City of Adelaide v Cinema Place P/L - [2006] SASC 22

SUPREME COURT OF SOUTH AUSTRALIA
(Land and Valuation Division)
CITY OF ADELAIDE v CINEMA PLACE P/L & ANOR
Judgment of The Honourable Justice Debelle
31 January 2006
REAL PROPERTY - RESUMPTION OR ACQUISITION OF LAND - COMPENSATION - PAYMENT INTO AND OUT OF COURT
Compulsory acquisition of land – dispute as to true amount of compensation payable – whether money standing in court should be paid out prior to resolution of dispute – relevant principles – held, money should be paid out.
Land Acquisition Act 1969 s 18, s 19, s 20, s 22, s 23, s 23A, s 23D, s 26, referred to.
Minister for the Environment v Florence (1979) 21 SASR 108; Spencer v The Commonwealth (1907) 5 CLR 418, considered.

CITY OF ADELAIDE v CINEMA PLACE P/L & ANOR
[2006] SASC 22
Land and Valuation Division

DEBELLE J. This is an application for payment out of court of monies paid into court in consequence of the acquisition of land pursuant to the Land Acquisition Act 1969 (“the Act”). The acquiring authority is Corporation of the City of Adelaide (“the Council”). The owner of the land acquired is Cinema Place Pty Ltd (“Cinema Place”).
By notice of acquisition gazetted on 4 November 2004 the Council acquired land in the City of Adelaide owned by Cinema Place. The land is comprised and described in Certificate of Title Register Book Volume 5884 Folio 161. Cinema Place has an estate in fee simple in the land. At the time of the acquisition the land was subject to a mortgage but that mortgage has since been discharged.
The land acquired by the Council constitutes a private road. It is known as Vaughan Place. It runs between Rundle Street and Frome Street, Adelaide. The land is subject to some 18 easements which, in effect, provide the rights of way which constitute the private road.
The Council made an offer to Cinema Place of $210,000 as compensation for the value of the land. Pursuant to s 23A of the Act the Council paid that sum into court. Cinema Place has not accepted that offer. It claims compensation in the sum of $900,000 for the value of the land. In making its claim, Cinema Place relies on the valuation of Mr R H Brooke dated 1 June 2005. The claim of $900,000 is for the value of the land acquired. No claim is made under any other head of compensation. However, notice has been given of a possible claim for disturbance. The Council has retained Mr Alec Smithson to value the land. Mr Smithson values the land at $220,000, a sum in excess of the amount paid into court by the Council. The Council disputes the claim for compensation made by Cinema Place. The claim has been referred into court for determination.
The application by Cinema Place is for an order that the sum of $210,000 paid into court and interest thereon be paid to it without prejudice to its right to claim further compensation under the Act. The Council has opposed the application on the ground that the compensation as assessed by the court might be less than that paid into court.
When the Act was enacted in 1969, it contained a number of reforms to what had hitherto been cumbersome and antiquated procedures for land acquisition. The Act was based on the final report of the Land Acquisition (Legislation Review) Committee established by the Government of the day. The Chairman of the Committee was the Honourable W A N Wells QC who later became the first judge of the Land and Valuation Division of this Court. One of the important innovations in that Act was the régime which imposed an obligation upon an acquiring Authority to nominate what it believed to be the value of the land acquired and to pay into court an amount equal to that value. Payment into court had to be made within seven days of the publication of the notice of acquisition in the Government Gazette. The procedure was explained in these terms in the Second Reading Speech (Hansard, Legislative Council, 1969 at p 3086):
The proclamation embodies a notice of acquisition, which must be served on interested persons; contemporaneously with the notice of acquisition the authority is required to state a figure representing the value of the land and to pay the amount of that value into court. That important innovation makes it possible for every person with an interest in the land (and there will usually be only one owner or one group of joint owners) to apply to court for payment out, leaving any other disputed amounts (for example, a further sum representing value, severance or disturbance) to be agreed or litigated in due course.
The procedure ensures that persons interested will be able to have immediate recourse to a fund representing a substantial proportion, sometimes the whole, of the amount to which they will ultimately be adjudged to be entitled by way of compensation. After payment into court, the remaining issues in dispute (if any) between the parties can quickly be defined under the Act, and, at that stage, the proceedings will reflect the benefit to be derived from the new Land and Valuation Court, the subject of separate legislation.
The relevant provisions in the Act were s 20 and s 26. Section 20 imposed the obligation upon the Authority to pay into court and s 26 empowered the court to pay the money out of court. Section 26 was expressed in these terms:
26.The Court may by order direct that any moneys paid into Court, or compensation ordered, under this Act be applied –
(a)     in the purchase, redemption or discharge of any tax, debt, mortgage or encumbrance affecting the subject land;
(b)     in the purchase of other land or securities to be conveyed or settled upon or towards the same uses, trusts or purposes as the subject land;
(c)     in removing or replacing any buildings or substituting others in their stead, in such manner as the Court may direct;
(d)     in payment to any persons absolutely entitled to the moneys, or in the case of incapacity or disability to their trustees or guardians;
or
(e)     in such other manner as the Court thinks fit.
It will be noticed that para (e) enabled the court to direct that the monies be paid out of court in such manner as it thinks fit.
The practice of the court was invariably to order payment out of the whole of the amount paid into court once an application to do so had been made by the dispossessed owner. Payment out was made notwithstanding that the dispossessed owner might have claimed more than the amount paid into court. The practice was grounded on the fact that the scheme of the Act imposed an obligation on an acquiring Authority to make a realistic assessment of the value of the land before acquiring it. A further justification for the practice was that, once valuations have been exchanged by the parties, the court was aware of the basis upon which the acquiring Authority had made its offer.
Mr Wells QC for the Council contended that the practice was also grounded on the terms of s 19 of the original Act. Section 19 provided:
19.(1) The Authority must append to a copy of a notice of acquisition served upon a claimant an offer in writing that –
(a)must state the total amount of compensation that the Authority proposes to pay in respect of the value of the subject land;
and
(b)may state amounts of compensation for any other matters in respect of which compensation is payable.
(2) To the extent that an amount of compensation, or any separable component of that amount, is not disputed, a statement under subsection (1) of this section shall be binding upon the Authority.
The effect of s 19(2) was briefly noted by Wells J in Minister for the Environment v Florence (1979) 21 SASR 108 at 109 where, after referring to s 19(2), the claim for compensation in that case, and the reply by the acquiring Authority to that claim, Wells J said:
It follows, in my opinion that the disputed claim of which this Court stands seized is a claim for an amount that is above $240,000 and that does not exceed $434,000 … As I read the Act, the Minister is bound to concede to the claim of an amount of compensation of at least $240,000.
Mr Wells submitted that those remarks confirmed that s 19(2) bound the acquiring Authority to pay as compensation at least what had been paid into court.
The meaning and intended operation of s 19(2) is not entirely clear. It is not clear whether s 19(2) authorised payment out where the claimant disputed the amount paid into court on the ground that it was an inadequate amount of compensation. Another question is whether the Authority is bound to pay at least what has been paid into court only in those instances where the claim is not disputed. For example, if the Authority has paid into court as compensation an amount for the value of the land acquired and an amount to compensate for disturbance and if the claimant agrees the assessment of the value of the land but contends that the amount payable as compensation for disturbance is wholly inadequate, is the Authority bound only in respect of the amount paid into court and not with respect of the value of the land? The effect of the submissions of Mr Wells QC was that, if a claimant sought a higher sum for compensation than what had been paid into court, the Authority was at least required to pay what had been paid into court. That is clearly how Wells J understood the Act.
The single sentence with which Wells J stated the effect of s 19(2) does not address all of the above questions. As s 19(2) has now been repealed, it is not necessary to resolve those issues. Nor is it necessary to determine whether it was the basis on which orders for payment out were made. For present purposes, it is sufficient to note that s 19(2) was part of a statutory scheme which required the acquiring Authority realistically to assess the value of the compensation payable, to offer that sum to the dispossessed owner, and to pay that sum into court.
In 1994, the Act was extensively amended to include provisions relating to the acquisition of native title. Other amendments were also made. Those amendments included alterations to the procedures relating to the making and disputing of claims. However, the Act retained the obligation upon the acquiring Authority to make an offer of compensation as well as the obligation to pay into the court an amount equal to that offer. That obligation is now provided in s 23A of the Act. Section 26 was not amended.
Mr Wells QC submitted that the repeal of sections 18 to 23 and in particular s 19 and the replacement of those sections by what are now sections 18 to 23D and the absence of an equivalent provision to s 19(2) has resulted in the offer of compensation and payment into court becoming no more than an offer, without admission, in the context of the duty to negotiate in good faith prescribed by s 23 of the Act. He called in aid part of the Second Reading speech made when the 1994 amendments were introduced. When explaining the purpose of the Bill, the Deputy Premier said:
Most features of the existing compulsory acquisition scheme have been retained, but are incorporated into a negotiation process.
If an acquiring Authority and a claimant are unable to agree on the amount of compensation payable or on the question of whether the claimant has a compensable interest, either party may refer the matter to the Land and Valuation Court.
Later, in the course of explaining each clause of the Bill, the Deputy Premier said:
Clause 14: Substitution of ss 18 to 23
The current scheme is that on publication of a notice of acquisition under section 16 the land vests in the Authority. At the same time as the notice of acquisition is served on all persons with an interest in the land, the Authority must make an offer of compensation and pay that amount into Court. The claimant may accept the offer or make a claim for further compensation within 60 days. A disputed claim may be referred by the Authority or the claimant to the Court.
The new scheme generally retains the current procedure but incorporates into it a negotiation process.
The Authority is required to negotiate in good faith with persons who have or had (or who claim to have or to have had) an interest in the land that is divested or diminished or the enjoyment of which is adversely affected by the acquisition. The ERD Court may be requested to mediate between the parties. Non‑monetary compensation may be proposed.
An offer is to be made by the Authority and the amount paid into the Land and Valuation Court. If agreement is reached the agreement is filed in the Court. If agreement is not reached (either as to whether a claimant has an interest or as to the amount of compensation), the Authority may refer the matter to the Court. The Court is given power to make all relevant orders including orders as to whether a claimant holds an interest in the land and the nature of that interest.
Although the 1994 amendments introduced by s 23 included an obligation to negotiate in good faith, it is to be noticed that acquiring Authorities had already been negotiating with claimants for compensation. That was implicit in s 22 of the original Act. When s 23 was included in the 1994 amendments, it did no more than make explicit what had before then been implicit. I do not think, therefore, that the 1994 amendments in any way affected the obligation to negotiate in good faith. Even if the amended legislation for making and disputing claims of compensation has a greater emphasis upon negotiation than the Act as initially enacted, that does not necessarily have the consequence that the court should not order payment out to the claimant of the amount paid into court.
Mr Wells QC also fastened on the fact that s 19(1) of the original Act required the acquiring Authority to state the total amount of compensation that it “proposed to pay”, whereas s 23A requires the Authority to offer what it “is prepared to pay”. There is, in my view, no material difference between the two expressions. If there is any difference, the requirement in s 23A of the present Act that the Authority must offer the amount it is prepared to pay suggests an even more binding commitment on the part of the Authority.
The amendments in 1994 did not change an important characteristic of the legislative scheme under the original Act, namely, the requirement that the acquiring Authority offer to pay the claimant what it believed to be the value of the land, and to pay that sum into court. I do not believe that the Parliament intended to substitute a different scheme which would enable the acquiring Authority to contend that the value of the land is less than the amount paid into court. There was no suggestion that there was any mischief in the scheme of the original Act. In my view, the spirit of the legislative scheme which had long operated before the 1994 amendments was, in fact, retained. Any doubt on that question is removed by the Deputy Premier’s assertion that “The new scheme generally retains the current procedure but incorporates into it a negotiation process”. Notwithstanding the repeal of s 19(2), Parliament did not intend to amend the scheme of the original Act which required the acquiring Authority to be bound by its offer of compensation. There are policy reasons which justify that conclusion. The requirement that the Authority is bound by its offer enables the process of negotiation and the court’s resolution of the amount of compensation to proceed in an orderly manner. The Authority must be bound by that offer unless the circumstances are truly exceptional. That offer must represent the basis upon which the Authority will negotiate in good faith as required by s 23. One consequence of Mr Wells’ contention is that, if a claimant claimed a higher amount as compensation, the Authority would be at liberty to withdraw its offer. That is plainly not the intention of the Act. The amount which a claimant seeks by way of compensation is not a counter‑offer entitling the acquiring Authority to withdraw its offer. Instead, the spirit of the Act is that the offer stands throughout the negotiations and, if the disputed claim is referred into court, the offer stands throughout the hearing of the claim.
Mr Wells QC referred to a number of decisions as to the consequences of payment into court under rules of court. Those decisions included Spencer v The Commonwealth (1907) 5 CLR 418. In that case the Commonwealth had paid into court without a denial of liability an amount which it believed was the value of certain land. At the trial, the only contest was as to the true value of the land. It was not suggested that Mr Spencer was not entitled to receive at least the amount paid into court. Higgins J found that the compensation payable was less than what had been paid into court. He ordered that the balance be repaid to the Commonwealth. The decision was reversed on appeal because it was held that the effect of the Rules of the High Court was that the amount paid into court without a denial of liability was an admission of liability. The decision does not assist in this case because payment into court of an amount equal to the offer of compensation is not made pursuant to rules of court but pursuant to the Act. All of the other decisions concerning payments into court to which Mr Wells referred turned on the meaning of the relevant rules of court and, therefore, do not assist.
For these reasons, when considering whether to order payment out, it is proper for the court to have regard to the fact that Parliament has prescribed a scheme which imposes on the acquiring Authority the duty to assess realistically the amount of compensation payable, to offer that sum to the claimant, and to pay that sum into court.
Section 26 invests the court with power to order payment out but it does not impose an obligation on the court to do so. Instead, the court is invested with a discretion whether an order for payment out should be made. That is apparent from the opening words of s 26 which provide that “the court may by order direct that any monies paid into court” be applied in the manner spelled out in that section.
When considering whether to order payment out a relevant factor is whether the dispossessed owner is suffering hardship by reason of the acquisition. Cinema Place does not assert any hardship. It simply seeks to have paid to it what has been paid into court.
Another relevant factor is whether there are valuations which support the offer by the acquiring Authority and the claim for compensation. In a claim for compensation following a compulsory acquisition of land, the valuations take the place of pleadings. The valuations identify the claim for compensation, the items which constitute that claim, the amount of compensation under each head of compensation, and the grounds upon which each item is claimed. In a case where the issues are what is the proper compensation for the value of the land and improvements acquired, it sets out the grounds on which the valuer has reached his conclusion and the comparable sales upon which the valuer has relied in determining the value of the land. The valuation will disclose whether there are issues as to the circumstances of the comparable sales. In short, the valuations spell out the issues between the parties. The valuation prepared for the acquiring Authority may be for an amount equal to or higher than the amount paid into court. I am not aware of any occasion when the valuation has been for less than the amount paid into court. If that ever occurred, the acquiring Authority would not have discharged its obligation to make a fair assessment of the value of the land acquired.

In this matter, both valuers agree that the easements over the subject land have the practical effect of preventing any building development on the land and preclude any long‑term arrangements with third parties to lease the land or to take a licence to use it. The valuers also agree that the value of the subject land lies in the fact that it may add additional potential to development of adjoining land by way of a transfer of plot ratio area to that land. There is some dispute as to the ability to transfer the plot ratio area to sites other than to land which is contiguous to Vaughan Place. Other factors also affect the value of the land.
The task of assessing the value of this parcel of land is difficult. It is complicated by the factors mentioned in the previous paragraph. As is usual where there is a dispute as to the value of the land, there are also questions as to which of the comparable sales relied upon by the respective valuers are the most useful for assisting a determination of the value of the land. The valuers therefore disagree both as to the value of the land as unaffected by the factors mentioned in the previous paragraph and as to the extent to which those factors reduce that value.
Mr Smithson has assessed the value of the land acquired to be $220,000. He reached that figure by determining the value of the land without reference to the registered easements and by making a reduction to that value to reflect the existence of those easements and his opinion that there is only one likely purchaser for the plot ratio provided by the land. In his view, those and other factors reduce the value to about 25 per cent to 30 per cent of what the value would be if unaffected by those factors. If reduced to 25 per cent, the value of the land acquired was $203,150. If reduced to 30 per cent, the value was $243,780. He then rounded off those figures to produce his valuation of $220,000. Mr Wells QC submitted that the court might find that the value was even less. In my view, Mr Smithson’s valuation demonstrates that there were proper grounds for the Council’s offer of compensation. Although Mr Smithson’s estimates range between $203,150 and $243,780, it is incorrect to submit, as Mr Wells did, that the range of Mr Smithson’s valuations begins at $203,000. Mr Smithson has determined the value of the land by reference to a number of factors and concluded that the value is $220,000.
The Council’s contention that the determination of the disputed claim for compensation might result in an award of compensation for an amount less than that offered by the Council must be weighed against two facts. The first is that, if Cinema Place had accepted the offer, the Council could not later contend that it had paid too much as compensation. The person making a claim which is disputed should not be in any inferior position to that of a person who accepts the offer.
The second and more important factor is that, pursuant to an order of this Court, the valuers have conferred. Although they were not able to agree the true value, it is quite apparent that it was not suggested that the valuation of Mr Smithson was too high. There is no suggestion that Mr Smithson seeks to amend his valuation or that the Council wishes to rely on another valuation.
In this case, the Council has paid $210,000 into court. Cinema Palace claims substantially more as compensation than what the Council has offered. Its claim is supported by valuation. The Council’s valuer has assessed the value of the land to be $220,000. I acknowledge that a valuer may wish to amend the valuation to reduce the assessment of value. However, that must be weighed against the fact that the offer could have been accepted and against the fact that there has been no suggestion that Mr Smithson seeks to amend his valuation or that the Council has another valuation which has assessed the value of the land at a sum less than that determined by Mr Smithson. I acknowledge also that what is the true value of land does not admit of a ready answer. It is not a matter of science but a matter of opinion and an opinion on which reasonable valuers might reasonably disagree. However, allowing for all of these factors, it is highly unlikely that the Court will assess the value of the land to be less than $210,000. It is even more unlikely since Mr Smithson has assessed the value to be $220,000 and the Council has not produced another valuation which calls Mr Smithson’s valuation into question. In my view, the likelihood that the Court would assess the value at being less than $210,000 is so remote that it does not constitute a reason why the Court should not make an order to pay to Cinema Place the sum of $210,000 already paid into court.
For these reasons, there will be an order for payment to Cinema Place of the sum of $210,000 and the interest which that sum has earned.