Chadrysiak v Commissioner of Highways
[2018] SASC 77
•7 June 2018
SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division: Civil)
CHADRYSIAK v COMMISSIONER OF HIGHWAYS
[2018] SASC 77
Judgment of The Honourable Justice Blue
7 June 2018
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - PROCEEDINGS FOR COMPENSATION - SOUTH AUSTRALIA - OTHER MATTERS
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - COMPENSATION - ASSESSMENT - DISTURBANCE - PARTICULAR CASES
REAL PROPERTY - COMPULSORY ACQUISITION OF LAND - COMPENSATION - ASSESSMENT - INTEREST
Reference into Court of question concerning entitlement to compensation for acquisition of land.
In January 2014 the respondent Commissioner of Highways acquired the property owned by the claimant Mr Chadrysiak situated on the corner of South and Grange Roads West Hindmarsh. The Commissioner offered to pay compensation of $419,000, comprising $385,000 for land value and $34,000 for disturbance and paid that amount into court. This was based on a valuation obtained by the Commissioner.
In September 2014 Mr Chadrysiak obtained a valuation from Mr Morgan valuing the land at $705,000 and disturbance at $5,000. In March 2015 the Commissioner obtained a valuation from Mr Pamula valuing the land at $500,000 and disturbance at $45,000.
Mr Chadrysiak was allowed by the Commissioner to reside rent-free in the property and then in an alternative property until February 2016 when he became liable to pay rent of $400 per month.
In February 2016 Mr Chadrysiak obtained a second valuation from Mr Morgan valuing the land at $600,000 and disturbance at $51,000. In November 2016 Mr Chadrysiak moved into another property for which he paid rent of $150 per month.
In February 2018 the parties agreed that the value of Mr Chadrysiak’s property as at January 2014 was $505,000.
Mr Chadrysiak claims that he is entitled to additional compensation of $67,670 because the Commissioner made a manifestly inadequate offer of compensation for his property in January 2014; by reason thereof he did not have sufficient funds to buy a replacement property; the price of replacement properties of the same value increased by $67,670 to May 2017; and the acquisition therefore caused him to suffer a loss in that amount.
The Commissioner contends that compensation for loss due to a rising market is not recoverable under the Land Acquisition Act 1969 (SA); alternatively Mr Chadrysiak has failed to prove causation of any loss; alternatively Mr Chadrysiak has not proved the quantum of loss claimed; alternatively any loss should be offset against interest received by Mr Chadrysiak on the compensation paid; alternatively Mr Chadrysiak failed to mitigate his loss. Mr Chadrysiak takes issue with these contentions and alternatively contends that, if interest is to be offset, rent should be offset against interest.
Held:
1. As a matter of principle, loss due to a rising market is a recoverable head of loss under section 25 of the Act if causation of loss is proved (at [83]).
2. Mr Chadrysiak has failed to prove that he was unable to buy a replacement property for $505,000 due to the Commissioner’s inadequate offer of compensation (at [102]).
3. If Mr Chadrysiak had proved causation up to date, the prima facie quantum of his loss would have been $25,000 (at [133]).
4. Interest received by Mr Chadrysiak of $29,912 should be offset against the rise in market value and rent paid or payable by Mr Chadrysiak of $21,400 should be offset against the interest. This gives a quantum of loss, if causation had been proved, of $16,488 (at [143]).
5. Mr Chadrysiak is has not proved an entitlement to compensation under the head of loss due to a rising market (at [148]).
Land Acquisition Act 1969 (SA) 23A, 23B, 23C, 25 ; Public Works Act 1912 (NSW) 124, referred to.
Brewarrana Pty Ltd v Commissioner of Highways (1973) 4 SASR 476; Commissioner of Highways v George Eblen Pty Ltd (1975) 10 SASR 384; Commissioner of Highways v Ship Bros (1978) 19 SASR 215; Crouch v Minister of Works (1985) 38 SASR 502; Haines v Bendall (1991) 172 CLR 60; Kerry v State Transport Authority (1985) 38 SASR 502; March v Stramare (E & MH) Pty Ltd (1991) 171 CLR 506; Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438; South Australian Land Commission v Bletas (1978) 77 LSJS 344, considered.
CHADRYSIAK v COMMISSIONER OF HIGHWAYS
[2018] SASC 77Land and Valuation Division
BLUE J:
This is a reference into Court pursuant to section 23C of the Land Acquisition Act 1969 (SA) (the Act) of a question arising concerning entitlement to compensation by the claimant Stefan Chadrysiak in relation to an acquisition by the respondent Commissioner of Highways of his property.
Between August 2001 and January 2014 Mr Chadrysiak was the registered proprietor and occupier of the house property at unit 5, 2 Grange Road West Hindmarsh (the Property).
In January 2014 the Commissioner issued a notice of acquisition of Mr Chadrysiak’s interest in the Property pursuant to section 16 of the Act. The Commissioner offered to pay and paid into Court compensation of $419,000, comprising $385,000 for the actual value of the land and $34,000 for disturbance. This was based on a valuation obtained by the Commissioner in December 2013 valuing the Property at $385,000 and assessing disturbance at $34,000.
In January 2018 Mr Chadrysiak and the Commissioner agreed that the actual value of the Property as at January 2014 was $505,000.
Mr Chadrysiak claims that the amount offered by the Commissioner in January 2014 was manifestly inadequate; by reason thereof he did not have sufficient funds to buy a replacement property; in the meantime the price of replacement properties of the same value increased by $67,670 to May 2017; and in the premises the acquisition caused him to suffer a loss in purchasing a replacement property of $67,670.
The Commissioner contends that a loss due to a rising market is not a recoverable head of loss under section 25 of the Act; alternatively Mr Chadrysiak has failed to prove that any loss he has suffered was caused by the acquisition; alternatively Mr Chadrysiak’s loss due to delay in purchasing a replacement property is only $20,000; alternatively the interest received by Mr Chadrysiak on the compensation paid in respect of the Property should be offset against any recoverable loss due to a rising market; and alternatively Mr Chadrysiak failed to mitigate his loss.
The issues on the reference are:
1.Is a loss due to a rising market a recoverable head of loss as a matter of principle under section 25 of the Act?
2.Did Mr Chadrysiak in fact suffer loss due to a rising market caused by the acquisition?
3.What is the quantum of any such loss?
4.Should the interest received by Mr Chadrysiak on the compensation paid in respect of the Property be taken into account in assessing any loss and if so should rent paid or payable by Mr Chadrysiak also be taken into account?
5.Did Mr Chadrysiak fail to mitigate his loss and if so to what extent?
Background
Mr Chadrysiak was born in 1958. In 1987 he and his wife owned a house and he was employed at General Motors Holden. In 1987 he suffered injuries in a work accident. He received workers compensation payments of about $600 per week for the next two years because he could not return to work.
In 1989 Mr Chadrysiak returned to work at Casey Crash Repairs as manager of the paint shop. He continued in that employment until 1994 when his injuries prevented his continuing. He resumed receiving weekly workers compensation payments.
At some point Mr Chadrysiak’s marriage broke down and he transferred his interest in his house to his wife.
In August 2001 Mr Chadrysiak bought the Property for about $150,000. He funded the purchase by borrowing about $150,000 from Westpac secured by a mortgage over the Property. At that time he was in receipt of workers compensation payments of about $1,000 per week.
The Property is situated on the intersection of South and Grange Roads. It comprised 550 square metres the subject of a strata title. It comprised a three bedroom, two bathroom house and a detached garage. The Property was originally 1,101 square metres but at some point it was divided into two approximately equal halves. The Property comprised the northern half fronting onto Grange and South roads. The southern half fronted onto South Road and comprised four units in a double story unit block together with five carports and a driveway. One of the carports was dedicated to the Property.
Sometime between 2001 and 2010 Mr Chadrysiak refinanced the Westpac loan with the Commonwealth Bank. At the same time or later he undertook renovations to the house, borrowing about $200,000 extra from the Commonwealth Bank for that purpose. His loan facility allowed him to pay down and redraw monies provided that he did not exceed the facility limit.
In July 2006 the Department of Transport, Energy and Infrastructure (the Department) made an offer to Mr Chadrysiak to purchase the Property for $310,000 together with $25,000 for disturbance (including incidental costs of purchasing a replacement property). This was because the Department foresaw a future project widening South Road although no such project was then funded. Mr Chadrysiak declined to sell the Property.
In 2010 Mr Chadrysiak entered into a redemption agreement with WorkCover under which he received about $320,000 in redemption of WorkCover’s liability to pay workers compensation to him. He used it to reduce his mortgage by $190,000 and deposited the balance in a bank account.
On 15 October 2013 pursuant to section 10 of the Act the Commissioner served on Mr Chadrysiak a notice of intention to acquire the Property.
On 27 December 2013 Daniel Sander, a certified practising valuer, produced for the Department a valuation report valuing the Property at $385,000. Mr Sander valued the Property on the basis that its highest and best use was residential.
On 30 January 2014 the Commissioner published a notice of acquisition of the Property in the Government Gazette. By virtue of section 16 of the Act, the Property thereby vested in the Commissioner.
On 30 January 2014 pursuant to subsection 23A(1) of the Act the Commissioner sent to Mr Chadrysiak an offer of compensation for the acquisition being $385,000[1] for the actual value of the land and $34,000 for disturbance and other compensable matters. The offer of $34,000 was intended to cover the costs and disbursements (including stamp duty, registration fees and broker costs) of Mr Chadrysiak acquiring another property and the costs of moving to that other property.
[1] All dollar figures are exclusive of GST. It is doubtful that GST would be applicable in any event.
Although the Commissioner was now the owner of the Property, he did not require Mr Chadrysiak to vacate the Property. Mr Chadrysiak continue to reside in the Property rent free until 10 June 2015.
As at January 2014 Mr Chadrysiak was undertaking three types of remunerative work. He undertook work on motor vehicles (minor painting and repairs, polishing and detailing) and bought and sold motor vehicles. The premises were particularly suitable for this work because of the garaging facilities (including a hoist). He bred West Highland White Terriers. He also undertook occasional computer technician work. As at January 2014 he had about $100,000 credit in his bank account and owed about $245,000 on his mortgage.
On 5 February 2014 pursuant to subsection 23A(3) of the Act the Commissioner paid into court $419,000.
On 18 February 2014 John Morgan, a certified practising valuer engaged by Mr Chadrysiak’ssolicitor, inspected the Property for the purpose of valuing it.
On 18 September 2014 Mr Morgan produced for Mr Chadrysiak’s solicitor a valuation report valuing the Property as at 30 January 2014 at $715,000 and assessing disturbance at $5,000. Mr Morgan valued the Property on the basis that its highest and best use was conversion into offices and hence commercial as opposed to residential use. He assessed disturbance as limited to time spent and disbursements incurred in dealing with the acquisition rather than in respect of the purchase of another property.
On 14 November 2014 Mr Chadrysiak’s solicitor sent a copy of Mr Morgan’s report to the Department.
On 19 November 2014 the Department wrote to Mr Chadrysiak’s solicitor rejecting that the Property was worth $715,000 or should be valued as a commercial property and proposing that a third independent valuation be undertaken at the Department’s cost.
On 5 February 2015 Mr Chadrysiak filed an interlocutory application seeking amongst other things determination of the amount of compensation payable to him for the Property.
On 13 March 2015 Mr Chadrysiak’s solicitors wrote to the Commonwealth Bank enquiring whether the Bank would consent to payment out of all of the monies in court to Mr Chadrysiak or whether it would first require payment of its debt. On 16 March 2015 the Bank responded saying that the debt could be paid in full or there could be a substitution of security with a new property. Mr Chadrysiak did not respond or pursue the substitution of security over a new property.
On 27 March 2015, on Mr Chadrysiak’s application, the monies paid into court together with accrued interest of $10,856[2] were paid out as to $257,000 (being the approximate balance of Mr Chadrysiak’s loan facility) to the Commonwealth Bank and the balance of $172,856 to Mr Chadrysiak.
[2] All dollar figures which include cents are rounded to the nearest whole dollar.
On 27 March 2015 Stanislaw Pamula, a certified practising valuer, produced for the Department a valuation report valuing the Property as at 30 January 2014 at $500,000 and assessing disturbance at $45,000. Mr Pamula valued the Property on the basis that its highest and best use was residential. He did this because he was informed by a planner at the Council that a commercial use would be considered non-complying and would not be approved and that a home business use would be restricted to one room, portion of the entry hall and a car park space restricted to 30 square metres.
On 10 June 2015 Mr Chadrysiak moved out of the Property into a property at 240 South Road Mile End that had been acquired by the Commissioner. It was agreed that he would pay no rent up to 31 January 2016 and then rental of $400 per week from 1 February 2016. He ceased undertaking remunerative activities.
On 23 July 2015 Mr Chadrysiak’s solicitor requested Phil Weaver, a traffic engineer, to provide a report as to parking and access requirements that would be imposed if the Council approved use of the Property as a combination dwelling and 75 square metres within the house as an office (home business use). On 11 August 2015 Mr Weaver produced a report. On 12 August 2015 Mr Chadrysiak’s solicitor requested Matthew King, a consultant planner, to provide a planning report as to whether the Council would approve use of the Property for home business use.
On 18 August 2015 Mr King provided a planning report to Mr Chadrysiak’s solicitor. He relied on Mr Weaver’s report in respect of parking and access requirements. He expressed the opinion that use of the Property as home business use would be approved by the Council. On 20 August 2015 Mr Chadrysiak’s solicitor sent a copy of the King and Weaver reports to the Department’s solicitor.
On 10 September 2015 Mr Pamula produced for the Department a second valuation report valuing the Property on the basis that its highest and best use was as home business use in accordance with the opinions expressed by Messrs King and Weaver. On this basis he valued the Property as at 30 January 2014 at $500,000.
On 6 October 2015 Brenton Burman, a planning consultant, produced for the Department a report. He expressed the opinion that use of the Property as home business use would not be approved by the Council.
On 9 October 2015 Mr Pamula produced for the Department a third report. He had been provided with the Burman report. He adhered to his original valuation of the Property on the basis that its highest and best use was residential and on this basis he adhered to his valuation of $500,000 and $45,000 for disturbance.
On 30 October 2015 Mr Sander produced for the Department a second report. He had been provided with the Burman report. He adhered to his original opinion that the highest and best use of the Property was residential.
On 3 November 2015 the Department’s solicitor sent copies of the October 2015 Pamula and Sander reports to Mr Chadrysiak’s solicitor.
On 22 November 2015 Mr Morgan sent an email to Mr Chadrysiak’s solicitor. He expressed the opinion that the value of the Property on the assumption that its highest and best use was residential was between $550,000 and $575,000 and assessed disturbance at $45,000. He expressed the opinion that the value of the Property on the assumption that its highest and best use was home business use was $25,000 higher and assessed disturbance on this assumption at $37,500. He expressed the opinion that it was not possible to argue that the Property could be utilised completely as commercial use as he had done in his original valuation.
On 1 February 2016 Mr Chadrysiak became obliged to pay rent of $400 per week for the Mile End property. He did not commence paying rent.
On 18 February 2016 Mr Morgan produced for Mr Chadrysiak’s solicitor a second valuation report. He expressed the opinion that the Property should be valued on the basis that its highest and best use was home business use and on this basis valued the Property at $600,000 and assessed disturbance on this assumption at $51,000.
On 9 March 2016 Mr Chadrysiak’s solicitor sent a copy of Mr Morgan’s report to the Department’s solicitor.
In May 2016 the Commissioner brought a proceeding for ejectment against Mr Chadrysiak in the South Australian Civil and Administrative Tribunal.
On 3 May 2016 the Commissioner filed and served a formal offer[3] to settle the action by payment of $548,000 (comprising $500,000 for the value of the land and $48,000 for disturbance) plus interest on the balance of $129,000 not already paid plus costs.[4]
[3] Both parties consented to the receipt of the formal offer notwithstanding the limitations on the tender of formal offers under rule 187 of the Supreme Court Civil Rules 2006 (SA) as rule 187 then stood.
[4] The offer of costs was implicitly on a solicitor and client basis. It excluded costs incurred since 18 August 2015 in considering compensation on the basis of use for commercial purposes exceeding the home business use and in respect of the Commissioner's application for ejectment.
On 9 June 2016 Mr Chadrysiak commenced receiving a Newstart Allowance from Centrelink of just over $300 per week.
In about June 2016 the South Australian Civil and Administrative Tribunal made an order that Mr Chadrysiak make instalment payments of rent in accordance with a schedule.
In October 2016 the Tribunal made an eviction order against Mr Chadrysiak because he had not fully complied with the order for instalment payments.
In November 2016 Mr Chadrysiak moved out of the Commissioner’s Mile End property into another rental property paying rent of $150 per week. At that point he owed $9,991 to the Commissioner for rent.
On 7 December 2016 Mr Chadrysiak’s solicitor wrote to the Department’s solicitor formulating a claim and making an offer. Given my conclusions below, it is not necessary to set out the terms of the claim or offer.[5]
[5] The letter was expressed to be without prejudice save as to costs and was prima facie protected by settlement privilege. However both parties consented to its receipt into evidence.
On 19 April 2017 Mr Chadrysiak filed a statement of claim in which he claimed:
1.$125,000 being the difference between the alleged value of the land of $510,000 and the amount paid into court of $385,000;
2.$11,000 for general disturbance being the difference between $45,000 and the amount paid into court of $34,000;
3.$2,500 for general disturbance by way of a second lot of relocation costs;
4.$71,400 disturbance for loss in a rising market based on a general appreciation in property values of 14 per cent from January 2014 to May 2017 from a market value of $510,000 at the date of acquisition.
On 17 May 2017 the Commissioner filed a defence pleading amongst other things that the market value of the Property was $500,000, admitting the general disturbance claim at $45,000 and denying the rising market claim on multiple grounds.
On 12 July 2017 the Commissioner made an informal offer[6] to settle the action by payment of $555,000 plus interest on the balance of $136,000 not already paid plus costs.[7]
[6] The letter was expressed to be without prejudice save as to costs and was prima facie protected by settlement privilege. However both parties consented to its receipt into evidence.
[7] The offer of costs was on a solicitor and client basis subject to counsel fees being in accordance with the Supreme Court Indicator on Counsel Fees.
On 28 July 2017 the Commissioner paid to Mr Chadrysiak $134,472 comprising:
1.$115,000 being the difference between the admitted value of the land of $500,000 and the amount paid into court of $385,000;
2.$11,000 for general disturbance being the difference between $45,000 and the amount paid into court of $34,000;
3.$8,472 interest from 30 January 2014 to 28 July 2017 on the additional principal of $126,000.
The trial proceeded on 26 and 27 February 2018.
The evidence
Both parties tendered various chronological documents.
Mr Chadrysiak gave evidence in chief by affidavit and was cross-examined. He tendered a document produced by the South Australian government setting out quarterly movements in median house prices for metropolitan Adelaide (the Median House Price Statistic) between amongst others the quarters ended December 2013 and December 2017.
The Commissioner called Mohammed Elgazzar, Manager Portfolio & Acquisition Services within the Department, to give evidence. He gave evidence in chief by affidavit and was cross-examined. In addition an affidavit by another department employee Hanna Samuels was received as a vehicle for the tender of various documents. Mr Elgazzar said that since May 2016 he had been a delegate of the Commissioner who had authority to approve compensation offers and settlements. He gave evidence addressing a hypothetical question. He said that, if in May 2016 Mr Chadrysiak had formulated a claim or made an offer involving total payment of $557,500 plus interest and costs, he would have endorsed an offer by the Commissioner involving total payment of $555,000 plus interest and costs. This evidence was not challenged and in any event I accept it given the offer that was made by the Commissioner in May 2016.
The Commissioner called Mr Pamula to give evidence. He gave evidence about movements in the value of the Property from January 2014 to May 2016 and May 2017 and about movements in median house prices that is addressed more specifically below.
Recoverability of compensation for loss due to rising market
Mr Chadrysiak contends that, if the amount offered and paid into court by the authority on a compulsory acquisition is manifestly inadequate, by reason thereof the landowner does not have sufficient funds to buy a replacement property and in the meantime the price of replacement properties increases causing loss, the landowner is entitled to be compensated for that loss under the Act. For convenience, the parties called this type of loss a “loss due to a rising market”.
The Commissioner contends that a loss due to a rising market is not a recoverable head of loss regardless of the circumstances.
For the purpose of analysis, I assume for the time being that Mr Chadrysiak will have proved that he could not buy a replacement property between February 2014 and February 2018 because he did not have sufficient funds to do so because the Commissioner’s offer was manifestly inadequate and that the market has risen since then causing him a loss. Whether each of these matters has been proved is addressed below.
The entitlement to compensation is conferred by section 22B. That section provides:
22B—Entitlement to compensation
Subject to this Act, a person is entitled to compensation for the acquisition of land under this Act if—
(a)the person's interest in land is divested or diminished by the acquisition; or
(b)the enjoyment of the person's interest in land is adversely affected by the acquisition.
Principles in accordance with which compensation is to be determined are set out in subsection 25(1). That subsection provides:
25—Principles of compensation
(1)The compensation payable under this Act in respect of the acquisition of land shall be determined according to the following principles:
(a) the compensation payable to a claimant shall be such as adequately to compensate him for any loss that he has suffered by reason of the acquisition of the land; and
(b) in assessing the amount referred to in paragraph (a) of this section consideration may be given to—
(i) the actual value of the subject land; and
(ii)the loss occasioned by reason of severance, disturbance or injurious affection; and
(c) compensation shall be fixed as at the date of acquisition of the land; and
(d) where the claimant's interest in the subject land was liable to expire or be determined, any reasonable prospect of renewal or continuation of the interest must be taken into account; and
(e) any special suitability or adaptability of the land for any purpose shall not be taken into account if it could be applied to that purpose in pursuance only of statute, or if the suitability or adaptability is peculiar to the purposes or requirements of a particular person or of any Governmental or local governing authority but any bona fide offer to acquire the land made before the passing of the special Act shall be taken into account; and
(f) where the value of the land is enhanced by reason of its use, or the use of any premises on the land, in a manner that may be restrained by any court, or is contrary to law, or is detrimental to the health of any persons, the amount of that enhancement shall not be taken into account; and
(g) no allowance shall be made on account of the fact that the acquisition is effected without the consent, or against the will, of any person; and
(h) no allowance shall be made for any enhancement or diminution in the value of the land in consequence of—
(a) the passing of the special Act; or
(b) the acquisition under this Act of any other land; or
(c)any proposed or expected development of the land after its acquisition; and
(i) where the land is, and but for acquisition would continue to be, devoted to a particular purpose, and there is no general demand or market for land devoted to that purpose, the compensation may, if reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement; and
(j) allowance shall be made in favour of the Authority for any enhancement in value of land adjoining the subject land in which the claimant is interested by reason of development of the land after its acquisition, but in no case shall the claimant be liable to make any payment to the Authority in respect of such enhancement in value; and
(k) where a notice of intention to acquire land has been served upon a person interested in the land, any sales, transactions, arrangements, licences or approvals effected or obtained with respect to the land, and any improvements to the land effected, after service of the notice, shall not be taken into account unless it is proved that they were effected or obtained bona fide.
The cardinal principle, subject to the qualifications and limitations contained in paragraphs (c) to (k), is set out in paragraph (a). In the paradigm case such as the present where the claimant is the owner in fee simple of the land, the compensation is to be such as will adequately compensate the owner for any loss suffered by reason of the acquisition of the land.
This concept is equivalent to the compensation principle applied in assessing compensation for tort or breach of contract. In Haines v Bendall,[8] Mason CJ, Dawson, Toohey and Gaudron JJ said:
The settled principle governing the assessment of compensatory damages, whether in actions of tort or contract, is that the injured party should receive compensation in a sum which, so far as money can do, will put that party in the same position as he or she would have been in if the contract had been performed or the tort had not been committed. Compensation is the cardinal concept. It is the "one principle that is absolutely firm, and which must control all else": Skelton v Collins per Windeyer J.[9]
[8] (1991) 172 CLR 60.
[9] At 63. (Citations omitted).
Paragraph (a) imports a causation test by requiring that the loss be suffered “by reason of the acquisition”. This concept of causation is analogous to the causation test applying to the recovery of damages at common law. Thus, in Commissioner of Highways v Ship Bros[10] Wells J said:
The passage “by reason of the acquisition” imports an element of causation into this fundamental principle which, in its function, is not unlike the same element incorporated into the rules according to which awards of damages are made at common law.[11]
[10] (1978) 19 SASR 215.
[11] At 219.
Paragraph (b) distinguishes between the actual value of the land (a direct and immediate loss) and loss occasioned by reason of severance, disturbance or injurious affection (an indirect or consequential loss). However paragraph (a) remains the paramount principle and (subject to the exceptions and qualifications contained in paragraphs (c) to (k)) a head of loss will be recoverable if it falls within the cardinal principle even if it does not fall within one of the two limbs of paragraph (b). Thus, in Commissioner of Highways v George Eblen Pty Ltd[12] Wells J said:
Paragraph (b) mentions certain traditional heads of compensation, but the appearance of the word ‘may’ makes it clear that the stated heads are not intended to be exhaustive; those that are explicitly referred to must, I think, subject to qualification imposed by the context, be accorded the meanings respectively that have been developed over the years by courts when fixing compensation with respect to each.[13]
[12] (1975) 10 SASR 384.
[13] At 390.
Similarly in South Australian Land Commission v Bletas[14] Wells J said:
The dominating principle is stated in paragraph (a) of s 25, which reads: ‘The compensation payable to a claimant shall be such as adequately to compensate him for any loss that he has suffered by reason of the acquisition of the land’. Broadly speaking, that loss falls under two headings: first of all, there is the actual value of the land taken, which must be fixed as at the date of the acquisition; and then there are other losses which are occasioned by reason of the taking and which may be placed under the headings of severance, disturbance, injurious affection, or any other loss. The categories, however, are not closed.[15]
[14] (1978) 77 LSJS 344.
[15] At 347.
“Disturbance” has a traditional meaning that was articulated by Bray CJ (with whom Walters J agreed) in Brewarrana Pty Ltd v Commissioner of Highways[16] by reference to Cripps Compulsory Acquisition of Land[17] in the following terms:
Various types of loss included under the head of disturbance are discussed in Cripps, 4-229 – 4-236. These include such matters as the cost of purchasing a comparable property, increased rent, removal expenses, diminution in value of fixtures on forced sale, loss of goodwill in relation to a trade conducted on the subject land, loss of profits during re-establishment of a business on another site and the like.[18]
[16] (1973) 4 SASR 476.
[17] (1962, 11th ed).
[18] (1973) 4 SASR 476 at 484.
“Severance” and “injurious affection” both relate to the detrimental effect of the acquisition of part of the owner’s land on the value to the owner of the remaining part retained. They are both species of the same genus of consequential loss[19] and it may be difficult to draw a precise line between them.[20] In general terms, severance is regarded as referring to the detrimental effect of the acquisition itself whereas injurious affection is regarded as referring to the detrimental effect of the actual and future use of the acquired land on the retained land.[21]
[19] Lenz Nominees Pty Ltd v Commissioner of Main Roads [2012] WASC 6, (2012) 186 LGERA 58 at [237] per Edelman J.
[20] Brown, Land Acquisition, (2009, 6th ed) at [33.1].
[21] Marshall v Director-General, Department of Transport [2001] HCA 37,(2001) 205 CLR 603 at [20] per Gleeson CJ, Gummow, Kirby and Callinan JJ (with whom Gaudron and Hayne JJ agreed) and [44]-[46] per McHugh J.
Given the breadth of the cardinal principle contained in paragraph (a), there is no a priori reason why, if the owner suffers loss because due to the payment of inadequate compensation he or she cannot afford to buy a replacement property over a period while the market rises, that loss cannot be recovered provided that it passes the causation test contained in paragraph (a), namely that the owner proves that the loss was suffered “by reason of the acquisition”.
The Commissioner contends that such a claim could not pass the causation test because the reference in paragraph (a) to “the acquisition” is confined to the divestment of the owner’s interest in the land and does not encompass payment of the value of the land. The Commissioner contends that any loss caused by the payment of inadequate compensation for the value of the land is not caused by the divestment of the owner’s interest in the land.
The Commissioner’s first premise must be rejected. There are many recoverable losses which are accepted as passing the causation test in paragraph (a) where the loss is not caused in the narrow sense used by the Commissioner solely by the divestment of the owner’s interest in the land. One example is injurious affection where the owner can recover the loss comprising the diminution in the value of adjoining land as a result of the use made by the authority of the acquired land. Another example is disturbance where the owner can recover the stamp duty and other incidental costs of purchasing replacement land. In both examples the loss is not caused solely by the divestment of the owner’s interest in the land. The reference to “acquisition” in paragraph (a) includes not only the divestiture but also the circumstances in which the divestiture occurs.
In any event the Commissioner’s second premise must be rejected. The concept of causation embodied in paragraph (a) is similar to the common law concept of causation as articulated by the High Court in March v Stramare (E & MH) Pty Ltd,[22] in which Mason CJ (with whom Toohey and Gaudron JJ agreed) said:
The law does not accept John Stuart Mill's definition of cause as the sum of the conditions which are jointly sufficient to produce it. Thus, at law, a person may be responsible for damage when his or her wrongful conduct is one of a number of conditions sufficient to produce that damage…
…
…the courts are no longer as constrained as they were to find a single cause for a consequence and to adopt the "effective cause" formula. These days courts readily recognize that there are concurrent and successive causes of damage on the footing that liability will be apportioned as between the wrongdoers…
…
The common law tradition is that what was the cause of a particular occurrence is a question of fact which "must be determined by applying common sense to the facts of each particular case", in the words of Lord Reid. That proposition is supported by a long line of authority in the United Kingdom: It is supported also by this Court's decision in Fitzgerald v Penn.
…
As Dixon C.J., Fullagar and Kitto JJ remarked in Fitzgerald v Penn: "it is all ultimately a matter of common sense" and "(i)n truth the conception in question (i.e., causation) is not susceptible of reduction to a satisfactory formula".[23]
[22] (1991) 171 CLR 506.
[23] At 509-515 (Citations omitted).
When an owner’s interest is divested upon a compulsory acquisition and the owner suffers loss because due to the payment of inadequate compensation the owner cannot afford to buy a replacement property over a period while the market rises, there must be a concurrence of circumstances for the loss to occur. The divestment of the owner’s interest in the property is an essential cause because without it no loss would be suffered: the “but for” test is satisfied. The mere fact that this will only cause loss in a concurrence of three circumstances, namely payment of inadequate compensation, the owner’s straitened financial means and a rise in the market, does not mean that the divestment is not a common sense cause of the loss. In those circumstances, the divestment is both a substantial and common sense cause of the loss.
Having regard to the text, context and evident purpose of subsection 25(1), loss due to a rising market is a recoverable head of loss provided that the claimant proves causation on the evidence.
In Kerry v State Transport Authority[24] Matheson J held that loss due to a rising market is a recoverable head of loss when the claimant proves causation on the evidence. Kerry owned a house property adjoining the River Torrens and grew extensive fruit and vegetables using River Torrens water. Kerry looked for a similar property after the acquisition but could not find one over the period of 18 months after the acquisition. Matheson J found that over the 12 months after the acquisition the value of the house property increased by $18,000. Matheson J awarded this as a separate head of loss. Matheson J said:
I have decided that the claimant is entitled to an award for this loss. Section 25(a) of the Land Acquisition Act 1969 is in wide terms. It provides…
Section 25(c) provides that compensation shall be fixed at the date of acquisition of the land, but this does not necessarily apply to items such as disturbance…
I do not think s 25(c) defeats this claim, nor do I think the presence in the said Act of interest provisions, namely, ss 20 and 33, defeats this claim. They are clearly designed to compensate claimants who are being kept out of his money while legal processes continue, and do not touch losses due to a rising market situation.[25]
[24] (1985) 38 SASR 502.
[25] At 508-509.
The Commissioner submits that the decision in Kerry is contrary to principle. First the Commissioner submits that the scheme of the Act is that claimants are compensated by payment of statutory interest (under subsection 23A(4) being the interest earned on moneys paid into court and section 33 being equivalent statutory interest on any deficit of moneys paid into court) for not having had the immediate use of funds – not by payment of an additional amount of compensation by reference to a loss due to a rising market.
The answer to this submission is the one given by Matheson J that interest and a loss due to a rising market are distinct matters which depend on entirely different circumstances. Interest on moneys paid into court is to be paid to the claimant regardless of whether the claimant purchases a replacement property or not and regardless of whether the price of any replacement property has fallen, stayed the same or increased since the acquisition. Conversely, compensation for a loss due to a rising market does not depend on the time that has elapsed since the monies were paid into court: it depends on the payment of inadequate compensation into court operating in conjunction with straitened financial circumstances and a rising market.
Secondly the Commissioner submits that it is an essential premise of Matheson J’s reasoning that a claimant has an entitlement to purchase a reasonable substitute for the property divested. The Commissioner submits that a claimant “has no vested right to re-establish himself on a similar piece of land elsewhere”, citing the judgment of Wells J in Crouch v Minister of Works.[26] Leaving aside that the observation by Wells J was made in a very different context, the recoverability of a loss due to a rising market does not depend on a claimant having an entitlement to purchase a replacement property: it depends on the claimant establishing that the acquisition relevantly caused the loss. If the Commissioner’s submission were correct, stamp duty on a replacement property could never be recovered but it is regarded as a paradigm disturbance loss.
[26] (1985) 38 SASR 502.
Thirdly the Commissioner submits that it is an essential premise of Mr Chadrysiak’s claim that an owner may claim loss based on a lack of financial means. The Commissioner submits that the Full Court held in Brewarrana Pty Ltd v Commissioner of Highways[27] that lack of financial means is too remote as a foundation for a claim under the Act. In that case, Brewarrana claimed that it would not have incurred interest and other costs if the land had not been acquired and claimed such interest and other costs as a consequential loss. The Full Court held that these claims were too remote. The assessment of remoteness is fact specific. The facts in Brewarrana Pty Ltd were far removed from the facts in the present case and a decision on remoteness in one case cannot be transposed to a different case. If Mr Chadrysiak otherwise succeeds in proving causation, he will still have to prove that the loss is not too remote. However, causation is assessed independently of and prior to consideration of remoteness.
[27] (1973) 4 SASR 476 at 485-486 per Bray CJ, 491 per Walters J and 502 per Wells J.
The Commissioner contends that the decision of the New South Wales Court of Appeal in Minister Administering the Heritage Act 1977 v Haddad[28] casts doubt on the correctness of the decision of Matheson J in Kerry. However, in Haddad the Court of Appeal considered section 124 of the Public Works Act 1912 (NSW) which provided only for compensation for the value of the land and for severance and injurious affection. It contained no provision for disturbance and no equivalent of section 25(1)(a) of the Act. Haddad was forced to contend that a loss due to a rising market impacted the value of the land,[29] an ambitious contention rightly rejected by the Court of Appeal. Clarke JA distinguished the decision in Kerry v State Transport Authority because of the great difference between the respective statutory provisions.[30]
[28] (1988) 67 LGRA 438 at 442-446 Mahoney JA (with whom Kirby P agreed) and 447-448 per Clarke JA.
[29] See at 443 per Mahoney JA (with whom Kirby P agreed).
[30] At 447-448.
In conclusion, a loss due to a rising market is a recoverable head of loss provided that the claimant proves causation on the evidence and subject to principles of remoteness and mitigation of loss.
Proof of causation
As observed above, Mr Chadrysiak must prove that he did not and could not buy a replacement property between February 2014 and February 2018 because he did not have sufficient funds to do so because the Commissioner’s January 2014 offer was manifestly inadequate. He must also prove that the market has risen since then causing him a loss.
There are two aspects to the first part of the proof of causation. First has Mr Chadrysiak proved that he could not buy a $505,000 replacement property in early 2014 for the postulated reasons? Secondly, has Mr Chadrysiak proved that that he could not buy the equivalent of a $505,000 replacement property as at January 2014 thereafter up to February 2018 for the postulated reasons?
First causation question
I first consider whether Mr Chadrysiak has proved that he could not buy a $505,000 replacement property in the first half of 2014 because he did not have sufficient funds to do so because the Commissioner’s January 2014 offer was manifestly inadequate.
Mr Chadrysiak has proved that the Commissioner’s January 2014 offer was objectively manifestly inadequate. This is proved by the Commissioner’s acceptance in his pleading that the value of the Property as at January 2014 was $500,000. Compared to that value, the offer of $385,000 was manifestly inadequate.
For convenience, although it is an essential element in the proof of causation, I consider below under the Quantum heading whether Mr Chadrysiak has proved that the market has risen between January 2014 and the relevant date. In the meantime, I assume for the sake of analysis that this has been proved.
The issue then is whether Mr Chadrysiak has proved that he did not and could not buy a replacement property in the first half of 2014 because he did not have sufficient funds to do so.
Mr Chadrysiak did not give evidence that he looked at possible replacement properties in January 2014 or at any time thereafter. His evidence was that he did not do so. Mr Chadrysiak did not give evidence that he approached the Commonwealth Bank to ascertain whether it would transfer its existing loan to a replacement property or that he approached any financier to ascertain whether it would make a new loan towards the purchase of a replacement property and if so how much.
Mr Chadrysiak said in his affidavit that he was extremely frustrated and distressed with the Commissioner for making a manifestly inadequate offer of $385,000. I find that this was the reason why he did not explore buying a replacement property at that stage. Mr Chadrysiak said his affidavit that he knew that there was no possibility of replacing his home for a purchase price of only $385,000. I accept that evidence as far as it goes. However Mr Chadrysiak said that this was the reason why he did not search for a replacement property. I cannot accept that evidence because, for reasons given below, Mr Chadrysiak was not necessarily limited to purchasing a replacement property for only $385,000. I find that the reason why he did not search for a replacement property was his anger with the Commissioner for making a manifestly inadequate offer. In addition he hoped to obtain compensation of at least $600,000.
To succeed on the issue of causation, given his lack of enquiry Mr Chadrysiak needed to prove that if he had attempted to do so he would have been unable to purchase a replacement property for $505,000 plus incidental costs in and after February 2014. This involves three steps:
1.proof of the amount needed to purchase a replacement property for $505,000 plus incidental costs;
2.proof of the amount he could have contributed out of his own resources; and
3 proof of the amount (if any) that he could have borrowed.
Mr Chadrysiak did not attempt to prove these matters in his own case. Such evidence as was adduced emerged in cross-examination of Mr Chadrysiak or in evidence adduced by the Commissioner.
The first step is relatively straightforward. Mr Pamula in his first report said that stamp duty on purchase of a $500,000 property was $21,330 and conveyancing costs (implicitly including registration fees) were $4,000. Allowing for slightly higher stamp duty and registration fees on a purchase of a $505,000 property, the total cost inclusive of stamp duty and conveyancing costs would be $531,000.[31]
[31] Mr Chadrysiak could have deferred incurring removal costs because the Commissioner allowed him to remain in the Property rent free for a substantial time after January 2014. In any event, as Mr Chadrysiak bears the onus of proof, I am not satisfied of the quantum of removal costs that he would have incurred or that did not have other resources from which he could have paid such removal costs in early 2014.
As to the second step, Mr Chadrysiak said during cross-examination that he had approximately $100,000 in his bank account at the time of the acquisition of the Property. He gave only vague evidence as to his assets, liabilities, income and expenditure. He did not tender his bank statements to show more particularly the amount he had in his bank account. Based on such limited evidence as was given by Mr Chadrysiak, provided that the Commonwealth Bank would have left in place his existing facility (which question is addressed below), he had available at least approximately $519,000 being $419,000 paid into court by the Commissioner plus $100,000 in his bank account. As Mr Chadrysiak bears the onus of proof, given the vagueness of his evidence I am not satisfied that he did not have available resources that would have given him (subject to the same proviso) the requisite amount of $531,000 to purchase a replacement property for $505,000. In any event Mr Chadrysiak has failed to prove that, if the Commonwealth Bank would have left in place his existing facility, there was not a margin of at least $12,000 between the limit of his facility and the amount drawn down by him in early 2014 to bridge any gap.
As to the third step, very limited evidence was adduced as to the attitude of the Commonwealth Bank to continuing Mr Chadrysiak’s existing loan facility supported by alternative security over a replacement property or advancing a new loan to purchase a replacement property. Mr Chadrysiak did not in fact at any point approach the Commonwealth Bank enquiring about its attitude in either respect.
As noted above, in March 2015 Mr Chadrysiak’s solicitors wrote to the Bank enquiring whether it would consent to payment out of all of the monies in court to Mr Chadrysiak or would first require payment of its debt. No suggestion was made of substituting security for the existing loan or making a fresh loan. Notwithstanding this, the Bank responded volunteering that there could be a substitution of security with a new property. This was not pursued by Mr Chadrysiak.
In March 2017 Mr Chadrysiak’s solicitor wrote to the Bank enquiring as to its policy as at March 2015 about the substitution of one property as security for an existing property in respect of an existing loan facility. The Bank’s response was ambiguous. It might be read as indicating that the Bank would normally agree to the substitution provided that its valuation of the new property offered as security satisfied the Bank’s security criteria. This construction is supported by the fact that the Bank said that upon substitution a current loan would remain open and any established mortgage insurance policy would remain in place. On the other hand it might be read as indicating that the Bank would in addition apply its standard credit criteria to the customer’s ability to make the required payments of interest or instalments of principal and interest as the case may be. Mr Chadrysiak should have called evidence from a banker (either with or previously with the Commonwealth Bank or a current or previous banker who could give evidence about industry practice) to identify the criteria applied on an application for substitution of security. The onus of proof in this respect lay on Mr Chadrysiak.
In the same letter, Mr Chadrysiak’s solicitor also enquired whether the Bank was now able (in March 2017) to provide a loan to purchase another property. Mr Chadrysiak’s solicitor said that his only income was a Newstart Allowance of $635 per fortnight. The Bank said that it would need to apply its standard credit criteria to any application for a loan and declined to give a hypothetical answer. It did say that a Newstart Allowance was excluded income for the purpose of its income verification purposes.
Mr Chadrysiak did not adduce evidence of the limit on his Commonwealth Bank loan facility. However, an appendix to an actuarial report provided by Mr Brett to Mr Chadrysiak’s solicitor in December 2016 shows that the highest six monthly balance of the loan account between 30 June 2009 and 31 December 2013 (just before acquisition of the Property by the Commissioner) was just over $300,000. Mr Chadrysiak bore the onus of proving the limit of the facility. I infer that the limit of the facility was at least $300,000. The schedule to Mr Brett’s report shows that the amount drawn down on the loan facility as at 31 December 2013 was $241,360 and as at 15 May 2014 was $256,171. It follows that, if the Bank would have agreed to the substitution of security in early 2014, Mr Chadrysiak could have drawn down of the order of $50,000 towards the purchase of a replacement property.
Mr Chadrysiak did not adduce any evidence as to whether his income and expenses as at the first half of 2014 would have qualified him under the Commonwealth Bank’s standard credit criteria for a loan facility with a limit of either $250,000 or $300,000 secured over a replacement property. Mr Chadrysiak bore the onus of proof in this regard.
In the circumstances, I am not satisfied on the balance of probabilities that Mr Chadrysiak could not have purchased a replacement property in the first half of 2014 for $505,000 with finance from the Commonwealth Bank either by substitution of security under the existing loan facility or the grant of a new loan facility.
For this reason Mr Chadrysiak’s claim must be dismissed.
Second causation question
For the sake of completeness I address the second causation question on the assumption that Mr Chadrysiak had succeeded on the first causation question. The second causation question is whether Mr Chadrysiak has proved that he could not buy a replacement property at a price equivalent to $505,000 as at January 2014 at any time up to and including February 2018.
Assuming that Mr Chadrysiak could not afford to buy a replacement property for $505,000 in the first half of 2014, ex hypothesis on his case he would have been able to do so after it had been determined (or agreed) that he was entitled to compensation of $505,000 plus stamp duty and conveyancing costs plus an allowance for the rise in price of a replacement property between 30 January 2014 and the date of receipt of that compensation.
In those circumstances, it is an essential component of Mr Chadrysiak’s causation case that he prove that he prosecuted this proceeding with reasonable diligence. Assume for example that, if he had prosecuted the proceeding with reasonable diligence, the trial would have taken place and judgment would have been delivered within 12 months of February 2014. In that event, as a matter of causation any loss due to a rising market from February 2014 to February 2015 would be caused by the acquisition because at the end of that period he would have been awarded sufficient compensation to purchase a property with a price equivalent to $505,000 as at February 2014. If he failed to prosecute the proceeding with reasonable diligence such that judgment would not have been delivered until February 2018, any additional loss due to a rising market from February 2015 to February 2018 would have been caused by his failure to prosecute the proceeding diligently rather than by the acquisition.
It is therefore necessary for Mr Chadrysiak to prove that he diligently prosecuted the proceeding and the fact that the trial was not listed to occur until February 2018 was not caused by his failure to do so. Otherwise he would only be entitled to an assessment of quantum on the basis of a rise in the market (if any) up to the date when judgment would have been delivered if he had diligently prosecuted the proceeding. This is not a mere matter of failure to mitigate loss, in respect of which the respondent would bear the onus of proof. It is an essential element of Mr Chadrysiak’s causation case in respect of which the onus of proof lies on him.
I am in any event affirmatively satisfied that Mr Chadrysiak failed to prosecute this proceeding diligently. He became aware in early February 2014 that the Commissioner was only offering $385,000 as the value of the Property. Although it is unclear on the evidence when he became aware of or received the Sander valuation of December 2013, he could by the exercise of reasonable diligence have obtained a copy in February 2014. Mr Morgan was quickly instructed to provide a valuation and inspected the Property for that purpose on 18 February 2014. However his report was not obtained until September 2014 and was not served until November 2014. The timing in relation to all of the other valuation reports in the matter indicates that there is no reason why a valuer could not have provided a valuation report within one or two months of receipt of instructions to do so.
In this case, the valuation involved an additional complexity, namely whether the highest and best use of the Property was purely residential, combination residential and commercial (home office) or purely commercial (offices). When the planners and a traffic engineer were instructed to provide reports on whether the Council would grant planning permission for use of the Property as a home office, they provided their reports within a short time of receiving instructions. If Mr Chadrysiak intended to claim that the Property should be valued on the basis of use as offices or a home office, a planner (and consequently a traffic engineer) should have been engaged at the outset before preparation of a valuation report by Mr Morgan.
If Mr Chadrysiak had prosecuted the proceeding with reasonable diligence, there is no apparent reason why it could not have been listed for a trial nine months after February 2014 and judgment delivered within a further three months, that is by February 2015. It may well be that it could have been listed and judgment delivered before that time.
However, I must have regard to the manner in which the parties’ respective cases were run and in particular the Commissioner’s case in relation to lack of diligence by Mr Chadrysiak in the prosecution of the proceeding. The Commissioner does not contend that the matter should have been finally determined before May 2016 and (while the onus of proof in relation to quantum does not lie on the Commissioner) does not attempt to quantify any loss due to a rising market in respect of any period before May 2016. In light of this, I am affirmatively satisfied that at most any loss due to a rising market suffered by Mr Mr Chadrysiak was not caused by the acquisition insofar as it was suffered after May 2016.
Quantum of loss
I address the quantum of any loss suffered by Mr Chadrysiak due to a rising market on the assumption that Mr Chadrysiak had succeeded on the issues of causation addressed above.
Movement in house prices over time
The first aspect of assessing the quantum of any loss is to assess the movement in market prices of a replacement property over time.
Mr Chadrysiak’s case is that the movement in price of a replacement property over time should be assessed by reference to the movement in the quarterly Median House Price Statistic published by the South Australian government over the relevant period. That publication shows that the median price of houses in the Adelaide Metropolitan area sold in each relevant quarter (together with the percentage movement since 31 December 2013 and the percentage movement applied to the value of the Property as at 31 December 2013) was as follows:
Quarter ended Median Price Movement
since 31.12.2013Adjusted value
of Property31 December 2013 $410,000 $505,000 31 March 2014 $412,800 0.7% $508,535 30 June 2014 $418,000 2.0% $515,100 30 September 2014 $411,000 0.2% $506,010 31 December 2014 $425,000 3.7% $523,685 31 March 2015 $425,000 3.7% $523,685 30 June 2015 $426,000 3.9% $524,695 30 September 2015 $428,000 4.4% $527,220 31 December 2015 $440,000 7.3% $541,865 31 March 2016 $436,000 6.3% $536,815 30 June 2016 $446,000 8.8% $549,440 30 September 2016 $440,000 7.3% $541,865 31 December 2016 $448,000 9.3% $551,965 31 March 2017 $459,000 12.0% $565,600 30 June 2017 $455,000 11.0% $560,550 30 September 2017 $455,000 11.0% $560,550 31 December 2017 $465,000 13.4% $572,670
Mr Chadrysiak’s claim for loss due to a rising market is $67,670 being the difference between the first and last rows of the final column.
The Commissioner’s case is that the movement in the quarterly Median House Price Statistic has not been proved to be statistically reliable as an indicator of the movement in house prices over time and in any event a better indication is the movement in the value of the Property over the relevant time. The Commissioner relies on the evidence of Mr Pamula.
Mr Pamula prepared a report dated 27 June 2017. He valued the Property using comparative sales. His valuation as at January 2014 in his first report was $500,000. His valuation in his June 2017 report was $500,000 as at May 2016 and $520,000 to $530,000 as at May 2017.
For his valuation as at May 2016, Mr Pamula had regard to five sales in the inner western suburbs between August 2015 and June 2016 and ultimately relied in particular on two sales of houses on Port Road and Torrens Road in April and May 2016. For his valuation as at May 2017, Mr Pamula had regard to three sales in the inner western suburbs between October and December 2016 and ultimately relied in particular on two sales of houses on Grange Road and South Road in November and December 2016.
Mr Pamula expressed the opinion in his report that movements in the median sale price for a particular suburb are not statistically reliable because of the small number of sales during a quarter in a particular suburb (approximately three or four) and the small ratio of sales to houses (less than one per cent). This opinion was not challenged in cross-examination.
Mr Pamula also referred to the differences between various measures of median house price. He said that a measure of median house prices in metropolitan Adelaide reported by CoreLogic showed a median house price of only $432,000 compared to the South Australian government figure of $455,000 as at June 2017 and the movement in median house prices according to CoreLogic between December 2013 and June 2017 was only 5.8 per cent (cf the figure of 11 per cent shown in the table at [114] above). He also said that all published residential sales statistics are affected by small sample sizes. He said that approach would not be supported by any member of the Australian Property Institute as the basis of assessing the value of a property at a specific date. He said that the Median Sale Price is affected by the gentrification occurring where older low value dwellings are being demolished to make way for higher value modern dwellings.
Mr Pamula elaborated in evidence in chief on his opinion in relation to the reliability of the Median Sale Price for metropolitan Adelaide. He said that no self-respecting valuer would regard median prices as being anything other than something the newspaper would like to produce every now and again. Mr Pamula also expressed the opinion that movements in the Median Sale Price for metropolitan Adelaide published by the South Australian government are not statistically reliable for the purpose of assessing the movement in the price of a replacement property. He said that there are nearly 500,000 houses of Adelaide but only about 4,500 are sold each quarter, so that less than one per cent of the population is accounted for in the median. He said that extrapolating the percentage movement according to the Median Sale Price and applying it to a valuation at an earlier period does not match a comparison of valuations of a property at the two different dates. He said that the appropriate measure of the effect of delay in acquiring a replacement property is to compare a current valuation of the relevant property with a valuation as at the earlier date. He said that this was what he had done by undertaking a current valuation (as at May 2017) of the Property which could be compared with his valuation as at January 2014.
In cross-examination Mr Pamula was shown a Valuation Record produced by the Department for rating purposes showing that the Property had a capital value for the calendar year 1 January to 31 December 2016 of $520,000 and a capital value for the calendar year 1 January to 31 December 2017 of $570,000. Mr Pamula said that the Valuer General only undertakes a valuation of any given property every five years and in between merely uses statistics to adjust the previous value. He said that a valuer would never have any regard to the rating capital value in assessing a market valuation of a property at a particular date. It was put to Mr Pamula that the Valuer General has used mass appraisal since at least the beginning of 2016 and he said that it had been used since before that date but the modelling had enormous problems and the data was unreliable.
Mr Pamula was challenged in cross-examination on his opinion in relation to the reliability of the Median Sale Price for metropolitan Adelaide published by the South Australian government but he maintained his opinion.
The difference between Mr Chadrysiak’s case and the Commissioner’s case based on Mr Pamula’s evidence is summarised in the following table:
Mr Chadrysiak Commissioner Date Base Movement Movement Base 31 December 2013 $505,000 $500,000 31 March 2014 $508,535 $3,535 30 June 2014 $515,100 $10,100 30 September 2014 $506,010 $1,010 31 December 2014 $523,685 $18,685 31 March 2015 $523,685 $18,685 30 June 2015 $524,695 $19,695 30 September 2015 $527,220 $22,220 31 December 2015 $541,865 $36,865 31 March 2016 $536,815 $31,815 30 June 2016 $549,440 $44,440 Nil $500,000 (as at 1 May 2016) 30 September 2016 $541,865 $36,865 31 December 2016 $551,965 $46,965 31 March 2017 $565,600 $60,600 30 June 2017 $560,550 $55,550 $20,000-$30,000 $520,000-$530,000 (as at 1 May 2017) 30 September 2017 $560,550 $55,550 31 December 2017 $572,670 $67,670
Mr Chadrysiak contends that the quantum of loss should be assessed at $67,670. The Commissioner contends that, if the loss is not to be assessed as at an earlier date, the quantum of loss should be assessed at $20,000 based on the lower figure of the range given by Mr Pamula.
Mr Chadrysiak did not adduce any evidence from a statistician that the movements in the Median Sale Price for metropolitan Adelaide are statistically reliable or appropriate for determining the likely increase in the price of a replacement house that he could have been purchased in February 2014 for $505,000. Mr Chadrysiak did not adduce any evidence from a valuer in relation to these questions.
Mr Chadrysiak invites me to reject the evidence of Mr Pamula notwithstanding that no contrary expert evidence was adduced by him. A finder of fact is not bound to accept expert evidence merely because no contrary expert evidence is adduced. However, I would have to have good reason to reject Mr Pamula’s evidence.
Mr Chadrysiak relies on the principle that in compulsory acquisition cases doubts are resolved in favour of the dispossessed owner.[32] However, this does not displace normal principles concerning the evaluation of evidence. As Allsop P said in Sydney Water Corporation v Caruso:[33]
The general principle that in determining compensation to a dispossessed owner doubts should be resolved in favour of a more liberal estimate is well-known. That does not, however, detract from the need to engage with and evaluate evidence and competing witnesses.[34]
[32] Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia limited (1947) 74 CLR 358 at 373-374 per Dixon J; Valentini v City of Salisbury (1997) 69 SASR 332 at 340 per Matheson J; Mitchell v Roads and Traffic Authority of New South Wales [2008] NSWLEC 258, (2008) 164 LGERA 375 at [10]-[11] per Pain J; Sydney Water Corporation v Caruso [2009] NSWCA 391, (2009) 170 LGERA 298 at [3] per Allsop P and [99]-[100] per Tobias JA (with whom Sackville AJA relevantly agreed).
[33] (2009) 170 LGERA 298.
[34] At [3]. (Citation omitted)
Applying logic and common sense, I accept that it is conceivable that another valuer might take a different view to the opinion of Mr Pamula and might regard the movements in the Median Sale Price for metropolitan Adelaide as appropriate for determining the likely increase in price of a replacement house for Mr Chadrysiak. I accept that a statistician might regard the movements in the Median Sale Price for metropolitan Adelaide as statistically reliable. In one of those two events I might be persuaded that movements in the Median Sale Price for metropolitan Adelaide should be used to assess the loss due to a rising market. However in the absence of such evidence, I am not satisfied on the balance of probabilities that I should reject Mr Pamula’s opinions in this respect.
No evidence was adduced by Mr Chadrysiak that the Valuer General’s capital value is reliable for present purposes. Mr Pamula gave evidence that it is not reliable other than in respect of values based directly on a five yearly valuation. In the circumstances, I am not satisfied that I should rely on the Valuer General’s capital values in respect of the Property as at 2016 or 2017.
In general, in the absence of any basis to do otherwise I accept Mr Pamula’s evidence and the resulting calculation. However, it is not appropriate to select the lower figure in the range of values given by Mr Pamula as at May 2017. When valuers give a range of values and then adopt a specific value, they generally adopt the midpoint. I adopt the midpoint of $525,000 as the value of the Property as at May 2017.
I concluded above that, if Mr Chadrysiak had proved causation, given the manner in which the Commissioner ran his case, he did not prove that the acquisition caused any loss due to rise in market value beyond May 2016. On that basis, I assess the rise in market value between January 2014 and May 2016 at nil based on Mr Pamula’s valuations.
If Mr Chadrysiak had proved causation up to the date of trial, I would have assessed the rise in market value at $25,000.
Interest received by Mr Chadrysiak
The Commissioner contends that the interest that Mr Chadrysiak has received on the compensation paid of $545,000 should be taken into account in assessing the loss suffered by Mr Chadrysiak due to a rising market.
Mr Chadrysiak takes issue with this contention and contends in the alternative that, if interest is taken into account, the rent that he has paid or is payable should also be taken into account.
The assessment of loss should be undertaken by comparing:
·the actual financial position of Mr Chadrysiak; and
·the position in which he would have been if he had received $505,000 plus $45,000 for general disturbance in February 2014 and had purchased a replacement property.
If Mr Chadrysiak had received $550,000 in February 2014 and purchased a replacement property, he would not have earned interest on the sum of $545,000 because it would have been invested in his purchase of the replacement property and in paying removal and other ancillary costs. Nor would he have paid rent.
In actuality, Mr Chadrysiak has received interest on the principal sums paid by the Commissioner over time totalling $545,000. The interest that the Commissioner contends that Mr Chadrysiak received comprises:
·$10,856 interest received on 27 March 2015;
·$8,472 interest received on 28 July 2017;
·$10,585 being interest on the amount of $172,856 received on 27 March 2015 that he could have earned by investing in a term deposit at 2.6 per cent compounding four weekly between 27 March 2015 and 28 July 2017.
Mr Chadrysiak does not take issue with the Commissioner’s calculations in this respect. He merely contends that as a matter of principle interest should not be taken into account (or alternatively rent should be offset). I reject the contention that as a matter of principle interest should not be taken into account. It is necessary to take it (along with rent) into account for the reasons given above.
On the Commissioner’s unchallenged calculations, if Mr Chadrysiak had proved causation up to the date of trial, interest totalling $29,912 should be taken into account in assessing the loss suffered by him due to a rising market.
Rent paid by Mr Chadrysiak
As noted above, Mr Chadrysiak contends that, if interest is taken into account, the rent that he has paid or is payable should also be taken into account and I accept that contention.
Mr Chadrysiak paid or is liable to pay rent to the Commissioner of $400 per week from 1 February 2016 to November 2016 (which I assume to be 8 November 2016 based on his answer to a question in cross-examination). Rent for 40 weeks is $16,000. He paid or is liable to pay rent of $150 per week to his new landlord from 8 November 2016 to 28 July 2017 (to match the date to which interest was calculated). Rent for 36 weeks is $5,400. The total amount to be taken in account is $21,400.
Conclusion
If Mr Chadrysiak had proved causation up to the date of trial, I would have assessed the loss due to the rise in market value at $16,488, being $25,000 less $29,912 plus $21,400.
However, Mr Chadrysiak failed to prove any causation of loss suffered by reason of the acquisition for the reasons given at [102] above. Even if he had proved causation, he failed to prove that he suffered any loss by reason of the acquisition for the reasons given at [132] above.
Remoteness and mitigation of loss
The Commissioner contends that Mr Chadrysiak failed to mitigate his loss by diligently prosecuting this proceeding. There is no need to consider this defence because Mr Chadrysiak was required to prove diligent prosecution as part of his causation case and he failed to do so for the reasons given at [95] to [102] above. In any event, I would have found that the Commissioner had proved that Mr Chadrysiak failed to mitigate his loss by diligently prosecuting this proceeding.
The Commissioner contends that Mr Chadrysiak failed to mitigate his loss by not accepting the Commissioner’s May 2016 offer or making a reasonable counter offer of $555,000 plus interest and costs. It is unnecessary to decide this contention.
The Commissioner contends that Mr Chadrysiak’s loss is too remote to be recoverable. It is clearly established that a remoteness test applies to the recovery of compensation under the Act. Although it is not strictly necessary to decide, if Mr Chadrysiak had proved causation of loss up to trial, I would have held that his loss was not too remote. Even applying a strict test that the loss must be the “natural and probable consequence” or the “natural, direct and reasonable consequence” of the relevant circumstances, those tests would be satisfied.
Conclusion
Mr Chadrysiak has failed to establish that he is entitled to compensation for loss due to a rising market.
I will hear the parties as to the orders to be made to finalise the proceeding.
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