Brompton Lodge Pty Ltd (ACN 004 458 833) (in liquidation) & Ors (according to the attached Schedule) v Head, Transport For Victoria and 1050 Western Port Highway Pty Ltd (ACN 623 531 706)

SUPREME COURT OF VICTORIA

COURT OF APPEAL

S EAPCI 2021 0008

BROMPTON LODGE PTY LTD (ACN 004 458 833) (in liquidation) & ORS (according to the attached Schedule)	Applicants
v
HEAD, TRANSPORT FOR VICTORIA	First Respondent
and
1050 WESTERN PORT HIGHWAY PTY LTD (ACN 623 531 706)	Second Respondent

---

JUDGES:	EMERTON, KENNEDY and OSBORN JJA
WHERE HELD:	MELBOURNE
DATE OF HEARING:	8 September 2021
DATE OF JUDGMENT:	8 November 2021
MEDIUM NEUTRAL CITATION:	[2021] VSCA 302
JUDGMENT APPEALED FROM:	[2020] VSC 797 (Garde J)

---

VALUATION OF LAND – Claim for compensation under Planning and Environment Act 1987 s 98(1) – Applicant landowners entered into property development agreement with property developer to subdivide and develop land – Part of land subject to reservation for road widening – Applicants sold land to developer and assigned to developer proceeds of compensation claim for reservation – Sale price of $55 million included assignment of proceeds of compensation claim and release from property development agreement – Valuers assessed loss on sale by reference to reduction in market value of land based on hypothetical sales – Whether actual sale price of $55 million relevant to establishing loss resulting from reservation – Whether applicants suffered financial loss on sale of land as natural, direct, and reasonable consequence of reservation – No evidence that applicants sold land at a lower price than they might otherwise have expected to receive had part of land not been reserved – Sale price reflected particular circumstances of sale, including restrictions imposed by the property development agreement – Application for leave to appeal granted – Appeal dismissed – Planning and Environment Act 1987 ss 98(1), 99(b), 104, 106, 107, 108 – Land Acquisition and Compensation Act 1986 ss 30, 37(8), 40, 80.

---

APPEARANCES:	Counsel	Solicitors
Applicants	Mr S Morris QC with Mr P Chiappi	Arnold Bloch Leibler
First Respondent	Mr S Goubran QC with Mr C Hibbard	Hall & Wilcox
Second Respondent	No appearance

EMERTON JA

KENNEDY JA

OSBORN JA:

The applicants owned 101.31 hectares of contiguous land at 655 and 655S Cranbourne-Frankston Road, 700 Ballarto Road, and 1000S and 1020 Western Port Highway, Cranbourne South (the ‘Brompton land’). They acquired the Brompton land in a piecemeal fashion between 1966 and 1984 and, for many years, the second and third applicants, Peter and Sandra Carpenter, lived on and farmed the Brompton land.[1]
[1]Peter and Sandra Carpenter are the directors of Brompton Lodge Pty Ltd, which is currently in a members’ voluntary liquidation. They are also the directors of Carpenter Nominees Pty Ltd (ACN 004 990 514) which owns all of the shares in Brompton Lodge. Mr Carpenter owns all of the shares in Carpenter Nominees.

On 14 January 2016, part of the Brompton land was reserved for the future upgrade of the Western Port Highway. The reserved portion of the Brompton land (the ‘subject land’) was essentially a strip land of approximately 10 hectares running alongside the existing Highway.

On 8 January 2018, the applicants sold the Brompton land to a development company (‘1050’ or ‘purchaser’ as the context requires) owned by or related to developers with whom Mr and Mrs Carpenter had a long-standing relationship. Apart from monetary consideration, the terms of the sale released the applicants and the developers from an earlier arrangement to jointly develop the Brompton land and assigned to the purchaser the proceeds of compensation payable to the applicants as a result of the reservation of the subject land. The applicants agreed to take all necessary steps to claim compensation for the imposition of the reservation.

Accordingly, on 9 April 2018, the applicants made a claim for compensation under s 98(1)(a) of the Planning and Environment Act1987 (‘PE Act’) for financial loss incurred on the sale of the Brompton land as a result of the reservation of the subject land. The claim was supported by a certificate of valuation assessing compensation for loss on sale at $25,110,000.

On 9 July 2018, the claim became a disputed claim under s 37(8) of the Land Acquisition and Compensation Act1986 (‘LAC Act’). On 11 July 2018, the applicants referred the disputed claim to the Supreme Court for determination pursuant to s 80 of the LAC Act.

On 24 August 2018, the applicants filed Particulars of Claim under ss 98(1)(a) and 106 of the PE Act specifying a ‘before’ value for the Brompton land as $141,214,500 and an ‘after’ value of $116,120,000, resulting in a loss of value of $25,110,000.

On 14 September 2018, the respondent (‘Authority’) filed Particulars of Offer, and, on 17 June 2019, Amended Particulars of Offer. The Authority declined to offer any compensation to the applicants. Among the Authority’s reasons for rejecting the applicants’ claim were the following:

(c) Brompton Lodge has not demonstrated that it sold [the land affected by the reservation] at a ‘lower price than [it] might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved’, pursuant to section 106(1)(a) of the P&E Act, as Brompton Lodge has not particularised the affected or unaffected market value of [the land affected by the reservation];
(d) further and in the alternative, the Claimants have not demonstrated that they sold the Subject Land at a ‘lower price than [they] might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved’, pursuant to section 106(1)(a) of the P&E Act, as the purchase price for the Subject Land ($55,101,400 of which $101,400 related to cattle) bears no relationship to the alleged affected value of $116,120,000 or the alleged unaffected value of $141,330,000, which is pleaded by the Claimants in their Particulars of Claim; and
(e) further and in the alternative, the Claimants have not demonstrated that they sold the Subject Land at a ‘lower price than [they] might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved’, pursuant to section 106(1)(a) of the P&E Act, as the purchase price for the Subject Land ($55,101,400 of which $101,400 related to cattle) includes a sale of the Claimants’ entitlement to compensation under the Act. Whatever value attaches to their entitlement to compensation (if any) was paid to them by the purchaser, such that they have been made whole.

The trial of the disputed claim commenced before the primary judge on 9 September 2020 and proceeded over eight sitting days until 18 September 2020. Judgment was delivered on 1 December 2020. The primary judge dismissed the applicants’ claim on the basis that it did not meet the requirements of ss 98(1)(a) and 106(1)(a) of the PE Act. In substance, his Honour held that the applicants had not established that they incurred a loss attributable to the reservation of the subject land upon the sale of the Brompton land.

Background facts

The Brompton land is a triangular shaped block of land fronting each of the Western Port Highway, Cranbourne-Frankston Road and Ballarto Road, as appears on the map below. It contains two road reservations:

(a) in 1978, a small strip running along the Western Port Highway was reserved (‘PAO1’, highlighted in yellow); and

(b) in 2016, the reservation in respect of which compensation was sought below was imposed (‘PAO2’, highlighted in red).

The disputed claim arises from the 2016 reservation, POA2 (‘Reservation’). However, the issues in dispute are bound up with the rezoning and proposed development of the Brompton land as a whole, which has transitioned from rural land to land suitable for residential subdivision in the last 10 years, following its inclusion within the Urban Growth Boundary (‘UGB’) in 2012.

The potential of the Brompton land for urban development was evident well before 2012. In March 2006, Mr Carpenter was approached by a development consultant, John Woodman, about a possible land deal involving the Amstel Golf Course, which adjoined the Brompton land. In 2007, Brompton Lodge and Mr and Mrs Carpenter entered into an agreement with Urban Development Investments Australia Pty Ltd (ACN 118 918 924) (‘UDIA’),[2] a company controlled by Mr Woodman’s son, Heath Woodman, and Simon Berry. The parties agreed that:
[2]On 30 June 2014, UDIA’s rights under an agreement with the applicants referred to at para 17 below were assigned to Brompton Developments Pty Ltd. This company then changed its name to UDIA Consolidated Pty Ltd (ACN 600 437 376). We shall refer to both UDIA and UDIA Consolidated Pty Ltd simply as ‘UDIA’.

(c) Brompton Lodge and Mr Carpenter as owners would sell the eastern part of the Brompton land to the owner of the Amstel Golf Course land for $13 million, conditional on the rezoning of the Amstel Golf Course land for residential use;

(d) UDIA would be responsible for bringing the Brompton land within the UGB. If successful, the parties would negotiate a joint venture for the development and sale of the land within the UGB;

(e) UDIA would keep Brompton Lodge and Mr Carpenter fully informed as to progress and indemnify them for costs and expenses; and

(f) the agreement would sunset on 21 December 2011.

The sunset date was later extended by one year to 31 December 2012.

The sale of part of the Brompton land to the owner of the Amstel Golf Course land did not eventuate. Nevertheless, UDIA continued to endeavour to have the Brompton land brought within the UGB to be rezoned for residential development.

In 2009, UDIA arranged for town planners to lodge a submission to the Growth Areas Authority for inclusion of the Brompton land within the UGB. In August 2010, Amendment VC68 to the Casey Planning Scheme substantially extended the UGB, but not so as to include the Brompton land.

On 8 July 2011, UDIA organised a submission to the Logical Inclusions Advisory Committee for the Brompton land to be placed within the UGB. The Growth Areas Authority and the City of Casey (the ‘Council’) supported the proposal.

On 11 November 2011, the Logical Inclusions Advisory Committee recommended that the Brompton land be included in the UGB and rezoned to Urban Growth Zone (‘UGZ’). This was effected on 13 September 2012 by Amendment C170 to the Casey Planning Scheme.

By this stage, however, Mr and Mrs Carpenter were no longer young and did not wish to become property developers. On 23 September 2013, they entered into a property development agreement with UDIA, Simon Berry and Heath Woodman (‘PD Agreement’) in which it was agreed, in substance, that:

(g) UDIA would have the right to undertake the subdivision and development of the Brompton land in accordance with the PD Agreement;

(h) UDIA would receive a development fee;

(i) UDIA would pay the holding costs, project costs and the Growth Areas Infrastructure Contribution levy; and

(j) an advisory committee would be appointed to supervise UDIA’s conduct of the project.

Under the terms of the PD Agreement, the proceeds of the subdivision and development of the Brompton land would be distributed (after payment of GST) as follows and in the following order:

(k) $25 million to the applicants;

(l) to cover borrowings and costs of development;

(m) 50.01 per cent to the applicants and 49.99 per cent to UDIA of the next $90 million in proceeds;

(n) 60 per cent to the applicants and 40 per cent to UDIA of the next $20 million in proceeds; and

(o) 50.01 per cent to the applicants and 49.99 per cent to UDIA of any remaining proceeds.

It will be seen that the PD Agreement gave UDIA significant entitlements to the fruits of the development of the Brompton land and constrained the applicants in dealing with that land while the PD Agreement remained on foot.

Following the inclusion of the Brompton land within the UGB, UDIA commenced discussions with the Council to prepare a planning scheme amendment for the adoption of a Precinct Structure Plan to allow urban development on the Brompton land.

On 14 January 2016, Amendment C199 to the Planning Scheme imposed the Reservation.[3]
[3]Brompton Lodge Pty Ltd (in administration) v Head, Transport for Victoria [2020] VSC 797, [8] (‘Reasons’).

On 15 December 2016, Amendment C190 was approved, incorporating a Precinct Structure Plan in the Casey Planning Scheme and rezoning the Brompton land as UGZ11. This opened the way for residential subdivision of the Brompton land.

At around this time, the applicants and UDIA decided to test the market by offering the Brompton land for sale. They received the following offers:

(p) Dahua offered $76 million to be paid over 28 months;

(q) Villawood offered $84 million to be paid over 30 months; and

(r) Country Garden offered $100 million to be paid over 12 months.

On 24 February 2017, the applicants accepted the Country Garden offer, although a number of matters remained unresolved. Negotiations with Country Garden continued until September 2017, but were ultimately unsuccessful. It is common ground that, as a result of the arrangements in the PD Agreement, the applicants could not sell the Brompton land without the agreement of UDIA.

Following the abandonment of the sale to Country Garden, UDIA negotiated with the applicants to buy the Brompton land. UDIA offered the applicants $40 million, together with the compensation payable by the Authority in respect of the Reservation.

The applicants rejected UDIA’s offer of $40 million, as they considered the amount of compensation they would receive for the Reservation to be uncertain. Instead, Mr Carpenter proposed that the applicants receive $60 million for the Brompton land on an ‘all in’ basis. By this, he meant that the proceeds from the compensation claim for the loss attributable to the Reservation would be paid to UDIA.

On 29 November 2017, the applicants and UDIA entered into heads of agreement for the applicants to receive $55 million for the sale of the Brompton land, the assignment of the proceeds of the compensation claim, and the release of the parties from the PD Agreement.

On 8 January 2018, the applicants, UDIA, Simon Berry and Heath Woodman entered into a deed of surrender and release in respect of the PD Agreement (the ‘PD Agreement surrender deed’), which was conditional on settlement of the contract of sale. Under the PD Agreement surrender deed:

(s) the PD Agreement was terminated, and each party to the PD Agreement surrender deed unconditionally released each other party from any further obligation under the PD Agreement;

(t) UDIA agreed to make no claim against the applicants in relation to an amount of $602,302 advanced to them under the PD Agreement; and

(u) UDIA remained responsible for holding costs relating to the Brompton land as provided in the PD Agreement.

The contract of sale was executed on the same day between the applicants and UDIA’s nominee, 1050. The purchase price for the Brompton land was $55 million (excluding $101,400 for cattle). Settlement took place on 30 January 2018.

Special condition 30 of the contract of sale dealt with the assignment to the purchaser of the proceeds of the claim for compensation for the Reservation. It provided:

30.1 Definitions

In this special condition 30, ‘Compensation’ means the full monetary amount of compensation which the Vendor receives from [the Authority] as a result of its claim for compensation under section 106 of the [PE Act] in respect of Public Acquisition Overlay – Schedule 1.

30.2 Assignment of Compensation
(a)Subject to Settlement occurring and with effect from the Settlement Date, the Vendor assigns to the Purchaser the Vendor’s right, title and interest in the Compensation.
(b)To give effect to Special Condition 30.2(a), the:
(i)parties will set up a new bank account in the joint names of the Vendor and the Purchaser with a bank mutually agreed by the parties where both parties are signatories of the account (New Account);
(ii)Vendor will authorise and direct VicRoads to pay the Compensation into the New Account;
(iii)parties acknowledge and agree that once the Compensation is paid into the New Account it is held on trust for the Purchaser and is the irrevocable property of the Purchaser; and
(iv)Vendor authorises the Purchaser to transfer the Compensation from the New Account to its own bank account and it will sign any necessary documents to facilitate this transfer.

(c)After the date on which Settlement occurs, the parties agree that:
(i)the Purchaser may act on the Vendor’s behalf in respect of the Vendor’s claim for Compensation (Compensation Claim) and, in this regard, the Purchaser will have the full carriage of the Compensation Claim including without limitation doing all things necessary and convenient to prepare, lodge, and pursue the Compensation Claim and appointing its own consultants to assist with the Compensation Claim;

(ii) the Vendor must:
(A)not, and must procure that its consultants and/or the Vendor’s Legal Practitioner do not, take any action in respect of the Compensation Claim including without limitation settling or finalising the claim or accepting any amount of Compensation from [the authority] unless it obtains written instructions from the Purchaser to do so;

(B) at the Purchaser’s cost:
(1)promptly provide to the Purchaser copies of all documents, notices or correspondence the Vendor received in respect of the Compensation Claim;
(2)do all things reasonably required by the Purchaser in respect of the Compensation Claim including executing any necessary documents within 7 days of written request from the Purchaser.

(d)The Vendor indemnifies the Purchaser against all actions, claims, proceedings, demands, liabilities, losses, damages, expenses and costs (including legal costs on a full indemnity basis) that may be brought against the Purchaser or which the Purchaser may pay, sustain or incur as a direct or indirect result of any breach or non-performance of this special condition 30.2 by the Vendor.
(e)If the Vendor breaches this special condition 30.2 prior to Settlement, the Purchaser may end this Contract by written notice to the Vendor with immediate effect. General Condition 27.1 does not apply to this special condition.

Legislative Scheme

Part 5 of the PE Act provides for compensation to be paid to land owners for losses incurred as a result of the reservation of land.

Section 98 relevantly 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; or
…

Section 98(1) therefore confers a right to compensation on the owner or occupier of land in the event of financial loss caused as the natural, direct and reasonable consequence of reservation giving effect to a public purpose.

‘Owner’ is relevantly defined by s 98AA and s 3 of the PE Act as a person who is registered, or is entitled to be registered, under the operation of the Transfer of Land Act 1958 as proprietor of an estate in fee simple in the land.

Section 99 further governs the circumstances in which the right to compensation arises:

A right to compensation and the liability of a planning authority or responsible authority to pay compensation arises—

(a)under section 98(1)(a), (b) or (c) after—
(i)the responsible authority has refused to grant a permit for the use or development of the land on the ground that it is or may be required for a public purpose; or
(ii)the Tribunal directs that a permit must not be granted on the ground that the land is or may be required for a public purpose; or
(iii)the responsible authority—
(A)fails to grant a permit within the period prescribed for the purposes of section 79; or
(B)grants a permit subject to any condition which is not acceptable to the applicant—

and the Tribunal disallows any application for review of the failure or condition on the ground that the land is or may be required for a public purpose; or

(b)under section 98(1)(a), (b) or (c), on the sale of the land concerned under section 106; or
(c)under section 98(1)(d), on the coming into operation of the relevant provision of the planning scheme; or
(d)under section 98(2), on the refusal of the permit.

In this case, the right to compensation and the liability to pay compensation potentially arose pursuant to s 99(b), that is, on the sale of the Brompton land in accordance with s 106.

Section 104 limits the amount of compensation payable and incidentally confirms that the value of compensation is to be assessed by reference to the value of the land at the date on which the liability to pay compensation first arises:

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.

Section 106 makes further specific provision with respect to claims for loss upon the sale of land. It provides:

(1)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.

(2)The owner is not required to give notice under subsection (1)(b) if—
(a)the owner and the relevant authority have agreed that the owner does not have to give notice; or
(b)before or after the sale, the Minister exempts the owner from giving notice on the ground that the requirement to give notice would cause hardship to the owner.

(3)In this section relevant authority means—
(a)the Minister, public authority or municipal council designated in the planning scheme as the acquiring authority for the purposes of this Act in respect of the land; or
(b)if there is no acquiring authority, the planning authority.

Section 107 provides for compensation upon the removal or lapsing of a reservation.

Section 108 makes specific provision as to the time at which the owner or occupier of land must be the owner or occupier of land in order to make a claim.

(1)A person does not have a claim for compensation in respect of any land if that person was not the owner or occupier of the land at the time the right to claim compensation arose.
(2)A person does not have a claim for compensation in respect of the sale of land which the person acquired after–
(a)notice is published in the Government Gazette under section 19 of a proposed planning scheme or amendment to a planning scheme which shows the land as being reserved for a public purpose; or
(b)the approval of a planning scheme or amendment reserving the land for public purposes; or
(c)a declaration under section 113 that the land is proposed to be reserved for public purposes–

unless a subsequent amendment to the planning scheme provides or proposes more stringent planning controls over the use or development of the land.

Evidence and submissions at trial

The applicants had to prove that they suffered financial loss as a result of the imposition of the Reservation. Mr Carpenter was the only witness called by the applicants to give evidence about the negotiations leading to the contract of sale and the PD Agreement surrender deed. He said that he focused on getting what he thought was an appropriate price for the Brompton land and that, in negotiating the sale price of $55 million, he was influenced by a number of factors:

(v) the Country Garden offer of $100 million, which set a benchmark for the Brompton land;

(w) under the PD Agreement, the applicants were to receive $25 million plus their share of the profits from development of the Brompton land over a number of years;

(x) the development of the Brompton land involved risk;

(y) a cash flow analysis prepared in 2012 showed that the applicants would receive a total of $80 million under the PD Agreement, including the $25 million land cost; and

(z) later cash flow calculations showed the applicants receiving only about $70 million under the PD Agreement, despite increasing lot prices since 2012.

Mr Carpenter gave evidence that there were negotiations between his family and Heath Woodman after the Country Garden offer was received, but no agreement was reached as to the division of the proceeds. He said that when he decided to accept UDIA’s offer of $55 million, there was no allocation in his mind as to any aspect of the consideration for the sale.

Mr Carpenter told the Court that UDIA’s initial offer of $40 million plus compensation was unsatisfactory, as there was no certainty about the amount of compensation that the applicants would receive. The sale of the Brompton land for $55 million included the assignment of the right to the proceeds of the compensation claim. It was up to the purchaser to pursue compensation from the Authority.

Mr Carpenter said he viewed the assignment of the proceeds of the compensation claim in cl 30.2(a) of the contract of sale as a condition of the sale. The purchaser had exercised its power under cl 30.2(c)(i) of the contract of sale to act on the applicants’ behalf and had pursued the compensation claim. Mr Carpenter understood that by reason of cl 30.2(c)(ii), the applicants were not to interfere in any action taken by the purchaser. He had done what was asked of him.

Mr Les Brown, an experienced valuer, was called to give evidence of the financial loss suffered by the applicants as a result of the imposition of the Reservation by reference to the provisions of the PD Agreement and the likely profit to be derived from the urban development of the Brompton land. Using an escalated model and a six per cent discount rate, he determined that the net present value of the loss to the applicants occasioned by the Reservation prior to the sale contract was $25,203,543. The net present value of the loss fell to $20,496,167 if a 9.35 per cent discount rate or a static model was used.

Three other valuers undertook conventional land valuations of the Brompton land at the date of its sale (‘relevant date’) with and without the Reservation. Brian Dudakov undertook the valuations for the applicants, while Marcus Willison and Geoffrey Brown were instructed by the Authority. These three valuers provided alternative valuations in order to deal with the possibility that the 1978 reservation (PAO1) was not compensable. Accordingly, each valuer was instructed to provide a valuation of the Brompton land:

(aa) before, or unaffected by, the 1978 reservation (PAO1) and the Reservation (PAO2); and

(bb) after, or affected by, the 1978 reservation (PAO1) and the Reservation (PAO2),

in order to calculate the financial loss/compensation with respect to both reservations; and

(cc) before, or unaffected by, the Reservation (PAO2); and

(dd) after, or affected by, the Reservation (PAO2),

in order to calculate the financial loss/compensation with respect to the Reservation (PAO2) only, in the event that the 1978 reservation (PAO1) was not compensable.

All three valuers based their valuations on the highest and best use of the Brompton land being for residential subdivision. As to methodology, each valuer employed two approaches: a ‘direct comparison’ approach, where the value of the land was calculated on a dollar-per-hectare basis by reference to sales of comparable land in nearby areas; and based on the net yield from individual lot sales using hypothetical development plans.

The experts were instructed to provide alternative valuation figures on the basis of hypothetical development plans and costings prepared by development experts from Spiire Australia Pty Ltd (engaged by the Authority); and from Watsons Pty Ltd (engaged by the applicants). The Spiire and Watsons development plans differed in several important respects, including in relation to the developable area and the total number of lots to be developed. Spiire and Watsons issued a Joint Statement on 28 May 2020 — which reconciled some, but not all, of those differences — and the valuers issued revised valuations of the Brompton land in accordance with the new development plans.

The results of the revised valuations set out in the Joint Statement of Valuation were as follows:

Mr Willison

Mr Dudakov[4]

Mr (Geoffrey) Brown

Compensation for both reservations, 1978 (PAO1) and 2016 (PAO2)
(ie, assuming the 1978 reservation PAO1 is compensable)

‘Before’ both reservations:

$132,255,500 (Spiire plans)

or

$136,649,750 (Watsons plans)

$138,940,000

(Spiire plans)

or

$143,330,000

(Watsons, ‘all titles’)

$130,030,000

(Spiire plans)

or

$134,545,000

(Watsons plans)

‘After’ both reservations:

$112,750,000 (Spiire plans)

or

$115,450,000 (Watsons plans)

$118,230,000

(Spiire plans)

or

$120,550,000

(Watsons, ‘all titles’)

$110,500,000

(Spiire plans)

or

$113,400,000

(Watsons plans)

Compensation:

$19,505,500 (Spiire plans)

or

$21,199,750 (Watsons plans)

$20,710,000

(Spiire plans)

or

$22,780,000

(Watsons, ‘all titles’)

$19,530,000

(Spiire plans)

or

$22,145,000

(Watsons plans)

Compensation for the 2016 Reservation only (PAO2)
(ie, assuming the 1978 reservation PAO1 is not compensable)

‘Before’ 2016 reservation:

$131,400,000 (Spiire plans)

or

$135,750,000 (Watsons plans)

$138,040,000

(Spiire plans)

or

$142,400,000

(Watsons, ‘all titles’)

$129,200,000

(Spiire plans)

or

$133,700,000

(Watsons plans)

‘After’ 2016 reservation:

$112,750,000 (Spiire plans)

or

$115,450,000 (Watsons plans)

$118,230,000

(Spiire plans)

or

$120,560,000

(Watsons, ‘all titles’)

$110,500,000

(Spiire plans)

or

$113,400,000

(Watsons plans)

Compensation:

$18,650,000 (Spiire plans)

or

$20,300,000 (Watsons plans)

$19,810,000

(Spiire plans)

or

$21,840,000

(Watsons, ‘all titles’)

$18,700,000

(Spiire plans)

or

$20,300,000

(Watsons plans)

Estimated land value of the 1978 reservation only (PAO1)

$855,500

(Spiire plans)

or

$899,750 (Watsons plans)

$900,000

(Spiire plans)

or

$930,000

(Watsons plans)

$841,000

(Spiire plans)

or

$870,000

(Watsons plans)

[4]The applicants’ valuer, Mr Dudakov, was instructed to provide valuations based on two alternative sets of development plans provided by Watsons: an ‘all titles’ basis (88.93 hectares of developable land), and a ‘three titles only’ basis (61.74 hectares of developable land). As the ‘all titles’ basis is more comparable to the land assessed by the other valuers, those figures are included here.

However, in their Joint Statement, the valuers agreed that the financial loss arising from the imposition of the reservations was:

(ee) with respect to the Reservation (PAO2) only — $19 million (based on the Spiire development plans) or $20.55 million (based on the Watsons development plans); and

(ff) with respect to the 1978 reservation (PAO1) – $900,000.

There was a high level of agreement between the valuers as to the unaffected and affected value of the Brompton land at the relevant date. The valuers adopted unaffected values between $129 and $143 million and affected values between $110 and $121 million.

At trial, however, the Authority submitted that the applicants had not established any compensable financial loss under pt 5 of the PE Act as they had failed to prove that:

(a) they suffered financial loss as the natural, direct and reasonable consequence of the reservation of the subject land, as required by s 98(1)(a); and

(b) they sold the Brompton land at a lower price than they might have reasonably expected to get if the subject land had not been reserved, as required by s 106(1)(a).

The Authority contended that: (a) the applicants were ‘made whole’ by selling their right to compensation; and (b) the asserted loss was hypothetical and did not reflect actual loss. The Authority submitted that the sale price of $55 million was the price ‘unaffected’ by the Reservation, albeit grossly below market value.

The applicants submitted that there was no requirement under ss 99(b) or 106(1) of the PE Act for the sale price to be the affected value of the land. They submitted that the price that they might reasonably have expected to get for the Brompton land absent the Reservation was between $129 and $143 million. It was only if the sale price, including consideration for the assignment of the proceeds of compensation, exceeded the unaffected value of the Brompton land that real questions might arise as to whether the trigger in s 99(b) was satisfied.

Reasons for decision

The primary judge focused on two issues: first, whether the claim had been enlivened or crystallised by an event that fell within the terms of s 106(1) of the PE Act; and, secondly, whether, if the sale price for the Brompton land could not be relied on as an indicator of loss, that prevented the assessment of loss by the Court. The primary judge held that the applicants had not met the requirement in s 106(1) to establish the sale of the Brompton land at a lower price than would have been achieved without the Reservation and had failed to establish the causal nexus required by s 98(1) of the PE Act.

The primary judge’s reasons for deciding that the applicants had failed to enliven the claim under s 106(1) are set out succinctly in the following paragraphs of the Reasons:

Section 106 imposes requirements in sub-ss (1)(a) and (b). It is not just a trigger.
The issue under sub-s (1)(a) is whether the claimants sold the [Brompton] land at a lower price than they might have expected to receive had part of the subject land not been reserved. There is no doubt that the requirement in sub-s (1)(b) is satisfied.
By the sale contract, the claimants sold the affected land and assigned the proceeds of the compensation claim to the purchaser. Taken together, what the claimants sold and assigned is the direct equivalent of the value the unaffected land.
Mr Carpenter did not say that he would have sold the [Brompton] land to the purchaser at a higher price than $55 million were it not for the reservation. His concern with the $40 million offer was that it left open the amount of the compensation claim. The purchase price was raised to $55 million on the basis that the compensation claim would benefit and be the responsibility of the purchaser.
A sale of the [Brompton] land at market value was never in contemplation. Mr Carpenter was well aware of the division of proceeds under the [PD Agreement] referring to cash flows of $80 million and $70 million to the applicants from lot sales over a period of years. The sale price of $55 million was not unreasonable from his perspective having regard to the present value of the [applicants’] future revenue stream under the [PD Agreement], and his awareness of the inherent risks.
There is no evidence from Mr Carpenter or anyone else that he sold the [Brompton] land at a lower price only by reason of the reservation. To the contrary, he obtained an acceptable price in the negotiations by agreeing to transfer the subject land together with the proceeds of the claim for compensation.[5]

[5]Reasons [88]–[93].

The primary judge observed that under s 106(1)(a) of the PE Act, the applicants must show that they sold the Brompton land at a lower price than they might have expected to receive had the subject land not been reserved. He found that they had not done so. The consideration that the applicants received under the sale contract was the same as they would have received had the subject land not been reserved.[6] The consideration made allowance for the fact that UDIA’s obligations under the PD Agreement had been partly, but substantially, performed through the change to the UGB, the rezoning, the approval of the Precinct Structure Plan, the grant of permits and the commencement of lot sales.
[6]Ibid [96].

As to causation and the requirements of s 98(1) of the PE Act, the primary judge found that the sale of the Brompton land at a price well below market value, the assignment of the proceeds of the compensation claim to the purchaser and the simultaneous extinguishment of the parties’ rights under an existing commercial contract for the development of the Brompton land (the PD Agreement) were all unusual and extraordinary intervening causes. His Honour held that a loss suffered under an agreement for sale with the features described was not ‘natural’ or arising in the usual course of things, or ‘direct’ without intervening agency, and nor could it be described as ‘reasonable’. The sale price should represent the affected value of the Brompton land. It could not be said that there was a close and limited connection between the Reservation and the financial loss said to have been suffered by the applicants. The sale held out as the sale under s 106 performed none of these functions. It was of no assistance in quantifying the actual loss caused by the imposition of the Reservation, did not measure the applicants’ gross loss and had no causal nexus with the imposition of the Reservation.[7]
[7]Ibid [97]–[105].

Proposed grounds of appeal

The applicants have raised nine proposed grounds of appeal, divided into three categories:

(a) grounds concerning the construction of s 106 of the PE Act (proposed grounds 1, 2, 4 and 5);

(b) grounds challenging the primary judge’s findings in relation to s 106 (proposed grounds 6, 7 and 8); and

(d) grounds challenging holdings concerning s 98 of the PE Act (proposed grounds 9 and 10).

Proposed ground 3 was abandoned.

Grounds concerning the construction and application of s 106(1)(a)

The applicants submit that the primary judge erred:

(a) in construing s 106(1)(a) of the PE Act, in particular, the words ‘if the owner of the land sold it at a lower price than the owner might reasonably have expected to get if … part of the land had not been reserved’ (proposed ground 1);

(b) in holding that s 106 is directed at the cause of financial loss suffered as the consequence of the land being reserved for a public purpose under a planning scheme, rather than just establishing a precondition for payment of compensation and the time at which loss is to be ascertained. In particular, the judge erred in holding that s 106 speaks of ‘financial loss’ (proposed ground 2);

(c) in construing s 106(1)(a) of the PE Act in applying a finding that what the applicants sold and assigned was the direct equivalent of the value of the unaffected land (proposed ground 4);

(d) in holding that whether or not the applicants sold the land at a lower price by reason of the Reservation, or only by reason of the Reservation, was relevant to, or answered, the test in s 106(1)(a) of the PE Act (proposed ground 5).

Proposed grounds 6, 7 and 8 challenge findings relevant to the application of s 106 that:

(a) the applicants had not shown that they sold the Brompton land at a lower price that they might have expected to receive had part of it not been reserved (proposed ground 7); and

(b) there was no evidence from Mr Carpenter or anyone else that the applicants sold the Brompton land at a lower price only by reason of the Reservation (proposed ground 8).

As a corollary, the applicants also challenge the primary judge’s failure to find that they sold the Brompton land at a lower price than they might reasonably have expected to receive if the subject land had not been reserved (proposed ground 6).

Grounds concerning s 98

Proposed ground 9 is that the judge wrongly proceeded on the basis that the claim was made for a financial loss suffered by the applicants as the natural, direct and reasonable consequence of the land being reserved for a public purpose under a planning scheme, as measured by the difference between the unaffected value of the land and the sale price.

Proposed ground 10 is that the primary judge, having accepted the applicants’ submission that the sale price of $55 million was of no assistance in quantifying the loss caused by the reservation, erred in holding that this finding prevented an assessment of financial loss suffered by the applicants under s 98(1). The applicants submit that the relevant measure of loss under pt 5 of the PE Act is set by s 98(1)(a) — the financial loss suffered as the natural, direct and reasonable consequence of the land being reserved for a public purpose under a planning scheme. By contrast, s 106 does not set the measure of loss. This is so notwithstanding that the sale of land affected by a reservation may provide evidence as to the quantum of loss suffered as a consequence of the imposition of the reservation.

Applicants’ submissions

On the hearing of the application for leave to appeal, the applicants did not address the proposed grounds of appeal individually, but made submissions generally directed to the construction of ss 98(1), 99 and 106(1) of the PE Act which, of course, must be read together.

As to how the task of construing the provisions of pt 5 of the PE Act is to be conducted, the applicants rely on statements by Gaudron J in Marshall v The Director-General, Department of Transport[8] to the effect that statutory provisions conferring the right to compensation for the compulsory taking of land should be construed with all of the generality that the words permit.[9]
[8](2001) 205 CLR 603; [2001] HCA 37.
[9]Ibid 623 [38].

The applicants submit that it is impermissible to construe the provisions of pt 5 of the PE Act on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute. The PE Act confers a very broad power on a planning authority to use the planning scheme to regulate the use and development of land. Part 5, by imposing on the authority a liability to pay compensation in the circumstances outlined, places a constraint on the exercise of the power to reserve land so as to ensure that the power is exercised fairly. Furthermore, it was submitted, the objective of the PE Act set out in s 4(1)(a) — to provide for the fair, orderly, economic and sustainable use and development of land — is promoted if land cannot be sterilised without compensation. It would be inconsistent with that objective if an authority which exercised its power to sterilise land was not liable to pay compensation to the affected land owner.

The applicants approached the construction of s 106 by pointing out that its heading, ‘Loss on sale’, does not form part of the PE Act and then by deconstructing s 106(1) word by word.

Breaking s 106(1) into its component parts, the applicants submit:

(a) ‘[A]fter’ in the context ‘may claim compensation after the sale of the land’ is a temporal term that refers simply to the time following the happening of an event. It is not a word of causation but a word of sequencing.

(b) The first use of the word ‘if’ at the end of the introductory words simply means ‘in the circumstances that …’. It is followed by the matters that need to be satisfied in order to enliven the owner’s entitlement to make a claim under s 98(1). Again, it is not a word of causation.

(c) Next, s 106(1)(a) requires the identification of the price at which the land was sold. Here, that was not controversial: it was $55 million.

(d) The words ‘than the owner might reasonably have expected to get if part of the land had not been reserved’ require a hypothetical exercise. The word ‘if’ is to be read as meaning ‘assuming’. The assumption that needs to be made is one that is contrary to the facts, that is, that land was not reserved. Again, the word ‘if’ does not have a causative meaning but, rather, requires the making of an assumption and a hypothetical exercise.

The applicants submit that s 106(1) is not directed to the cause of loss. Rather, it stipulates a precondition for the payment of compensation and identifies, as Mason v Head, Transport for Victoria[10] explains, the time at which the right to compensation arises and the date upon which loss is to be assessed. Section 98(1), which confers the right to claim compensation for financial loss suffered as the consequence of land being reserved, is the provision that deals with causation, with s 99 and, in this case, s 106 providing a ‘trigger’ for the right to be paid and a liability to pay. According to the applicants, it is significant that words ‘the … consequence of’ are used in s 98 (and s 107) but these words, or similar, are not used in s 106.
[10](2021) 63 VR 175; [2021] VSCA 19 (’Mason’).

Accordingly, so the applicants submit, s 106(1) does not require them to show that they sold the land at a lower price by reason of the Reservation. Their motive for the sale of the Brompton land is not relevant to their right to make a claim. As a consequence, it is not correct to refer to what is described in s 106 as ‘financial loss’. In truth, s 106 does not actually describe financial loss at all but provides a circumstance based on a hypothesis that crystallises a claim. In many but not all cases, the sale will also provide evidentiary information as to what the financial loss is for the purpose of s 98(1).

The applicants submit that s 106(1) requires consideration of circumstances in a hypothetical world. The use of the word ‘reasonably’ means that in the hypothetical world, an objective answer is sought, not one that turns on what might have been in the mind of the vendor, and the hypothetical exercise does not involve a sale that can only be made to the actual purchaser. The circumstances of the actual purchaser are not relevant. Even if the owner of the land has a contractual obligation to another person, that does not change the nature of the hypothetical exercise.

According to the applicants, to focus on the circumstance of the vendor and to seek to ascertain what the vendor thought the land was worth would produce an unusual and incorrect outcome. It is necessary to ask what the land would have been worth in the market. Such an approach is consistent with s 104 of the PE Act and with the way in which ss 45(5) and 41(7) of the LAC Act are intended to operate. Thus, while the sale of the affected land is necessary to bring s 98(1) into play, and it must be established that the land was sold at a lower price than would have been the case without the reservation, the sale price itself is not necessarily relevant to the financial loss that can be claimed. It is sufficient to show, as the valuers did in this case, that the land was worth less with the reservation than it would have been worth without the reservation. The measure of loss can be established without reference to what occurred in the actual sale.

The applicants submit that the primary judge incorrectly proceeded on the basis that the sale price referred to in s 106(1) must set the measure of loss. This led the judge to wrongly conclude that it was not possible to quantify the loss caused by the imposition of the Reservation and to the anomalous result that, despite it being common ground that the Reservation caused a reduction in land value of at least $19 million, there was no compensable loss.

The applicants submit that this anomaly does not arise if the loss is assessed under s 98(1)(a). Section 98(1)(a) does not require loss to be measured by, or reflected in, the terms of a sale. The loss is assessed having regard to the loss the owner suffered as a consequence of the imposition of the reservation.

According to the applicants, the actual sale is only relevant in two ways: the existence of a sale at less than the value of the unaffected land is a statutory precondition to making a claim and the sale sets the date on which loss is to be assessed. Otherwise, so the applicants contend, the sale can be ignored. It is sufficient that valuers value the land in its affected and unaffected states at the date of the sale, and compensation is payable in the amount of the difference.

The applicants therefore submit that the primary judge’s statement that ‘the sale price should represent the affected value of the subject land’ was not correct. The sale price might represent the affected value of the land in some cases, but it does not necessarily have to be so. The applicants submit that the primary judge erred in concluding that the sale price was an essential ingredient in the exercise and that, without that ingredient, it was not possible to make findings. If a claim is enlivened by s 106 and the sale price does not provide evidentiary information of value in relation to loss, it by no means follows that there has been no loss or that the loss cannot be assessed.

The applicants concede that the circumstances of the sale in this case were unusual, but submit that it is possible to imagine many different circumstances where, similarly, it will be inappropriate to measure loss caused by a reservation by reference to the actual sale price for the land. Owners may be motivated by different factors to sell land and those factors may affect the terms and price of a sale. An unwell vendor may wish to sell land quickly. A parent may choose to sell at an advantageous price to offspring. A sale may be made to an associated person on particular terms in order to minimise tax. Any of these circumstances may give rise to a sale price that is not relevant to assessing the loss caused by the reservation and the primary judge’s approach would exclude such owners from obtaining compensation for the reservation of their land for a public purpose.

The applicants rely on the fact that it was uncontested that the price that the applicants could reasonably have expected to get for the Brompton land on the open market had part of it not been reserved was at least $129 million, but it was sold for $55 million. The primary judge accepted that the Brompton land was sold at a gross undervalue. The applicants say that given the uncontested evidence, and his finding, it was not open to the primary judge to hold that the requirements of s 106(1) had not been satisfied.

The applicants submit that, even if s 106(1) required consideration of a hypothetical sale to the actual purchaser (which, in this case, would involve a sale that is subject to the PD Agreement), it is not correct to say that the applicants failed to show that they sold the Brompton land for a different price than would have been achieved had part of it not been reserved. All three valuers agreed that the difference between the affected value and the unaffected value at the relevant time was $19 million. On any view of the evidence, the Brompton land had to be worth $19 million more without the Reservation.

Furthermore, the applicants submit, Mr Les Brown’s evidence was put forward in anticipation that the Authority would argue that any loss needed to be measured having regard to the existence of the PD Agreement. Mr Brown assessed the return to the applicants under the PD Agreement with and without the Reservation. However, the Authority’s valuers did not approach the task in that way. They approached the task as a conventional land valuation, as did Mr Dudakov.

The applicants also take issue with the primary judge’s statement that, taken together, what the applicants sold and assigned was the direct equivalent of the value of the unaffected land.[11] They submit that where land is sold with a provision assigning the proceeds of a compensation claim, what is ‘sold’ in that regard is not something that can be objectively ascertained. The vendor and the purchaser may have completely different ideas about the value of the assignment. It follows that a contract for the sale of land that includes the assignment of the benefit of a compensation claim to the purchaser is not the same as the ‘unaffected’ land value, which is capable of being objectively determined.
[11]Reasons [90].

As to the primary judge’s conclusion that the causal nexus under s 98(1) was not established, the applicants submit that the language of ‘intervening causes’ used by the primary judge is ‘very odd’ in that it suggests that because the circumstances were unusual and extraordinary, that somehow prevented a loss from having occurred. They submit that it is not correct, as the primary judge reasoned, that the loss must be ‘natural’, ‘direct’ and reasonable’. Those adjectives attach to the word ‘consequence’, not ‘loss’.

Analysis

The primary judge held that the burden of establishing financial loss for the purposes of s 98(1) had not been satisfied as the applicants had failed to show that they suffered a loss on the sale of the Brompton land. Furthermore, the fact that the applicants received consideration for the land, plus consideration for the assignment of the proceeds of the compensation claim, meant that they were not out of pocket due to the imposition of the Reservation.

As discussed, the applicants contend that they proved to the primary judge that there was a reduction in land value (assessed at the relevant date) due to the existence of the Reservation and that that is the relevant financial loss for the purpose of s 98(1). They say that they proved that there was a sale of the Brompton land at less than its worth if unaffected by the Reservation, and that the existence of the sale both satisfied the precondition in s 106 and provided the relevant date for the assessment of their loss.

The basic proposition advanced by the applicants is that where loss on sale is relied upon as giving rise to a right to compensation for the imposition of a reservation, the loss does not have to be assessed by reference to the actual sale or, more specifically, by the actual sale price. They say that in this case, the sale price did not reflect the market value of the Brompton land and their financial loss for the purposes of s 98(1) was to be assessed by comparing the affected and unaffected market values of the Brompton land at the relevant date based on hypothetical sales. In other words, the determination of their loss as the natural, direct and reasonable consequence of the imposition of the Reservation was to be carried out on a basis almost entirely divorced from the actual circumstances of the sale to UDIA/1050.

There was no dispute that the sale price of $55 million was not the price the applicants would have obtained for the Brompton land on the open market if freed from the constraint of the PD Agreement. The dispute is whether financial loss suffered by the applicants attributable to the imposition of the Reservation can be established for the purposes of s 98(1) of the PE Act by comparing different land values based exclusively on hypothetical sales, ignoring the circumstances of the actual sale of the Brompton land. As the applicants do not rely on the sale price to establish the compensation they contend is payable, it was necessary for them to persuade the primary judge that s 106(1), in combination with ss 98(1) and 99, does not require their compensable loss be established by reference to the circumstances of the actual sale and that his Honour was bound to accept as evidence of the applicants’ loss the product of the valuation exercises carried out by three valuers who assessed the affected and unaffected values of the Brompton land using market valuations.

The hypothetical sale is the basis for establishing the market value of land resumed for a public purpose under the LAC Act. Under the LAC Act, the owner may make a claim for compensation for land that has been compulsorily acquired upon publication of the notice of acquisition.[12] The claim will include an amount for the market value of the land that has been taken in accordance with the definition of ‘market value’, which is, in turn, based on the test articulated in Spencer v Commonwealth,[13] namely, ‘the amount of money that would have been paid for the interest [in land] if it had been sold on [the relevant] date by a willing but not anxious seller to a willing but not anxious purchaser’.[14] The willing but not anxious seller and the willing but not anxious buyer are both artificial constructs.
[12]LAC Act s 30.
[13](1907) 5 CLR 418; [1907] HCA 82.
[14]See definition of ‘market value’ in s 40 of the LAC Act.

In the circumstances of a compulsory acquisition of land, while the amount of compensation will be assessed by reference to the hypothetical sale of the acquired land by willing but not anxious sellers, the owner of the land that has been compulsorily acquired has actually been deprived of a valuable asset. There is an actual, quantifiable loss or detriment. The owner of resumed land may also claim compensation for losses attributable to disturbance, such loss also being actual loss arising from the taking of the land. Loss attributable to disturbance is described in the LAC Act in near identical terms to the loss that is compensable under s 98(1) of the PE Act.[15] The claimant is required to establish such loss as actual loss incurred.
[15]Ibid.

In contrast, the scheme in pt 5 of the PE Act recognises that the reservation of land will not, in and of itself, cause loss. Indeed, reservation may enhance the value of land where it is for a purpose which, when effected, will make the land more valuable, such as the establishment of a transport corridor in an area slated for urban development. It may, at the time of reservation, not be clear whether and to what extent the value of land is reduced or enhanced by the reservation. The highest and best use of the land and its market value may change subsequent to reservation. Even where reservation can be expected to reduce the value of land, there will be no financial loss to the owner unless and until it impedes the owner’s ability to use or develop the land, or where it results in a loss on the sale of the land.

Hence, compensation under pt 5 is payable, not upon the imposition of the reservation, but only when the owner has suffered actual financial loss. Section 99 provides that the right to compensation does not arise until the happening of a specified event, being an event causing actual detriment to the owner. One of those events is the ‘sale of the land concerned under section 106’. Relevantly, s 106(1) provides that the owner may claim compensation under s 98 ‘after the sale of land’ if the owner ‘sold it at a lower price’ than he or she ‘might reasonably have expected to get’ if the land had not been reserved.

The principles of statutory construction require consideration of the ordinary and grammatical meaning of the words used, taking into account both context and legislative purpose.[16] The words ‘sold it’ in s 106(1)(a) refer to a specific action by the owner and to a specific event; and the words ‘at a lower price’ refer to a specific outcome of that event. The reference to ‘price’ is to be compared to the use of the word ‘value’ elsewhere in pt 5. Based on the ordinary meaning of the words in s 106(1), the section calls for a comparison between an actual outcome and a hypothetical outcome that assumes the land was sold in the same circumstances as the actual sale but unburdened by the reservation.
[16]R v A2 [2019] HCA 35, [32]–[37] (Kiefel CJ and Keane J), [124] (Bell and Gageler JJ).

While it is true, as the applicants submit, that s 106(1) requires entry into the hypothetical realm, the enquiry is nonetheless anchored by the sale and the price obtained for the land burdened by the reservation. It is not the case that s 106(1) simply provides a date for the assessment of loss and the vague and undemanding ‘precondition’ that there has been a sale for an amount that is less than might otherwise have been achieved absent the reservation. As Batt J said in Halwood Corporation Ltd v Roads Corporation,[17] the sale under s 106 is ‘of practical effect in quantifying the loss caused’[18] and ‘furnishes the measure of the owner’s gross loss and satisfaction of the causal requirements of s 98(1)’.[19]
[17](1995) 89 LGERA 280 (‘Halwood (No 1)’).
[18]Ibid 287.
[19]Ibid 289.

In Mason, this Court rejected the proposition that s 98(1) was the substantive provision conferring the right to compensation and that s 99 (and, by extension, s 106) was merely a procedural ‘trigger’. The Court observed that s 99 expressly provides that the relevant right to compensation arises when one of the events referred to occurs. Each of the events requires the pre-existing reservation of the land to ‘bite’, that is, to have a real detrimental effect on the use or development of the land, or on the realisation of its value.[20] Because the highest and best use of the land and its market value may change subsequent to reservation, the critical question governing the right to compensation is whether an actual financial loss has been suffered as at the date of one of the events specified in s 99 as a natural, direct and reasonable consequence of the reservation. The Court explained:

There will be many cases — such as the reservation of a narrow strip of farmland for road widening purposes — where the reservation does not affect the highest and best economic use of the land and no loss is suffered until compulsory acquisition. There will be other cases where the highest and best use of the land changes after the imposition of the reservation and it is only following this change that the reservation can be said to have resulted in financial loss. Section 99 contemplates that the question of loss (and hence the existence of a right to compensation) will not fall to be assessed until one of the stipulated events occurs. It cannot be said that a right to compensation arises until an actual loss is ascertained.[21]

[20](2021) 63 VR 175, 185 [50(a)] and [50(b)]; [2021] VSCA 19 (Beach, Emerton and Osborn JJA).

[21]Ibid 190–1 [71(4)].

This makes it clear that the compensation regime in pt 5 of the PE Act is concerned with the actual loss suffered by the owner of reserved land, not with an abstract or hypothetical loss, or a loss likely to be suffered in the future if and when the reserved land is resumed. This is consistent with the words in s 106(1), ‘the owner sold it at a lower price’. In calling for a comparison of the ‘price’ achieved on sale with the price that might have been achieved without the reservation, s 106(1) is to be contrasted with s 104, which uses the term ‘value’. Section 104 calls for the comparison of two hypotheticals: the land value on the day on which the liability to pay compensation first arose and the value that the land would have had on that day had it not been affected by the reservation. However, s 104 does not create or contribute to creating the right to compensation; rather, it sets — as a matter of public policy — an artificial ceiling on the amount of compensation payable for losses caused by the reservation of land.

While the applicants as owners would be entitled to compensation assessed by reference to ‘before’ and ‘after’ hypothetical sales on the resumption of the subject land, for so long as the subject land remains reserved pending compulsory acquisition, they are only entitled to be compensated for losses incurred on the happening of the events identified in ss 99 and 106 (provided the relevant causal nexus is satisfied).

Section 98(1) provides for compensation for ‘financial loss’. That financial loss must be ‘the natural, direct and reasonable consequence’ of the reservation. Those words have been held, in combination, to connote a very close and limited connection between the event giving rise to compensation and the financial loss suffered.[22] The use of the word ‘consequence’ plainly invokes causation. The reservation of the land (in this case) must be the cause of the financial loss, such loss occurring upon one of the events referred to in s 99, including the sale of the land. The means of establishing loss advanced by the applicants can be applied to establish a loss ‘on paper’ at any point in time. That loss is not grounded in any of the events referred to in s 99. It is abstract, not real.
[22]Halwood (No 1) (1995) 89 LGERA 280, 302–3 (Batt J). See also Melbourne City Link Authority v Teford Pty Ltd (2001) 113 LGERA 102, 112–3 [24] (Batt JA, Tadgell J agreeing at 104 [1], Chernov JA agreeing at 115 [31]); [2001] VSCA 54.

In our view, s 106(1), in combination with ss 98(1) and 99, requires compensable loss to be established by reference to the circumstances of the actual sale.

At trial, the applicants sought to persuade the primary judge that the quantum of their loss was to be assessed by reference to a figure that, as a result of the PD Agreement, they could never have achieved for the sale of the Brompton land. The PD Agreement compromised the applicants’ ability to sell the Brompton land, as they did not enjoy the usual advantages that are associated with being a fee simple owner of land. By entering into the PD Agreement, the applicants had effectively granted UDIA an equity in the Brompton land, including the subject land. As the primary judge found:

The [PD Agreement] was essentially a joint venture between the claimants as owners and the Woodman interests as the subdivider and developer through UDIA and later UDIA Consolidated. The claimants agreed to split the profits to be made from the project with the developer. The claimants were passive investors and were not required to retain consultants, borrow money, or bear project costs.
The active investor was UDIA and later UDIA Consolidated. It had to procure the extension of the UGB, rezoning of the subject land, approval of the [Precinct Structure Plan] and subdivision permits. It was responsible for retaining planners, surveyors, engineers, and other consultants. It was exposed to the risk that the project might not be approved or might be delayed.
Under the [PD Agreement], the claimants could expect to realise only some profits from the project. The other profits would go to the developer.[23]

[23]Reasons [64]–[66].

The PD Agreement, and UDIA’s interest in developing the Brompton land, are matters of considerable significance in determining the extent of any loss suffered by the applicants when they sold the Brompton land to UDIA/1050. The applicants’ interest in the Brompton land was subject to UDIA’s interest and consequently the applicants obtained significant advantages of both accelerated and certain return from the land upon agreement as to its immediate sale. In the circumstances, the applicants’ claim for $25 million as loss under s 98(1) does not reflect a loss actually sustained by the applicants themselves as a result of the imposition of the Reservation.

Furthermore, Mr Carpenter’s evidence was that he was fully compensated in the sale price for any loss caused by the reservation of the subject land.

Insofar as it was necessary for the applicants to quantify their loss by reference to the sale price for the Brompton land, the sale transaction included a number of elements and was structured so as to make the disentanglement of those elements very difficult, if not impossible. As the primary judge found:

The sale of the subject land did not quantify the amount of compensation payable as a consequence of the reservation of part of the subject land. The sale price did not measure nor reflect the gross loss suffered by the claimants. It did not allow the quantum of the compensation claim to be calculated. It was simply the negotiated consideration for the sale of the subject land, the assignment of the proceeds of the compensation claim and the extinguishment of the parties’ rights under the PD Agreement.[24]

[24]Ibid [95].

The applicants’ own case before the primary judge was that the sale price was not capable of disaggregation. However, it was suggested to this Court in oral submissions that the affected value of the Brompton land was $40 million and that Mr Carpenter took $15 million for the assignment of the compensation, leading to a loss of at least $4 million, based on the valuers’ joint minimum assessment of loss of $19 million. We reject this basis for identifying error in the decision below. Further, no findings in support of this conclusion were made below and it is not possible for this Court to re-analyse the evidence to arrive at such a conclusion.

We do not consider that Mr Les Brown’s assessment of the return to the applicants under the PD Agreement with and without the Reservation solves the problem identified. Although Mr Brown’s analysis takes the PD Agreement into account, it rolls together the interests of the applicants and UDIA and neglects other aspects of the arrangement between the parties. It also entirely ignores the sale of the land and the precondition in s 106(1) that there be a sale for less than would have otherwise been achieved.

As for the fact that the three other valuers — including the valuers retained by the Authority — purported to quantify the amount of compensation payable, this evidence was based on an incorrect legal premise and we do not accept it.

In our view, the primary judge did not err when he held that the applicants had failed to discharge the onus of establishing loss suffered as the natural, direct and reasonable consequence of the imposition of the Reservation. The primary judge was correct to hold that there was no evidence from Mr Carpenter or anyone else that the applicants sold the Brompton land at a lower price than they might have expected to receive had part of it not been reserved. The fact that the primary judge accepted that the Brompton land was sold at a gross undervalue did not prevent him from concluding that the requirements of s 106(1) had not been satisfied and that the applicants had failed to establish that they had suffered financial loss for the purposes of s 98(1).

Disposition

Leave to appeal is granted, but the appeal is dismissed.

- - -

SCHEDULE OF PARTIES

Brompton Lodge Pty Ltd (in liquidation) (ACN 004 458 833)	First Applicant
Peter William Carpenter	Second Applicant
Sandra Gael Carpenter	Third Applicant
and
Head, Transport for Victoria	First Respondent
1050 Western Port Highway Pty Ltd (ACN 623 531 706)	Second Respondent

Actions

Download as PDF Download as Word Document

Citations

Brompton Lodge Pty Ltd (ACN 004 458 833) (in liquidation) & Ors (according to the attached Schedule) v Head, Transport For Victoria and 1050 Western Port Highway Pty Ltd (ACN 623 531 706) [2021] VSCA 302

Most Recent Citation

Director of Public Prosecutions v Morin [2024] VCC 675

Cases Citing This Decision

4

Jomaring Pty Ltd v Head, Transport for Victoria [2025] VSCA 128

Greenwells Wollert Pty Ltd v Head, Transport for Victoria [2023] VSC 271

AG Dennis Pty Ltd v Minister for Environment [2023] VSC 44

Cases Cited

6

Statutory Material Cited

0

Brompton Lodge Pty Ltd (in administration) v Head, Transport for Victoria [2020] VSC 797

Marshall v Director General, Department of Transport [2001] HCA 37

[2021] VSCA 302

8 November 2021