Carbone v Melton City Council

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION
VALUATION COMPENSATION AND PLANNING LIST

S CI 2014 0421

PAOLO CARBONE

and

GAETANA CARBONE

Plaintiffs

MELTON CITY COUNCIL

and

REGISTRAR OF TITLES

First Defendant

Second Defendant

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JUDGE:	EMERTON JA
WHERE HELD:	Melbourne
DATE OF HEARING:	30, 31 May, 22 June 2018
DATE OF JUDGMENT:	21 December 2018
CASE MAY BE CITED AS:	Carbone v Melton City Council
MEDIUM NEUTRAL CITATION:	[2018] VSC 812

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VALUATION AND COMPENSATION – Growth Area planning – Amendment to Melton Planning Scheme to allow urban development of land subject to compliance with precinct structure plan and development contributions plan – Plaintiffs’ land vested in the Council by registration of plan of subdivision – Plaintiffs made no enquiries about compensation payable – Council only prepared to pay compensation calculated on the basis of land values in the development contributions plan – Plaintiffs demanded compensation for market value of land assessed under Land Acquisition and Compensation Act 1986 (‘LAC Act’) – Whether vesting of the land in the Council an ‘acquisition’ for the purposes of ss 3 and 4 of the LAC Act – Whether the Council breached statutory duties by not giving notices under Part 2 of the LAC Act – Whether compensation to be assessed under Parts 3 and 4 of the LAC Act – LAC Act inapplicable – No breach of statutory duty – Whether Council required to make restitution for unjust enrichment – No unjust enrichment – Proceeding dismissed – Charter of Human Rights and Responsibilities Act 2006 ss 20, 32 – LAC Act ss 3, 4, 5, 6, 7, 8, 18, 22, 30, 37, 41, 43, 53 – Local Government Act 1989 s 187 – Planning and Environment Act ss 46I, 46J, 46P, 80, 82, 172, 173 – Subdivision Act 1988 ss 5, 22, 24 – Supreme Court Act 1986 ss 58, 60.

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APPEARANCES:	Counsel	Solicitors
For the Plaintiffs	Mr J Barber	Purcell & Purcell
For the First Defendant	Mr P Chiappi	Harwood Andrews

HER HONOUR:

Introduction

The plaintiffs, Mr and Mrs Carbone, were until 6 March 2012 the registered proprietors of approximately ten hectares of land at 828–850 Taylors Road, Plumpton, Victoria (‘Land’). The Land was situated within the urban growth boundary.

On 18 June 2010, the plaintiffs entered into a contract of sale for part of the Land with a residential developer, York Place Pty Ltd (‘Purchaser’). It was anticipated that the Land would initially be subdivided into two lots: ‘Lot A’ and ‘Lot B’. The plaintiffs would retain Lot A and Lot B would be sold to the Purchaser. The sale of Lot B to the Purchaser was contingent upon the subdivision of the Land as set out in a proposed plan of subdivision. Under the contract of sale, the purchase price was payable by a deposit on the signing of the contract, the sum of $1,701,300 was payable six months from the date of the contract or 30 days from registration of the plan of subdivision (whichever was the later), and the balance of the purchase price was payable 12 months from the date of the contract or 30 days from registration of the plan of subdivision.

The contract of sale contained a condition requiring the Purchaser to immediately take all necessary steps to have the proposed plan of subdivision approved by the first defendant, Melton City Council (‘Council’), and registered by Land Victoria. The plaintiffs authorised the Purchaser to make any necessary application and sign any document required to have the plan of subdivision certified and registered.

On 21 July 2010, the Purchaser’s solicitors lodged with the Council an application for a planning permit for a two lot subdivision on the Land, which divided the Land into ‘Lot A’ and ‘Lot B’. Lot B was a single large parcel comprising most of the middle of the Land, and Lot A was two non-contiguous parcels which would continue to be owned by the plaintiffs. Lot A was made up of the house parcel fronting onto Taylors Road and a much larger parcel across the rear of the Land which the plaintiffs understood would be acquired by the Council for public open space in due course.

At the date of the application for the subdivision permit, the permit could not be granted because, while the Land was in an Urban Growth Zone, no ‘precinct structure plan’ applied to the Land. The provisions of the Urban Growth Zone (cl 37.07 of the Melton Planning Scheme) prohibited the subdivision of the Land into lots of less than 40 hectares unless and until a precinct structure plan governing the development of the Land applied. This involved the amendment of the Melton Planning Scheme to incorporate a precinct structure plan.

On 28 October 2010, Amendment C82 to the Melton Planning Scheme was gazetted. Amendment C82 incorporated into the Melton Planning Scheme the Taylors Hill West Precinct Structure Plan, May 2010 (‘PSP’) and the Taylors Hill West Development Contributions Plan, July 2010 (‘DCP’). The PSP identified the very front of the Land for the widening of Taylors Road, the middle part of the Land for residential use and the rear of the Land (the non-contiguous part of Lot A) for unencumbered active open space.

The Council did not determine the permit application and the Purchaser lodged an application for review with the Victorian Civil and Administrative Tribunal against the Council’s failure to make a determination.

On 13 July 2011, before the hearing of the application for review in the Tribunal, the Council’s solicitors wrote to the solicitors for the Purchaser in the following terms:

There are fundamental deficiencies in the current (application) plan of subdivision. These are:
•It fails to show the reservation for Taylors Road across the entire frontage of the subject land vesting in the relevant road authority in return for compensation;
•It fails to show the active public open space land at the rear of the land vesting in the Council in return for compensation;
•It fails to provide adequate road reservation access to the large lot for the existing dwelling;
•The large lot for the existing dwelling is inconsistent with the subdivision pattern expected for the area.

The Council’s letter went on to state that in order to gain the Council’s support, the application for subdivision had, among other things, to:

(a) make provision for road widening across the entire frontage of the Land to Taylors Road in return for compensation; and

(b) show the active open space land at the rear of the Land as vesting in the Council in return for compensation.

On 8 August 2011, the Purchaser’s solicitors submitted to the Council’s solicitors a revised plan of subdivision PS637169F (Version 5 dated 20 July 2011) (‘Plan of Subdivision’) showing two road reserves across the front of the Land and a reserve for public open space at the rear of the Land.

This is what the Plan of Subdivision looked like:

On 6 September 2011, the Tribunal directed by consent the issuing of a planning permit for the subdivision of the Land into two lots with a reserve for active open space and a reserve for the road. On 9 September 2011, the Council granted a planning permit for the subdivision of the Land in accordance with the direction of the Tribunal. The permit included as Condition 11:

Unless Council agrees to an alternative mechanism, prior to the issue of a Statement of Compliance, the owner of Lot B [the Purchaser] must enter into a section 173 agreement to be registered on the title to Lot B which provides for:
•The creation of a lawful access way to Reserve No. 1 [the active open space land that was part of Lot A];
•The payment of development contributions in respect of Lot A at the time of further subdivision of Lot B;
•The payment of clause 52.01 public open space contribution in respect of Lot A at the time of the further subdivision of Lot B or as an offset against the compensation payable in respect of Reserve No. 1.

On 10 November 2011, the Purchaser submitted the Plan of Subdivision to the Council, and the Council endorsed the Plan under the permit. The endorsed Plan showed the reserves for the road widening and the active open space land issuing to the Council upon registration of the Plan. On the same date, the Purchaser and the Council entered into an agreement under s 173 of the PE Act in accordance with Condition 11 of the permit (‘s 173 Agreement’). The plaintiffs were not parties to the s 173 Agreement.

On 22 November 2011, the plaintiffs wrote to the State Revenue Office (‘SRO’) in seeking a Certificate of No Liability in relation to the Growth Areas Infrastructure Contribution (‘GAIC’).

On 13 December 2011, the plaintiffs signed an application to Land Victoria for the registration of the Plan of Subdivision.

Although the Plan of Subdivision clearly showed the reserves over parts of the Lot A land in favour of the Council, the plaintiffs made no inquiry about the amount of compensation that they would receive for the land that would vest in the Council upon registration of the Plan of Subdivision or about the basis upon which such compensation would be calculated.

However, on 15 December 2011, the Purchaser’s solicitor sent an email to the Council referring to a telephone discussion on 8 December 2011 regarding ‘the land being vested in council upon registration of the plan of subdivision’. The Purchaser’s email referred to the timing for the Council to pay for the land being vested in it and continued:

Further we agreed that the quantum of monies would be in accordance with the Taylors Hill West DCP and applying the current valuation amounts to the area vested. You were checking on the status of the current valuation. It is noted that the owner is only entitled to compensation to the part of the R1 being vested which abuts the Lot A. The part R1 which abuts Lot B we are providing to Council and will be part of our DCP offset.

On its face, this constitutes an agreement by the Purchaser — who was charged by the plaintiffs to organise the subdivision of the Land — that the parts of Lot A reserved to the Council by the Plan of Subdivision were to be valued for compensation purposes using the land value or values specified in the DCP.

The Council responded to the Purchaser by letter dated 9 January 2012, referring to the acquisition of the active open space land and the road widening land and noting that it was seeking revaluations for ‘the property’ which, when received, would be incorporated into a letter of agreement between the Council and the plaintiffs (as the owners of Lot A) regarding ‘payment and timing’.

On 10 January 2012, the SRO denied the plaintiffs’ application for a Certificate of No Liability in respect of the GAIC and, on 16 January 2012, the SRO assessed the plaintiffs for GAIC in the amount of $825,500 for the whole of the Land. The plaintiffs paid the GAIC on 3 February 2012.[1]
[1]In September 2013, the plaintiffs applied to the SRO for a review of its determination to refuse the No Liability Certificate. The application was again refused in December 2014.

On or around 20 February 2012, the Purchaser lodged the Plan of Subdivision for registration. On 6 March 2012, the Plan of Subdivision was registered and the following titles issued:

(a) Lot A, Certificate of Title Volume 11337, folio 033, registered in the name of the plaintiffs;

(b) Lot B, Certificate of Title Volume 11337, folio 034, registered in the name of the Purchaser;

(c) Reserve 1, Certificate of Title Volume 11337, folio 035, registered in the name of the Council (‘Reserve No 1’, being the active open space land previously part of Lot A);

(d) Road R1, Certificate of Title Volume 11337, folio 036, registered in the name of the Council (‘Road R1’, being the road widening land previously part of Lot A); and

(e) Road R2, Certificate of Title Volume 11337, folio 037, registered in the name of the Council (‘Road R2’, being the road widening land previously part of Lot B).

On 23 March 2012, the plaintiffs and the Purchaser completed the sale of Lot B.

On or soon after 13 June 2012, the Council obtained a land valuation from Charter Keck Cramer for the purpose of determining the value of land to be acquired by the Council for the purposes of the PSP and the DCP (‘CKC valuation’). An addendum to the CKC valuation was provided to the Council on 27 July 2012.

The CKC valuation valued the active open space land that had vested or was to vest in the Council at $900,000 per hectare and the road widening land at $925,000 per hectare.

On 14 March 2013, the Council’s solicitors wrote to the Purchaser’s solicitors, referring to the s 173 Agreement and stating in part:

We are instructed that Reserve No 1 [the active open space land formerly part of Lot A] has vested in Council on registration of Plan of Subdivision number PS637169F. Compensation is owing but not yet paid and under negotiation. On its face this triggers the operation of Clause 4.2. We are instructed that once your client pays the Development Contributions Council will be comfortable ending the Agreement subject to commentary below. In order to avoid any confusion, our client seeks a statement from a duly authorised officer of York [the Purchaser] confirming that:
·York has no interest, claim or entitlement whatsoever to the compensation payable for the Council’s acquisition of Reserve No 1 by vesting under Plan of Subdivision PS637169F.
·The proper subject of such compensation is the registered proprietor of Lot A on Plan of Subdivision 637169F, for the time being Paolo and Gaetana Carbone.

On 18 March 2013, the Purchaser paid the development contributions for Lot A to the Council. The Purchaser also made a statutory declaration to the effect requested by the Council’s solicitors in the letter of 14 March 2013.

Under cover of a letter dated 13 June 2013, the Council’s solicitors submitted to the plaintiffs a draft Deed of Agreement (‘Deed’) by which the Council proposed to pay the plaintiffs the sum of $3,104,888 in respect of Reserve No 1 and Road R1.

The Deed recorded that the subdivision permit resulted in part of the Land (referred to as the ‘Subject Land’) being set aside as a reserve for active open space and as a road reserve and that it was nominated in the PSP and the DCP ‘as forming part of the development contributions payable with respect to the Permit Land’. It stated that the parties agreed that the plaintiffs as owners were entitled to be reimbursed by the Council for the vesting of the Subject Land in the Council in accordance with the Deed ‘and in the amount specified in the [DCP]’. The operative provisions provided that the plaintiffs accepted the amount of $3,104,888 in full and final payment for the Subject Land, being the amount calculated in accordance with the DCP, such payment to be made within 30 days of execution of the Deed. The Council would also be liable to compensate the plaintiffs for any GST payable by them. However, the plaintiffs would retain any liability that they had to pay the GAIC.

On 1 July 2013, the plaintiffs’ solicitors wrote to the Council stating that the amount of compensation for the Subject Land had never been agreed and enquiring as to how the figure offered as compensation had been calculated. The Council’s solicitors wrote back on 8 August 2013, explaining as follows:

In summary, the compensation has been determined in accordance with the land values in the Taylors Hill West Development Contributions Plan (adjusted to the most recent Council valuation). There are two relevant projects:
•Project DI-LA-01, which relates to the road widening of which a total of 0.17 hectares of 10.04 hectares has been provided by your client. The value of the 10.04 hectares (that is the total area) is as adjusted $9,275,000 and proportionately this equates to compensation of $157,888.
•Project DI-LA-03, concerning the open space, relates to a total of 8.71 hectares and has a total value of $7,825,000 as adjusted. The Carbone contribution to this area is 3.28 hectares, with a value of $2,947,000.

Together, these amounts have been determined to be $3,104,888.

The plaintiffs did not accept this explanation. By letters from their solicitors to the Council dated 22 August 2013 and 6 September 2013, the plaintiffs sought payment from Council of $3,104,888 as an advance of compensation without prejudice to the final amount sought. By a further letter dated 3 October 2013, the plaintiffs demanded an advance of compensation in the amount of $3,104,888 plus penalty interest to the date of payment, making a total of $3,113,819.86.

The Council’s solicitors responded by letters dated 11 October 2013 and 12 November 2013 stating, among other things, that the Council had the funds available to immediately pay the compensation offered of $3,104,888 as soon as the plaintiffs executed the Deed.

On 4 February 2014, the plaintiffs commenced this proceeding. On 30 March 2014, the Council made a payment to the plaintiffs in the sum of $3,104,818 in respect of the Subject Land.

The plaintiffs have obtained a valuation report dated 8 September 2015 from Mr Les Brown of M3 Property Strategists, valuing the Subject Land as at 6 March 2012 at $4,845,000 exclusive of GST.

The dispute

By this proceeding, the plaintiffs seek further compensation from the Council for the Subject Land. They also seek declaratory relief and statutory interest.

The plaintiffs’ principal case is that the Land Acquisition and Compensation Act 1986 (‘LAC Act’) applied to the acquisition of the Subject Land by reason of s 4 of the Act, which provides:

An Authority which is empowered under a special Act to acquire an interest in land by compulsory process must not acquire that interest by compulsory process or by agreement except in accordance with this Part.

The plaintiffs say that the identification of the Subject Land as being required for public open space and road widening activated the Council’s power under s 172(1)(a) of the Planning and Environment Act 1987 (‘PE Act’) to acquire the Subject Land by compulsory process and that, whether the Subject Land became vested in the Council by compulsory process or by agreement, the processes in the LAC Act had to be followed and they were not. The plaintiffs submit that pursuant to the LAC Act, they are entitled to be compensated for the market value of the Subject Land which, according to Mr Brown, was $4,845,000 as at the date of acquisition. Deducting the compensation already paid by the Council of $3,104,888, there remains an outstanding balance of $1,740,112.

The plaintiffs contend further that the Council has breached ss 6, 8(2) and 22 of the LAC Act, depriving them of the opportunity to claim interest under the provisions of the LAC Act from the date of acquisition, being 6 March 2012.

In the alternative, the plaintiffs say that if compensation is not determined in accordance with the LAC Act, then they are entitled to common law restitution for the Council’s unjust enrichment. They have, by the registration of the Plan of Subdivision, transferred the Subject Land to the Council. The transfer was made at the Council’s request by way of the letter dated 13 July 2011 from the Council’s solicitors to the Purchaser’s solicitors, which insisted that the Subject Land be shown as vesting in the Council in return for compensation. The Council freely accepted the Subject Land by consenting to the orders in the Tribunal approving the Plan of Subdivision showing the Subject Land vesting in the Council. It is common ground that no gift was intended. In these circumstances, so the plaintiffs contend, the Council has been unjustly enriched, at the expense of the plaintiffs, if the Council does not pay the plaintiffs the full value of the Subject Land.

As to interest, the plaintiffs submit that if the Court finds that compensation is payable under the LAC Act, interest should be awarded pursuant to s 53 of the LAC Act for the period for which compensation remained unpaid. The relevant period is from the date of acquisition on 6 March 2012 until 30 March 2014 in respect of the sum of $3,104,888 and from the date of acquisition until judgment for the amount representing the balance.

Alternatively, the plaintiffs claim interest under s 58 of the Supreme Court Act 1986. They say that regardless of whether the Court orders compensation in addition to the amount of $3,104,888 that the Council ultimately paid, interest ought to be awarded under s 58 on at least that sum from 6 March 2012 until the date of payment on 30 March 2014.

For its part, the Council submits that the Subject Land vested in it by the operation of the controls introduced by Amendment C82 to the Melton Planning Scheme. There was no acquisition of the Subject Land by compulsory process or by agreement within the terms of s 4 of the LAC Act. The Council has complied with its obligation under the Melton Planning Scheme to compensate the plaintiffs for the Subject Land and there has been no breach of statutory duty or unjust enrichment.

According to the Council, the facts show that the Subject Land vested in the Council by the sole and unilateral choice of the plaintiffs in that they sought to develop the Land, the approval for which was contingent upon compliance with the Melton Planning Scheme, which incorporated the PSP and the DCP. In choosing to proceed with the development of the Land — its subdivision into Lot A and Lot B — the plaintiffs were required to comply with this condition. The DCP identified and costed the projects to be funded by persons proposing to develop land within the DCP area and, insofar as the projects involved the acquisition of land by the Council, the developers would be paid compensation in the amounts fixed by the DCP.

It is necessary to set out the statutory framework in some detail before analysing the competing submissions as to whether, in particular, the LAC Act applied to the transfer of the Subject Land to the Council.

Statutory Framework
Growth Areas planning and Amendment C82

The Taylors Hill west area, including the Land, was brought within Melbourne’s Urban Growth Boundary in 2005. The area was earmarked in the Melton-Caroline Springs Growth Area Framework Plan for urban land supply.

The planning and land use arrangements governing the Land and its surrounds are arrangements that were put in place for the development of designated ‘growth areas’ on what were previously the outskirts of Melbourne. As was submitted by the Council, special arrangements apply to the development of land in growth areas, including those in the Shire of Melton.

In 2006, Part 3AAB was inserted into the PE Act to provide for growth area planning.[2] Part 3AAB established the Growth Areas Authority[3] (‘GAA’), the objectives of which included ensuring that development in growth areas occurred in a coordinated and timely manner, ensuring that infrastructure, services and facilities were provided in a coordinated and timely manner and fostering the development of communities in growth areas.[4] The functions of the GAA included making recommendations and reporting to the Minister on the planning, use, development and protection of land in growth areas, and on the use and expenditure of levies collected in growth areas under development contribution plans.[5] The GAA could also be appointed by the Minister to prepare an amendment to a planning scheme, which occurred in this case.
[2]Part 3AAB was repealed in 2017.
[3]The GAA was established under s 46AQ (now repealed). Its functions (or similar) are currently performed by the Victorian Planning Authority.
[4]PE Act ss 46AR(a), (b) and (g) (repealed).
[5]PE Act ss 46AS(a) (i) and (ii) (repealed).

The GAA prepared Amendment C82 to the Melton Planning Scheme to introduce a package of planning controls to manage urban development in the area. Significantly, Amendment C82 introduced Schedule 1 to the Urban Growth Zone (‘UGZ’) and incorporated the PSP and the DCP in the Melton Planning Scheme.

The Explanatory Report for Amendment C82 made it clear that the package of new controls and measures introduced by the Amendment C82 was to guide the development of a new urban community and was to provide the infrastructure that the new community needed in a timely manner. Amendment C82 was required because of the need to develop the precinct in an integrated way:

There is a high demand for housing in the area and releasing more land for urban development will contribute to meeting this demand while moderating housing prices by increasing supply. The amendment will facilitate the development of homes and local community and retail facilities …
Completing the amendment will provide management tools to develop the land in an integrated way, provide an overall structure for the area and provide certainty in development decisions and clarity as to the cost and location of services.

The Explanatory Report states that the objectives of planning in Victoria are met by Amendment C82 enabling ‘the orderly provision and coordination of public utilities and other facilities for the benefit of the community’ and it identifies the key social effects to include, ‘adequate provision of services required to serve the future community’ and the ‘delivery of key infrastructure in a timely and efficient manner’. Its key economic effects include:

Implementing a streamlined process for development approvals that reduce development approval times, holding costs and the administrative burden of planning approvals to the Council and the community.

As will be seen, the planning controls introduced by Amendment C82 involved special ‘streamlined’ arrangements for development approvals aimed at securing the urban development of the precinct, with developers providing or paying for designated infrastructure that would be provided in a timely manner as the urban development of the precinct progressed.

The Melton Planning Scheme

The principal measures in the Melton Planning Scheme used to guide urban development in the Taylors Hill west area are the UGZ, the PSP and the DCP.

The UGZ is cl 37.07 of the Melton Planning Scheme. It has among its purposes:

To manage the transition of non-urban land into urban land in accordance with a precinct structure plan.
To provide for a range of uses and the development of land in accordance with a precinct structure plan.
…
To provide for the continued non-urban use of the land until urban development in accordance with a precinct structure plan occurs.
To ensure that, before a precinct structure plan is applied, the use and development of land does not prejudice the future urban use and development of the land.

The UGZ is in two parts: Part A, where no precinct structure plan applies; and Part B, where a precinct structure plan applies.

Under Part A, a permit is required to subdivide land and each lot must be at least 40 hectares in size. Without a precinct structure plan there can be no urban development. The UGZ operates as a holding zone, preventing use or development that might compromise urban development in accordance with the precinct structure plan in the longer term.

Under Part B, where a precinct structure plan applies, cl 37.07-10 provides that a permit for subdivision must be generally in accordance with the precinct structure plan and must include any conditions or requirements specified in the Schedule to the UGZ. An application for a subdivision permit under this clause that is generally in accordance with the precinct structure plan is exempt from the specified notice and decision requirements of the PE Act and from the review rights in s 82(1) of the PE Act.

Schedule 1 to the UGZ relates to the PSP. Clause 4.0 of Schedule 1 contains conditions and requirements for permits to develop land in the precinct. It provides, relevantly:

A planning permit must include a condition or conditions which ensure that any requirements or conditions set out in the Taylors Hill West Precinct Structure Plan (including the Taylors Hill West Native Vegetation Precinct Plan) are implemented as part of the planning permit or the plans endorsed under the permit.
Land required for community facilities, public open space or public roads must be shown on a plan of certification as a reserve in favour of Melton Shire Council or another relevant person or body.

The Melton Planning Scheme therefore authorised the Council to require the Subject Land to be shown on a plan of subdivision submitted for certification as land reserved in its favour.

The PSP

The PSP was prepared by the GAA in conjunction with Melton Shire Council in May 2010. It applies to approximately 217 hectares of land in the Taylors Hill west area (‘Precinct’) and describes how the Precinct is expected to be developed for 2,400 new dwellings.

The objectives of the PSP are expressed to be as follows:

The PSP is a long-term plan for urban development. It describes how the land is expected to be developed and how and where services planned to support development will be delivered.
The Precinct Structure Plan:
…
•Sets the vision for how land should be developed and the desired outcomes to be achieved.
•Outlines projects required to ensure that future residents, visitors and workers within the area can be provided with timely access to services and transport necessary to support a quality, affordable lifestyle.
•Details the form and conditions that must be met by future land use and development.
…

The PSP sets out infrastructure and services that are required to meet the needs of the Precinct. Infrastructure and services are to be provided in a number of ways, including through:

•Subdivision construction works by developers;
•Development contributions (community infrastructure levy and development infrastructure levy);
•Utility service provider requirements; and
•Capital works projects by the Council, State government agencies and non-Government organisations.

The PSP records that the DCP was prepared for the Precinct in conjunction with the PSP and that the DCP is also an incorporated document in the Melton Planning Scheme. The PSP gives an overview of the infrastructure and services to be included in the DCP and records that these items are to be either fully funded or partly funded through the DCP.

Table 7 in the PSP, which sets out infrastructure and services required within the Precinct to support its development, includes a project described as the provision of land ‘for road widening and construction of the first carriageway for future VicRoads arterial’ with an indicative cost of $4.1 million and a project described as ‘active recreation reserve of 8 ha incorporating two senior AFL or cricket ovals, tennis courts, a pavilion to support these facilities’, to be provided in the short to medium term at a cost of $8 million.

These are the projects in the Precinct requiring the Subject Land to be vested in the Council on any approved plan of subdivision.

The DCP

The DCP is expressed to support the funding of infrastructure in the Precinct. It records as follows:

The Taylors Hill West Precinct Structure Plan guides future development in the Taylors Hill West Precinct and sets the long-term strategic framework for the development of the Taylors Hill West Precinct in relation to:
•Land use (such as residential development of varying densities, retail, commercial uses, open space, education facilities and community facilities);
•Transport (such as the primary and local arterial road network, collector roads & proposed public transport);
•Activity centres (Neighbourhood Activity Centres and Neighbourhood Convenience Centres); and
•Open space (passive & active), waterway and environmentally sensitive areas.
…

The Taylors Hill West Precinct Structure Plan will require a range of physical and social infrastructure as part of the development of the Taylors Hill West Precinct. Not all of this infrastructure will be funded through this DCP.
This infrastructure is provided through a number of mechanisms including:
•Subdivision construction works by developers;
•Development contributions (community infrastructure levy and development infrastructure levy);
•Utilities service provider contributions; and
•Capital works projects by Council, State government agencies and community groups.

This DCP will require the payment of levys to ensure that the infrastructure specified in this plan is funded to enable Melton Shire Council to provide the infrastructure. However, this DCP is not the sole source of funding for all infrastructure in the Taylors Hill West Precinct. The full range of infrastructure identified in the Taylors Hill West Precinct Structure Plan will only be delivered if the lower order infrastructure items are provided by those developing the land through the imposition of planning permit conditions. Decisions have been made about the type of infrastructure which will be funded by this DCP. These decisions are in line with the Ministerial Direction for Development Contributions.

The DCP sets out the costs for capital works and/or land purchases associated with each infrastructure project nominated in the PSP. The costs are listed in infrastructure project sheets. Construction costs are expressed in March 2009 dollars, while land purchase costs are expressed in June 2010 dollars. Both costs are to be adjusted annually in accordance with the method specified in the DCP.

The project cost sheets in the DCP include a sheet for ‘Taylors Road Duplication — Land Acquisition’ and a sheet for ‘Active Open Space — Land Acquisition’. They specify, in respect of each project, the project cost, the project timing, the external usage discount and apportionment of costs, along with demand units and the levy amount.

The DCP, as part of the Melton Planning Scheme, authorises the Council to apportion, as between the persons seeking to develop land in the Precinct, the costs of providing the infrastructure required by the PSP. This involves, broadly speaking, calculating the cost of providing the said infrastructure and then dividing that cost between the persons seeking to develop land in the Precinct.[6] In order to cost the necessary infrastructure, the DCP places a value on the land that needs to be acquired and estimates the cost of works. To this end, the Council obtained the CKC valuation.
[6]The apportionment methodology adopted by the DCP in relation to the development of land for housing is based on a ‘demand unit’. Contributions for the development of infrastructure in the Precinct are to be made by developers at a rate calculated per hectare of net residential developable area.

Clause 3.1.7 of the DCP concerns construction and land value costs. In relation to land costs, it states:

In relation to the cost of land included in an infrastructure project the land value must be adjusted by adopting a revised land value for each parcel to be acquired:
The revised land value and the adjustment of the contributions must be calculated as of 1 September in each year (excluding 2010).
Within 14 days of the adjustments being made, the Responsible Authority must publish a notice of the amended contributions in a newspaper circulating in the municipality.

As to administration and implementation, cl 3.1.4 of the DCP records that responsibility for the delivery of infrastructure works described in the DCP lies with the Council, with the exception of specified items. It records that s 46P of the PE Act envisages that the relevant collecting agency — in this case the Council — may accept the provision of land, works, services or facilities by the developer in part or full satisfaction of the amount of levy payable:

Where Melton Shire Council as Collecting Agency agrees in writing, infrastructure projects funded in this DCP may be provided by developers with a credit being provided against their development contribution.

Clause 3.1.6 provides for transparent administration of funds received and expenditures and requires all monies to be used solely for the provision of infrastructure as itemised in the DCP. The clause continues:

Should [the Council] resolve not to proceed with any of the infrastructure projects listed in this Development Contributions Plan, the funds collected for these items will be used for the provision of additional works, services or facilities where approved by the Minister responsible for the Planning & Environment Act , or will be refunded to developers and/or owners of land subject to these infrastructure charges.

PE Act

Part 3B of the PE Act provides the legislative support for the DCP. It provides, relevantly, for development contribution plans to be made as follows:

(a) Pursuant to s 46I, a planning scheme may include one or more development contributions plans for the purposes of levying contributions to fund, among other things, the provision of works, services and facilities in relation to the development of land in the area to which the plan applies.

(b) Pursuant to s 46J, a development contributions plan may provide for either or both of the imposition of a development infrastructure levy and the imposition of a community infrastructure levy.

(c) Section 46K requires a development contributions plan to contain certain matters, including the works, services and facilities to be funded through the plan, and the staging of the provision of the works, services or facilities. It must specify in respect of each of the works, services and facilities, the estimated costs of the works, services or facilities, or the standard levy applicable to them.

(d) Section 46N provides:

Collection of development infrastructure levy
(1)Without limiting section 62, if—
(a)an approved development contributions plan provides that a development infrastructure levy is payable in respect of the development of any land; and
(b)an application is made under this Act for a permit to carry out that development on that land—

the responsible authority must include a condition in the permit that the applicant—
(c)pay the amount of the levy to the relevant collecting agency within a specified time or within a time specified by the collecting agency; or
(d)enter into an agreement with the relevant collecting agency to pay the amount of the levy within a time specified in the agreement.

(2)If—
(a)an approved development contributions plan provides that a development infrastructure levy is payable in respect of the development of any land; and
(b)a permit is not required under this Act for the development—

a person who proposes to carry out that development of the land must—
(c)pay the amount of the levy to the relevant collecting agency within a time and in a manner specified by the collecting agency in accordance with the approved development contributions plan; or
(d)enter into an agreement with the relevant collecting agency to pay the amount of the levy within a time specified in the agreement.

(e) Section 46P provides that the collecting agency may accept the provision of land, works, services or facilities by the applicant in part or full satisfaction of the amount of levy payable.

Section 62(5)(a) of the PE Act allows conditions to be included in planning permits in relation to development contributions. It provides:

(5)In deciding to grant a permit, the responsible authority may—
(a)include a condition to implement an approved development contributions plan or an approved infrastructure contributions plan; …

Subdivision Act

The Subdivision Act 1988 contains the procedure for the certification and registration of plans of subdivision. In brief, s 5(3) provides that a person who wishes to have a plan of subdivision registered must prepare a plan in accordance with that Act and regulations, submit it to the Council for certification, obtain a statement of compliance from the Council and lodge the certified plan at the Office of Titles for registration along with, among other things, the statement of compliance from the Council.

Section 22 authorises the Registrar to register the plan of subdivision if certain conditions have been met, including the certification of the plan, and s 24(2) provides that upon registration, land set aside as a reserve vests in the body named in the plan ‘freed and discharged from any mortgage, charge, notice or memorandum of charge, restriction, lease or sub-lease’. Section 24(3) requires the Registrar to create a folio of the Register for each lot and each reserve.

The availability of compensation under the LAC Act
Plaintiffs’ submissions

The plaintiffs submit that as the Council had the power to acquire the Subject Land compulsorily, under either s 172(1)(a) of the PE Act or s 187 of the Local Government Act 1989, s 4 of the LAC Act applies to require the application of that Act to the acquisition of the Subject Land.

Section 1 of the LAC Act is headed ‘Purpose’ and provides:

The main purposes of this Act are —
(a)to establish a new procedure for the acquisition of land for public purposes; and
(b)to provide for the determination of the compensation payable in respect of land so acquired.

According to the plaintiffs, the broad expression of the main purposes of the LAC Act makes it unlikely that, save for any specific legislated exceptions, Parliament intended to exclude from the scope of the LAC Act an acquisition of land for public purposes that could not be characterised as either compulsory or by agreement. It would defeat the purpose of determining compensation payable in respect of land acquired for public purposes if s 4 were held to exclude an acquisition for public purposes that was neither compulsory nor by agreement. The plaintiffs therefore contend that the words ‘by compulsory process or by agreement’ in s 4 cover the field of acquisitions of land for public purposes by an Authority with power to acquire the land compulsorily.

This contention, so plaintiffs say, is supported by the definition of ‘acquire’ in s 3(1) of the LAC Act, which provides:

acquire, in relation to an interest in land, means to acquire that interest—
(a)by compulsory process; or
(b)by agreement if the person acquiring that interest is empowered to acquire it by compulsory process.

The plaintiffs therefore submit that it is necessary to construe the words ‘by compulsory process or by agreement’ in s 4 of the LAC Act broadly so that a landowner does not ‘fall between two stools’. The term ‘compulsory process’ should not be confined to the formal process set out in the LAC Act, and ‘by agreement’ should not be confined to a formal written contract executed by the parties. Rather, it should include any negotiated or consensual process by which land is acquired by an Authority for public purposes, including an acquisition by the Authority requesting and receiving land, or freely accepting it.

The plaintiffs submit that the extrinsic materials for the LAC Act support this construction. The Second Reading Speech for the Land Acquisition and Compensation Bill[7] used the word ‘negotiated’ rather than ‘by agreement’ when describing the objects of the legislation. The plaintiffs submit that ‘negotiated’ includes a communication or conference held for the purpose of arranging some matter by mutual agreement and/or discussing a matter with a view to reaching some settlement or compromise. This is a looser concept than the word ‘agreement’, as it is further from a formal contract. The plaintiffs also point to the description of one of the major objects of the Bill, being ‘to reform, consolidate and codify the law relating to compensation for interest in land’, which they say is broadly expressed to provide compensation for land acquired for public purposes, without qualification as to the precise manner in which the land is acquired.
[7]Victoria, Parliamentary Debates, Legislative Assembly, 8 May 1986, 2013-17.

The plaintiffs rely on a number of principles of statutory interpretation to support this construction of s 4 of the LAC Act, including the following:

(a) The LAC Act is remedial legislation which should be given a liberal or beneficial construction;

(b) Where a statute is capable of more than one construction, the construction should be chosen which least interferes with private property rights; and

(c) Section 32(1) of the Charter of Human Rights and Responsibilities Act 2006 (‘Charter’) provides that, so far as it is possible to do so consistently with their purpose, all statutory provisions must be interpreted in a way that is compatible with human rights. Section 20 of the Charter provides that ‘a person must not be deprived of his or her property other than in accordance with the law’.

The plaintiffs submit that the Charter assists in construing the words ‘by compulsory process or by agreement’ in the following way. The LAC Act contains a mechanism for the formal taking or appropriation of land. Its application is extended by ss 3 and 4 to an acquisition by agreement or private treaty by an Authority that has the power to acquire the relevant land compulsorily. This recognises that the bargaining positions of the parties in the marketplace are not the same if one party has power to exercise powers of compulsory acquisition. If the words ‘by compulsory process or by agreement’ allow, by way of exception, a class of acquisitions by a public authority with power to acquire compulsorily that does not enjoy the legal protections provided by the LAC Act, then that Act would operate arbitrarily and not in accordance with law in the sense required by s 20 of the Charter.

The plaintiffs submit that, given the breadth of the terms ‘by compulsory process’ and ‘by agreement’, the acquisition of the Subject Land by the Council can be characterised as having taken place by means of either or both. The acquisition was compulsory in that the plaintiffs were bound to proceed with the Plan of Subdivision by the contract of sale with the Purchaser and their entitlement to subdivide the Land would have been denied but for their satisfying the Council’s condition that the Subject Land vest in Council in exchange for compensation. While the ‘right to subdivide’[8] is qualified by legislation and planning instruments, nothing in the PSP obliged the plaintiffs to vest the Subject Land in the Council, nor the Council to insist on the Subject Land vesting in it.
[8]The plaintiffs submit that a ‘right to subdivide’ was recognised by the High Court of Australia in Lloyd v Robinson (1962) 107 CLR 142, 154 and Chang v Laidley Shire Council (2007) 234 CLR 1, 24 [76] (Kirby J), 35 [121] (Callinan J).

The plaintiffs submit that the acquisition was by agreement, in a broad sense, in that, although no price was ever agreed, the Council intended to obtain the Subject Land, requested it by letter of 13 July 2011 in exchange for compensation and then consented to the Tribunal’s orders. The Plan of Subdivision showing the Subject Land as vesting in the Council was lodged for registration with the plaintiffs’ authority and was registered, with the result that titles to the Subject Land issued to the Council.

The plaintiffs have commenced a separate proceeding by way of a Notice of Referral under s 80 of the LAC Act seeking compensation under that Act. They contend that they have a claim for compensation pursuant to s 30 of the LAC Act notwithstanding that no Notice of Intention to Acquire the Subject Land was served, and that there is a disputed claim for the purpose of s 37(8) of the LAC Act.

According to the plaintiffs, the LAC Act required the Council to reserve the Subject Land by or under a planning instrument in accordance with s 5(1) of the LAC Act, serve on them a notice of intention to acquire and a statement setting out their rights and obligations under the LAC Act and then publish a notice of acquisition in the Government Gazette. Moreover, the Council could not remove itself from the operation of the LAC Act by the simple expedient of serving a notice under s 7(1)(b) of the LAC Act stating that it did not intend to acquire the Subject Land by compulsory process because the Subject Land was specifically shown in the PSP as required for public purposes and the Council was going to have to acquire it eventually. A notice under s 7(1)(b) would have been disingenuous at best.

The plaintiffs further contend that the reason the Council did not comply with the LAC Act was to avoid any risk of having to pay more by way of compensation than the amount identified in the CKC valuation.

In these circumstances, so it is contended, the only lawful way for the Council to acquire the plaintiffs’ land was pursuant to the procedures set out in the LAC Act. Had the Council complied with the LAC Act, the plaintiffs’ entitlement to compensation assessed in accordance with the provisions of the LAC Act would have been triggered. The Council should not be permitted to rely on its failure to comply with the LAC Act and the Court should proceed as if it had complied and assess compensation accordingly.

Council’s submissions

For its part, the Council submits that, so far as it had any intention to acquire the Subject Land, it was because the land was earmarked for DCP projects. ‘Acquire’ in this context, would have to encompass being provided with the land in exchange for a credit against development contributions, purchasing the land and simply having the land vest in Council. This goes beyond the meaning of ‘acquire’ in s 4 of the LAC Act. In the LAC Act, ‘acquire’ means by compulsory process or by agreement if the purchaser is empowered to acquire by compulsory process.

The Council submits that the sequence of events described in the background to this judgment show that there was no element of compulsion by the Council against the plaintiffs. The plaintiffs were under no compulsion to deliver the Subject Land to the Council. In particular, they were not obliged to agree to the registration of the Plan of Subdivision in the form negotiated between the Purchaser and the Council. The plaintiffs were not obliged by the contract of sale with the Purchaser to agree to the registration of the Plan of Subdivision. Amongst other things, they could have readily decided that the Plan of Subdivision negotiated between the Purchaser and the Council was not acceptable and walked away from the contract of sale. They had the right to do so because Special Condition 5.3 of the gave the Purchaser the right to make only ‘minor’ alterations to the plan which showed the Land subdivided into two lots with no reserves. The registered plan (the Plan of Subdivision) had two lots, three reserves and an easement of way. The effect of these changes was profound and they cannot be construed as minor alterations. Moreover, the contract of sale was a private agreement between the plaintiffs and the Purchaser and no obligation in the (private) contract of sale could amount to the Council compelling the acquisition of the Subject Land.

As to the permit to subdivide, the Council points out that it was issued by consent. The Purchaser sought its issue and agreed to its form. The Purchaser could readily have pursued its application before the Tribunal and tested whether the proper application of the Melton Planning Scheme required the conditions sought by Council. Moreover, the dealings with the Council over the permit did not involve the plaintiffs in any way: they were not the applicants; they did not take part in the negotiation; they were not aware of what was going on. There could therefore be no compulsion of them.

More broadly, the Council submits that the Melton Planning Scheme did not compel the plaintiffs to subdivide their land:

(a) The adoption of Schedule 1 to the UGZ and the incorporation into the Planning Scheme of the PSP and the DCP allowed for the urban development of the Land. It was the plaintiffs’ choice, however, whether they wanted to take the opportunity provided by the Melton Planning Scheme to subdivide the Land for urban purposes.

(b) The opportunity to subdivide the Land for urban purposes carried with it the need to comply with the requirements of the PSP and the DCP. That is, the benefit of increased development opportunity (and any uplift in land values) carried with it the burden of development contribution levies and the provision of land for DCP projects.

(c) To the extent that the Melton Planning Scheme required a subdivision of the Land so as to set aside reserves for open space and roads, there was ample opportunity for the plaintiffs to decide whether they wanted to proceed with a subdivision that would vest the Subject Land in the Council. There was also ample opportunity for the plaintiffs to agree with the Council as to the compensation payable in respect of the provision of land for a DCP project and, if not so satisfied, to discontinue the application to develop the Land.

According to the Council, the opportunity to develop land cannot be construed as a compulsion to provide land. It is markedly different from an acquiring authority taking land by compulsory process where the landowner has no choice to retain the land.

As to the circumstances of the registration of the Plan of Subdivision, the Council argues that registration was within the control of the plaintiffs, not the Council. The fact that the Subject Land vested in the Council upon registration of the Plan of Subdivision is no evidence of compulsion. The vesting flowed directly from the voluntary acts of the plaintiffs.

As to whether there was an acquisition ‘by agreement’ for the purposes of s 4 of the LAC Act, the Council submits that the circumstances do not show an agreement between the plaintiffs and the Council. There was no offer, no acceptance, and no agreement on any essential terms. The consent position reached between the Purchaser and the Council on the permit application went no further than agreement on the form of the proposed Plan of Subdivision; it was not an agreement for the acquisition of an interest in land. Nor was the lodging of the Plan of Subdivision with Land Victoria an agreement with the Council. The Purchaser’s approach to the Council referred to in the email of 15 December 2011 does not show an agreement between the Council and the plaintiffs for the acquisition of an interest in land by the Council. The agreement referred to is for an acknowledgment that the Council would pay for the ‘land being vested’ at the DCP valuation. The Council’s response of 9 January 2012 makes it clear that there was no agreement for acquisition of an interest, but rather that the Council expected there would be an agreement. However, such agreement never came to pass.

The Council submits that it is evident from the DCP itself that it does not simply involve the collection of levys. It provides for implementation of the DCP projects, including by acquiring land where the acquisition of land is necessary for or forms part of the DCP project. The Council submits that the DCP is a self-funding arrangement with the full costs of each project (to the extent of the identified precinct demand for the project) to be met from the development contributions levied under the DCP. The amount of the contribution is set by the project cost. As project costs vary from year to year, so the contribution levied varies.

According to the Council, it is inherent in the structure of the DCP that the payment to developers for project land will be at the cost or value set out in the DCP itself, as adjusted from year to year. The rationale for this is that developers make contributions that are based on the costs or values specified in the DCP. Landowners can only expect to be paid for land at the cost specified in the DCP, as this is what determines the contributions that they are required to make. They effectively get back what they put in. Where works are to be provided by a landowner under a ‘works in kind’ agreement, there is a similar expectation that the works will be paid for at the cost set out in the DCP. This is consistent with the provision in the DCP for development contributions to be held until required for the item in question and, where funds are not spent on a project, for the money collected for that item to be used for additional projects or refunded to landowners.

In this context, so the Council contends, a landowner, acting prudently, will seek to negotiate an agreement with the Council regarding the provision of land. If the landowner is not prepared to accept the DCP price for the land, the landowner does not have to proceed with the development/subdivision. If the landowner wants the benefits arising from the integrated package of controls and measures introduced by Amendment C82, such as the ability to turn the land to urban development, the landowner will accept the DCP price for the land. The DCP is based on the voluntary provision of land and contains no mechanism for the compulsory taking of land. Had the plaintiffs approached the Council, prior to subdivision, to negotiate an agreement for the provision of the Subject Land, the Council would have informed them of the price it would pay for the land as set out in the DCP. The plaintiffs could have chosen to accept that price, or they could have chosen not to proceed with the subdivision.

Analysis

Whether compensation must be paid to the plaintiffs in accordance with the LAC Act is a legal question, but it arises in the following context.

Prior to the gazettal of Amendment C82, the Land could not be subdivided. With the gazettal of Amendment C82, the PSP and the DCP were incorporated in the Melton Planning Scheme and the Land became amenable to subdivision, but only in accordance with the Melton Planning Scheme, which included Schedule 1 to the UGZ, the PSP and the DCP. The Land could not be developed for residential subdivision without the PSP, and the PSP showed the intended use of the Subject Land as active open space and road widening. The DCP made provision for the funding for these projects, which would be implemented by the Council.

The plaintiffs have not challenged the validity of the PSP or the DCP, or, indeed, any decisions taken by the Council under the arrangements in those plans. They have not challenged the values in the DCP or the CKC valuation from which those values are taken. Instead, they took advantage of the existence of the PSP to subdivide the Land and sell Lot B to the Purchaser to be developed for housing. The PSP allowed plaintiffs to develop the Land — to their considerable benefit. The PSP operates in tandem with the DCP, which placed a value on the land that needed to be acquired for the projects identified in the PSP.

Both the Purchaser and the plaintiffs had an interest in securing the timely subdivision of the Land, and the plaintiffs authorised the Purchaser to take the necessary steps to secure a subdivision permit. The permit was ultimately issued by consent, but the Plan of Subdivision was not in the form agreed by the plaintiffs and the Purchaser in the contract of sale. Nonetheless, the plaintiffs executed the application to Land Victoria to register the Plan of Subdivision that reserved the Subject Land in favour of the Council, resulting in vesting the Subject Land in the Council upon registration.[9] The subdivision of the Land into Lots A and B took place, the purchase of Lot B was completed and Lot B has been further sub-divided and developed for housing.
[9]Subdivision Act 1988 s 24(2).

Where land is required for PSP projects, the Council has, as Mr Baggio said in his evidence, a practice of paying the price given for land in the DCP. Communications between the Purchaser and the Council about compensation for the Subject Land were based on recognition and acceptance of this practice. The plaintiffs themselves made no enquiries of the Council about the compensation the Council was prepared to pay for the Subject Land before they signed the application to register the Plan of Subdivision. They only raised the question of the amount of compensation once they had secured the benefit of the subdivision permit and the Subject Land had been transferred. They now seek to re-open the question of compensation.

To this end, they invoke the LAC Act.

Section 4 of the LAC Act requires a person or agency who is empowered to acquire property by compulsory process[10] to comply with the procedural requirements in Pt 2 of the LAC Act, even when acquiring an interest in land by agreement with the interest-holder.
[10]By s 172(1) of the PE Act, the Council, as a responsible authority, may compulsorily acquire ‘any land which is required for the purposes of any planning scheme’.

The plaintiffs contend that the Subject Land was compulsorily acquired by the Council in that it had the power to do so under the PE Act and the Local Government Act and they had no choice but to apply for a subdivision permit under their contractual arrangements with the Purchaser. They say that even if there was no compulsion, the agreement to transfer the Subject Land to the Council involved an ‘acquisition’ of land for the purposes of s 4. As a result, so they say, the LAC Act governed the compensation payable by the Council for the acquisition of the Subject Land.

I do not accept that the Subject Land was compulsorily acquired. The plaintiffs embarked upon and completed a process involving the voluntary transfer of the Subject Land to the Council. The Council did not initiate the process; the plaintiffs did (by applying to subdivide the Land), and they completed it (by signing the application to register the Plan of Subdivision) without having any communications with the Council whatsoever. The plaintiffs transferred the Subject Land to the Council without making any enquiry about the compensation the Council was prepared to pay, let alone seeking to negotiate a price that was acceptable to them. While the Council was only prepared to pay compensation based on the land values in the DCP, it could not have forced the plaintiffs to accept that price. As the Council submitted, if the plaintiffs believed that the land values in the DCP were insufficient, it was open to them to ‘sit’ on the land or use it for other purposes.

The Council’s Manager of Planning Services, Mr Robert Baggio, was asked in cross-examination to confirm that had the Land not been subdivided, the Council would eventually have had to acquire the Subject Land compulsorily. Mr Baggio told the Court that the Council would have ‘hung out’ for as long as possible for the Land to be subdivided. He said, ‘very rarely does the Council actually initiate a compulsory acquisition in a PSP area’ and that a compulsory acquisition would be undertaken only ‘as a last resort’. He agreed that if the Council acquired the Subject Land compulsorily, its value would be assessed in a different manner from the values in the DCP.

The evidence given by Mr Baggio is not evidence of the exercise by the Council of any powers of compulsion. To the contrary. It is an acknowledgment by the Council that the process undertaken by the plaintiffs to vest the Subject Land in the Council was a process in respect of which the Council enjoyed no powers of compulsion in the sense used the LAC Act. It was open to the plaintiffs, not only to withdraw their application for a development permit and ‘hang out’ for a compulsory acquisition of the Subject Land (the timing of which would have been uncertain), but to involve themselves in the Tribunal proceeding that resulted in the issuing of a permit for subdivision that reserved the Subject Land in favour of the Council. The permit application came before the Tribunal as a deemed refusal. The plaintiffs could have challenged the Council’s (deemed) decision to refuse a permit for the subdivision proposal that they had agreed upon with the Purchaser. They did not. Additionally, of course, the plaintiffs could have declined to lodge the Plan of Subdivision for registration (or declined to have it lodged on their behalf).

Furthermore, the existence of a contractual obligation between the plaintiffs and the Purchaser to secure a subdivision permit, a contract in which the Council played no part, did not involve the exercise of any powers of compulsion by the Council. In any event, as the Council pointed out, the Plan of Subdivision differed significantly from the plan that had been agreed for the purpose of the contract of sale.

In my view, therefore, the LAC Act could only be applicable on the basis that there was an acquisition of an interest in the Subject Land ‘by agreement’ rather than by compulsion.

The inclusion of an agreement for the acquisition of land (as opposed to outright compulsion) in s 4 of the LAC Act is consistent with the recommendation of the report to the Minister for Planning which informed the development of the LAC Act that any Authority[11] that possesses the power to compulsorily take land should be obliged to comply with provisions of the new Act [the proposed LAC Act], whether or not it is proposed to use compulsion to take that particular land.[12] The reason for this recommendation was expressed as follows: [13]

The question arises whether a landowner should be given any kind of statutory protection in relation to the purchase of land by agreement. Why is this necessary? Because the bargaining positions of the parties are not the same as in the market place: one party possesses the power to compulsorily acquire. This fact means that some ‘voluntary’ sales may be that in name only. To overcome this inequality in bargaining positions, the ALRC. recommended that, generally speaking, Authorities be required to supply specified information to landowners even in the case of a voluntary sale.

[11]An ‘Authority’ for the purposes of the LAC Act is a person or body who or which is authorised by or under ‘the special Act’ to acquire land and in ‘the special Act’ is expressed to be the Authority for the purposes of the LAC Act.

[12]Stuart Morris, ‘Land Acquisition and Compensation: Proposals for New Land Acquisition and Compensation Legislation’ (Report to the Minister for Planning, January 1983); see also Victoria, Parliamentary Debates, Legislative Assembly, 8 May 1986, 2015 (F N Wilkes).

[13]Stuart Morris, ‘Land Acquisition and Compensation: Proposals for New Land Acquisition and Compensation Legislation’ (Report to the Minister for Planning, January 1983) 16 [406].

As the plaintiffs submit, this supports a broad construction of s 4 of the LAC Act, a construction that is further supported by the fact that the LAC Act as a whole is beneficial legislation aimed at providing just compensation to persons whose interest in land is divested or diminished for public purposes. The Charter, too, requires a broad construction that protects the position of land-owners who may be overborne by government fire-power. However, I reject the proposition that s 4 ‘covers the field’ in the sense that it applies to any acquisition of land for a public purpose by an Authority with the power to acquire land compulsorily. If that were the intention, s 4 could have said so. Section 4 does not cover any and all means by which land comes into the hands of the Council.

The word ‘agreement’ implies a meeting of minds. It is difficult to see how there was any kind of agreement for the purposes of s 4 of the LAC Act between the plaintiffs and the Council with respect to vesting of the Subject Land. There was no communication between them until well after the registration of the Plan of Subdivision. There was no offer by the Council to acquire the Subject Land and no acceptance of any offer by the plaintiffs. There was no agreement on price. At the risk of repetition, the evidence is that the plaintiffs unilaterally embarked upon and completed the process of vesting the Subject Land in the Council without reference to the Council at all.

In my view, s 4 of the LAC Act has no application in the circumstances of this case.

Moreover, even if there were found to be some form of ‘compulsion’ or ‘agreement’ in this case for the purposes of s 4, there are very real difficulties applying Part 2 of the LAC Act to circumstances where the transfer of land takes place at the initiative of the owner by way of the registration of a plan of subdivision that accords with the requirements of the planning controls introduced by Amendment C82.

The plaintiffs contend, in effect, that the Melton Planning Scheme, which provides for the implementation of the PSP, contemplates that land shown on a plan of subdivision as a reserve in favour of the Council consistently with the UGZ and the PSP must be acquired by the Council in accordance with the processes and requirements of the LAC Act.

Section 4 of the LAC Act requires compliance with Part 2 of the LAC Act. Simply put, Part 2 requires or provides for the following:

(a) The land to be acquired must be reserved under a planning instrument for a public purpose;

(b) The Authority must serve on interested persons a notice of intention to acquire the land in the prescribed form;

(c) The land is acquired by the publication in the Government Gazette of a notice of acquisition, which has the effect of vesting the land in the Authority ‘without transfer or conveyance’ .

Section 30 of the LAC Act (which is in Part 3) confers a right to compensation on every person who, immediately before the publication of a notice of acquisition, had an interest in land that was divested or diminished by the acquisition to which the notice related.

Section 18(1) of the LAC Act allows for the acquisition to take place ‘by agreement’ where a notice of intention to acquire has been served, but before its lapse or withdrawal and before publication of a notice of acquisition. Because there will have been no notice of acquisition in those circumstances, s 18(2) provides:

The compensation paid by the Authority pursuant to an agreement referred to in subsection (1) may take into account the compensation which would have been payable in respect of the interest if a notice of acquisition had been published in respect of the interest on the date of the agreement.

The first requirement under Part 2 is the reservation of the land that the Authority intends to acquire. Other than in a limited number of circumstances (none of which is presently relevant), s 5(1) of the LAC Act prohibits an Authority from commencing to acquire an interest in land unless the land has first been reserved by or under a planning instrument for a public purpose.

In this case, the relevant planning instrument was the Melton Planning Scheme. As at 6 March 2012, the Melton Planning Scheme reserved land for a public purpose by the application of a Public Acquisition Overlay (‘PAO’) under cl 45.01. Clause 45.01-6 provided:

Any land included in a Public Acquisition Overlay is reserved for a public purpose within the meaning of the Planning and Environment Act 1987, the Land Acquisition and Compensation Act 1986 or any other act.

The PE Act envisages that, if land is reserved for a public purpose, it will be identified as such in the planning scheme. Sections 6(2)(c), (fa) and (i) of the PE Act anticipate that a planning scheme will designate land as reserved for public purposes and the acquiring authority in respect of each such reservation, as well as stating the provisions of the planning scheme that would have applied to the reserved land had it not been reserved for a public purpose.

There was no PAO over the any part of the Land and the Subject Land was not designated in the Melton Planning Scheme as reserved for a public purpose. The Land was subject to a specific set of controls for the reasons outlined in the Explanatory Report for Amendment C82, including a Development Contributions Plan Overlay (cl 45.06).

The imposition of constraints on the development or use of land for the benefit of a precinct under a planning scheme does not constitute the reservation of the land.[14] The identification of part of Lot A for active open space and road widening in the PSP was not a reservation for the purposes of the LAC Act. The PSP showed the desired development of the land in the Precinct; it did not constitute a statement of intention by the Council to acquire the land earmarked for public open space or road widening.
[14]Van Der Meyden v MMBW [1980] VR 255; Equity Trustees Executors and Agency Co Ltd v MMBW [1994] 1 VR 534.

Accordingly, the Subject Land was not reserved for a public purpose under a planning instrument. That would have required a planning scheme amendment of quite a different type from Amendment C82. It would have taken the Subject Land — anomalously — outside of the arrangements specifically put in place for the development of the Precinct. Pursuant to the LAC Act, in the absence of its reservation for a public purpose, the Council could not compulsorily acquire the Subject Land.[15] However, the Subject Land could and did lawfully vest in the Council via an alternative pathway: by the registration of a plan of subdivision showing the Subject Land reserved in favour of the Council — as was anticipated in the PSP and provided for in the Schedule to the UGZ.
[15]Assuming the Council was otherwise ‘empowered’ to compulsorily acquire the Subject Land.

In order for an Authority to acquire land by compulsion or agreement under the LAC Act, a notice of intention to acquire and prescribed information setting out the principal rights and obligations of the person whose interest in the land is to be acquired must be served on the interested person(s) (ss 6 and 7).

The Council did not serve on the plaintiffs a notice of intention to acquire or any of the information required to accompany a notice of intention to acquire. The plaintiffs allege that this constituted a breach of statutory duty.

The Council’s failure to serve a notice of intention to acquire the Subject Land was not the result of an omission or default by the Council. Rather, it was a function of the arrangements in the PE Act and the Melton Planning Scheme for the vesting of land in the Council upon registration of the certified plan of subdivision. Under these arrangements, it is the person who seeks to subdivide the land for urban development that initiates the process, not the Council that receives the proposed plan of subdivision for certification and, ultimately, the land.

The plaintiffs do not say when a notice of intention to acquire should have been served. Had the Council served a notice of intention to acquire the Subject Land prior to the lodging of the Plan of Subdivision for registration, this would have prevented, or at least impeded, its registration. Under the LAC Act, once a notice of intention to acquire land has been served, there is a restriction on any dealings with the land and on the making of any durable improvements on the land (s 12). The service of a notice of intention to acquire would have derailed the plaintiffs’ arrangements with the Purchaser and most likely frustrated the contract of sale. It would have required the plaintiffs to take an entirely different — and more complex and costly — course in relation to the proposed subdivision of the Land and the sale of Lot B.

The plaintiffs also allege that the Council breached its statutory duty by failing to publish a notice of acquisition. They allege that this duty arose upon registration of the Plan of Subdivision. This allegation is also misconceived and neatly illustrates the difficulty applying the LAC Act where the process embarked upon (and completed) is the vesting of land by way of the registration of a plan of subdivision.

Upon registration of the Plan of Subdivision, the Subject Land vested in the Council. The legal effect of the publication of a notice of acquisition is to vest the acquired land in the Authority (s 24(1)). The process proposed by the plaintiffs therefore involves an unnecessary and potentially confusing duplication.

Section 105 of the PE Act provides for the application of specified parts of the LAC Act for the purpose of assessing compensation where land is affected by the imposition of a reservation for a public purpose. In such circumstances, there will be no notice of intention to acquire and notice of acquisition. However, there is no equivalent provision in the PE Act or the UGZ where land in the Precinct is transferred to the Council by the registration of a plan of subdivision.

In my view, it is implicit in the suite of controls introduced by Amendment C82 that the measures in Part 2 of the LAC Act do not apply to the vesting of land in the Precinct in the Council by means of the registration of a plan of subdivision. For the reasons given, integrating the processes and requirements of Part 2 of the LAC Act and the arrangements in the controls introduced by Amendment C82 is problematic. The plaintiffs’ argument is predicated on the two regimes working together and the requirements of the LAC Act being compatible with the package of controls in Amendment C82, but they do not and they are not.

Furthermore, the LAC Act itself provides a remedy for non-compliance with Part 2 of the LAC Act, which is a remedy that the plaintiffs do not seek. Section 13 provides that if an Authority enters into an agreement to acquire an interest in land but fails to serve a notice of intention to acquire, the acquisition is voidable at the option of the person whose interest in land is being acquired. That option is exercised by the service of a notice on the Authority.

The plaintiffs’ remedy for the Council’s alleged non-compliance with Part 2 of the LAC Act is therefore to set aside the ‘acquisitions’ effected by the registration of the Plan of Subdivision. The plaintiffs have not served any notice on the Council that they wish to set aside the transfers. Instead, they seek a declaration that Part 2 of the LAC Act applies to the Subject Land and compensation pursuant to Part 3 of the LAC Act. What they in fact seek is for compensation to be assessed in accordance with Part 4 of the LAC Act.

The difficulty reconciling the two regimes is not limited to Part 2 of the LAC Act. Part 3 of the LAC Act confers the entitlement to compensation and follows with a complicated regime for the making of claims for and offers of compensation. Following service of the notice of acquisition, the Authority must make an initial offer of compensation, attaching a copy of the certificate of valuation (s 31). The claimant must make a response to the initial offer within three months (ss 33, 34 and 35) and the Authority must serve a reply to any claim within a further three months (s 36). If the offer, or alternatively the claim, or alternatively the revised offer, is not accepted by the relevant party, there is a ‘disputed claim’ which may be referred to the Tribunal or the Court for adjudication.

These procedures in the LAC Act are highly prescriptive and the timeframe for the negotiation of the amount of compensation payable is lengthy. None of the Subdivision Act, the PE Act or the Melton Planning Scheme contains any equivalent process or processes. To the contrary, the purpose of the controls introduced by Amendment C82 to ensure the timely and efficient provision of services to the Precinct and to provide a streamlined development approval process would be defeated by the requirement for compliance with the regime of claims, and offers in the LAC Act.

Additionally, the protracted process for the settlement or determination of compensation claims would make it very difficult for the DCP to be effectively administered. The DCP requires contributions by developers to be fixed based on accurate estimates of the cost of projects and for funds to be made available in a timely manner to enable the projects needed for the urbanisation of the Precinct to be rolled out without undue delay. Growth areas planning is built around the timely and efficient satisfaction of that need, reducing costs to developers and, ideally, reducing the cost of housing. The process in Part 3 of the LAC Act does not advance these objectives.

In any event, there was no attempt by either of the parties to comply with the regime of offer and counter-offer in Part 3 of the LAC Act. The plaintiffs do not complain about this. Their complaint is based on the Council’s non-compliance with Part 4 of the LAC Act.

In determining the measure of compensation payable pursuant to Part 4 of the LAC Act, regard must be had to specified factors, including the market value of the land, any special value to the owner, any losses suffered attributable to severance and disturbance, the effect of the implementation of the purpose for which the land was acquired on its value, and any legal, valuation and other expenses incurred (s 41). A further amount of compensation for solatium (not exceeding 10% of the market value of the land) is available (s 44). Part 6 of the LAC Act contains special provisions for the payment of interest on amounts of compensation was Part 4.

Some of the compensation provisions in Part 4 of the LAC Act are plainly inapt for the assessment of compensation where land has been transferred to a public authority by the registration of a plan of subdivision prepared and lodged by the owner, and where the land is in a growth area and the grant of the subdivision permit depends on compliance with a controls introduced by Amendment C82.

Section 43(1)(a) of the LAC Act requires the valuation to disregard any increase or decrease in the market value of the interest in land which is acquired arising from the carrying out, or the proposal to carry out, the purpose for which the interest was acquired (s 43).

The expert valuer retained by the plaintiffs, Mr Les Brown, gave evidence that for his valuation, he assumed that the Subject Land was acquired for the purpose of providing active open space and for the purpose of road widening. However, when taken to the Explanatory Report for Amendment C82, Mr Brown acknowledged that the DCP, the PSP and the rezoning of the Precinct formed part of a single package of controls and that these controls, as a package, were introduced into the Melton Planning Scheme to permit the urban development of the Precinct. Mr Brown accepted that the active open space project and the road widening project were two of a group of projects which, as a whole, were intended to provide for the needs of the new urban community within the Precinct. He said he had not turned his mind to whether the entire package of changes brought in by Amendment C82, including the ability to subdivide the Land, had to be disregarded in the ‘before’ scenario by reason of s 43(1)(a) of the LAC Act. He agreed that if the Land could not be subdivided as was proposed, its market value would be different. In the assessment of market value using a comparable sales method, comparable sales with different characteristics would need to be used. I infer that its value would have been markedly different.

This illustrates one of the difficulties of applying Part 4 of the LAC Act in a growth area where a package of integrated controls is in play. The rezoning to permit urban development, the precinct structure plan and the development contributions plan form part of an integrated package, compliance with which is integral to the entitlement to develop the land for urban purposes.

Furthermore, the provisions in Part 4 of the LAC Act that provide for compensation to be paid for disturbance, severance and special value seem to me to be largely inapplicable where the vesting of land in a public authority is a product of the owner’s choice to develop the land intensively by applying for permission to subdivide it.

Having regard to the foregoing, it is no oversight that neither the PE Act nor the UGZ make provision for any part of the LAC Act to apply in respect of the vesting of land as part of the implementation of a precinct structure plan. This stands in contrast to Part 5 of the PE Act, which expressly provides that relevant parts of the LAC Act apply where land is reserved under a planning scheme for a public purpose.

I have therefore concluded that the LAC Act did not apply to the vesting of the Subject Land in the Council through the registration of the Plan of Subdivision. The Charter requirement to interpret statutory provisions in a manner compatible with human rights does not affect this conclusion.

This disposes of the plaintiffs’ claims for breach of statutory duty.

It does not, however, dispose of the plaintiffs’ claim that the Council unjustly enriched itself by paying less for the Subject Land than the Subject Land was worth on the open market.

Unjust enrichment

The plaintiffs make a claim for common law restitution based on the Council’s alleged unjust enrichment in taking the Subject Land for less than its market value. They submit that the law recognises an obligation on the part of a defendant to make fair and just restitution for a benefit derived at the expense of a plaintiff. The concept of unjust enrichment is a ‘unifying legal concept’ which assists in the determination of whether the law should, in justice, recognise such an obligation in a new or developing category of case.[16] One such case, so the plaintiffs submit, is where a (hypothetical) defendant requests a (hypothetical) plaintiff to confer a benefit and the plaintiff confers it accordingly, but where the plaintiff has no remedy in contract because the price has not been agreed, or because the contract is frustrated, avoided or unenforceable.[17] The plaintiff is entitled to restitution for the defendant’s unjust enrichment, which in the case of goods, involves the payment of a reasonable price or quantum valebat.[18] While the plaintiffs concede that they have not found any authority awarding restitution on the basis of a quantum valebat in the absence of an agreed price for the supply of land (as opposed to goods), they say that, on the application of principle, they have a claim in debt based on or derived from the count of quantum valebat.
[16]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-7 (Deane J).
[17]Ibid 256.
[18]Referring to BP Exploration Co v Hunt (No 2) [1979] 1 WLR 783, 805.

The plaintiffs describe how their circumstances fall within this legal paradigm in the following terms:[19]

Here the Plaintiffs have, by the Plan of Subdivision, transferred the Acquired Land to the Council. The transfer was made at the Council’s request by way of the letter dated 13 July 2011 from Maddocks to Best Hooper, which insisted that the Acquired Land should be shown as vesting in the Council in return for compensation. Further, the Council freely accepted the Acquired Land by consenting to orders in VCAT approving the Plan of Subdivision which showed the Acquired Land vesting in Council. It was common ground that no gift was intended.
In these circumstances, the Council is unjustly enriched, at the expense of the Plaintiffs, if the Council does not pay the Plaintiffs the full value of the Acquired Land. The value is $4,855,000, of which Council has paid $3,104,888, leaving a balance outstanding of $1,740,112.

[19]Plaintiffs’ final written submissions (18 June 2018) 43-4 [146], [147].

There are a number of problems with this analysis. It is true that the plaintiffs transferred the Subject Land to the Council by applying for and having the Plan of Subdivision registered by the Registrar of Titles. By operation of s 24(2) of the Subdivision Act, upon registration of the Plan of Subdivision, the Subject Land vested in the Council ‘freed and discharged from any mortgage, charge, notice or memorandum of charge, restriction, lease or sub-lease’, and the Registrar of Titles was required to create a folio for each reserve. By reason of the UGZ and its Schedule, the Council was entitled to ask that the proposed plan of subdivision show the Subject Land as reserves in its favour. The Council ‘requested’ the transfer of the Subject Land to the extent that it was required by the planning controls in force for the Land to ensure that the proposed plan of subdivision did not compromise the implementation of the PSP. However, the Council did not need to ‘accept’ the Subject Land, freely or otherwise, in circumstances where it was transferred to the Council by the registration of the Plan of Subdivision, which was ‘freely’ lodged for registration by the plaintiffs[20] without reference to the Council. The registration of the Plan of Subdivision was within the control of the plaintiffs, not the Council.
[20]Or by the Purchaser on their behalf.

Liability for unjust enrichment can arise, subject to any defences, where each of the following is satisfied:

(a) The defendant is enriched;

(b) The defendant’s enrichment is at the expense of the plaintiff; and

(c) The defendant’s enrichment is unjust.[21]

[21]Pavey & Matthews Pty Ltd v Paul (1987) 162 CLR 221, 256-7 (Deane J).

There is a threshold issue as to whether a public body such as the Council, which is administering a scheme to provide facilities and services to the public for the purpose of which it collects funds and resources for redistribution, can be ‘enriched’. Under the DCP, the Council must put back what it takes in. The DCP provides for monies received as development contributions to be applied to the projects in the DCP and for the refund of monies not spent of those projects.

Furthermore, the Council will not have been unjustly enriched at the expense of the plaintiffs if the plaintiffs have been fairly compensated for the Subject Land. Fairness must be assessed in the context of the objectives of the controls introduced by Amendment C82, and having regard to the advantages and disadvantages to land owners and developers inherent in those arrangements. Even if the compensation that the plaintiffs received was somewhat less than they might have received on a compulsory acquisition, any such ‘enrichment’ will not be ‘unjust’ in circumstances where it forms part of an arrangement facilitating the form of development that the plaintiffs wish to pursue and where they voluntarily effected a transfer of land in order to secure permission to subdivide the Land.

Furthermore, the plaintiffs’ claim for restitution also depends on the Court accepting the expert evidence adduced by the plaintiffs about the market value of the Subject Land. For the reasons given below, I am not persuaded by that evidence that the compensation paid by the Council was unfair or unjust.

The relevance of the land values in the DCP

The plaintiffs submit the DCP does not fix the price that the Council must pay for land and that it is not the purpose of a development contributions plan to determine the price of land to be acquired for the purpose of the projects to be funded.

The first proposition appears to me to be uncontroversial. The Council does not contend that the DCP authorises it to compel the transfer of land at the price fixed by the DCP. However, the Council disputes that the DCP is purely a funding arrangement that plays no role in establishing the value of land needed for the implementation of the projects in the PSP.

As was stated in its Explanatory Report, Amendment C82 sought to provide ‘management tools to develop [the Precinct] in an integrated way, provide an overall structure for the area and provide certainty in development decisions and clarity as to the cost and location of services’. The package of controls introduced by Amendment C82 aims to provide ‘key infrastructure’ in a timely and efficient manner. The benefits to those paying contributions and making land available for PSP projects include a streamlined process to reduce development approval times and holding costs, as well as the entitlement to subdivide land in the Precinct for urban development.

The DCP sits in this package of controls as the key mechanism for delivering the benefits identified. Under the DCP arrangements, developers who pay the development contributions get the benefit of the projects that are funded by the contributions, even if only indirectly. As the Council submitted, there is a direct relationship between what developers receive for land vested in the responsible authority for PSP projects and their development contributions. The lower the costs of land and works, the lower the contributions payable by developers.

While the Council is a ‘collecting agency’ for the purposes of the DCP,[22] it is also a ‘development agency’ and it had a range of other functions and powers in relation to the Land as a responsible authority under the PE Act and the Melton Planning Scheme. The DCP has a timeframe of 15 years. During that period, funds will come in and be paid out. In administering the DCP, the Council has to make a range of administrative decisions such as when projects are to be carried out, which projects can be undertaken through a ‘works in kind’ arrangement and which projects it will undertake as principal. Those decisions are dependent on the amounts of the contributions made from time to time, the likely timing for the receipt of funds in the future, and so forth. Clause 3.6.1 of the DCP recognises this broad function and provides for the reassignment of unused funds to other projects or for such funds to be repaid to developers if not used for PSP purposes.
[22]PE Act s 46GA; Casey City Council v Dennis Family Corporation [2007] VSC 238.

In this context, the land values specified in the DCP are necessary in order to strike levies. Land costs are aggregated with other costs to be divided among developers. Land values must also be specified in the DCP to enable the payment of development contributions through the provision of land, as contemplated by s 46P(2) of the PE Act. Where the responsible authority agrees to accept works or land in satisfaction of all or part of the amount of levy payable, the value of those works or that land (as the case may be) is to be determined by reference to the costs of those works or that land specified in the DCP.[23]
[23]The DCP conditions the acceptance of works or land by the Council on an agreement in writing between the Council and the developer in question.

If development contributions are determined by reference to the cost of acquiring land for precinct use from the developers and developers may offset their contributions by providing land for precinct use, and in each case the land value is fixed by the DPC, it is reasonable that where the Council has to compensate developers for land that is transferred to the Council for PSP projects, the compensation also be calculated on the basis of the land values in the DCP.

Neither the PE Act nor the DCP provides that the land values specified in the DCP, which relate to individual projects, establish the compensation that must be paid for the transfer of private land into public ownership. The DCP does not preclude the negotiation of a different value. However, the fact that the Council has only agreed to pay compensation for the Subject Land based on DCP values does not mean that the compensation is unfair or unjust. To the contrary, it weighs in favour of the compensation being fair and equitable in all of the circumstances.

The plaintiffs made a number of submissions to the effect that the Council had no power to acquire land based only on the DCP. It was submitted that:

(a) the DCP did not give the Council the power to acquire the Subject Land;

(b) the Subject Land was not, as a matter of fact, acquired under or pursuant to the DCP;

(c) the CKC valuation was carried out on the wrong basis and cannot be relied upon by the Council; and

(d) the CKC valuation does not bind the plaintiffs in any event.

It is uncontroversial that the DCP was not the source of the Council’s power to take title to the Subject Land. However, I am not persuaded that the Council needs to demonstrate a source of power to receive land through the registration of a plan of subdivision. To the extent that any power needs to be shown, cl 4.0 of Schedule 1 to the UGZ provides for permit conditions to be imposed to ensure that any requirements or conditions set out in the PSP are implemented as part of the planning permit.

It is also uncontroversial that the transfer of the Subject Land to the Council did not satisfy any development infrastructure levy or community infrastructure levy liability. The development infrastructure levy for the plaintiffs’ land – Lot A – was paid in cash. However, this does not mean, as the plaintiffs appear to contend, that the Council unlawfully accepted the Subject Land ‘under the auspices of the DCP’. The Council did not ‘accept’ the Subject Land under the auspices of the DCP or at all. The plaintiffs caused the Subject Land to vest in the Council by lodging the Plan of Subdivision for registration. Again, the registration of the Plan of Subdivision was within the control of the plaintiffs, not the Council.

It is accepted that the plaintiffs were not ‘bound’ by the CKC valuation, but not for the reasons advanced by the plaintiffs. Mr Baggio gave evidence of what the Council was prepared to pay by way of compensation for the transfer of the Subject Land. That amount was based on the CKC valuation. If, ultimately, the Council made a decision to acquire land compulsorily, then a different value might apply. Again, the plaintiffs were at liberty not to proceed with the subdivision if they could not negotiate acceptable compensation from the Council. They were free to reject the values in the CKC Valuation.

In any event, even if I am wrong about the basis on which the Subject Land vested in the Council, in order to make out their claim for unjust enrichment, the plaintiffs must show that they were not fairly compensated for the Subject Land, having regard to prevailing land values. I turn to consider the valuation evidence put forward by the plaintiffs.

Valuation Evidence
Plaintiffs’ valuation

The plaintiffs retained Mr Les Brown to assess the market value compensation payable under the LAC Act for the Subject Land on an assumed compulsory acquisition. Mr Brown is a well-known and very well respected land valuer. There was no question that he was qualified to give an expert opinion on the market value of the Subject Land.

In his valuation report dated 8 September 2015, Mr Brown assessed the market value of the Subject Land as at 6 March 2012 as $4,845,000.

In accordance with the requirements of the LAC Act, Mr Brown treated the vesting of the Subject Land in the Council as a partial acquisition of Lot A pursuant to s 41(3) of the LAC Act. In Mr Brown’s valuation, the ‘before’ scenario was the plaintiffs’ interest in Lot A immediately before the vesting of the Subject Land in Council on 6 March 2012; the ‘after’ scenario was their interest in Lot A after the vesting, that is, minus the Subject Land. In the ‘before’ scenario, Lot A was 4.34 hectares; in the ‘after’ scenario, it was only 0.903 hectares, resulting in a loss of 3.437 hectares or almost 80% of Lot A. In both scenarios, the land was treated as capable of development for residential purposes.

Mr Brown valued the plaintiffs’ land using two methods: by reference to comparable sales and by way of a hypothetical development analysis. Both methods, according to Mr Brown, produced the same or near the same market value for the Subject Land.

Putting to one side the complexities of applying s 43(1)(a) of the LAC Act to the acquisition of land covered by the controls introduced by Amendment C82, Mr Brown’s valuation based on comparable sales is problematic for a number of reasons.

Mr Brown identified as comparable sales four sales of in globo land dating from July 2010 to April 2013. One was the sale of the neighbouring property at 852–870 Taylors Road, which sold for $7.54 million in April 2013, that is, 13 months after the relevant date in this case. The land area was ten hectares, producing a per hectare rate of $754,000. However, like the Land, the northern part of the neighbouring property was required for active open space and its southern end for road widening. Mr Brown proceeded on the basis that the neighbouring land had a developable area of 6.16 hectares, yielding 100 lots. Dividing the sale price by the number of lots, he settled on a per lot value of $75,400.

In his oral evidence, however, Mr Brown agreed that in return for the purchase price of $7.54 million, the purchaser of neighbouring property received developable land accommodating 100 lots, plus 3.61 hectares for which the purchaser would receive compensation of $900,000 per hectare under the DCP. The compensation payment was worth $3.249 million, which meant that the purchaser paid $4.291 million for the developable land, producing a rate of $42,000 per lot rather than $75,400 per lot.

Further, Mr Brown did not include the sale of Lot B in 2010 in his comparable sales. He told the Court that ‘with hindsight’ he probably should have included it. Lot B sold for $750,000 per hectare in 2010, and produced a value of $44,615 per lot.

The Council submitted that the sale of Lot B in 2010 (with an analysed lot rate in the order of $44,000) and the sale of the neighbouring property in April 2013 (with an analysed lot rate in the order of $42,000) should be viewed as bookends, as the relevant date, 6 March 2012, lay in the middle. When asked to confirm that there was nothing in his report that would explain why, having regard to these two bookend sales, the Subject Land would be regarded as generating a value of $85,000 per lot, Mr Brown said:

No, only that the hypothetical development enables one to do a more specific assessment of [the] value of the land in question, rather than looking at the generalities of the sales. I think the material factor that I saw in the hypothetical development was for the costs … the costs were in the order of $58,000 per lot. Which in my view obviously reflects the fact that services and amenities are there to be tapped into, and that will have a material impact on land value.

The anomaly in the values identified above was therefore explained by the low development costs of the Subject Land, which Mr Brown described as ‘the material factor’. Why these low costs would not apply to Lot B or to the immediately adjoining neighbouring land was not explained. Furthermore, in his report, when describing the matters to which he had regard in assessing value on a direct comparison basis, Mr Brown listed a number of factors, including the fact that the GAIC had already been paid on the Subject Land, but he did not mention the low development costs as a factor distinguishing the Subject Land from the surrounding land or from the other comparable sales on which he relied.

In his report, Mr Brown concluded that the sales evidence reflected an analysed rate per hectare in the range of $704,224 to $1,110,000. He then valued the Subject Land at $1,410,000 per hectare, which is $300,000 per hectare more than the highest value in the range he had identified. This represents a significant and unexplained premium on the ‘top of the range’ value, even if the payment of the GAIC by the plaintiffs is taken into account.

It appears that Mr Brown has boosted the market value of the Subject Land in his comparable sales analysis to conform with the result of his hypothetical development analysis, which produced a value of $1,474,490 per hectare and $88,889 per lot in the ‘before’ scenario and a value of $1,660,578 per hectare and $100,000 per lot in the ‘after’ scenario, giving an overall compensation figure for market value of $4.9 million.

The values generated by Mr Brown’s hypothetical development analysis are substantially higher than the values indicated by the comparable sales. While the hypothetical developer/purchaser would carry out a hypothetical development analysis when considering what to pay for the Subject Land, I find it inconceivable that the hypothetical purchaser would not have regard to the actual sale of Lot B in establishing what he, she or it was willing to pay for the Subject Land. Furthermore, the sale of Lot B in combination with the later sale of the neighbouring property, neither of which accords with the values generated by Mr Brown’s hypothetical development analysis, suggests that the latter may have produced an inflated value. I consider that Mr Brown’s assessment of the market value of the Subject Land to be inflated, having regard to the evidence of the surrounding values.

In the circumstances, I do not consider that Mr Brown’s valuation shows the amount paid by the Council as compensation to be unfair or unjust.

CKC valuation

The purpose of the CKC valuation was to assess the ‘fair market value’ of the land to be acquired for the PSP. The land identified in the CKC valuation is the land required for the widening of Taylors Road and Hume Drive, the land required for a multipurpose community centre and the 8.71 hectare parcel of active open space land comprising Reserve No 1 and the northern part of the neighbouring land. The valuation was carried out in June 2012.

CKC valued the land to be acquired for the purposes of the DCP on a project parcel by project parcel basis. It did not value the individual land holdings that made up each parcel. As a result, CKC valued as a parcel the active open space land made up of Reserve No 1 (part of Lot A) and the northern part of property immediately adjoining the Land. It did not value Reserve No 1 independently.

The assessments of the individual project parcels were made from an external inspection and publicly available information relating to the development potential of each holding[24] and on the basis that the GAIC had yet to be paid on the land that was valued.
[24]The CKC valuation contains the caveat that, should information relating to encumbrances and development potential of the individual holdings be made available, the valuation should be returned to CKC for further consideration and, if necessary, reassessment.

The active open space land was assessed on the basis that it could be sold as an in globo development site, and CKC assessed its value having regard to comparable sales of in globo development land across the Melbourne area. It treated the highest and best use of the active open space land as residential development and valued it on the basis that services and facilities were available to the Precinct, including water, gas, electricity, telephone and mains sewer. The costs associated with extending services to the land were not reflected in the assessment of value. The assessment was also carried out on the basis that infrastructure (road network and services) extended to each parcel.

CKC identified eleven comparable sales of in globo land within the Urban Growth Boundary in the western and northern growth corridors between July 2010 and May 2012. Based on its analysis of these sales, CKC settled on a rate of $900,000 per hectare, exclusive of GST, for the 8.71 hectare parcel of active open space land, giving it a value of $7,839,000 for the purpose of the DCP. CKC assessed the land for the road widening as partial acquisitions using a ‘before’ and ‘after’ methodology based on the value of the parent holdings. On 27 July 2012, CKC provided an addendum in relation to the values assessed in the ‘before’ and ‘after’ scenario on a per property basis for, inter alia, the land required for the Taylors Road duplication. The value used in both the ‘before’ and ‘after’ scenarios was $925,000 per hectare.

The plaintiffs submit that the CKC valuation was not before the Court as evidence of the value of the Subject Land, but only as evidence of the Council having fulfilled its obligations under the DCP. They further submit that the CKC valuation was carried out on the wrong basis for the following reasons:

(a) It assumed that the GAIC would be paid at development, reducing the valuations given.

(b) It valued land to be acquired on an in globo basis per project, rather than valuing individual, separately titled and separately owned parcels of land going to make up each project. It thereby:

(i) undervalued individual parcels because a smaller parcel of land would generally attract a higher price per unit of area;

(ii) ignored the fact that the value of development land varies according to how close it is to the advancing development front and therefore how ‘ripe’ it is for development; and

(iii) ignored the services that Council insisted be provided to the Land by the s 173 agreement.

In relation to this final point, the plaintiffs argue that the requirement that the Purchaser provide an access road and frontage to and along the northern boundary of Lot B would increase the value of the Subject Land to a purchaser and that the requirement came at a cost to the plaintiffs, because the cost of providing these services would ‘no doubt’ have been factored in to the price the Purchaser was prepared to pay for Lot B.

It is true that the CKC valuation is not before the Court as evidence of the value of the Subject Land. However, it serves as evidence that Mr Brown’s valuation is most likely too generous. The CKC valuation is more consistent with the sales of the neighbouring land and Lot B that Mr Brown acknowledged were relevant comparable sales. As to the criticisms of the CKC valuation by the plaintiffs, I am not persuaded that the difference in land size in question would make the substantial difference to the per hectare value of the Subject Land contended for by Mr Brown. Nor is it likely that such a large difference in value was referrable to the distance of land from the ‘development front’, having regard to the location of the neighbouring land and Lot B. There was no evidence about the effect on value of the services required to be provided by the s 173 agreement. Furthermore, although it seems likely that the payment of the GAIC by the plaintiffs would have added to the value of the Subject Land, there was no evidence about how much value would be added. Even if the full GAIC amount of $80,000 per hectare were added to the CKC figure, the per hectare value of Reserve No 1 would still fall far short of Mr Brown’s valuation.

It was for the plaintiffs to show that they were not fairly compensated for the Subject Land. On the basis of the valuation evidence, I am not persuaded that they were not fairly compensated.

Interest

Regardless of whether the Court orders compensation in addition to the amount already paid by the Council, the plaintiffs claim interest under s 58 of the Supreme Court Act 1986 for interest on that sum ($3,104,888) from 6 March 2012 until the date of payment on 30 March 2014.

In substance, the plaintiffs complain that despite their demand on 22 August 2013 for payment of the $3,104,888, being the amount that the Council conceded that it should pay, the Council made no payment until seven weeks after the proceeding was commenced.

Section 58 of the Supreme Court Act does not apply to compensation awarded under Part 3 of the LAC Act or to compensation awarded under Part 5 of the PE Act because such compensation is not a ‘debt or sum certain’. Interest has been allowed under s 60 of the Supreme Court Act on amounts awarded under Part 5 of the PE Act on the basis that compensation is ‘debt or damages’ for the purpose of that provision.[25]
[25]The composite expression in s 60(1), ‘debt or damages’, embraces any proceeding in which a claim for money is made and there is, therefore, prima facie an entitlement to interest on an award of compensation for planning blight made by the Court pursuant to the PE Act: Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520.

In my view, s 58 does not apply to the amount advanced by the Council as compensation for the vesting of the Subject Land.

In any event, the amount of $3,104,888 was offered to be paid in full and final settlement of the Council’s obligations for the Subject Land well before the commencement of the proceeding, but the plaintiffs refused the offer on the basis that they did not want to sign the Deed and accept the amount offered in full and final settlement of the Council’s obligations. They brought the proceeding in order to obtain a greater amount of compensation.

The plaintiffs have failed to establish an entitlement to any greater sum. They have been paid the amount of the amount of $3,104,888. It was not an amount recovered in the proceeding.

The plaintiffs have no entitlement to interest under s 58 of the Supreme Court Act.

Disposition

The LAC Act did not apply to the vesting of the Subject Land in the Council. As a result:

(a) No declaration will be made as sought in paragraph A of the prayer for relief in the Further Amended Statement of Claim;

(b) There is no entitlement to any compensation as sought in paragraph B of the prayer for relief;

(c) The Council is not liable for damages for breaches of statutory duty as sought in paragraph C of the prayer for relief.

The plaintiffs have not made out their claim based on unjust enrichment. As a result, there will be no order for the amounts sought in paragraph D of the prayer for relief.

The plaintiffs have not made out their claim for interest pursuant to s 58 of the Supreme Court Act. There will be no order for interest as claimed in paragraph E of the prayer for relief.

The proceeding will be dismissed.

The parallel proceeding (No SCI 2018 00804 ) brought by notice of referral pursuant to the LAC Act must also be dismissed. For the reasons given, the LAC Act did not apply to the vesting of the Subject Land in the Council.

[2018] VSC 812

21 December 2018