofar as it was applicable, the LAC Act. In these circumstances, it could not be said that the amount representing the loss on sale was ‘withheld’ by the Authority.

I am not persuaded that the value of any lost opportunity to invest the proceeds of sale was compensable under s 98(1)(a) as a financial loss that was the natural, direct or reasonable consequence of the reservations. The timing of the receipt of compensation payments reflecting the unaffected value of the land was a function of the statutory arrangements for the payment of compensation under the PE Act.

In my view, the Barillas are not entitled to compensation under s 98(1)(a) for the costs of the CGT advice or for the value of the lost opportunity.

In any event, for the reasons that follow, as the Barillas have been paid the difference between the value of the land unaffected by the reservations and its affected value, their claims for further losses under s 98 are defeated by the operation of the cap in s 104. They are not entitled to anything more.

‘Value of the land’ under section 104

Section 104 limits the amount of compensation available under s 98 of the PE Act to the amount that is the difference between the value of the land unaffected by the reservation and the value of the land affected by the reservation. In other words, compensation is limited to the amount of the diminution in land value as a result of the reservation.

The Authority submits that ‘the value of the land’ in s 104 means the amount of money that would have been paid for an interest in the land had it been sold on the relevant date by a willing but not anxious seller to a willing but not anxious purchaser, in accordance with the test in Spencer v Commonwealth.[20] It submits that in this case, ‘the value of the land’ is the market value of the land.
[20](1907) 5 CLR 418 (‘Spencer’s Case‘).

The classic test for establishing the value of land for compensation purposes was laid down in 1907 in Spencer’s Case. Chief Justice Griffith said:[21]

In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was in fact on that day a willing buyer, but by inquiring ‘What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?’

[21]Ibid 432.

To the same or similar effect, Isaacs J said:[22]

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration.

[22]Ibid 441.

On this basis, so the Authority contends, the unaffected value of the land for the purpose of s 104(b) was $3,815,000 and the affected value of the land for the purposes of s 104(a) was the actual sale price of $3,200,000. The difference between the two was $615,000, which is the payment that the Authority made to the Barillas as compensation for loss on sale under s 98.

The Barillas interpret the words ‘the value of the land’ in s 104(b) differently, arguing that the words mean the ‘value to the owner’, which in this case exceeds its market value.

The concept of ‘value to the owner’ is well known to the law of compulsory acquisition. Thus, for example, in Spencer’s Case, Barton J recognised that in valuing land upon a resumption, the ‘special advantages’ of the land must be taken into account.[23] His Honour said:[24]

The Court must take into consideration all the circumstances, and, to quote the admirable judgment of the Supreme Court of New Zealand in Russell v The Minister of Lands, must ‘see what sum of money will place the dispossessed man in a position as nearly similar as possible to that he was in before.’ His loss is to be tested by the value of the thing to him … and the loss he has sustained is not necessarily to be gauged by what the land would realise if peremptorily brought into the market on a day named. True, it is ‘value’ which is to be assessed, but the value to the loser of land compulsorily taken is not necessarily the mere saleable value.

[23](1907) 5 CLR 418, 436.

[24]Ibid 435 (citations omitted).

In Pastoral Finance Association Ltd v Minister,[25] the Privy Council confirmed that in some compensation cases land may have a value to its owner that exceeds its market value. The question there was whether profits expected to be generated as the result of moving a business to the land that was subsequently acquired formed part of the value of land to the owner. The claimant conducted a meat packing business which it intended to move to land that was resumed. A jury awarded the claimant over £23,000, although the land itself was worth only £9,950, apparently in order to account for the profits expected from the relocation of the business. On appeal, the New South Wales Supreme Court reduced the award to the market value of £9,950. The Privy Council held that the proper award was the value of the land to the claimant,[26] noting that it was ‘common ground that the site had special suitability for the use to which the [claimant] proposed to put it’.[27] Nonetheless, Lord Moulton criticised the trial judge for directing the jury to add the expected profits to the value of the land, stating:[28]

No doubt the suitability of the land for the purpose of their special business affected the value of the land to them, and the prospective savings and additional profits which it could be shewn would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them. But that is a very different thing from saying that they were entitled to have the capitalized value of these savings and additional profits added to the market value of the land in estimating their compensation. They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land. Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.

[25][1914] AC 1083 (‘Pastoral Finance’).

[26]Ibid 1087.

[27]Ibid 1086.

[28]Ibid 1088 (emphasis added).

The formulation in the final sentence of this passage has been widely adopted to describe ‘value to the owner’. Rather than consider what the hypothetical purchaser would pay for the land, the question is, ‘What would the owner give for the land rather than fail to obtain it?’

In Leichhardt Council v Roads & Traffic Authority,[29] Spigelman CJ described the concept of ‘value to the owner’ as a ‘unifying concept’ in the following terms:[30]

The traditional formulation of ‘value to the owner’ was developed as a gloss on the statutory words ‘value of land’ or equivalent appearing in a statute authorising compulsory acquisition. It was a unifying concept which encompassed ‘market value’, ‘special value’, ‘disturbance’ and ‘severance’. ‘Value to the owner’ was not a concept which, at least in its origins, operated in addition to market value. Rather, market value was, in most cases, the way of computing ‘value to the owner’.

[29][2006] NSWCA 353 (‘Leichhardt Council’).

[30]Ibid [24].

The proposition that ‘value to the owner’ could incorporate a range of other losses suffered by the owner as a result of the resumption of his or her land, including losses for disturbance, was stated in clear terms by the Privy Council in Minister for Public Works v Thistlethwayte:[31]

It must not be forgotten that it is the value of the land to the owner that has to be ascertained and that the willing seller and purchaser is merely a useful and conventional method of arriving at a basic figure to which must be added in appropriate cases further sums for disturbance, severance, special value to the owner and the like.

[31][1954] AC 475, 491.

However, in Commonwealth v Reeve,[32] the High Court emphasised that the assessment of the value of land in resumption cases is to take place within the framework of the hypothetical voluntary bargain. Chief Justice Latham said:[33]

It is often said in compensation proceedings that that which is to be assessed is the value of the land to the owner, and this expression is sometimes understood and applied as if the proposition meant that the owner is entitled to recover whatever loss he may suffer from losing his land. But the point of the phrase ‘value to the owner’ is not that the owner is entitled to damages for all his loss consequent upon acquisition of his land, but that the value to the acquiring authority is not the measure of compensation.

[32](1949) 78 CLR 410 (‘Reeve’).

[33]Ibid 417–8.

Nonetheless, Latham CJ added the following:[34]

The value of the land to the owner is what he can get for it. He can never get for it more than other will give for it. But what other people will give for it is not unaffected by what the owner is prepared to take for it, and if the sale of the land would involve him in costs and expenses that fact may be an element which would affect the amount which he is willing to take.

[34]Ibid 418 (emphasis added).

In Commonwealth v Arklay,[35] the High Court confirmed that ‘value’ in the context of the provisions of Commonwealth legislation with respect to the compulsory acquisition of land meant ‘value to the owner’.[36] However, it went on to describe the ‘familiar rule’ which was authoritatively formulated in Spencer’s Case as follows:[37]

Shortly stated what is required is ‘an estimate of the price which would have been agreed upon in a voluntary bargain between a vendor and purchaser each willing to trade but neither of whom was so anxious to do so that he would overlook any ordinary business considerations’ … It is simply an analysis of what in all the relevant circumstances would be the price that a willing purchaser would have to pay a vendor willing but not anxious to sell in order to obtain the land. Where land has no special suitability for some business or activity carried on by the owner and has no added potential value if put to some better use the value on a free market is usually its market value.

[35](1952) 87 CLR 159 (‘Arklay’).

[36]Ibid 169.

[37]Ibid.

It is noted that there is some tension between the formulation of ‘value to the owner’ as a ‘unifying concept’ that may include disturbance losses such as the costs and expenses associated with the sale of the land, and the ‘value to the owner’ that cannot exceed what another will give for the land in the absence of some special suitability of the land to the owner. As will be seen, the adoption in modern compulsory acquisition legislation of a list of factors to be considered when assessing compensation — market value, losses attributable to disturbance, severance, special value to the owner and the like — has significantly reduced the currency of ‘value to the owner’ as a unifying concept incorporating a variety of different types of loss. ‘Special value to the owner’ has been more rigorously defined, requiring the establishment of a demonstrable economic advantage enjoyed by the claimant as an incident of the ownership of the land, and it has been distinguished from losses attributable to disturbance.

Nonetheless, the Barillas’ construction of s 104 is based on the proposition that, for the purposes of determining ‘the value of the land’ in s 104(b), it must be assumed that they would not have given up the land for sale unless its ‘value’ included the amounts of the losses claimed. They contend that this involves adding to the market value of the unaffected land amounts representing the costs of sale, the cost of the CGT advice and the value of the lost opportunity. The effect of this is to increase the difference between the unaffected and affected values of the land so as to raise the cap on compensation.

The Barillas contend, in effect, that the words ‘the value of the land’ in paragraphs (a) and (b) of s 104 involve different forms of value: in the ‘affected’ situation (s 104(a)), the words refer to the market value of the land; in the ‘unaffected’ situation (s 104(b)), the words refer to the ‘value to the owner’, which is what the owner would require to be paid for the land in order to agree to sell it (or, using the formula in Pastoral Finance, what the owner would have given for the land rather than fail to obtain it). In this case, on the Barillas’ analysis, the value of the land to them was the market value of the land plus the amounts of the financial losses in issue, for which they say they would have required to be compensated in order to give up the land for sale.

Given the financial losses that the Barillas say should be incorporated in ‘value to the owner’ in one limb of s 104, this ‘value to the owner’ is the ‘unifying concept’ described by Spigelman CJ in Leichhardt Council, that is, a concept of value incorporating financial losses of a type that, strictly speaking, are not productive of any value in the land at all. The costs incurred in selling the land were transaction costs; the costs of the CGT advice related to the Barillas’ ability to benefit from certain taxation arrangements following the sale of land; similarly, the cost of the lost opportunity to invest part of the proceeds from the sale of the land is related to investment choices following the disposal of the land. None of these expenditures or missed opportunities contributed or could have contributed to ‘the value of the land’ in the ordinary sense of the words.

There can be no doubt that ‘value to the owner’ as a ‘unifying concept’ has played an important role in the assessment of compensation for the compulsory taking of land. However, as the High Court said in Walker Corporation v Sydney Harbour Authority,[38] caution is required in construing modern Australian legislation by reference to principles derived from a body of case law built up in various jurisdictions where there are in force statutes in the same or similar terms, particularly in relation to compulsory acquisition and compensation.
[38](2008) 233 CLR 259, 270 [31] citing Marshall v Director-General, Department of Transport (2001) 205 CLR 603, 632-3 [62].

In order to determine whether the Barillas can recover the amounts in issue, the Court is required to construe s 104 of the PE Act. The task of statutory construction must begin with consideration of the text itself. Historical considerations and extrinsic materials cannot be relied upon to displace the clear meaning of the text. The language which has actually been employed in the legislation is the surest guide to its legislative intention.[39] However, the meaning of the text may require consideration of its context, which includes the general purpose and policy of the provision and the mischief that it is seeking to remedy.[40]
[39]Secretary to the Department of Economic Development, Jobs, Transport and Resources v Manor Lakes (Werribee) Pty Ltd [2017] VSCA 114 [26].
[40]Ibid.

Section 104 requires a comparison of two land values: ‘the value of the land’ affected by the reservation and ‘the value of the land’ unaffected by the reservation. The relevant date for ascertaining value in both cases is the date upon which the liability to pay compensation arose under s 99. In this case, it is the date of the sale of the land, which triggered the liability to pay compensation under s 99(b). The two land values are relevant to fixing, by way of a simple mathematical calculation, the maximum amount of the compensation payable to a land owner or occupier for losses that are the natural, direct and reasonable consequence of the reservation of the land.

Section 104 uses the words ‘the value of the land’ in relation to both the ‘before/unaffected’ situation and the ‘after/affected’ situation. The words are also used in s 103 of the PE Act, which deals with ‘small claims’ and provides that a claim for compensation may be rejected if the financial loss claimed is less than a given amount. Absent clear indication to the contrary, it may be assumed that the legislature intended the phrase ‘the value of the land’ to carry the same meaning throughout Part 5 of the PE Act and, in particular, within the one provision. I do not consider that the unqualified use of the word ‘value’ in paragraphs (a) and (b) of s 104 invites a comparison of land values assessed on different conceptual bases.

Whatever uncertainties there are in the text of s 104, its purpose is clear. It is intended to limit the compensation payable for losses resulting from the reservation or proposed reservation of land. It does so by providing that compensation cannot exceed the diminution in the value of the land. Conversely, s 103(b) uses ‘the value of the land’ to set a minimum amount for a claim. In the case of both s 104 and s 103, ‘the value of the land’ is intended to produce a figure to be used for determining whether the claim meets or exceeds a monetary threshold or limit.

Significantly, if the Barillas’ construction is accepted, s 104 will not achieve its purpose of limiting the amounts that can be recovered as consequential losses under s 98 of the PE Act. The clear purpose of s 104 is to cap the compensation payable for consequential losses. The cap would be compromised, if not defeated, if all manner of losses or expenditures could simply be added to the market value of the land in order to raise the cap. This cannot have been what the legislature intended.

In construing s 104, it must be steadily borne in mind that it is not concerned with valuing land so as to properly compensate the owner for what he or she has lost. To the contrary, s 104 contains (what is intended to be) a simple mechanism to limit the availability of compensation for consequential losses in cases involving planning blight. For the limiting mechanism in s 104 (and the floor in s 103) to operate effectively, its terms must be clear. While s 104 does not specify what form of land value is to be used for comparison purposes, the test in Spencer’s Case is the generally accepted method for ascertaining the value of land and it will reflect the market value of land in most cases.[41] Unlike ‘value to the owner’, market value is readily and objectively ascertainable.
[41]Leichhardt Council [2006] NSWCA 353 [24].

Taking ‘the value of the land’ to be its market value — at least in the usual course — is consistent with the terms of s 106(1), which allow for a claim for compensation to be made under s 98 after the sale of land if ‘the owner of the land sold it at a lower price than the owner might reasonably have expected to get if the land … had not been reserved’. Section 106 contemplates a sale of the affected land at its market value, which produces the ‘lower price’. Correspondingly, the price that ‘the owner might reasonably have expected to get for the land’ absent the reservation is the price that the land would have achieved if sold by a willing and not anxious vendor to a willing and not anxious purchaser, namely, its market value. The language of s 106 is the language of market value and the comparison for which it provides is a comparison of market values.

Construing ‘the value of the land’ in s 104 as the market value of the land would also be consistent with ss 41(5) and (7) of the LAC Act, which provide for a reduction in the amount of compensation payable upon a compulsory acquisition where compensation has already been paid for the reservation of the land under the PE Act. Sections 41(5) and (7) provide:

(5)If compensation has previously been paid in respect of the land pursuant to Part 5 of the Planning and Environment Act 1987, the amount of compensation payable under this Part in respect of an acquired interest in land or in respect of land in which an acquired interest subsists must be reduced by the prescribed amount.

…
(7)In this section the prescribed amount in relation to land is the amount calculated by the following formula—
where—
A = the amount of compensation previously paid in respect of the land for loss of market value due to—
(i)the reservation or proposed reservation of the land or part of the land for a public purpose in a planning instrument; or

(ii) any part of the land being required for a public purpose.

B = the market value of the land in respect of which the compensation was paid, that value to be determined on the basis of the actual zoning that applied to the land at the date which was the basis for the calculation of that compensation.
C = the compensation payable under this Part for market value and severance less the value of the land attributable to improvements of a durable nature made—
(i)with the consent of the Authority under section 12(1)(b); or
(ii)after the last date on which compensation was paid in respect of the land and before service of the most recent notice of intention to acquire an interest in the land.

Construing ‘the value of the land’ in s 104 as its market value, with the result that compensation under s 98 of the PE Act is capped at the difference between the market values of the land in the before and after situations, better correlates with the method for calculating the ‘prescribed amount’ in s 41(7) of the LAC Act.

Nonetheless, I do not think it necessary in the present context to express a concluded view as to whether ‘the value of the land’ in s 104 is the market value of the land. Having regard to the text and purpose of s 104, I do not accept the construction advanced by the Barillas that ‘the value of the land’ in one limb of s 104 means its market value plus additional amounts that the owner asserts would need to be included in order to induce him or her to sell the land. This would allow the cap in s 104 to be raised in quite an arbitrary fashion based on the simple assertion by the owner that they would not sell the land without compensation for certain expenditures, whether or not those expenditures were capable of enhancing the potential of the land. The construction advanced by the Barillas effectively defeats the purpose of s 104, which is to limit the recovery of consequential losses.

It remains to consider the relevance of the authority upon which the Barillas principally rely and which, they contend, the Court is bound to follow unless persuaded that it is clearly wrong, Mario Piraino Pty Ltd v Roads Corporation (No 2).[42]
[42][1993] 1 VR 130 (‘Mario Piraino’).

In Mario Piraino, the Court interpreted ‘the value of the land’ in s 104 to mean ‘value to the owner’ and held that amounts of compensation in addition to the market value of the land fell under the cap in s 104. Like the present case, Mario Piraino concerned an award of compensation for planning blight pursuant to s 98 of the PE Act. The Court considered the interaction of ss 98 and 104 and held that a range of expenditures incurred by the claimants in preparing to develop the land which were lost upon its reservation were recoverable as part of the value of the land to the claimants. The Barillas submit that the Court is bound to follow Mario Piraino unless the Court is persuaded that it is clearly wrong.

Having regard to more recent authority and for the reasons that follow, I am persuaded that Mario Piraino does not represent the current state of the law and that I should not follow it.

The facts in Mario Piraino were as follows. Mr and Mrs Piraino were directors of the claimant company and directors and shareholders of another company (‘AFS’) that ran a number of furniture stores. The Pirainos wished to embark upon a program of expansion, which included setting up a large furniture showroom. Eventually, a site was found on or near the Calder Highway that met all the Pirainos’ criteria, including having the potential to secure the necessary town planning permit. The Pirainos[43] acquired the land and worked on the development of the new showroom. By June 1988, an application for a planning permit had been submitted and was shortly to be granted, and the preparation of building plans was well advanced. Substantial costs had been incurred in preparing the detailed architectural and engineering drawings for the development. However, the development was brought to an end in July 1988, when the Roads Corporation objected to the grant of the permit on the ground that the land (or part of it) was or might be required for a public purpose.[44] As a result, the Pirainos abandoned the proposed development. When the project was brought to a standstill, the issue of the planning permit was imminent and the building permit was not far behind. Mr Piraino had invested much time in the project and had spent around $135,000 for architects’ plans and engineering drawings. The Pirainos sought an award of compensation to reflect this added value over and above the bare value of the land.
[43]Through the claimant company.
[44]The public purpose in question was a proposal for an interchange where the new Western Ring Road crossed the Calder Freeway. The consequence of the interchange proposal was that nearly half of the Pirainos’ land would be required to accommodate ramps.

The Pirainos commenced proceedings for compensation for loss sustained as a result of the denial of a planning permit and the forced abandonment of the project. This included a claim for the reduction in the value of the land and further claims for (a) loss of profits from the new larger premises, (b) the costs of relocating to a distant and less convenient location, and (c) for various legal and other costs, including holding costs and the likely costs of purchasing an alternative site. There was also a claim for what was described as both ‘value to the owner’ and ‘special value’ based on the increased profits that AFS would have made at the new site and paid as higher rental to the Pirainos.

In the event, the Court:

(a) refused, on the ground that the loss did not fall within s 98 and on evidentiary grounds, the claim for ‘special value’ based on the land having a very high scarcity value once it had a planning permit and a particular value because of the benefit to the owner of completing the development and relocation;

(b) allowed the claims for holding costs, architects’ and engineering fees, executive time costs and outgoings (rates and taxes) as falling within s 98 and as representing ‘value to the owner’;

(c) refused the claim for legal costs and stamp duty on the original purchase as being no more recoverable than the original purchase price; and

(d) refused the claim for legal costs, stamp duty and agents’ costs on replacement land on evidentiary grounds.

Referring to the items in paragraph (b) above, Gobbo J said:[45]

Each of the above items in my view amounts to financial loss suffered as the natural direct and reasonable consequence of a planning refusal or reservation within s 98. Each of these items could properly be described as reasonably incurred expenditure that was totally lost. This was so with the drawings for the showroom and allied developments; there was also a total waste of the interest rates and taxes paid while a complete halt occurred and any meaningful use or development was prevented. Each of these items were such as to fall readily in my view within the notion of value to the owner and so come within any limit set by s 104 … In the light of the earlier discussion as to the method of combining actual loss under s 98 and value to the owner in the wide context of s 104, I am satisfied that the proper course is to add the sum of $276,170 to the other component of actual loss by way of land reduction

[45][1993] 1 VR 130, 147.

Justice Gobbo observed that the value of the land in the ‘before’ (unaffected) situation represented no more than the bare market value of the land, treating the land as having a high potential for peripheral sales, but not as having had considerable expense and work committed to it to secure the issue of permits in the near future. For this reason, it was necessary to have regard to the value of the land to the Pirainos. His Honour described ‘value to the owner’ as a well-established concept in the law of compensation for land acquisition and adopted the following lengthy description of ‘value to the owner’ in the judgment of Mahoney JA in Housing Commission of New South Wales v Falconer:[46]

Value to the owner: property is, of course, to be valued by reference to whatever potential it may have to whoever may be the owner of it: Turner v Minister of Public Instruction (1956) 95 CLR 245. But it has long been accepted that, in compensation cases, the value of property may go beyond this. Its value is its value to the particular owner and, in assessing that value, there is to be taken into account also a potentiality which is available only to the individual who is the owner at the relevant date or is peculiar to him: Pastoral Finance Association Ltd v The Minister [1914] AC 1083, at pp 1087, 1088; see also Spencer v Commonwealth (1907) 5 CLR 418, at p 435; Minister for Public Works v Thistlethwayte [1954] AC 475, at p 491. On this basis, if the land is, physically, by reason of its zoning or otherwise, particularly suited for the use to which the then owner wishes to put it or is putting it, and that makes it specially valuable to him, that which is to be assessed in money terms is not merely the value of the land generally on the market but its value having regard to that special value: Dangerfield v Town of St Peters (1972) 129 CLR 586.
The cases in which special value to the owner may be found in this way have been held not to be restricted of cases of physical or legal advantage. If, for example, the owner has prepared the land for sale and obtained permits for its sale, the value of the land to him has been assessed by reference to the special advantages by way of profit which the land thereby has for him: Kennedy Street Ltd v The Minister (1962) 80 WN (NSW) 1251, at p 1254; Ward v Housing Commission of New South Wales (1951) 19 LGR 77; and if the owner’s efforts have, for example, made it more likely that he will obtain particular building permits in respect of the land, the costs of these have to be taken into account also: Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201, at p 205; Chapman v The Minister (1966) 84 WN (Pt 1) (NSW) 417.

[46][1981] 1 NSWLR 547, 572-3 (‘Falconer’) cited in Mario Piraino [1993] 1 VR 130, 139-140.

In Mario Piraino, the Court’s adoption of ‘value to the owner’ was therefore based on Falconer and the approach taken in Kennedy Street Ltd v Minister,[47] Baringa Enterprises Pty Ltd v Manly Municipal Council,[48] and Chapman v The Minister,[49] among other cases.
[47][1963] NSWR 1252 (‘Kennedy Street’).
[48](1965) 15 LGRA 201 (‘Baringa’).
[49](1966) 84 WN (Pt 1) NSW 417 (‘Chapman’).

In Kennedy Street, the claimant purchased land that was resumed after contracts were exchanged but before settlement took place. It had purchased the property to subdivide and sell at a profit and had paid a deposit, along with some expenses such as stamp duty and surveying costs. The court held that the land had special value to the claimant over and above its market value as a result of a set of circumstances that were very similar to those in Mario Piraino. In particular:[50]

[The claimant] had given close and careful consideration to the problems associated with the proposed subdivision. It had paid stamp duty and legal fees to acquire it; it had also paid survey fees and engineering fees, and the council fee in relation to the subdivision application. The knowledge and experience acquired by Mr. Robertson and the time spent by him in examining the land and taking the steps appropriate to ensure an expeditious approval of the subdivision were, in the event that happened, of no value to the [claimant]. The resumption deprived the [claimant] of land proposed to be used by it in what would in all probability have been a profitable venture; thus the [claimant’s] profit-earning potential was diminished, the extent of such diminution depending upon a number of factors, one of the most important being the length of time reasonably required by the [claimant] to re-equip itself for this type of business.

[50][1963] NSWR 1252, 1255–6.

On this basis, Hardie J was satisfied that, rather than lose the opportunity of acquiring the land, the claimant would have paid a price substantially in excess of the market value for it. His Honour found that, having expended £840 on the project over and above the deposit and being in a position to proceed at once with the completion of the purchase and the subdivision and sale of the land, the claimant would have been prepared to pay an additional sum of £2,500 over and above the market value of the land.

Baringa also concerned the resumption of land acquired by the claimant for development. At the date of resumption, approval had been obtained for the construction of the building and plans had been prepared by architects, who had called for tenders for the construction of the building. The court assessed compensation for the resumption of the land by including a component for special value over and above market value on the basis of the approval and the information held by the claimant. Hardie J said:[51]

Looking at the matter from all aspects and bearing in mind the [claimant’s] substantial expenditure on the project over and above the cost of the land, some of which gave the land an added value in its hands, and some of which was not reflected in added value, I am of the opinion that … a prudent purchaser in the position of the [claimant] company could have been prepared to pay for the subject property a sum … over and above its market value

[51](1965) 15 LGRA 201, 205.

The similarity in approach to determining ‘the value of the land’ in these cases and in Mario Piraino is evident. In each case, it involved adding to the ‘bare’ or market value of the land amounts representing expenditures on the land that had been rendered futile by the taking of the land and the aborting of the proposed development.

The blanket application of such an approach was rejected by the High Court of Australia in Boland v Yates.[52]
[52](1999) 167 ALR 575.

In Boland v Yates, the claimant owned land at Darling Harbour on which he had approval to construct a market with 896 stalls. By the time the land was resumed, the claimant had spent almost two years preparing plans for the market, gaining approvals and obtaining registrations of interest from future stall-holders. He claimed that a buyer in his position would pay more for the site than its market value, because he could begin construction immediately, whereas a buyer who was not in his position would be delayed by the months that he had spent in preparation. In considering a claim against his lawyers for not putting the ‘head start’ argument, the High Court held that the claimant would not have been entitled to the costs of preparing the land for development as special value.

Referring to the Public Works Act 1912 (NSW), Gleeson CJ distinguished between special value and consequential losses, stating:[53]

The ‘value of the land’ means ‘value of the land to the owner’. What is to be noted, however, is that the basis of compensation was the value of the land taken and not, apart from the specific kinds of damage referred to in s 124, the general or particular financial harm otherwise suffered by [the claimant] as a consequence of the resumption.

[53]Ibid 579 [11] (citation omitted).

The Chief Justice observed that in some circumstances, land may have a ‘special value’ over and above the price which a hypothetical purchaser may pay. Although in Spencer’s Case, Griffiths CJ said that ‘value’ means ‘exchange value’— a value which presupposes a person willing to give what is being valued in exchange for money and another willing to give money in exchange for what is being valued — it was established in Pastoral Finance[54] that in some circumstances land may have a special value to the owner which exceeds the market value of the land. As Bray CJ said in Arkaba Holdings v Commissioner of Highways,[55] it is the value to the owner that must be paid, even if it exceeds market value. ‘Special value to the owner’ may arise from some attribute of the land, some use made of it or advantage derived from it which is peculiar to the claimant and would not exist in the case of the hypothetical purchaser.[56]
[54][1914] AC 1083 (‘Pastoral Finance’).
[55][1970] SASR 94, 100.
[56]Boland v Yates (1999) 167 ALR 575, 596 [80].

Chief Justice Gleeson recognised that there was a ‘degree of tension’ between the concept of value as exchange value, which carries the notion that the value of something is the price the owner can get for it, and the concept of special value to the owner over and above the price which a hypothetical purchaser would pay.[57] His Honour elaborated:[58]

Special value to the owner directs attention to the perspective of the vendor. What is insisted upon is that … what is in question is the value of the land or other resumed or acquired asset, not the fixing of compensation for all loss resulting from the resumption or acquisition. The dividing line between those two ideas sometimes becomes blurred by claims for special value based upon what is called ‘disturbance’, or upon wasted (‘abortive’) expenditure upon resumed land. Although such claims have on occasion been accepted as legitimate, in a statutory context such as that which applied to the present case, they can only be justified if they support the conclusion of special value, and not merely some form of loss or damage to the dispossessed owner.

[57]Ibid [83].

[58]Ibid 597 (emphasis added).

‘Special value to the owner’ in this sense is to be distinguished from ‘value to the owner’ as the ‘unifying concept’ described by Spigelman CJ in Leichhardt Council. Attention is directed to the value of the land, not the fixing of all loss resulting from the acquisition or reservation of the land.

Justice Callinan undertook a most comprehensive analysis of ‘special value to the owner’. His Honour held that the ‘head start’ claimed to be a part of the special value of the land to the owner was simply a reflection of the ‘highest and best use’ of the land.[59] In this context, his Honour emphasised that disturbance and special value to the owner are ‘separate’ but ‘related’ concepts. In an important passage, Callinan J said:[60]

The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. … There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner.

[59]Ibid 650.

[60]Ibid 654 [292].

Justice Callinan rejected the examples of special value given by Handley JA in the Court of Appeal,[61] which included expenses involved in subdivision plans, stamp duty, legal fees, engineering fees, Council subdivision fees and the ability to quickly develop land. These, according to his Honour, were properly categorised as disturbance losses. His Honour said:[62]

While it must be accepted that there will be cases in which the distinction between special value and disturbance and perhaps ‘reinstatement’ may not be clearly drawn, no difficulty in that regard arises in this case because … a claim for special value in the sense in which it is properly used as a term of art was not available in this case.

[61]Ibid 655 [294].

[62]Ibid [297].

Justice Callinan gave careful consideration to whether Kennedy Street and Baringa should have been applied. His Honour concluded that Kennedy Street was wrongly decided in awarding compensation as special value for the surveying, engineering and council fees involved in preparing land for subdivision and sale, because these were matters that any prudent purchaser would have taken into account and which would be reflected in the highest and best use of the property — that is, they contributed to the market value of the land.[63] Everything in the claimant’s hands was ‘readily transmissible’ to any new owner of the property;[64] it therefore did not represent special value to the current owner.[65]
[63]Ibid 664 [336].
[64]Ibid.
[65]Ibid.

In relation to Baringa, Callinan J observed that the trial judge had acknowledged that at least some of what had been done by the claimant would be of utility and value to a purchaser. However, no attempt was made to explain what would and what would not have been of utility, or why the highest and best use was not for the construction of the building that had been approved. His Honour described Baringa as a ‘highly questionable decision’.[66]
[66]Ibid 663 [344].

For the same reasons, Callinan J described the reasoning in Chapman[67] as ‘unconvincing’.[68]
[67][1966] 2 NSWLR 65 (‘Chapman’).
[68](1999) 167 ALR 575, 667 [347].

The reasoning in Boland v Yates was applied by the Western Australian Court of Appeal in Mount Lawley Pty Ltd v Western Australia Planning Commission,[69] a case concerning compensation for planning blight. The relevant legislation[70] required compensation to be paid for ‘the value of the land’ and included compensation for injurious affection arising from land being reserved if the relevant authority rejected an application for a planning permit on the affected land. It included a ‘capping’ provision identical to s 104 of the PE Act. The trial judge awarded the claimant the cost of the permit application, stating that ‘[a] prudent vendor would seek to recover those costs as a component of the sale of land and a prudent purchaser would recognise that component’.[71] The trial judge also awarded interest on the acquisition price, as well as rates and taxes paid by the claimant since the election date.[72] On the other hand, the trial judge declined to compensate the claimant for stamp duty and conveyancing costs on replacement land.[73] The claimant appealed the refusal of stamp duty and conveyancing costs; the authority appealed the award of interest, and the permit application and holding costs.
[69](2004) 29 WAR 273.
[70]Metropolitan Region Town Planning Scheme Act 1959 (WA) (repealed).
[71]Quoted at (2004) 29 WAR 273, 327 [266].
[72](2004) 29 WAR 273, 327.
[73]Ibid 328 [270].

The Western Australian Court of Appeal doubted whether the term ‘value’ in the particular statutory context included special value to the owner, but found that even if it did, there was no basis for an award of special value in that case.[74] Referring to Pastoral Finance and Yates, the court confirmed that special value will be ‘rare’, as ‘factors of special value are likely to be components of the market value which are recognisable as such by a … purchaser who [is] “conversant” or “perfectly acquainted” with the land and all its features’.[75] In relation to the cost of the permit application, the court found that there was nothing in that expenditure reflecting a capacity of the claimant to exploit the land that was exclusive or almost exclusive to the claimant.[76] This was ‘even more clearly the case for the holding costs of the land and interest on the sale price until settlement, and the costs the [claimant] would have incurred in buying a replacement property’.[77] Their Honours concluded as follows:[78]

Those costs and that interest do not relate to attributes of the land, but rather, as the trial judge acknowledged, to the particular sale transaction itself. They represent matters that do not go to increasing the value of the land, but rather to compensating the vendor for loss on delay in completion of that transaction and from being forced to find replacement property … Even in relation to resumption, the authorities from Spencer’s case onwards have clearly distinguished between claims for the value of the land and claims for ‘damage otherwise’: Isaacs J, in Spencer’s case (at 438), quoted by Callinan J in Boland v Yates (at [355]).

[74]Ibid 329–30 [282].

[75]Ibid 330 [286].

[76]Ibid 330–1 [288].

[77]Ibid.

[78]Ibid 331 [289].

Likewise, in this case, the claimed components of value to the owner, namely the costs of sale, the costs of the CGT advice and the cost of the lost opportunity, do not relate to attributes of the land, but rather to the sale transaction itself. They do not concern attributes or features of the land that contribute to its value, let alone in a manner that can only be enjoyed by the Barillas. They are simply expenditures or losses arising from the sale of the land for which the Barillas would like to be compensated.

Most recently, in Secretary to the Department of Economic Development v Manor Lakes (Werribee) Pty Ltd,[79] the Court of Appeal, when considering the nature of disturbance losses in a compulsory acquisition, noted that in Boland v Yates the High Court recognised that the types of costs there in issue were best described as losses attributable to disturbance rather than as part of special value to the owner.[80] The Court of Appeal said:[81]

As the analysis of Dixon CJ and Kitto J in The Commonwealth v Milledge explains, a loss of the kind in issue may be regarded as reflecting an element of underlying value to the owner. But the better view is that under the provisions of the LAC Act such a claim is not one for special value but for loss attributable to disturbance.

[79][2017] VSCA 114.

[80]Ibid [81].

[81]Ibid [83]–[84] (citation omitted).

The Barillas submit that in considering the continuing relevance of ‘value to the owner’ there is a distinction to be drawn between the LAC Act (and equivalent legislation in other jurisdictions) and the compensation provisions in the PE Act. In the former, a list of factors to be considered in assessing compensation has replaced the unifying concept of ‘the value of the land’.[82] It is submitted that as there is no equivalent list of factors for the assessment of compensation for planning blight in the PE Act, the concept of ‘value to the owner’ remains relevant in construing the compensation provisions in the PE Act.
[82]In Leichhardt Council [2006] NSWCA 353 [32], Spigelman CJ concluded that the idea of ‘value to the owner’ had been taken away as a unifying concept by the terms of the relevant statute which, like the LAC Act, listed factors for consideration in the assessment of compensation and did not use the expression ‘the value of the land’.

Part 5 of the PE Act was enacted after the enactment of the LAC Act and in the knowledge of the way in which compensation was to be assessed in the LAC Act, namely, by reference to a list of factors reflecting the types of loss or damage that may be suffered when land is compulsorily taken. Part 5 of the PE Act, in dealing with compensation for planning blight rather than for the actual taking of land, contains no equivalent list because, it must be inferred, the legislature formed the view that there was no need for one. In the case of planning blight, the owner, unless and until he or she chooses to sell the land, remains the owner of the land and, unless and until a planning permit is refused, can continue to use and develop the land unaffected by the reservation. In these circumstances, as s 104 itself makes plain, compensation for planning blight is not intended to be comprehensive.

In my view, there is no warrant for resurrecting ‘value to the owner’ as a unifying concept encompassing a range of different losses in the context of a statutory regime, like Part 5 of the PE Act, that includes a provision expressly limiting the availability of compensation for consequential losses. Section 104, along with s 103, is not concerned with securing an entitlement to compensation but with setting the boundaries within which the liability to pay compensation arises. Sections 103 and 104 are circumscribing provisions, not enabling provisions.

I therefore reject the proposition that, on the proper construction of s 104 of the PE Act, ‘the value of the land’ means ‘value to the owner’ in the unifying sense contended for by the Barillas, that is, as incorporating all consequential losses for which they would like to be compensated. The very purpose of s 104 is to limit the consequential losses that are recoverable where land has been reserved for a public purpose. If all manner of consequential losses can simply be added to the land value in one limb of s 104 so as to raise the cap, s 104 ceases to serve its purpose of limiting the compensation that is payable.

I am not persuaded that the Court should follow Mario Piraino on the construction of s 104 and its interaction with s 98 of the PE Act. I observe that, in any event, the expenses that were incorporated in ‘value to the owner’ in Mario Piraino — holding costs, architects’ and engineering fees, executive time costs and outgoings — at least related to the development of the land, whereas the amounts that the Barillas seek to have included in ‘the value of the land’ do not. Moreover, none of the costs said by the Barillas to form part of ‘value to the owner’ for the purposes of s 104(b) of the PE Act give the land any kind of special value in their hands. There is no conjunction of some special factor relating to the land and a capacity on the part of the Barillas to exclusively or almost exclusively to exploit it.

Having regard to the text and context of s 104, I have concluded that s 104 applies to cap the compensation payable to the Barillas pursuant to s 98 to the amount representing the difference between the market value of the unaffected land and the market value of the affected land. The Barillas have been paid the difference between the affected and unaffected values of their land and are not entitled to any further compensation under s 98 of the PE Act.

Section 101

The Barillas also seek to recover the costs of sale as expenses under s 101 of the PE Act.

Section 101 provides that if compensation is payable under s 98, the owner or occupier of any land may also claim from the planning authority or responsible authority any legal, valuation or other expenses reasonably incurred in preparing and submitting the claim.

The expenses in this case are the agent’s commission on sale ($105,600), the agent’s advertising expenses ($2,500) and legal services on sale ($4,313.78 and $2,138.40). There are also fees for valuation services ($5,500).

The costs of the legal services qualify as legal expenses; the valuation advice gives rise to a valuation expense. In order to fall under s 101, the agent’s commission and the advertising expenses would have to qualify as ‘other expenses’.

The Authority submits that ‘other expenses’ must be expenses incurred in obtaining professional services in the context of ‘legal’ and ‘valuation’ expenses. There is substance to this argument. If any and all expenses at all were reimbursable under s 101, the words ‘legal’ and ‘valuation’ would be superfluous. In my view, those words inform the meaning of ‘other expenses’. As the Authority submits, the words ‘other expenses’ in combination with ‘legal’ and ‘valuation’ implies expenses of a professional kind. On this basis, the advertising expenses would not be recoverable as expenses under s 101 and it is doubtful that the agent’s commission would satisfy this description.[83]
[83]In the Planning and Environment Bill 1987, the relevant clause (‘Claim for expenses’ clause 117) referred to ‘any legal, valuation or professional expenses’. The word ‘other’ was substituted for ‘professional’. In the third reading debate, the Hon AJ Hunt explained the reason for the amendment:
‘Its purpose is to slightly widen the ambit of costs that may be recovered on compulsory acquisition. The limitation to professional costs is perhaps too narrow as there may be other costs that genuinely and reasonably occur. Is so, they should be met.’
Victoria, Parliamentary Debates, Legislative Council, 9 April 1987, 825.

Moreover, even if all the costs of sale qualify as expenses for the purposes of s 101, they must be reasonably incurred ‘in preparing and submitting the claim’. Applying the ordinary grammatical meaning of the words, the costs of selling the land are not costs incurred in preparing and submitting a claim for compensation.

However, in Mario Piraino,[84] Gobbo J allowed as expenses under s 101 the costs of an appearance at the Administrative Appeals Tribunal which resulted in an order that a permit be refused, on the basis that it was essential for the Pirainos to take part in the appeal hearing in order to secure the entitlement to claim compensation under the PE Act. His Honour found that the appearance at the hearing was an essential step in the preparation of the claim, for without the hearing and what transpired at and as a result of the hearing, the claim could not commence. His Honour observed that the legislation should not be read restrictively and held that the word ‘preparation’ must carry with it not only the actual drawing up of the claim, but the securing of material that is a preliminary to writing up the claim. It will include the taking of essential prerequisite steps without which no claim could be written and submitted.[85]
[84][1993] 1 VR 130.
[85]Ibid 151.

In this case, so the Barillas contend, the right to compensation under s 98 was triggered on the sale of the land under s 106.[86] Section 99(b) requires the landowner to take the positive step of selling the land in order to trigger the right to compensation under s 98. Once the landowner has satisfied the preconditions under s 106 and has sold the land, the right to compensation is triggered and compensation is payable under s 98. The claimant is then entitled to be paid expenses incurred under s 101.
[86]PE Act s 99(b).

The Barillas submit that, consistently with Mario Piraino, all expenses involved in precursor steps to submitting the claim are recoverable, being:

(a)obtaining necessary advice as to the operation of s 106;
(b)giving notice to the Authority under s 106(1)(b) or, alternatively, pursuing one of the options in s 106(2);
(c)engaging real estate agents;
(d)advertising the property;
(e)obtaining valuation advice as to appropriate reserve and sale price;
(f)paying agent’s commissions on a successful sale; and
(g)paying legal costs and disbursements arising out of the conveyancing transaction associated with the sale.

According to the Barillas, the case for the recovery of expenses involved in selling the land under s 106 is compelling, particularly having regard to the purpose of the PE Act, the objectives of planning in Victoria and the objectives of the planning framework established by the PE Act, including the objective of providing for compensation when land is set aside for public purposes and in other circumstances.[87]
[87]Ibid s 4(2)(l).

Again, the construction of s 101 must focus on its text. The conjunction of the words ‘preparing’ and ‘submitting’, applying the ordinary grammatical meaning of those words conjoined, means that what is prepared is what is submitted. What is prepared for submission is what is given to the Authority in order to receive compensation. ‘The claim’ in this context means the description and detail of what the claimant says he or she is entitled to be paid as compensation. This will take the form of a document or a series of documents establishing the relevant losses.

Thus, s 105 of the PE Act provides that Parts 10 and 11 and s 37 of the LAC Act, with any necessary changes, apply to the determination of compensation as if ‘the claim’ were a claim under s 37 of the LAC Act.

Section 37 of the LAC Act provides, among other things, that a claim for compensation is to be in the same form and contain the same particulars as a notice of claim under s 35 of the LAC Act. Section 35 provides that a notice of claim must be in the prescribed form and contain certain information, including the amount of compensation to which the claimant claims to be entitled. Section 37 sets out a process for the service of the claim on the authority, for the provision of a statement in reply admitting or rejecting the claim or making an alternative offer, for the acceptance of the alternative offer or for the claim to become a disputed claim. Such a notice of claim contains information and numbers in respect of which professional help may be required.

‘Preparing and submitting the claim’ must be interpreted in this context. It involves the gathering of information and the preparation of a document that complies with the requirements of ss 35 and 37 of the LAC Act.

Steps taken in order to effect the sale of the land, such as advertising the land, paying commission to the agent and obtaining legal and other professional advice on how the sale should be effected or for the purpose of effecting the sale, are not, in my view, steps forming part of the preparation and submission of the claim. To hold that they were would create considerable uncertainty as to when the ‘preparation’ of a claim begins. The process of regression through ‘precursor steps’ contended for by the Barillas could result in the absurd outcome that the loss on sale itself became an expense involved in the preparation of the claim. Furthermore, it would invite claims for costs ordinarily dealt with as ‘financial loss’ under s 98, with the accompanying burden of establishing that the loss was the ‘natural, direct and reasonable consequence’ of the reservation, to be made under the less burdensome test in s 101.

The Barillas’ submission that s 101 expenses include costs incurred in triggering the right to be compensated under s 99 gains some support from the judgment of Tadgell JA (with whom Brooking and Ormiston JJA agreed) in Halwood Corporation Ltd v Roads Corporation.[88] Justice Tadgell’s analysis was, in turn, based on City of Nunawading v Day,[89] in which JD Phillips J held that s 98 and s 99 were ‘different in kind and in effect’, in that s 98 defined the subject-matter of a claim for compensation and s 99 was the ‘trigger’ to the right to compensation and the liability to pay compensation.[90] His Honour observed that the terms of s 99 were irrelevant to the definition of the subject matter of the claim[91] and recorded his agreement with Gobbo J in Cape Developments Pty Ltd v City of South Barwon,[92] that the predecessor to s 99 ‘was not the source of entitlement to compensation, but simply prescribed a procedural pre-condition to recovery’.[93] The right under the equivalent of s 98 was said to be ‘inchoate’ until one of the events prescribed has occurred.[94]
[88][1998] 2 VR 439 (‘Halwood’).
[89][1992] 1 VR 211.
[90]Ibid 226–7.
[91]Ibid.
[92][1982] VR 1011.
[93]Ibid 1018.
[94]Ibid 1019.

In Halwood, the landowner purchased property after it had been made subject to a reservation by the Roads Corporation. The previous owner had not claimed compensation. The new owner applied for a planning permit, which was refused, triggering a claim for compensation under ss 98 and 99. Because of the circumstances, it mattered whether the entitlement to compensation arose under s 98 or s 99: if s 98 was the operative provision, it could not be said that the new owner had suffered loss as a consequence of the reservation, because it had suffered loss as a consequence of its decision to purchase land that it knew to be reserved; however, if s 99 was the operative provision, the new owner could claim compensation because the right to that compensation would be triggered by the refusal of the permit under s 99.

The Court of Appeal held that the claim for compensation arose under s 98: compensation flowed as a result of the reservation rather than because of the refusal of the permit. According to the Court, ‘the right to claim is given by both subs (1) and (2) of s 98, and … s 99 provides a “trigger” to give rise to a right to be paid and a liability to pay.’[95] Having regard to the statutory language, ‘it is the act of reserving the land … that is the prescribed criterion’ and that ‘reservation alone can justify a claim for compensation under s 98(1)’.[96] This was ‘sufficient to gainsay the contention that no right to claim compensation arises until compensation can be quantified and becomes payable by virtue of the happening of an event described in s 99’.[97]
[95][1998] 2 VR 439, 447-8 (emphasis in original).
[96]Ibid 449.
[97]Ibid 449–50.

The Court in Halwood did not consider s 101 and its interaction with ss 98 and 99. It made no holdings on the construction of s 101 and what is meant by ‘in preparing and submitting the claim’.

On any view, even if the genesis of the claim is the reservation of the land, there is no liability to pay compensation in respect of the claim and no entitlement to be paid until the trigger event has taken place. In that sense, there can be no claim — in the form of a notice of claim — capable of being prepared and submitted. I do not consider that taking a procedural step pursuant to s 99 to transform what Gobbo J described as an ‘inchoate’ claim arising upon the reservation of land into a right to be paid compensation amounts to ‘preparing’ the claim for the purposes of s 101.

In my view, the costs of sale are not recoverable as expenses under s 101.

Conclusion

None of the application for compensation for the costs of sale, the CGT advice or for the loss of opportunity is made out.

The proceeding is dismissed.

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1 August 2017