Cairns City Council v CMB No 1 Pty Ltd
[1997] QCA 465
•19/12/1997
| IN THE COURT OF APPEAL | [1997] QCA 465 |
| SUPREME COURT OF QUEENSLAND |
Appeal No. 286 of 1997
Brisbane
[Cairns City Council v CMB No. 1 P/L]
BETWEEN:
CAIRNS CITY COUNCIL
(Respondent) Appellant
AND:
CMB NO. 1 PROPRIETARY LIMITED
ACN 058 283 784
(Appellant) Respondent McPherson J.A.
Williams J.
Cullinane J.
Judgment delivered 19 December 1997
Separate reasons for judgment of each member of the Court; McPherson J.A. and Williams J. concurring as to the order made, Cullinane J. dissenting.
APPEAL ALLOWED WITH COSTS; SET ASIDE SO MUCH OF THE JUDGMENT ON 13 NOVEMBER 1995, IN APPEAL NO. 36 OF 1996 IN THE PLANNING & ENVIRONMENT COURT AS DETERMINED THAT THE RESPONDENT IN THIS COURT IS ENTITLED TO RECOVER FROM THE APPELLANT COMPENSATION IN THE AMOUNT OF $500,000, TOGETHER WITH INTEREST, FOR INJURIOUS AFFECTION; AND REMIT THE MATTER TO THAT COURT FOR REDETERMINATION OF THE AMOUNT OF THAT COMPENSATION.
CATCHWORDS: LOCAL GOVERNMENT - Town Planning - Appeal from Planning & Environment Court - Compensation for injurious affection - Rectification of Erroneous Rezoning - Relevance of, in assessing compensation.
Spencer v. The Commonwealth (1907) 5 CLR 418
Housing Commission of New South Wales v. Falconer [1981]
1 NSWLR 547
Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v.
Pontypridd Waterworks Co. [1903] AC 426
Thorpe v. Brisbane City Council [1966] Qd R 37
Minister for the Army v. Parbury Henty & Co. Pty Ltd (1945)
70 CLR 459
McCathie v. Federal Commissioner of Taxation (1944) 69 CLR1
| Counsel: | Mr. D.R. Gore Q.C., with him Mr. J.J. Haydon for the appellant. Mr. P.J. Lyons Q.C., with him Mr. M.D. Hinson for the respondent. |
| Solicitors: | MacDonnells for the appellant. Hunt & Hunt for the respondent. |
| Hearing date: | 22 October 1997 |
| IN THE COURT OF APPEAL | |
| SUPREME COURT OF QUEENSLAND |
Appeal No. 286 of 1997
Brisbane
| Before | McPherson J.A. Williams J. Cullinane J. |
[Cairns City Council v. CMB No. 1 P/L]
BETWEEN:
CAIRNS CITY COUNCIL
(Respondent) Appellant
AND:
CMB NO. 1 PTY LTD.
ACN 058 283 784
(Appellant) Respondent
REASONS FOR JUDGMENT - McPHERSON J.A.
Judgment delivered 19 December 1997
In this appeal the events in chronological sequence which gave rise to the dispute are as follows.
On 8 September 1993 the claimant for compensation and respondent to the appeal, which is CMB
No. 1 Pty. Ltd., was registered as proprietor of the subject land. The land, which is 8.199 ha. in area
and has frontage to the Captain Cook Highway, is in the Cairns suburb of Smithfield. At that time it
was, under the Town Planning scheme of the appellant Council or its predecessor the Mulgrave Shire
Council, located in a Residential A zone. By 3 December 1993 the land had been rezoned to Local
Shopping. That done, the respondent in mid-January 1994 agreed to sell it for a price of $5 million to Lend Lease Retail Ltd. At that time a formal contract had not been executed, but it was in draft form
and the parties were agreed on the essential terms including that price.
On 17 December 1993, a new Town Planning scheme for the local authority area was
published and came into force. Under its provisions the Local Shopping zone was abolished and
replaced by a new zoning category designated Commercial, which for present purposes is accepted as
the equivalent in all respects of the former Local Shopping zone. However, through some accident or
error on the part of the Council, in the new Town Planning scheme the subject land was zoned not as
Commercial but as Rural. Some time passed before the contracting parties discovered the error and
drew the attention of the Council to it. Steps were at once taken by the Council to rectify the error.
To expedite matters, the Council itself on 21 March 1994 resolved to apply to the Governor in
Council to have the land rezoned Commercial, which avoided the need to advertise for objections to
the proposal. The need for an environmental impact statement was waived by the Department and the
application was formally made on 27 April 1994. The land was rezoned to Commercial by publication
of an order in council in the gazette on 27 May 1994. In the result, the rezoning error was speedily
corrected, which was to be expected, considering that otherwise the appellant Council would have been
liable to pay compensation amounting to some millions of dollars.
Meanwhile, after discovering the error the contracting parties entered into a fresh contract of
sale, which was executed on 28 March 1994. The executed contract maintained the original price of
$5 million but the deposit payable by Lend Lease as purchaser was reduced from $250,000 to
$50,000. The contract itself does not appear to have been tendered as an exhibit at the hearing; but
oral evidence about its terms was that it was subject to a condition making its completion dependent
on rezoning of the land from Rural to Commercial uses. Once the rezoning took place on 27 May
1994, the contract was, without any further hitch, settled on 10 June 1994.
On 8 September 1994 the respondent gave notice to the appellant Council, or its predecessor,
of a claim for compensation under s.3.5(1)(a) of the Local Government (Planning and Environment)
Act 1990 for injurious affection of its interest in the land by reason of the coming into force of the
provision in the Town Planning scheme which had altered the zoning of the subject land on 17
December 1993. The respondent and the appellant Council were unable to agree on the compensation
payable and it came before the Planning and Environment Court for determination. At the hearing in
August 1996, evidence was received from the respondent’s property development manager
Mr Montgomery, and from the valuers for each party, and his Honour Judge Quirk assessed the
compensation payable to the respondent at an amount of $500,000. It is from that decision that the
appellant Council now appeals to this Court.
Section 3.5(1)(a) of the Act provides that a person who has an interest in premises within a
planning scheme area that is injuriously affected by the coming into force of a provision in, or the
imposition of a restriction by, the scheme is entitled to compensation in accordance with that section.
Section 3.5(8)(a) provides that in assessing compensation under that provision:
“the amount of compensation is ... to be an amount equal to the difference between the market value of the interest immediately after the time of the coming into operation of the provision of the planning scheme ... and what would have been the market value of that interest if the provision had not come into operation ...”
The full text of these statutory provisions is set out in the reasons for judgment on this appeal of
Cullinane J., and need not be repeated here.
There is little doubt that the respondent sustained some losses in consequence of the rezoning
on 17 December 1993. The delay in settling the contract of sale of the land and the reduction in the
amount of the deposit from $250,000 to $50,000 were two sources of such loss, in the latter instance
because it involved a reduction in the interest earned by the respondent on that deposit. The real issue on this appeal, however, concerns the use, if any, to which evidence of the subsequent rectification of
the erroneous rezoning of 17 December 1993 can be put in arriving at the amount of compensation
determined in accordance with s.3.5(8)(a). Mr Gore Q.C. for the appellant Council submitted in the
first instance that compensation is by its nature payable only for loss, and that here no loss was sustained
by the respondent apart from matters of the kind already mentioned. In Bingham v. Cumberland
County Council (1954) 20 L.G.R. (NSW) 1, 10, Sugerman J. said that “injuriously affected” is no
more than an elaborate way of saying “injured” or “damnified” or “damaged”. That in my opinion is
relevant in considering claims for compensation under s.3.5(1)(a) of the Act; but it must be borne in
mind that s.3.5(8)(a) is specific about the way in which compensation is to be assessed in circumstances
like these. The amount of compensation for the damage is to be measured by the difference between
the market values before and immediately after the provision in the town planning scheme has come into
effect. Like Cullinane J., I do not consider it open to this Court to adopt a measure which departs from
that specified in the statute; but it does not follow that, in applying that measure, precisely the same
results will ensue in the case of compensation for injurious affection as for a resumption. In the latter
case, the owner is permanently deprived of his interest in the land, which at the moment of taking is
transformed into a statutory right to compensation measured by its value at that date. In the case of
injurious affection ownership of the land is retained even if its utility, and consequently its value, is
diminished by the coming into force of the town planning provision or restriction. If that provision or
restriction is later removed, the utility of the land is restored to its former condition. In this and other
ways, a claim for compensation in respect of injurious affection of an estate or interest in land differs in
various respects from a claim for compensation for resumption, and, as Sugerman J. observed in Bingham v. Cumberland County Council (1954) 20 L.G.R. (NSW) 1, 26, “reasoning by analogy
from the law of compulsory acquisition may, therefore, not always be reliable”.
In applying the statutory measure prescribed in s.3.5(8)(a), his Honour in the court below
preferred the valuation presented on behalf of the respondent claimant in preference to that advanced
by Mr Coonan for the appellant Council. The latter regarded the land as having the same market value
before and after the rezoning of the land from Local Shopping to Rural, and considered that the risk
factor would have been accommodated, as in fact it was, by making the contract of sale conditional on
or subject to rezoning to Commercial. His Honour rejected this approach on the ground that, as he
said, it would be “extraordinary that one could use a contract which is expressly subject to a rezoning
of land to a Commercial zone as weighty evidence of its value as land included in the Rural zone”.
Instead, the learned judge accepted the valuation approach of Mr Stallman for the respondent, who
considered that the risk factor should be compensated for by a “risk allowance” (which he put at 10%,
but which was reduced by the judge to 5%) of the market value of the property immediately after the
rezoning on 17 December 1993. By “risk factor” in this context is meant the risk that a rectification of
the erroneous rezoning would not in fact be achieved either at all or within such a time as to ensure
completion of the sale at the agreed price of $5 million.
His Honour accepted that the value of the land before the accidental rezoning to Rural came into
effect on 17 December 1993 was $5 million. In arriving at this figure he appears to have relied in part
on Mr Montgomery’s evidence that the respondent would on no account have accepted less than $5
million for the land, and in part on Mr Stallman’s opinion that one could do no better than look to the
sale of the subject land by the respondent claimant to the Lend Lease organisation on 28 March 1994
for $5,000,000. If his Honour to some extent acted on Mr Stallman’s opinion to that effect, it may perhaps seem surprising that he should also have rejected Mr Coonan’s valuation on the ground that
it was based on the same admittedly conditional contract concluded on 28 March 1994. The two
valuers were, however, using the same contract for different purposes. Mr Stallman relied on it as
affording evidence that the land was worth $5 million before 17 December 1993, and Mr Coonan as
evidence that its value was $5 million after the erroneous rezoning of that date and before it was rectified
on 27 May 1995. The peculiarity of the case is that, as events turned out, there was and is no difference
between any of those estimates because the contract was in fact settled on 10 June 1994 at the price
of $5 million previously agreed on in both January and March 1994, which was also the value ascribed
to it in December 1993 by Mr Stallman. Had it been completed at some other and lower (or higher)
price, the compensation might possibly have been assessed at a different amount depending on the
reason for the difference. But what is now said is that, consistently with the principles applied in
estimating the value of resumed land at a particular date, it is not permissible to give direct effect to that
subsequent fact in arriving at the compensation payable here for injurious affection. Events that impinge
on value after the date at which it falls to be determined are, on this approach to the question, to be
treated in law as irrelevant in assessing value at that date except to the extent that the parties would at
that date have foreseen and taken them into account as likely to occur.
It is not difficult to find judicial statements to that general effect in cases concerning
compensation for resumption. In Australia the classic test laid down in Spencer v. The
Commonwealth (1907) 5 C.L.R. 418 is that the market value of land at a particular date is to be
determined by reference to the price that would have been agreed on between a willing buyer and a
willing, but not over-anxious, seller of that land. In adopting this measure, Isaacs J. said (5 C.L.R. 418,
440):
“All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded.”
Applied literally, the statement that “all circumstances subsequently arising are to be ignored” would
have the consequence that, in arriving at the value of the subject land on or after the rezoning to Rural
on 17 December 1993, it would be necessary to exclude from consideration all subsequent events, such
as that, in January 1994, it was agreed to sell the land for $5 million; that a conditional contract to sell
at that price was executed by the parties on 28 March 1994; that the land was on 27 May 1994
rezoned to Commercial; and that the contract was completed at that price on 10 June 1994.
It is, however, clear that at the hearing in the court below, none of these subsequent
circumstances was ignored, but, on the contrary, in arriving at the value of the subject land on 17
December 1993, the valuers and the court took all of them into account. Their doing so accords with
the established practice of valuers in giving their opinions, and of the courts in receiving them, by which
sales of comparable land, both before and after the relevant date, are relied on in estimating the value
of the land at the relevant date. Experience suggests that in practice the opinions of valuers are
commonly influenced by a variety of factors, including overall rises or falls in land values, levels of
economic prosperity and activity or depression both generally and in the particular district where the
land is situated, and so on. To that extent, some of the broad statements of Isaacs J. on that subject
in Spencer’s case may have undergone a degree of qualification in practice during the period since that
decision was given in 1908.
It would, however, be a mistake to regard the reasons, read as a whole, of Isaacs J. in
Spencer’s case as completely excluding reference to matters arising after the date to which the valuation
relates. The hypothetical vendor and purchaser are not treated as being impervious to the influence of potential future events or developments. According to Mahoney J.A. in Housing Commission of New
South Wales v. Falconer [1981] 1 N.S.W.L.R. 547, 576, in a passage which is set out in full in the
reasons of Cullinane J. on this appeal, such persons are to be taken as knowing “what an appropriately
informed person would know on that date”, although as Mahoney J.A. added, “they cannot be seen as
knowing more”. As at that date, his Honour said, the price will be affected by uncertainties, and these
uncertainties and their impact on the postulated vendor and purchaser help to determine what price
would be found acceptable. The principle, his Honour, continued, does not operate necessarily to
exclude evidence of subsequent sales; but such sales are evidence, not of the subsequent outcome of
matters which at the relevant date were inherently uncertain, but of the price a relevant vendor and
purchaser found acceptable at that date for comparable land. The assumption is that what they would
have found acceptable can be inferred from evidence of such sales.
It would follow from applying here what was said by Mahoney J.A. in Housing Commission
v. Falconer that the evidence in this case of the subsequent rezoning of the land and completion of the
sale at $5 million would be admissible to support an inference as to the price which a hypothetical
vendor and purchaser might have agreed on as the sale price of the land after the rezoning to Rural on
17 December 1993. The possibility that a further rezoning would occur, and the strong likelihood,
approaching near certainty, that the Council would ensure that it did, are factors that would be taken
into account by such hypothetical persons in arriving at a price that affords evidence of the value of the
land at that date. In Re Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd. and Pontypridd
Waterworks Co. [1902] 2 K.B. 135, 141, the principle applied in valuation cases was likened by
Vaughan Williams L.J. to the ordinary rule for measuring damages for breach of contract, which, his
Lordship said, is that the value at the date when the contract ought to have been performed is to be taken into consideration, but not any matters so remote or so uncertain that they are incapable of being
measured. Read in the light of the later decision of Victoria Laundry (Windsor) Ltd. v. Newman
Industries Ltd. [1949] 2 K.B. 528, 539, the comparison is reminiscent of the distinction between
foresight based on knowledge of “the ordinary course of things”, which is imputed to all contracting
parties as reasonable persons, and foresight based on actual knowledge of special circumstances
outside the ordinary course of things.
It may have been knowledge of a kind in the first of those two categories that Mahoney J.A.
had in mind in Housing Commission v. Falconer when in his reasons in that case he spoke of persons
being “taken to know what an appropriately informed person would know on that date”. In the Bwllfa
case ([1902] 2 K.B. 135, 141), however, Vaughan Williams L.J. went on to say that “because the
assessment was postponed and a contingency occurred, that is no reason for augmenting the value of
the property which is being compulsorily acquired”. On that footing, it would not be permissible to use
the fact that on 27 May 1994 the land was rezoned Commercial and the contract became unconditional,
or that it was completed for $5 million on 10 June 1994, as showing that on and from 17 December
1993 the land had at all times retained the value of $5 million ascribed to it by Mr Stallman before that
date. The subsequent rezoning of the land and completion of the sale at that price would, on this
assumption, be considered as retaining their character of contingencies which, although fulfilled before
the hearing at which the compensation was assessed, could be relied on, if at all, only to show what, as
reasonable persons, a hypothetical seller and buyer might have foreseen as likely to result. On this
approach, the possibility that rezoning to Commercial would not take place must be viewed as a
continuing risk that would have been taken into account in arriving at a price for the land after the
rezoning on 17 December 1993, but which the court was not at liberty to treat as having in fact been eliminated by anything that was shown to have happened thereafter. The amount of compensation
awarded to the respondent in this case for the injurious affection brought about by the rezoning to Rural
on that date was clearly influenced by approaching the determination of value in this way.
The question is whether the resulting assessment of compensation, is in the particular
circumstances, correct as a matter of law. The decision of the Court of Appeal in the Bwllfa case was
reversed by the House of Lords in Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd. v.
Pontypridd Waterworks Co. [1903] A.C. 426, on the ground that, in determining the value of the
subject coal in that case, it was proper for the arbitrators to take into account that there had been rises
in the price of coal between the date of the notice to treat and the arbitration hearing. I agree with
Cullinane J. in thinking that the decision in Bwllfa is capable of being distinguished from the present case
in that it was not concerned with the assessment of market value at a particular date but with what the
coal owners might have expected to receive for the coal during the time they would have been working
the mine if not prevented by statute from doing so. The same may less readily be said of the decision
in Thorpe v. Brisbane City Council [1966] Qd.R. 37, in which the question was one of compensation,
assessed in accordance with Spencer’s case (see 29 Q.C.L.L.R. 367, 372, 374), for partial resumption
resulting from road widening, but where some two or more years after it the resuming authority, which
was the Council, offered to reinstate by moving a shop building to the rear of the site so that it would
stand wholly on the remaining area of the land retained. In the present case, the appellant Council did
not merely offer but acted to reinstate the zoning to its effective condition as it was before the accidental
rezoning to Rural on 17 December 1993.
In Thorpe v. Brisbane City Council [1966] Qd.R. 37, 44-45, Gibbs J., in delivering the judgment of the Full Court holding that the offer was a matter proper to be considered in assessing the compensation payable for the resumption, relied on Minister for the Army v. Parbury Henty & Co.
(1945) 70 C.L.R. 459, 514, where Williams J. said:
“The amount of compensation, being a matter of assessment, can, like damages, be calculated in the light of any subsequent facts to the extent to which they throw light upon the items of value which can properly be taken into account in the calculation, having regard to the circumstances existing at the date of acquisition.”
After referring to this passage, Gibbs J. went on to say that, at the date of the resumption in Thorpe v.
Brisbane City Council, it was reasonable to expect that the Council would offer to make the building
available because the purpose of the resumption was to widen the road, and possession of a building
could be of no use to the Council. “The fact”, said his Honour, “that it has since made the offer may
be regarded to show that as at the date of the resumption the building would have been available”
([1966] Qd.R. 37, 45).
Taking account at the hearing of the fact that a contingency affecting value has in fact been
fulfilled before the date as at which the compensation falls to be assessed has, since the decision in the
Bwllfa case, become the practice in assessing damages in the law of torts. It was recognised in the
passage quoted from the judgment of Williams J. in Minister for the Army v. Parbury Henty & Co.
In stating that principle, his Honour referred to remarks of his own in McCathie v. Federal
Commissioner of Taxation (1944) 69 C.L.R. 1, 16, as well as to those of Rich J. in Australian Apple
& Pear Marketing Board v. Tonking (1942) 66 C.L.R. 77, 108. In the first of the two cases,
Williams J. said that the “whole tendency of the court is to admit evidence of any events prior to the date
of the trial which will throw any light on the real issues”. In doing so, his Honour referred again to what
was said by Rich J. in the Australian Apple & Pear Marketing Board case (1942) 66 C.L.R. 77,
108, which was that “in determining this value, the price which, having regard to the objects of the
regulations, the fruit actually realised on the market can be taken into account”.
What was said by Rich J. on that occasion was accompanied by a reference to Williamson v.
John Thorneycroft & Co. Ltd. [1940] 2 K.B. 658, where, in assessing a claim for damages under
Lord Campbell’s Act, the Court of Appeal held that the fact that the plaintiff widow had died before
trial was a matter which ought to have been taken into account in assessing the damages recoverable
by her estate, even though, as was also accepted, such damages, for what is a statutory cause of action
for compensation for death (Seward v. The “Vera Cruz” (1884) 10 App.Cas. 59, 70), admittedly
fell to be assessed at the date of the death of the plaintiff’s husband. It is quite true, said Scott L.J.:
“... that the measure of damages has to be assessed at that date, but courts in assessing damages are entitled to inform their minds of circumstances which have arisen since the cause of action accrued and throw light upon the reality of the case”.
The decision was followed in Willis v. The Commonwealth (1946) 73 C.L.R. 105, where the plaintiff
widow had remarried before trial; and, in Curwen v. James [1963] 1 W.L.R. 748, a similar conclusion
was reached where evidence of the widow’s remarriage was admitted on appeal after judgment in the
action had been given at first instance. That aspect of the decision has produced a series of further
authorities (see Luntz, Assessment of Damages §12.2.07 (2nd ed., 1983)) concerning the admissibility
on appeal of evidence of subsequent events; but its principal relevance for present purposes lies in the
aphorism of Harman L.J. in Curwen v. James [1963] 1 W.L.R. 748, 753 that “the court should never
speculate where it knows”, which was a principle which, his Lordship said, was involved where, for
instance, “there is a change in value in property”. See also Ruby v. Marsh (1975) 132 C.L.R. 642,
647, 658; and Luntz, Assessment of Damages, §1.4.01. The authority on which Harman L.J. relied
for that statement was Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd. v. Pontypridd
Waterworks Co. [1903] A.C. 426, which, as I have said, was not concerned, as we are here, with the
assessment of compensation at a particular date before the hearing at which the assessment takes place. Nevertheless, I do not consider it possible, in determining compensation for injurious affection, in effect
to insulate the assessment of market value from the impact of subsequent events, while at the same time
admitting the relevance of such events for other purposes of the law, such as assessing compensation
for reinstatement, or damages in tort. That conclusion is supported by the fact that, in the High Court
decisions referred to, Williams J. specifically treated the assessment of damages as affording a direct
supporting analogy with the ascertainment of value for compensation purposes.
In the final analysis, however, the strength of the respondent’s argument for excluding reliance
on the happening of subsequent events may be thought to depend upon a strict and literal interpretation
of the word “immediately” in s.3.5(8)(a). In assessing compensation, the statutory provision requires
it to be an amount equal to the difference between (1) “the market value of the interest immediately
after the time of coming into operation” of the planning scheme provision, and (2) “what would have
been the market value of that interest” if that provision had not come into operation. It is the use of
“immediately” in this statutory context that lends force to the contention that the rezoning to Commercial
on 27 May 1994 cannot be given its full effect even though the contract was in fact executed on 28
March and completed on 10 June 1994 at the full price of $5 million which had been fixed by the parties
at a much earlier date.
Unless we are to return to the view adopted by Vaughan Williams L.J. in the Bwllfa case
([1902] 2 K.B. 135, 141) that it is irrelevant to the assessment of compensation that a particular
contingency was fulfilled before the compensation hearing took place, it does not seem to me to be
possible to give to the word “immediately” in s.3.5(8)(a) the literal effect for which the respondent in
this Court is forced to contend. The statements in the High Court decisions to which I have referred,
which recognise that the happening of the contingency before the hearing of the claim for compensation is capable of revealing its value at an earlier date, are sufficiently authoritative not to be affected by use
of that word in s.3.5(8)(a) of the Act. In determining at the hearing in August 1996 whether or not the
injurious affection on 17 December 1993 in fact reduced the market value of the subject land, the
learned judge was, I consider, entitled and bound as a matter of law to take account of the fact that the
error in rezoning was rectified on 27 May 1994; and that, some time before that event took place, the
parties had already agreed to sell, and subsequently sold and completed their contract, at the same price
of $5 million that they had always had in contemplation independently of that error.
As in Thorpe v. Brisbane City Council [1966] Qd.R. 37, 45, regard may be had to those
facts to show that immediately after the date of the injurious affection the land had a market value of $5
million. Looking back now at what in fact happened, there never was a time at which the market value
of the land was, except in the most theoretical way, diminished by the error in rezoning that occurred
on 17 December 1993 when the new Town Planning scheme came into effect on that date. In saying
this, I mean to confine my remarks to what I have previously described as the “risk factor” for which
allowance was made in the award. It follows that, in failing to approach the question in this way, an
error of law was made by the Planning and Environment Court in assessing the amount of compensation
payable for the injurious affection, and accordingly the determination of that amount cannot be permitted
to stand. It might perhaps be possible here and now to re-assess the compensation recoverable, and
to do so simply by eliminating the allowance of $238,095 included in the assessment for “risk
allowance”, leaving the remaining items in the assessment unaffected. But the parties should, I consider,
be given an opportunity to agree on the outcome in the light of these reasons; or, if that proves
| impossible, to present the matter for redetermination in the appropriate court. were regarded below as compensable are, or are not, now to be reconsidered at a future hearing. In | It should not, from anything I have said here, be assumed that I consider that other items which |
all but the particular question of principle determined on this appeal, the assessment of the compensation
payable to the respondent for injurious affection remains a matter for future determination by the
Planning and Environment Court. appeal no. 36 of 1996 in the Planning and Environment Court as determined that the respondent in this Court is entitled to recover from the appellant Council compensation in the amount of $500,000, together with interest, for injurious affection; and remit the matter to that Court for redetermination of the amount of that compensation.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 286 of 1997
Brisbane
| Before | McPherson JA Williams J Cullinane J |
[Cairns City Council v. CMB No. 1 P/L]
BETWEEN:
CAIRNS CITY COUNCIL
(Respondent) Appellant
AND:
CMB NO. 1 PTY LTD
ACN 058 283 784
(Appellant) Respondent
REASONS FOR JUDGMENT - WILLIAMS J
Judgment delivered 19 December 1997
Generally I agree with the reasoning of McPherson JA, but in the circumstances it is desirable
that I set out the reasoning which primarily leads me to conclude that the appeal should be allowed. The
facts and relevant statutory provisions are set out in the reasons for judgment of the other members of
the court, and I will not repeat them except where necessary.
Ultimately the critical issue is the extent to which, if at all, regard can be had to events which
occurred subsequently to the gazettal of the new Town Planning scheme on 17 December 1993 in
determining the quantum of compensation payable to the respondent for injurious affection. The judgment appealed from, and the respondent’s argument, are premised on the proposition that s.3.5(8)
of the Local Government (Planning and Environment) Act 1990 does not permit of any other
approach than a comparison of market values immediately before and immediately after the coming into
operation of the relevant town planning scheme in order to arrive at the amount of compensation
payable. That may be assumed to be correct for present purposes. But the corollary to their approach
is the proposition that the quantum of compensation is fixed as at the date of coming into force of the
scheme and events subsequent to that date cannot alter either the conclusion that there has been
injurious affection or the quantum to compensate for that.
Section 3.5(1) gives the landowner the entitlement to obtain from the local authority
compensation in respect of the injurious affection; it goes on to say that the landowner may “claim that
compensation in accordance with this section”. The term “compensation” is not defined, but it is of
some significance that that term is used rather than “damages”. Compensation is a term of longstanding
use in areas of the law concerned with property valuation. Generally in such context compensation
refers to the restoration of a former position; it does not (at least generally) give an entitlement to any
amount greater than is necessary to restore the previous position. It is sufficient to quote a passage from
the judgment of Dixon J in Nelungaloo Pty Ltd v. The Commonwealth (1948) 75 CLR 495 at 571 -
a case involving the acquisition by government of primary produce:
“Now 'compensation' is a very well understood expression. It is true that its meaning has been developed in relation to the compulsory acquisition of land. But the purpose of compensation is the same, whether the property taken is real or personal. It is to place in the hands of the owner expropriated the full money equivalent of the thing of which he has been deprived.
Compensation prima facie means recompense of a loss, and when an owner is to receive compensation for being deprived of real or personal property his pecuniary loss must be ascertained by determining the value to him of the property taken from him. As the object is to find the money equivalent for the loss or, in other words, the pecuniary value to the owner contained in the asset, it cannot be less than the money value into which he might have converted his property had the law not deprived him of it. You do not give him any enhanced value that may attach to his property because it has been compulsorily acquired by the governmental authority for its purposes. ... Equally you exclude any diminution of value arising from the same cause.”
In the present case the legislation gives some guidance with respect to the determination of what
compensation is payable for injurious affection. In s.3.5(4) one finds seven situations defined in which
compensation is not payable; that is, though injurious affection may be established no compensation is
payable with respect to the matters therein specified. For example, no compensation is payable in
respect of any injurious affection of an interest in land pursuant to a planning scheme under which the
subdivision of the land is prohibited or restricted.
Section 3.5(9) provides that where compensation is claimed for injurious affection the local
government may at its option compulsorily acquire the land instead of paying compensation.
Reference should also be made in this context to the provisions of paragraphs (2) and (2A) of
s.3.5 referred to in the other judgments.
Thus not all cases of injurious affection will ultimately result in payment of monetary
compensation.
Then comes paragraph (8) of s.3.5 which is of critical importance; it provides:
“Subject to subsections (2A) and (9), the following provisions are to have effect in
assessing compensation in respect of a claim made under subsection (1)(a) -
(a)
the amount of compensation is (subject to paragraphs (b), (c) and (d)) to be an amount equal to the difference between the market value of the interest immediately after the time of the coming into operation of the provision of the planning scheme by virtue of the operation whereof the claim for compensation arose and what would have been the market value of that interest if the provision had not come into operation;
(b)
any modification of the injurious affection that may be effected in consonance with the planning scheme is to be taken into account;
(c)
any benefit which may accrue to any land adjacent to the land in respect of which compensation is claimed in which the claimant has an interest -
(i)
by reason of the coming into operation of the relevant provision or any other provision of the planning scheme; or
(ii)
by reason of the construction or improvement by the local government at any time after the planning scheme comes into force upon the adjacent land of any work or service in pursuance of the planning scheme;
is to be taken into account;
(d)
if the land in respect of which compensation is claimed has, since the date upon which the planning scheme came into operation, become or ceased to be separate from other land, the amount of compensation is not to be increased by reason of its having become or ceased to be separate from other land.”
It is immediately obvious that paragraphs (b), (c) and (d) must refer to events subsequent to the
coming into operation of the planning scheme in question. A claim for compensation can be made within
three years after the date on which the claim arose, and if the local authority does not determine the
quantum of compensation within 40 days the landowner has a right of appeal to the Planning and
Environment Court which is then to determine the quantum of compensation. Clearly if that was the
course which was followed the court could have regard to matters covered by paragraphs (b), (c) and
(d) occurring many years after the date on which the claim arose. At least to that extent the legislation
makes it clear that subsequent events may be relevant to the determination of compensation.
The real difficulty in this case arises because of the wording of s.3.5(8)(a). McPherson JA has
commented on the significance of the word “immediately” therein and I will say no more as to that. By
using the expression “the amount of compensation is” the legislature appears to be indicating to the court
the method by which compensation is, prima facie, to be calculated. For purposes of that paragraph
the two relevant figures are those for market value of the property immediately before and after the
coming into operation of the relevant planning scheme. Rarely will there be direct evidence as to the
price that would have been agreed upon between a willing buyer and a willing, but not overanxious,
seller of that land on the particular date in question. Here, however, there is strong evidence as to the value immediately prior to the coming into operation of the relevant town planning scheme. At about
that date, and without knowledge of the changes effected by the relevant town planning scheme, the
respondent had agreed to sell the land for $5 million. There is general agreement that that represents
the market value of the land immediately before the coming into force of the relevant town plan.
The question of the value of the land as affected by the new zoning was not addressed for some
time after 17 December 1993. Mr Stallman, the valuer relied on by the respondent, did not inspect the
land until 10 March 1995, and his report is dated 6 April 1995. Stallman, whose approach was
generally accepted by his Honour Judge Quirk in the Planning and Environment Court, determined the
value as affected and in consequence the quantum of compensation as follows:
“The Value of the property as at the relevant date zoned Rural must be significantly less than its value zoned Local Shopping or Commercial. This would particularly be the case when it is known that commercial rezoning can be expensive, involves risks and takes time.
It is our opinion that the most appropriate method of assessing the value of the property at the relevant date zoned Rural, is by carrying out a Hypothetical Development exercise taking into account cost, risk and time factors. ... Many of the costs and figures shown in the hypothetical development valuation are either actual costs, or may be quite accurately calculated.
... indicated that it is favour of the zoning. This risk factor is due to:
Risk Allowance
A. Possibility of additional conditions being imposed by council ... B. Possible changes to the planning policies ... C.
Potential for additional conditions to be imposed by Department of Transport ...
D. It was necessary to readvertise the proposed rezoning ... E.
Possibility of some unforeseen circumstances arising which could delay the rezoning ...
...
It is our opinion that a risk factor of 10 per cent in this instance is fair and reasonable.
Rezoning Costs
We have been advised that potential additional costs involved in the rezoning process
caused by the back zoning of a subject land could be a total of $80,000. ...
Interest Rate
We have adopted an interest rate of 11.25 per cent which is considered an indicative
commercial rate as at the date of valuation. ...
Rezoning Period
The property was back zoned on 18 December 1993, with the commercial zone
eventually being gazetted on 27 May 1994. This is a period of 160 days (approx 5
months), or 0.44 years. We have adopted this as a rezoning period for the calculation
of interest and other holding charges.
...
Hypothetical Development Valuation
Gross Realisation $5,000,000 Less Risk allowance 10.0% $454,545
$4,545,455Less Rezoning Costs 80,000 Interest on Rezoning Costs 11.25% Rezoning Period in years (5 mths)
00.44 3,960 Holding Charges
Rates 1,760 Land Tax
1,630 3,390 $87,350
Gross Land Value $4,458,105 Less
Interest on Purchase 11.25% $210,268
$4,247,837
FOR PRACTICAL REAL ESTATE PURPOSES ADOPT $4,250,000 In his reasons for judgment his Honour said: “I have concluded that Mr Stallman has, in his evidence, sufficiently identified the method and relevant considerations to enable me to assess compensation using a risk factor of 5 per cent which I find to be fair and reasonable in the circumstances of this case. Accordingly his 'hypothetical development valuation' should be rewritten as follows:-
Hypothetical Development Valuation
Gross Realisation $5,000,000 Less Risk allowance 5.0% $238,095
$4,761,905Less Rezoning Costs 35,000 Interest on Rezoning Costs 11.25% Rezoning Period in years (5 mths) 00.44 1,732 Holding Charges
Rates 1760 Land Tax
1630 3,390 $40,122
Gross Land Value $4,721,783 Less
Interest on Purchase 11.25% $222,704
$4,499,079
FOR PRACTICAL REAL ESTATE PURPOSES ADOPT $4,500,000 Compensation pursuant to s.3.5(8)(a) $500,000 His Honour appears to have been conscious of the windfall profit the respondent obtained
because he said that “the result is somewhat less than satisfying in that the compensation which I have
been required to assess appears to be greater than the loss actually sustained by the appellants and that
this is attributable to the efforts of the respondent to mitigate the damage once the error was understood.
Unfortunately, however, the Act does not allow for these matters to be taken into account ...”
Every item in either “Hypothetical Development Valuation” relates to something which occurred,
either actually or hypothetically, after the relevant date. In my view the very calculation on which the
judgment appealed from is based necessarily takes into account subsequent events. Even on the respondent’s own case the proposition cannot be sustained that subsequent events must be totally
ignored for purposes of the calculation.
What the respondent appears therefore to be saying is that it is permissible, if not necessary,
to have regard to hypothetical subsequent events in determining compensation, but one must ignore what
actually occurred. There is nothing in the legislation, in my view, which forces one to accept that; it must
generally be regarded as an absurd proposition. The language of Lord Macnaghten in Bwllfa and
Merthyr Dare Steam Collieries (1891) v. Pontypridd Waterworks Company [1903] A.C. 426 at 431
is apposite:
“If the question goes to arbitration, the arbitrator’s duty is to determine the amount of compensation payable. In order to enable him to come to a just and true conclusion it is his duty, I think, to avail himself of all information at hand at the time of making his award which may be laid before him. Why should he listen to conjecture on a matter which has become an accomplished fact? Why should he guess when he can calculate? With the light before him, why he should he shut his eyes and grope in the dark?”
Harman L.J. put it succinctly in Curwen v. James [1963] 1 WLR 748 at 753 when he said that “the
court should never speculate where it knows”. That approach is consistent with other authorities:
Minister for Army v. Parbury Henty & Co (1945) 70 CLR 459 at 516, Nelungaloo Pty Ltd v. The
Commonwealth (1948) 75 CLR 495 at 514-515, and Housing Commission of New South Wales v.
Falconer [1981] 1 NSWLR 547. The only other authority to which reference need be made is Thorpe
v. Brisbane City Council [1966] Qd.R. 37, a resumption case. The Brisbane City Council resumed part
of a block of land leaving a wooden shop building partly on the resumed land and partly on the
remainder of the block. Proceedings were commenced by the landowner seeking compensation. Some
time later the Council wrote offering as part of a compensation package to bear the cost of moving the
shop back on the area retained by the landowner and of carrying out associated works. Speaking for
the Full Court Gibbs J said at 44-5:
“It was then argued on behalf of the respondents that in any case it was not correct to assess compensation on the basis that the Council would hand back the part of the building that it had acquired by the resumption. It was submitted that the respondents were entitled to compensation in money and were not bound to accept it in kind. ... In answering the question how much money is necessary for this purpose it becomes necessary to inquire in what manner the reinstatement should be effected. The question is in other words whether the manner of reinstatement proposed by the respondents is reasonable in the circumstances. ... If the Council offered to move back the existing shops it seems to me prima facie that the reasonable course was for the respondents to accept that offer, if, as I have held, it was lawful for them to do so. It was pointed out that the offer was not made until more than two years after the date of resumption and that compensation had to be assessed as at the latter date. ... In the present case at the date of the resumption it was reasonable to expect that the Council would offer to make the building available, since the purpose of the resumption was to widen a road and possession of portion of a building could be of no use to the Council. The fact that it has since made the offer may be regarded to show that as at the date of resumption the building would have been available.”
Here the learned primary judge held that at the time the relevant town planning scheme came
into force there were facts which established that a rezoning back to commercial “should not encounter
great difficulty”. Subsequent events proved that such was the case. The subsequent facts confirm a
foresight rather than prove a hindsight.
In those circumstances it was wrong for the primary judge to assess compensation after carrying
out a hypothetical development exercise as he did. Given all the relevant facts the market value
immediately after the coming into operation of the relevant town planning scheme was $5 million less
the losses sustained by the respondent in consequence of the rezoning on 17 December 1993;
McPherson JA has identified the possible areas of such loss. The matter must be remitted to the
Planning and Environment Court to enable such losses to be quantified.
I agree with the orders proposed by McPherson JA.
IN THE COURT OF APPEAL
SUPREME COURT OF QUEENSLAND
Appeal No. 286 of 1997
Brisbane
Before McPherson J.A.
Williams J.
Cullinane J.
[Cairns City Council v. CMB No. 1 P/L]
BETWEEN:
CAIRNS CITY COUNCIL
(Respondent) Appellant
AND:
CMB NO. 1 PROPRIETARY LIMITED
ACN 058 283 784
(Appellant) Respondent
REASONS FOR JUDGMENT - CULLINANE J.
Judgment delivered 19 December 1997
The appellant Council appeals against a decision of the Planning and Environment Court assessing compensation in the sum of $500,000 for injurious affection of land owned at the time of the relevant rezoning by the respondent.
The appeal lies pursuant to section 7.4(3) of the Local Government (Planning and Environment) Act 1990 as amended which limits the right of appeal to error or mistake of law or want of jurisdiction.
The circumstances are somewhat unusual. The land which has an area of some 8.199 hectares has frontage to the Captain Cook Highway approximately twelve kilometres north of Cairns. It adjoins a major shopping centre.
The respondent acquired it in December 1992 at a time when it was zoned Residential A. It set about attempting to rezone the land to local shopping. There was some difficulty encountered with conditions. This resulted in an appeal which was on 30 September 1993 the subject of a consent order and shortly afterwards a rezoning deed was entered into.
The rezoning to local shopping took effect when it was gazetted on 3 December 1993. In 1993 the respondent was interested in selling the land and had been approached by two major land developers. At all relevant times the respondent was prepared to accept $5,000 000 for the land but no less. Negotiations were entered into in late 1993 and the evidence indicates that the interest of the possible purchasers in the land followed their interest in purchasing the existing shopping centre and extending it on the subject land.
Negotiations between the ultimate purchaser and the respondent proceeded upon the basis that the land was in the process of being rezoned and had been rezoned on 3 December 1993.
On 17 December 1993 a new planning scheme came into effect. The process of implementing the new planning scheme had no doubt been underway for some significant period prior to this. When the scheme came into effect on 17 December 1993 the subject land was zoned rural. It was accepted by all that this occurred in error.
In January the respondent and the company which ultimately purchased the land had draft contracts prepared for the sale of the land in the sum of $5,000,000. The draft contracts were unconditional as to zoning because both parties believed that the land was zoned local shopping.
In the course of carrying out due diligence the purchaser discovered that the land was in fact now zoned rural. This led to some changes in the contracts which had not at that time been executed. The purchaser not surprisingly required that the contract be made conditional upon the rezoning of the land to commercial. It appears that this represented the zoning which was equivalent in terms of the right to develop the land for a shopping centre to the previous local shopping zone. The purchaser required that the provision for a deposit be altered from $250,000 to $50,000.
The local authority upon discovering the error took steps to remedy it. Some of these were taken as early as January 1994.
If a rezoning application had been made by the respondent this would have given rise to a right on the part of objectors to appeal against any decision to approve the rezoning.
As things happened, the local authority itself made application for the rezoning under section 2.18 of the Act, a course which precluded any right of appeal by objectors. The relevant department waived the requirement for an environmental impact study. This occurred on 21 March 1994. The local authority had resolved to apply for a rezoning under section 2.18 on 21 March 1994.
On 28 March 1994 the respondent and the purchaser executed a contract conditional on rezoning. The purchase price was $5,000,000. (His Honour found that $5,000,000 represented the unaffected value of the land at the date of rezoning.)
On 27 April 1994 the local authority resolved to forward the rezoning application subject to the same conditions as applied to the rezoning in 1993 to the department. The rezoning came into effect upon publication in the Government Gazette on 27 May 1994. The contract was completed on 10 June 1994.
Before turning to the grounds of appeal it is desirable to refer to the provisions of the Act dealing with compensation for injurious affection.
Section 3.5(1) provides as follows:
“Where a person -
(a) has an interest in premises within a planning scheme area and the interest is injuriously affected -
(i) by the coming into force of any provision contained in a planning scheme; or (ii) by any prohibition or restriction imposed by the planning scheme; or (b) has incurred expenditure pursuant to a town planning certificate given to that person by a local government pursuant to section 3.3 which expenditure is rendered abortive (in whole or in part) by reason of any error, omission or inaccuracy in the certificate; the person is, subject to compliance with this section, entitled to obtain from the local government compensation in respect of the injurious affection or expenditure and may claim that compensation in accordance with this section.”
Section 3.5(8) provides as follows:
“Subject to subsections (2A) and (9), the following provisions are to have effect in
assessing compensation in respect of a claim made under subsection (1)(a) -
(a)
the amount of compensation is (subject to paragraphs (b), (c) and (d)) to be an amount equal to the difference between the market value of the interest immediately after the time of the coming into operation of the provision of the planning scheme by virtue of the operation whereof the claim for compensation arose and what would have been the market value of that interest if the provision had not come into operation;
(b)
any modification of the injurious affection that may be effected in consonance with the planning scheme is to be taken into account;
(c)
any benefit which may accrue to any land adjacent to the land in respect of which compensation is claimed in which the claimant has an interest -
(i)
by reason of the coming into operation of the relevant provision or any other provision of the planning scheme; or
(ii)
by reason of the construction or improvement by the local government at any time after the planning scheme comes into force upon the adjacent land of any work or service in pursuance of the planning scheme;
is to be taken into account;
(d)
if the land in respect of which compensation is claimed has, since the date upon which the planning scheme came into operation, become or ceased to be separate from other land, the amount of compensation is not to be increased by reason of its having become or ceased to be separate from other land.”
The courses open to a local authority which receives a claim for compensation for
injurious affection are found in subsection (11) which provides as follows:
“In deciding a claim made to it pursuant to this section a local government is to -
(a) grant the claim, in whole or in part; or (b) reject the claim, in whole or in part; or (c) acquire the land pursuant to subsection (9); or (d)
by resolution, propose to amend the planning scheme pursuant to subsection (2A); or
(e) effect any combination of paragraphs (a), (b), (c) or (d).” Finally, reference should be made to subsections (2) and (2A). The effect of these
provisions is that where land under a planning scheme is included in a zone which limits the permitted use of such land to a use for public purposes or where land is affected by a proposed road a claim for injurious affection arises as a result. Subsection (2A) provides as follows:
“A claim for compensation arising pursuant to subsection (2) may be satisfied by the local government, with the approval of the Governor in Council, amending the planning scheme to remove the limitations on use rights.”
It is contended on behalf of the appellant that his Honour’s judgment was affected by two
errors of law. The two errors of law are:
| a) | “as the respondent sold the land for its unaffected value, it suffered no loss. Compensation is recompense for loss and the primary judge has awarded a profit. An award of profit is not an award of compensation. The primary judge applied an incorrect interpretation of Section 3.5.” |
| b) | “The compensation awarded was based upon a risk allowance for uncertainties, rezoning costs, holding charges and interest on acquisition costs. None of the uncertainties eventuated, and none of the costs was incurred. In compensation for injurious affection, it is wrong in principle to reject subsequent facts which establish that there was no loss, and to prefer artificial assumptions and a theoretical result. |
The first ground then is that because as at the date of the hearing the respondent had sold
the land upon its rezoning for its unaffected value, it has suffered no loss and the award of the land had been rezoned to commercial and the claimant had effected a sale of the land for an amount no less than the unaffected value at the time of rezoning of 17 December 1993. Indeed although counsel for the appellant at one time placed the matter on the basis that the subsequent rezoning which enabled the land to be sold at the price of $5,000,000 might be treated as a form of reinstatement or in a broad way satisfaction of any claim for compensation, he suggested that there would be the same result if the land was sold in its affected zoning but because of improved market conditions the price achieved was equivalent to the value of the land immediately before the rezoning giving rise to the claim.
$500, 000 represents not compensation but enrichment. This does not appear to be the way in
which the appellant’s case was conducted before his Honour. The proposition inherent in this
ground is that a right to compensation conferred by section 3.5 is defeated by subsequent events.
In my view, this proposition offends the basic principle that the loss to be assessed is a loss sustained at the date of the rezoning. This view accords with general principle (see Minister for Army -v- Parbury Henty & Co Pty Ltd (1945) 70 C.L.R. 459 at 514 per Williams J and see also Sugerman J in respect of a claim for injurious affection arising pursuant to a provision which seems to be in terms indistinguishable in any relevant sense from section 3.5(1) in
Bingham v. Cumberland County Council 20 L.G.R. (N.S.W.) 1 at 4). It also accords with the terms of section 3.5(8).
Whatever regard can be had to events subsequent to that date they are in my view relevant only to the task of measuring the loss (if any) which arose on 17 December 1993.
No authority was cited which would support the principle that such a claim can be defeated because there is a subsequent rezoning and sale of the land prior to the assessment of compensation at a price not less than its unaffected value at the time of rezoning. Nor is there any justification for treating the subsequent rezoning as in the nature of a reinstatement by the relevant local authority satisfying the claim for compensation. The legislation provides for circumstances in which a rezoning might satisfy a claim for compensation but it has no application to this situation. The ground ignores the statutory prescription in s. 3.5(8) requiring the amount of compensation to be arrived at by comparing the market value of the interest affected immediately after the rezoning with what the market value would have been had the rezoning not occurred.
The second ground is concerned with what is said to have been an error in law in the manner in which his Honour derived the after or affected value. His Honour approached this value by attempting to establish what value would be ascribed to the land in its affected state by a willing but not over-anxious vendor and purchaser at 17 December 1993 in the unusual circumstances of this case. This accorded with the approach of both valuers although each arrived at a very different result. These circumstances included the fact that the rezoning had occurred by mistake, that a local authority would be likely to take whatever steps it could to effect the rezoning of the land to commercial and (as his Honour found) that such a rezoning was “almost a certainty”.
The after exercise carried out by the valuer whose evidence his Honour preferred involved a hypothetical development which made certain allowances in respect of what were said to be uncertainties associated with these matters. Indeed it is correct as senior counsel for the appellant said, that the amount ultimately arrived at involved the total of these allowances albeit forming part of the hypothetical development evaluation. They include a risk allowance, rezoning costs and interest on rezoning costs for a period which equates with the period from 17 December 1993 to 27 May 1994. It is said that this is a wholly artificial exercise and that the court was in a position at the time of assessing compensation to know that in fact no loss of this kind was sustained by the respondent.
I have already said that I consider that section 3.5(8) prescribes the manner in which compensation for injurious affection is to be measured.
The ground raises the question of the extent to which the court can take into account
evidence of events subsequent to the date upon which the right to compensation arises in
arriving at the value of the land in its unaffected state and the use to which such evidence can
be put.
It is now clearly established that the right of a dispossessed owner where there has been an acquisition of land is the value of the land to the owner. This will not be necessarily limited to market value but may include a value over and above that. This value is called the special value and is usually expressed as the value which a prudent person in the dispossessed owner’s position would have been willing to give sooner than fail to obtain it. See Minister for Public Works v. Thistlethwayte [1954] AC 475, Housing Commission of New South Wales v. Falconer [1981] 1 NSWLR 547 per Glass JA at 563 and for a general summary of the principles, March v. City of Frankston [1969] VR 350 at 356 (per Barber J.) Compensation assessed on the basis of special value will permit recovery of items under the head of disturbance and in appropriate circumstances permit compensation to be awarded upon the principle of reinstatement.
Section 3.5(8) in my view precludes such an approach to the assessment of compensation
for injurious affection in a case such as this. It requires compensation to be assessed by a
comparison of two market values.
The classic test of what constitutes market value is to be found in Spencer v. The
Commonwealth (1907) 5 CLR 418 at 432 per Griffith CJ:
“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?’”
Per Isaacs J at 441:
“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. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.”
A little earlier at 440 Isaacs J had said:
“All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value as fixed by Statute as on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all-important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted.”
I think it is clear from the authorities that there is a difference between the use to which
events after the date on which the right to compensation arises can be put where on the one hand it is market value that is to be ascertained and on the other where the relevant value is a special value to the owner. The distinction is referred to by Mahoney JA in Housing Commission of New South Wales v. Falconer at 576 where he said:
“There are some cases in which the theory or principle on which the compensation is to be assessed prevents regard being had to subsequent events. Thus, where the compensation which is to be taken is measured by the ordinary market price of the property taken, the principle on which that market price is to be determined prevents (or at least restricts) reference to subsequent events. That market price is the price acceptable to a willing but not anxious vendor and purchaser on the relevant date. Such persons are to be taken to know what an appropriately informed person would know on that date. That being the principle, it follows that such persons (and the court, as determining what they would have done) cannot be seen as knowing more. The price which such persons would accept at that date will be affected by the uncertainties as at that date, as to, for example, the future demand for land at the relevant time, future decisions of zoning authorities, and the like. Those uncertainties and the effect of them on the postulated vendor and purchaser help to determine what price will be found acceptable. In that regard, therefore, evidence of what subsequently has occurred in relation to such matters may not ordinarily be referred to.”
Similarly Glass JA at 564 said:
“Whereas the market test of value to the owner was hinged upon the hypothetical sum
which the owner would accept or offer on an assumed sale at the date of resumption,
the reinstatement test assessed its value to him at that time by measuring the actual cost
of replacing what he then owned. Proof of events subsequent to the expropriation,
within a period limited by the necessity to act with reasonable dispatch, is an integral
part of the evidence supporting a claim for the cost of reinstatement.”
In an earlier judgment which is reported only in the Valuer, Sugerman J in Bennett -v- Commissioner for Railways (1952) 12 The Valuer 169 adverted to this distinction:
“Questions of compensation for special value to owner or disturbance of business ... unlike the question of improved value, are not confined within the limits of a statutory formula based on a hypothetical sale at the relevant date. In some cases it may be necessary to refer to events that have occurred since the relevant date, and the destruction of a business through loss of the land is such a case. It is indeed impossible to say whether or not a plaintiff has suffered such a destruction of business without inquiry into events occurring after resumption, with reference particularly to the possibility of acquiring other suitable land; and this general characteristic is shared with the common case of disturbance of business. The very basis of the claim is that it has been found impossible to acquire suitable alternative premises in which to constitute the business ... .
The distinction between a question of ‘improved value’ and a question of ‘special value’ in the circumstances such as the present is that discussed in the judgment of R. Fawler Ltd v. The Commissioner of Road Transport and Tramways (Vol 12 ‘Valuer’ at p 45 especially at p 47). On the first question it is necessary ... to limit consideration to the facts on the probability as they were known and appeared at the relevant date. On the second question it may only be necessary to substitute speculation as to probabilities for inquiry into actual facts because of the extent that the relevant facts are not fully worked out at the time of hearing. Such a question is truly a case in which facts, where available, ought to be preferred to prophecy ... .”
It is in my view this distinction which explains the admission of the evidence in cases such as Thorpe v. Brisbane City Council [1966] Qd.R. 37 which involved a claim for reinstatement. The passage from the judgment of Williams J (page 514) in Minister for Army v. Parbury Henty & Co Pty Ltd which is frequently quoted, in my view, also reflects this distinction:
“The right to compensation arises at the moment of acquisition, just as the proprietary right of the owner of property upon a voluntary sale is converted into a right to receive the purchase money when the contract is made. The amount of compensation, being a matter of assessment, can, like damages, be calculated in the light of any subsequent facts to the extent to which they throw light upon the items of value which can properly be taken into account in the calculation having regard to the circumstances existing at the date of acquisition. (Australian Apple and Pear Marketing Board v. Tonking (1942) 66 CLR 77 at p. 108; McCathie v. Federal Commissioner of Taxation (1944) 69 CLR 1 at pp. 16, 17). In the present case it would have been reasonable for the companies, as willing sellers of the proprietary interests acquired by the Minister, to have claimed, not only for the value of the proprietary interests so acquired, but also for what can be compendiously called the expenses of removal into premises at least as commodious and congenial, taking a broad view of the matter, as those of which they were dispossessed. If, instead of moving into such premises, the company moved into less commodious premises, it would be the Minister and not the company which would benefit, if the claim which could reasonably be made for the expenses of removal was thereby reduced.”
Reliance was placed by the appellant on the judgment of the House of Lords in The Bwllfa & Merthyr Dare Steam Collieries (1891) Ltd v. The Pontypridd Waterworks Company [1903] AC 426. This case concerned an assessment of compensation which was in my view not based on market value but what was payable to a miner as a result of a restriction upon the working of minerals (see McSweeny -v- Commissioner for Railways (1914) 14 SR (NSW) 18 where the judgment of the House of Lords was analysed in this way).
Evidence of sales of land after the relevant date are in a somewhat different category to the evidence of events which it is suggested should determine the question of compensation here. There is now a body of authority which supports the use of subsequent sales. In McCathie v. Federal Commissioner of Taxation (1944) 69 CLR 1 at 16, Williams J. said -
“But I will venture to repeat the remarks that I made in the Daandine Case on the question whether this evidence was admissible: - ‘Values must be calculated in the light of circumstances which existed on the material date, in this case 30th June 1939, but subsequent events can be taken into account in order to determine the proper weight to attach to such circumstances. Subsequent sales are just as admissible in evidence as prior sales, provided that in all the circumstances they are comparable. If between the material date and the date of the subsequent sale supervening events occur which alter the conditions previously existing, the subsequent sales would not be comparable and would be useless. But if on the material date there was a tendency in a district to closer settlement and for prices to rise, subsequent sales of property in subdivision at rising prices would be evidence in support of the view that it was correct to value land in the district suitable for subdivision which was being applied for some other purpose in the light of this potential value. The whole tendency of the courts is to admit evidence of any events prior to the date of trial which will throw any real light on the issues.' ”
See also Melwood Units Pty. Ltd. -v- Commissioner of Main Roads (1978) 52 ALJR 593. “a relevant vendor and purchaser found acceptable at that date for comparable land. The assumption of the law is that from that evidence it is possible to infer what the relevant vendor and purchaser would have found acceptable for the subject land.”
The contention of the appellant here is that the court was obliged to act on the evidence of the subsequent rezoning and sale as evidence of the subsequent outcome of matters which at the relevant date were uncertain. Such uncertanities as existed at the date of rezoning are rendered irrelevant by these events or should be treated as never having existed.
I do not think that this as a matter of principle can be justified. No authority was cited to us and I was not able to find any which would permit the use of evidence of this kind for such a purpose. It seems to me, that it is contrary to the principles which apply when market value is to be determined. These do not permit, in my view, market value to be determined by a wholly historical or ex-post facto approach. The principles to which I have referred are, in my view, equally applicable to an injurious affection claim such as this. Section 3.5(8) in my view does not permit of any other approach than a comparison of two market values to arrive at the compensation payable. There is therefore no error of law as the appellant contends in his Honour’s approach. Section 3.5(8) in my view does not permit of any other approach than a comparison of two market values to arrive at the compensation payable.
It was at one time in the course of argument suggested that a more appropriate way to compensate the respondent in the peculiar circumstances of this case would be to make an allowance for any losses flowing from delays and expenditures associated with the need to rezone the land to commercial after the error had been discovered. Whatever might be said in support of the approach in a general sense it in my view is not permitted by the prescriptive language of section 3.5(8). It is to be noted that it is for such factors that the valuers made allowance in carrying out the hypothetical development exercise to establish the affected value.
In disposing of the matter his Honour referred to what he described as the "less than satisfying result" and suggested that an amendment which might accommodate the circumstances of cases such as the present might merit examination. I have already referred to section 3.5(2A) which permits the local authority to satisfy a claim for compensation in certain circumstances by taking steps to amend the town planning scheme. It seems to me that a legislative initiative would be required to achieve the result which the appellant contends for here.
The appeal should be dismissed with costs.
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