DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority
[2025] WASCA 43
•2 APRIL 2025
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
TITLE OF COURT : THE COURT OF APPEAL (WA)
CITATION: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST -v- PUBLIC TRANSPORT AUTHORITY [2025] WASCA 43
CORAM: BUSS P
VAUGHAN JA
SEAWARD J
HEARD: 15 MARCH 2024
DELIVERED : 2 APRIL 2025
FILE NO/S: CACV 71 of 2023
BETWEEN: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST
First Appellant
CENTURY WEST TRANSPORT SERVICES PTY LTD
Second Appellant
AND
PUBLIC TRANSPORT AUTHORITY
Respondent
ON APPEAL FROM:
Jurisdiction : SUPREME COURT OF WESTERN AUSTRALIA
Coram: KENNETH MARTIN J
Citation: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST -v- PUBLIC TRANSPORT AUTHORITY [2023] WASC 165
File Number : CIV 1456 of 2018
Catchwords:
Compulsory acquisition of land - Assessment of compensation for resumed land - s 241 of the Land Administration Act 1997 (WA) - Value to the owner - Whether trial judge erred in assessment of whether the land should be valued on the basis of the Spencer test of market value or whether the land should be valued on the basis of the value to the owner - Use of quantity surveyor evidence by valuers and the court - Whether the trial judge erred in failing to apply the Executor Trustee principle
Claim for loss or damage sustained by reason of disruption and reinstatement of a business under s 241(6) of the Land Administration Act 1997 (WA) in the form of additional leasing costs for relocated business - Whether the appellants are entitled to compensation for additional leasing costs assessed on the basis of the financial position of the two appellants as a single economic unit
Claim by second appellant for loss or damaged sustained by reason of disruption and reinstatement of a business under s 241(6) of the Land Administration Act 1997 (WA) in the form of the loss of a business opportunity to enter into contracts for storage and transport haulage work which were no longer feasible at relocated business premises - Whether a loss of a business opportunity is loss or damage sustained for the purposes of s 241(6) of the Land Administration Act 1997 (WA)
Legislation:
Land Administration Act 1997 (WA)
Railway (Forrestfield-Airport Link) Act 2015 (WA)
Railway (Forrestfield-Airport Link) Bill 2015 (WA)
Result:
Appeal dismissed
Category: A
Representation:
Counsel:
| First Appellant | : | Mr R A Tokley KC & Ms L E Rowley |
| Second Appellant | : | Mr R A Tokley KC & Ms L E Rowley |
| Respondent | : | Mr A J Sefton SC & Mr I A Repper |
Solicitors:
| First Appellant | : | Rowley Legal |
| Second Appellant | : | Rowley Legal |
| Respondent | : | State Solicitor's Office |
Cases referred to in decision:
Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; (2009) 239 CLR 27
Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174; (2002) 125 LGERA 180
Arkaba Holdings Ltd v Commissioner of Highways (1970) 19 LGRA 398; [1970] SASR 94, 100
Baringa Enterprises v Manly Municipal Council (1965) 15 LGRA 201
Bennett v The Fitzroy Shire Council [2003] QCA 444; [2004] Qd R 494
Blue Mountains City Council v Mulcahy (1998) 45 NSWLR 577
Boland v Yates [1999] HCA 64; (1999) 74 ALJR 209
CIC Insurance Ltd v Bankstown Football Club Ltd [1997] HCA 2; (1997) 187 CLR 384
Collins v Livingstone Shire Council [1972] HCA 35; (1972) 127 CLR 477
Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358
Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157
Dangerfield v Town of St Peters [1972] HCA 15; (1972) 129 CLR 586
DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority [2023] WASC 165
DHN Food Distributors Ltd and Ors v London Borough of Tower Hamlets [1976] 3 All ER 462
Eastaway v The Commonwealth [1951] HCA 80; (1951) 84 CLR 328
Emerald Quarry Industries Pty Ltd v Commissioner of Highways (South Australia) [1979] HCA 9; (1979) 142 CLR 351
Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160
ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180; (2008) 20 VR 447
Italiano v The Water Corporation [No 2] [2020] WASC 112
Kelliher v Commissioner of Main Roads [2015] WASC 478
Kennedy Street Pty Ltd v Minister [1963] NSWR 1252; (1962) 8 LGRA 221
Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353; (2006) 149 LGERA 439
Lenz Nominees Pty Ltd v The Commissioner of Main Roads [2012] WASC 6; (2012) 186 LGERA 58
Makita (Australia) Pty Lt v Sprowles [2001] NSWCA 305; (2001) 52 NSWLR 705
Mario Piraino Pty Ltd v Roads Corporations [No 2] [1993] 1 VR 130
Marshall v Director-General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603
McKay v Commissioner of Main Roads [2013] WASCA 135
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223
Minister for Public Works v Thistlethwayte [1954] AC 475
Moloney v Roads and Maritime Services [2018] NSWCA 252; (2018) 98 NSWLR 651
Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273
Northern Territory v Mr A Griffiths (decd) and Lorraine Jones obh of Ngaliwurru and Nungali Peoples [2019] HCA 7; (2019) 269 CLR 1
Pastoral Finance Association Limited v The Minister [1914] AC 1083
Project Blue Sky Inc v Australian Broadcasting Authority [1998] HCA 28; (1998) 194 CLR 355
Roads and Maritime Services v United Petroleum Pty Ltd [2019] NSWCA 41; (2019) 99 NSWLR 279
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Smith, Stone & Knight v Birmingham Corporation [1939] 4 All ER 116
Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418
St John Ambulance Association of Western Australia Incorporated v East Perth Redevelopment Authority [2001] WASC 85; (2001) 114 LGERA 112
SZTAL v Minister for Immigration and Border Protection [2017] HCA 34; (2017) 262 CLR 362
TC Industrial Plant Pty Ltd v Robert's Queensland Pty [1963] HCA 57; (1963) 180 CLR 130
The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64
The Commonwealth v Reeve [1949] HCA 22; (1949) 78 CLR 410
Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 257
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259
Woolfson v Strathclyde Regional Council [1978] UKHL 5; (1978) 38 P & CR 521
Table of Contents
Introduction
Background
The Land
Relationship between the appellants
The compulsory acquisition
Compensation under the LAA
Issues in the trial
Grounds of appeal
Ground of appeal 1
Pleadings
Valuation evidence
Summary of reasons of the trial judge
Overview of parties' submissions
What is value to the owner?
Spencer v The Commonwealth - market value
Pastoral Finance Association Limited v The Minister - 'value to the owner'
Boland v Yates
Cases considering Pastoral Finance and Boland v Yates
Cases considering value to the owner in the context of a business being operated on the land
Summary of legal principles relating to value to the owner
Issue (1) - rare and exceptional case
Issue (2) - failure to have regard to aspects of Boland v Yates and Northern Territory v Griffiths
Issue (3) - question of law or fact
Issue (4) - failure to ask the correct question/apply the correct test
Issue (5) - valuation evidence relied upon by the trial judge
Disposition of ground of appeal 1
Ground of appeal 2
Valuation evidence
Summary of the reasons of the trial judge
Parties' submissions
Issue (1) - use of quantity surveyor evidence and value of improvements
Issue (2) - depreciation rate
Issue (3) - profit and risk discount
Issue (4) - Executor Trustee principle
Disposition of ground of appeal 2
Grounds of appeal 3 and 4
Overview
Pleadings
Ground of appeal 3
Summary of reasons of the trial judge
General findings of fact
One economic unit
Parties' submissions
Is Century West entitled to damages for additional leasing costs on the basis of the financial position of the single economic unit?
The case is not consistent with the pleadings
The single economic unit approach is contrary to the provisions of the LAA
The authorities support the respondent's construction
Application of the statutory provision to the facts
Disposition of ground of appeal 3
Ground of appeal 4
Summary of the reasons of the trial judge
Parties' submissions
Is a loss of a business opportunity loss or damage 'sustained'?
Has Century West in fact suffered any loss or damage?
Other matters raised by the parties
Disposition of ground of appeal 4
Conclusion
Schedule 1
Aerial photograph of the Land
Diagram showing the individual lots comprising the Land
JUDGMENT OF THE COURT:
Introduction
This appeal concerns a claim for compensation under s 241 of the Land Administration Act 1997 (WA) (LAA) made by the first and second appellants following the compulsory acquisition of land by the respondent for the purposes of the Forrestfield Airport Link railway project as authorised by the Railway (Forrestfield-Airport Link) Act 2015 (WA).
The first appellant, DBW Reynolds, is the trustee for the DBW Reynolds Family Trust, and in that capacity was the registered proprietor of six contiguous parcels of industrial land described as 249 Dundas Road, High Wycombe. The lots in question being lots 728, 729, 739, 740 and 741 on Deposited Plan 54700, and lot 757 on Deposited Plan 61088 (the Land).
The second appellant, Century West, leased the Land from DBW Reynolds and operated a transport haulage business and storage facility from the Land.
There is no dispute that DBW Reynolds, as the freehold owner of the Land, is entitled to compensation under s 241 of the LAA. There is also no dispute that Century West is entitled to compensation under s 241 of the LAA in relation to the taking of its leasehold interest in the Land.
The parties were unable to agree on the total amount of compensation payable for the compulsory acquisition. The trial judge assessed the total amount of compensation payable to each appellant, before interest and before subtracting advance compensation payments previously made by the respondent, at:[1]
(a)DBW Reynolds: $9,350,000; and
(b)Century West: $377,995.30.
[1] DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority [2023] WASC 165 [453] ‑ [454] (Primary Decision).
For the reasons set out below, the appeal should be dismissed.
Background
The Land
DBW Reynolds, in its capacity as trustee for the DBW Reynolds Family Trust, acquired the six lots constituting the Land in the early 2000s. One of the lots was a product of an amalgamation of three separate smaller lots that had been acquired earlier by DBW Reynolds.
The combination of the six lots resulted in the Land having a somewhat unique feature of three separate road frontages, being to Dundas Road, Sultana Road and Imperial Street, High Wycombe. An aerial photograph of the Land and a diagram identifying the six lots in question are attached at Schedule 1 to these reasons.
Century West entered into a lease with DBW Reynolds on 22 March 2011, and operated a road haulage, transport depot and associated storage business from the Land. Century West made use of the three road frontages in order to eliminate the need for space to turn large vehicles. The vehicles could instead enter the Land via one road frontage and exit via another. This arrangement enabled Century West to use some of the Land for the storage part of the business.
Relationship between the appellants
DBW Reynolds and Century West are separate legal entities. However, they are related in so far as Mr Haydn Reynolds and his wife Mrs Leida (Lisa) Reynolds are each:[2]
(a)directors of DBW Reynolds and Century West;
(b)an appointor and guardian of the DBW Reynolds Family Trust;
(c)members of the class of general beneficiaries of the DBW Reynolds Family Trust; and
(d)shareholders of Century West.
[2] Further Amended Statement of Claim [3] BAB 128 and Re-Amended Reply [1A] BAB 147.
The result of the above is that Mr and Mrs Reynolds were involved in the daily operations of each of DBW Reynolds and Century West.
The compulsory acquisition
A special Act of Parliament is required to authorise the construction of a railway.[3] On 2 November 2015, the Railway (Forrestfield-Airport Link) Act 2015 (WA) received Royal Assent. That Act authorised the construction of a railway along the line specified in sch 1. There is no dispute that the railway in sch 1 is for the purposes of the Forrestfield Airport Link railway project.
[3] Public Works Act 1902 (WA) s 96(1).
On 11 November 2015, the respondent registered with the Registrar of Titles a taking order authorising the taking of the Land for the purposes of the Forrestfield Airport Link railway. Upon the registration of the taking order, the interests of the appellants in the Land were terminated and converted into claims for statutory compensation under pt 10 of the LAA.[4]
[4] LAA s 179(b).
On 17 November 2015, the appellants lodged separate claims for compensation under the LAA. The respondent made offers of compensation to the appellants, but each was rejected and the appellants requested an offer of an advance payment of compensation. The respondent paid each appellant advance payments of compensation. The appellants commenced their claim for compensation by writ of summons filed 15 March 2018.
Compensation under the LAA
Prior to considering the grounds of appeal, it is convenient to detail the key statutory provisions governing the calculation of compensation payable for the compulsory acquisition of land under the LAA and the relevant heads of compensation.
Every person having any interest in land which is taken under pt 9 of the LAA is entitled, subject to pt 10, to compensation for the interest taken.[5] An interest for the purposes of pt 9 and pt 10 of the LAA means any legal or equitable estate or interest in land.[6]
[5] LAA s 202(1).
[6] LAA s 151(1).
On a trial of an action for compensation, the court is to determine the amount of compensation payable in respect of the taking of the interest in land, having regard solely to the provisions of pt 10 of the LAA and in particular to the matters prescribed in div 5 and s 256 of the LAA.[7] Section 256 of the LAA is not relevant in this appeal.
[7] LAA s 223(8)(a).
Section 241 is contained in div 5 of pt 10 of the LAA and governs the assessment of compensation and identifies a number of different heads of compensation. Relevantly for this appeal, s 241 provides as follows:
(1)In determining the amount of compensation (if any) to be offered, paid, or awarded for an interest in land taken under Part 9, regard is to be had solely to the matters referred to in this section.
(2)Regard is to be had to the value of the land with any improvements, or the interest of the claimant in the land, assessed as on —
(a)in the case of an interest taken for a railway or other work authorised by a special Act — the first day of the session of Parliament in which the Act was introduced; or
…
and discounting any increase or decrease in value attributable to the proposed public work.
…
(6)Regard is to be had to the loss or damage, if any, sustained by the claimant by reason of —
(a)removal expenses; or
(b)disruption and reinstatement of a business; or
(c)the halting of building works in progress at the date when the interest is taken and the consequential termination of building contracts; or
(d)architect's fees or quantity surveyor's fees actually incurred by the claimant in respect of proposed buildings or improvements which cannot be commenced or continued in consequence of the taking of the interest; or
(e)any other facts which the acquiring authority, the court, or the State Administrative Tribunal considers it just to take into account in the circumstances of the case.
It is not in dispute that the valuation date for the purposes of s 241(2) of the LAA in the present case is 11 April 2013, being the first day of the session of Parliament which introduced the Railway (Forrestfield‑Airport Link) Bill 2015 (WA).
'Public work' is defined in s 3 of the LAA as having the meaning given in s 2 of the Public Works Act 1902 (WA), which is as follows:
means a work, facility, building, structure or other thing that is —
(a)declared, or of a class declared, under section 2A to be a public work; or
(b)of a class described in Schedule 1;
A railway authorised under a special Act is a class of public work described in sch 1, item 2 of the Public Works Act 1902 (WA), and therefore the present railway project is a public work for the purposes of the compensation assessment.
Issues in the trial
The trial judge identified nine issues for resolution in the trial. However, only the following four of these issues are relevant to this appeal:
(1)Issue one: Whether DBW Reynolds is entitled under s 241(2) of the LAA to a higher compensation amount representing the value of its taken Land assessed to include value 'to the owner', being a sum higher than the Land's market value. This issue is relevant to ground of appeal 1.
(2)Issue two: What is the market value of the Land, including improvements? This issue is relevant to ground of appeal 2.
(3)Issue three: Whether Century West is entitled to compensation under s 241(6) of the LAA for the additional costs of leasing temporary business premises after the taking. This issue is relevant to ground of appeal 3.
(4)Issue four: Whether Century West is entitled to compensation under s 241(6)(b) of the LAA for 'lost income' for a loss of potential future revenue obtainable upon profitable contracts that Century West believes it would likely have obtained with a third party, had the taking of the Land not occurred. This issue is relevant to ground of appeal 4.
Grounds of appeal
The appellants appeal on the following four grounds:
1.The trial judge erred in law in his approach to the question of 'value to the owner' and instead his Honour should have found that the claimants were entitled to additional compensation.
2.The trial judge erred in principle in his Honour's assessment of the 'market value' of the taken Land resulting in an erroneous valuation.
3. The trial judge erred in law in his Honour's approach to the assessment of the loss sustained by the appellants by reason of having to relocate their business and should have considered that it was the loss sustained by reason of disruption of the business that was to be determined.
4. The trial judge erred in principle in considering that a loss of an opportunity to enter into a future profitable contract was not 'loss or damage … sustained' within the meaning of s 241(6) of the LAA and then in applying a 50% discount.
Grounds 1 and 2 concern the assessment of the value of DBW Reynold's freehold interest in the Land under s 241(2) of the LAA.
Grounds 3 and 4 concern the extent and amount of compensation payable to Century West under s 241(6) of the LAA for the loss and damage associated with the need to relocate its business.
It is important to observe that whilst the appellants jointly ran their case at trial and on appeal, each of the appellants made separate and distinct claims for compensation under the LAA. When considering each of the grounds of appeal, it is necessary to distinguish between the different appellants and which claim for compensation the ground of appeal concerns. However, as the appellants were represented by the same instructing solicitors and senior counsel, a single appellants' case was filed and a single set of oral submissions were made. References in these reasons to 'the appellants' submissions' must be understood in the above context.
Ground of appeal 1
Pleadings
There is no dispute that DBW Reynolds was the freehold owner of the Land and is entitled to compensation for the value of the Land, with improvements, pursuant to s 241(2) of the LAA.
There is a dispute between the parties as to how that valuation should be conducted. DBW Reynolds' case is that the Land should be valued on the basis of what is called 'value to the owner'. The basis of this claim is the pleading at [4] and [40] of the further amended statement of claim filed 9 July 2021, where DBW Reynolds pleads:[8]
[8] Further Amended Statement of Claim BAB 128 ‑ 129, 138 - 139.
4.By virtue of the relationships and control described in paragraph 3 hereof, Haydn and Leida Reynolds were at all material times able to effect or cause to be effected the following actions:
a) Alter, extend or terminate the lease;
b) defer, increase or decrease the rent payable by the Second Plaintiff under the lease, both formally and informally;
c) forgive any rent arrears not paid by the Second Plaintiff;
d) sell the business;
e) sell the land whether as a whole or individually in any configuration of its six lots at a time of their choosing;
f) continue to cause the Second Plaintiff or any other person or entity of their choosing including themselves to operate a transport depot from lot 757 and to sell or lease all or any of the remaining five lots in any commercially attractive configuration;
g) lease the land to another person or entity whether as a whole or individually in any configuration of its six lots;
h) lease the land to a purchaser of the business for any length of lease required by such a purchaser and whether as a whole or individually in any configuration of its six lots;
i) declare dividends and make distributions to beneficiaries and
j) make decisions collectively or individually for themselves, the First Plaintiff and the Second Plaintiff as a combined ownership and business enterprise
all of which options are collectively characterised as circumstances providing support for a valuation on a 'value to the owner basis' which will be further particularised by evidence prior to trial.
…
40.The First Plaintiff has spent a considerable amount of time and effort both in putting together the land so that it constituted the ideal shape and configuration for the efficient running of the business and in constructing the improvements erected on the land:
PARTICULARS
a) the Second Plaintiff specialises in transporting extendable loads and it was therefore important to achieve two road frontages to avoid the need for full turning of very large vehicles inside the depot;
b) the two road frontages were achieved through purchases, amalgamation and re-subdivision with an adjoining owner's land;
c) land swaps with that owner to mutual benefit over a period of five years between 2008 and 2012;
d) land providing a third street frontage was purchased in 2012 for access flexibility and storage for customer product;
e) the First Plaintiff expended a significant amount of money in stamp duty, consultants' fees and planning fees to achieve the configuration discussed in the foregoing particulars;
f) in order to obtain that configuration, the First Plaintiff had to give up 1130 sqm of land in the purchased landholding to form a drainage basin, to provide road reserve for Imperial Street and to contribute to the cost of both;
g) each lot is serviced and has deeper than usual bitumen surfacing to withstand the additional weight of the larger commercial vehicles;
h) each of the three entrances were fitted with automatic gates and security cameras and the exterior of the land was attractively fenced and landscaped;
i) three lots (nos 723,722 and 721) were amalgamated to form Lot 757 and the improvements constructed on that lot, which are of the highest quality and condition are described at paragraphs 33 and 34 hereof; and
j) the First Plaintiff, in acquiring replacement land, is now at risk of having to pay development contributions pursuant to State Planning Policy 3.6 and the Precinct Plans and Development Contributions Plans in course of preparation and imposition upon land within the Shire of Kalamunda
all of which collectively support a compensation valuation for the land calculated on the basis of 'value to the owner'.
In the prayer for relief, each appellant separately claims compensation. DBW Reynolds claims compensation for the value of the Land, assessed on a number of alternative bases.
The respondent does not admit that the Land should be valued on the basis of 'value to the owner' and instead says that the value of the Land is reflected in its market value. Paragraphs [4] and [40] of the re‑amended defence filed 12 August 2022 pleads as follows:[9]
[9] Re-Amended Defence BAB 154, 159.
4. The Defendant:
4.1. does not admit paragraphs 4(a) to (j) of the Statement of Claim; and
4.2. denies that these options are collectively characterised as circumstances providing support for a valuation on a 'value to the owner basis'; and
4.3. otherwise denies paragraph 4 of the Statement of Claim; and
4.4. says further that:
4.4.1 the First Plaintiff and the Second Plaintiff are separate legal entities; and
4.4.2 immediately prior to 11 November 2015, the First Plaintiff and the Second Plaintiff each held a different interest in the Land, namely:
a. the Second Plaintiff held a leasehold interest either under the Lease or under a tenancy on similar terms to the Lease; and
b. the First Plaintiff held a freehold interest, encumbered by the Second Plaintiff's leasehold interest and a mortgage.
…
40.The Defendant:
40.1. does not admit paragraph 40 of the Statement of Claim;
40.2. denies that the particulars listed collectively support a compensation valuation for the Land calculated on the basis of 'value to the owner';
40.3. says that:
40.3.1 the value of the Land (taking account of its shape, configuration and improvements) is reflected in its market value; and
40.3.2 the First Plaintiff is properly compensated for the value of all the attributes of the Land by the market value without any further allowance for what is claimed as 'value to the owner';
40.4. denies that any compensation is payable pursuant to an alleged loss of 'value to the owner', and denies that 'value to the owner' as pleaded, is compensable at all; and
40.5. says that to the extent that the Land's shape, configuration and improvements were suitable for the efficient running of the Second Plaintiff's business, this suitability was reflected in the rent payable by the Second Plaintiff to the First Plaintiff.
Valuation evidence
The trial judge heard evidence from four expert valuers: Matthew Garmony and Jenny Le‑Fevre called by the appellants, and Jonathan Fyson and Dale Hall called by the respondent. The valuers provided multiple written reports; participated in a pre‑trial conclave; prepared a joint conferral statement; and participated in a concurrent evidence session.
The valuers diverged on whether there was any value to the owner over and above the market value of the Land. Mr Hall and Mr Fyson did not consider there was any such value to the owner save for the fact that the Land consisted of six separate lots and there was flexibility as to how the owner may sell those lots (including single lot sales or in groups). Each of Mr Hall and Mr Fyson included this feature as part of their respective assessments of the market value of the Land.[10] Mr Garmony and Ms Jenny Le‑Fevre considered that there was value to the owner.
[10] Witness Statement of Jonathan Fyson dated 21 September 2022 [396] GAB 505; Report of Independent Valuers of Western Australia with Dale Hall's signature dated 22 August 2019 [103] - [104] GAB 555; Revised Valuers' Conferral Statement, item 18, GAB 224 (Revised Joint Conferral Statement).
Mr Fyson valued the market value of the Land at $8,500,000.[11] Mr Fyson also considered the question of whether there was any value to the owner. Mr Fyson considered each of the features of the Land pleaded by the appellants as the basis of the value to owner claim as pleaded at [4] and [40] of the further amended statement of claim. Mr Fyson explained whether he considered each constituted value to the owner; whether each was included in his valuation of the market value or whether any fell within any of the other heads of compensation provided for in s 241 of the LAA.[12] Mr Fyson ultimately concluded:[13]
The combination of these factors does not appear to result in the owner exclusively or almost exclusively being able to exploit financial value from this land, and many of the benefits listed by the Plaintiff are already intrinsically allowed for when assessing the value of land taken.
[11] Witness Statement of Jonathan Fyson dated 21 September 2022 [18] GAB 522.
[12] Expert Report of Jonathan Fyson filed 26 August 2019 [393] - [409] GAB 503 - 506.
[13] Expert Report of Jonathan Fyson filed 26 August 2019 [401] GAB 505.
Mr Hall valued the market value of the Land at $7,750,000.[14] Mr Hall also commented on the concept of value to the owner. Mr Hall considered each of the features of the Land pleaded by the appellants as the basis of the value to owner claim as pleaded at [4] and [40] of the further amended statement of claim. Mr Hall also considered each of these factors and explained whether he considered each constituted value to the owner; whether each was included in his valuation of the market value or whether any fell within any of the other heads of compensation provided for in s 241 of the LAA.[15] Mr Hall ultimately concluded that the limited value to the owner had already been included in his assessment of the market value of the Land with improvements.[16]
[14] Witness Statement of Dale Hall filed 21 September 2022 [5] GAB 609.
[15] Report of Independent Valuers of Western Australia with Dale Hall's signature dated 22 August 2019 [102] ‑ [115] GAB 554 - 556.
[16] Report of Independent Valuers signed by Dale Hall dated 22 August 2019 filed on 26 August 2019 [104] GAB 555.
Neither Mr Fyson nor Mr Hall were cross examined about this aspect of their reports and there were no supplementary reports prepared by Mr Garmony or Ms Jenny Le‑Fevre addressing this issue.
Mr Garmony first valued the market value of the Land at $9,625,000,[17] and then added the following additional amounts to that market value to calculate the value to the owner:[18]
I have also analysed the value of the subject property to the owner (DBW Reynolds Pty Ltd), who has accumulated the sites over the years and constructed the improvements. In determining the value to the owner, I have arrived at a cost to the owner on the basis they had to acquire the sites with those exact improvements. I have utilised the same approach to determining individual lot values (Gross Realisation) as in my Hypothetical development method of valuation, and then I have then added Stamp duty and Legal Fees & Professional Fess being additional costs that the acquiring owner would need to outlay in replicating the dispossessed lots. This amount reflects the total cost to the owner for the acquisition which equates to $11,585,000 exclusive of GST …
[17] Witness Statement of Matthew John Garmony with the attached Garmony Property Consultants report filed 23 August 2019 [124] GAB 184.
[18] Witness Statement of Matthew John Garmony with the attached Garmony Property Consultants report filed 23 August 2019 [125] GAB 184.
Ms Jenny Le-Fevre also valued the market value of the land, and then provided a number of different methods of valuing the additional value to the owner.
The first of those was to assess the market value of the land by way of the comparable sales approach (which Ms Jenny Le‑Fevre valued at $8,500,000 adopting one scenario[19] and $9,500,000 adopting a different scenario[20]) and then to apply an 8% premium to the market value to represent the value to the owner:[21]
In analysing the sales evidence, an 8% premium has been established as being applicable to the market value assessed from the sales evidence, as being at the least the amount the owner would be prepared to pay above market value rather than lose the right to continue to occupy the property.
[19] Witness Statement of Jenny Jane Le-Fevre dated 23 August 2019 [480] GAB 330 - valuing the Land where the highest and best use was the existing whole-of-site depot.
[20] Witness Statement of Jenny Jane Le-Fevre dated 23 August 2019 [500] GAB 332 - valuing the Land with lot 757 as a stand-alone depot plus five individually titled lots.
[21] Witness Statement of Jenny Jane Le-Fevre dated 23 August 2019 [506] GAB 333.
Ms Jenny Le-Fevre also used the summation method. In Ms Jenny Le‑Fevre's primary report, this was described as a 'check assessment',[22] although the submission of the appellants at trial was that by the time Ms Jenny Le‑Fevre gave evidence, this was her preferred method of valuation.[23]
[22] Witness Statement of Jenny Jane Le-Fevre dated 23 August 2019 [513] GAB 334.
[23] Primary Decision [226], [353].
Ms Jenny Le-Fevre assessed the summation method on two bases. The first was by depreciating the costs of the improvements. This resulted in the market value for the land (being $8,835,675 for the first scenario and $9,650,303 for the second scenario).[24] The second was by not depreciating the costs of the improvements, on the basis that they were new, but rather that this would be the cost of recreating these improvements on a new site (being $9,550,700 for the first scenario and $10,170,034 for the second scenario).[25] Ms Jenny Le‑Fevre concluded that this second method represented the value to the owner of recreating what had been taken.[26]
[24] Second Witness Statement of Jenny Le-Fevre dated 4 October 2022 [2] GAB 416.
[25] Second Witness Statement of Jenny Le-Fevre dated 4 October 2022 [2] GAB 416.
[26] Witness Statement of Jenny Jane Le-Fevre dated 23 August 2019 [515] - [517], [548(c)] GAB 335, 339.
It is also relevant to record that each party called expert quantity surveyors to give evidence as to the estimated costs of the improvements on the Land. This information was used in different ways by the different valuers. The quantity surveyor's evidence is considered further in these reasons in context of ground 2.
Summary of reasons of the trial judge
The trial judge provided a detailed outline of the principles applicable to the assessment of compensation under the LAA.[27] That outline was drawn from the decision of Edelman J in Lenz Nominees Pty Ltd v The Commissioner of Main Roads[28] (which in turn drew on the decision of Beech J (as his Honour then was) in McKay v Commissioner of Main Roads [No 7][29]) and also the decision of the trial judge in Italiano v The Water Corporation [No 2].[30] No issue is taken with this outline of principles.
[27] Primary Decision [68] - [71].
[28] Lenz Nominees Pty Ltd v The Commissioner of Main Roads [2012] WASC 6; (2012) 186 LGERA 58 (Lenz Nominees).
[29] McKay v Commissioner of Main Roads [No 7] [2011] WASC 223.
[30] Italiano v The Water Corporation [No 2] [2020] WASC 112.
The trial judge then considered, in detail, the concept of 'value to the owner'.[31]
[31] Primary Decision [74] - [92], [99] - [154].
The trial judge commenced by outlining DBW Reynold's pleaded case in relation to value to the owner,[32] as explained in their written opening and closing submissions;[33] and the respondent's case in response.[34]
[32] Primary Decision [76].
[33] Primary Decision [85], [91].
[34] Primary Decision [77] - [83].
His Honour concluded that the dispute between the parties as to the applicability of value to the owner was not a dispute regarding any real arguments of fact as to the particularised features of the Land, but rather a question of 'principle' and whether proven facts supported a claim for compensation valued on the basis of value to the owner, or whether those facts were already accounted for in the Spencer test of market value or in other sections of the LAA.[35]
[35] Primary Decision [77], [86].
The trial judge then identified that s 241(2) of the LAA requires a court to assess the value of the taken land, including improvements.[36] His Honour observed, this will usually be determined by identifying the price of a notional bargain between a hypothetical vendor and purchaser who are prudent, well‑informed and willing, but not anxious to complete the exchange.[37] This is known as the market value of the land, or the Spencer test, being a reference to the High Court decision of Spencer v The Commonwealth.[38]
[36] Primary Decision [99] - [104], [108] - [112] and the authorities cited therein.
[37] Primary Decision [99] - [104].
[38] Spencer v The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 (Spencer v The Commonwealth).
The trial judge then went on to consider the concept of 'value to the owner', being a measure of value above market value. His Honour reviewed various cases and other authorities regarding the concept of 'value to the owner'. His Honour accepted the appellants' characterisation of 'value to the owner' as being an 'elusive concept'.[39]
[39] Primary Decision [113] - [114].
The trial judge conducted a detailed consideration of various cases which considered the concept of 'value to the owner'.[40] It is not necessary to set out that consideration in detail at this stage. The trial judge then outlined the following four propositions which his Honour drew from his consideration of the case authorities:
150 First, as observed by Spigelman CJ, then Callinan J and then later still by the Court of Appeal in Mount Lawley at [286], situations where there is a difference between the market value of the land and a 'special value' to an owner are likely to be 'rare' cases. That is because factors of so-called 'special value' are likely to be components of market value recognisable under, in effect, the Spencer test by perfectly acquainted (with the land and its attributes) notional vendors and purchasers, as are objectively assumed.
151 Second, a claim predicated upon 'potential' for the subject taken land will be reflected in a correct derivation of its market value.
152 Third, 'value to the owner', or 'special value' does not encompass economic compensation for loss or damage arising by way of disturbance and dispossession. Such economic loss will be a separate claim, if available, to be pursued separately under the provisions of s 241(6) of the LAA.
153 Fourth, the terms of s 241(1) of the LAA render it absolutely explicit that in determining an amount of compensation to be paid for an interest in land taken under Pt 9 of the LAA, that regard is to be had 'solely' to matters as referred to in s 241.
154 Furthermore, it will be remembered that here, as a second plaintiff, Century West - as operator of a road haulage business operated on the land and obtained under lease from DBW - does pursue its separate financial loss claims for its economic disturbance and relocation expense losses said to arise out of a resultant early termination of its lease of its haulage business premises and so, a need for its subsequent relocation of that business to alternate (suboptimal, it says) leased business premises as were obtained (by it) at 415 Dundas Road, also in High Wycombe.
[40] Primary Decision [116] - [148] and the authorities cited therein.
In light of these principles, his Honour identified three misconceptions in the approach adopted by DBW Reynolds in relation to its claim that the value of the Land should be assessed on the basis of a 'value to the owner' over and above that of the market value of the Land:
192First, on my assessment, applying the observations cited I have cited from Mount Lawley at [286], by Callinan J in Boland and by Spigelman CJ in Leichhardt at [24], the present is not a rare or exceptional case. The correct ascertainment of a market value for the taken land, applying an objective approach long explained by Spencer, will take full account of all the laudable features of the taken land and of the efforts of Mr and Mrs Reynolds over time in assembling this aggregate parcel of land over years - for the purposes of establishing what was a very efficient road haulage transportation depot as its industrial use.
193Second, any economic loss component in their (DBW's) 'value to the owner' claim, on my view, would be encompassed in the present claim for economic compensation jointly claimed by the related corporation, Century West, as operator of the business under lease from DBW, as a related corporate owner.
194Third, a recurrent feature encountered in the plaintiffs' approach to this compensation exercise was to contend that because the first plaintiff's land had been compulsorily taken from it, that its right to statutory compensation was to be assessed on the basis of something akin to tortious reliance loss damages. The plaintiffs' position, expressed constantly, was that they ought to be restored back to the same position, in effect, to the exact dollar by statutory monetary compensation, so as to, in effect, transplant and relocate both plaintiffs to almost identically reconstructed replacement premises that would replicate every equivalent feature to the former business premises once owned, or as leased to the second plaintiff. That is rarely achievable.
The trial judge concluded that this was not 'one of those rare cases in which there is a difference between the market value of the land and its special value to the owner'.[41] His Honour further explained that this was because:
415… any such factors are likely to be components of the true ascertained market value, which are recognisable by the notional Spencer test for the assumed vendor and purchaser, who are 'conversant' or 'perfectly acquainted' with the land and all its features: Mount Lawley at [286]. Nor, in my view, can it be fairly said here that the corporate owner of the land, DBW, held any special qualities that, akin to a blacksmith with a non-conforming use located near a race course example, as was given by Callinan J in Boland, supports a greater 'value to the owner' being found. In effect, this land owner, DBW, was passive. It rented out its premises to a related business operator, Century West. And as far as Century West is concerned, there is no recognisable concept of 'value to the lessee'.
416These observations and conclusions will no doubt be said to not recognise the human realities of the Reynolds' control of both corporations. But they chose to use those lawful arrangements. They were not sham arrangements and the two entities they controlled, traded and paid tax on that favourably structured chosen basis. They cannot discard those corporate structures at their convenience for the purposes of a statutory compensation exercise following the taking of the land.
[41] Primary Decision [414].
In terms of the expert valuation evidence, for the purposes of this ground of appeal, it is sufficient to observe that the trial judge rejected the value to the owner valuations of Mr Garmony and Ms Jenny Le‑Fevre on the basis that these were not conceptually justifiable.[42] His Honour also preferred the evidence of Mr Fyson as being the most convincing property valuation analysis for the purposes of assessing the market value of the Land with improvements.[43]
[42] Primary Decision [338] - [340], [344] - [351].
[43] Primary Decision [400].
For these reasons, the trial judge assessed the value of the Land for the purposes of s 241(2) of LAA as $8,500,000.
Overview of parties' submissions
The appellants submit that the trial judge erred in concluding that there was no 'value to the owner' over and above that of market value for the Land.
In their written submissions, the appellants submit that the trial judge erred in the following five respects in reaching this conclusion:
(1)First, by concluding that value to the owner will only be applicable in 'rare or exceptional' cases, and in so doing adding an additional qualification to the circumstances in which value to the owner will be applicable;
(2)Secondly, by having regard only to the reasons of Callinan J in Boland v Yates,[44] and failing to have regard to the reasons of Gleeson CJ with whom Gaudron and Gummow JJ agreed, and in particular Gleeson CJ's approval of part of the judgment of Bray CJ in the decision of Arkaba Holdings Ltd v Commissioner of Highways.[45] The appellant also submits that the reasons of Gleeson CJ were also cited with apparent approval by the plurality in the more recent decision of the High Court in Northern Territory v Mr A Griffiths (decd) and Lorraine Jones obh of Ngaliwurru and Nungali Peoples.[46] In overlooking these, the appellant submits that the trial judge was deprived of relevant authority;
(3)Thirdly, by concluding that the question of whether 'value to the owner' was applicable was 'essentially a question of law for the court'.[47] The appellant relies on the decision of Gleeson CJ in Boland v Yates who considered that the question of value to the owner 'also raises an issue for factual judgment',[48] and therefore submits that the approach of the trial judge was inconsistent with High Court authority;
(4)Fourthly, the appellants submit that the trial judge applied the incorrect legal test by failing to have regard to the fact that a business was being operated on the Land, and in so doing failed to ask the correct question, being 'what would a claimant with full knowledge of the precise use of the land and the business conducted thereon reasonably pay, rather than fail to gain it?'. The appellants also submit that in answering this question, the trial judge was entitled to have regard to the knowledge of the appellants as to the precise use to which the land was being put, the profitability of the appellants, or hypothetical profits from modernisation and to every matter of value that extends beyond market value; and
(5)Fifthly, by failing to have regard to the expert valuation evidence of the appellants which, if the correct test had been applied, the trial judge would have been required to have regard to, as those were the only experts who assessed value to the owner on the correct basis.
[44] Boland v Yates [1999] HCA 64; (1999) 74 ALJR 209 (Boland v Yates).
[45] Arkaba Holdings Ltd v Commissioner of Highways (1970) 19 LGRA 398; [1970] SASR 94, 100 (Arkaba Holdings).
[46] Northern Territory v Mr A Griffiths (decd) and Lorraine Jones obh of Ngaliwurru and Nungali Peoples [2019] HCA 7; (2019) 269 CLR 1 (Northern Territory v Griffiths).
[47] Primary Decision [81].
[48] Boland v Yates [80].
Senior counsel for the appellants clarified in oral submissions that in ground 1 the appellants allege that the trial judge made an error of law by applying the wrong test as to the question of whether value to the owner had been assessed. Senior counsel submitted the trial judge failed to apply the correct test, which involved ascertaining what a prudent person in the position of the actual vendor would have been willing to pay for the relevant interest in the Land, rather than fail to obtain it.[49] That is, that the trial judge did not consider the value of the Land from the perspective of the appellants.
[49] Appeal ts 17.
Senior counsel further clarified that the appellants also submitted that the trial judge made an error of fact in concluding that value to the owner was not applicable to the Land, because any relevant factors going towards value to the owner are 'likely to be components of the true ascertained market value', which are recognisable by the notional Spencer test.[50] Again, the appellants submit that the trial judge failed to have regard to the perspective of the appellants in adopting this approach.
[50] Appeal ts 17 - referencing Primary Decision [415].
By way of broad overview, the respondent submits that the trial judge did not err in law in his approach to the question of value to the owner. The respondent submits that the trial judge applied the correct legal principles in a manner consistent with all the relevant authorities. The respondent submits that the trial judge properly had regard to the fact that a business was being conducted on the Land, and the trial judge did not add an additional qualification that DBW Reynolds' circumstances must be 'rare or exceptional' in order for value to the owner to be applicable. The respondent also submits that there was no error by the trial judge in preferring the expert valuation evidence of Mr Fyson.
What is value to the owner?
In order to consider the various issues raised by the appellants in ground 1, it is first necessary to consider in some detail the concept of value to the owner and the various authorities referred to by the trial judge, and the additional authorities relied upon by the parties.
It is relevant to observe that whilst the authorities concern the valuation of interests in land, the legislative regimes underpinning the various authorities often differ in some respects from the provisions of the LAA. These differences must be borne in mind.
Spencer v The Commonwealth - market value
Section 241(2) of the LAA provides that in determining the amount of compensation to be awarded for an interest in land, regard is to be had to the value of the land with any improvements, assessed as on the relevant date, and discounting any increase or decrease in value attributable to the proposed public work.
Determining the 'value of the land' involves determining a money equivalent of the land, and doing so by assuming that the land had been sold on the date of its acquisition. The method by which the 'value of the land' will ordinarily be calculated was outlined by the High Court in Spencer v The Commonwealth and is often described as the Spencer test of market value. In summary, it requires the value to be determined by identifying the price of a notional bargain between a hypothetical vendor and a hypothetical purchaser who are prudent and willing, but not anxious, to complete the exchange.[51] Further, it is to be assumed that the hypothetical vendor and purchaser are 'perfectly acquainted' with the land and cognisant of all circumstances and features which might affect its value.[52] Finally, in assessing the price of this notional bargain, it is to be assumed that the hypothetical purchaser would be purchasing the land for the most advantageous use for which it is adapted - also referred to as the land's highest and best use.[53]
[51] Spencer v The Commonwealth (432) (Griffith CJ), (441) (Isaacs J).
[52] Spencer v The Commonwealth (441) (Isaacs J), (432) (Griffith CJ) - 'conversant with the subject'; Boland v Yates [266] - [269] (Callinan J); Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259 [51].
[53] Spencer v The Commonwealth (441) (Isaacs J); Boland v Yates [271] (Callinan J); ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180; (2008) 20 VR 447 [40] and the authorities cited therein.
It is also relevant to observe, as outlined by the respondent in its written submissions, that what is being assessed is the value of the land with improvements, and that costs expended by way of improvements do not necessarily constitute value. However, evidence of the costs of improvements may be relevant to the assessment of the value of the land with improvements.[54] In this regard, Gibbs J held as follows in Collins v Livingstone Shire Council:[55]
… where … the relevant statute requires compensation to be assessed with reference to the value of the land acquired, evidence of the cost of improvements (whether of actual cost or of what the cost would be at the date of valuation) may be relevant to the value of the land in its improved state, but it is the value and not the cost that is the matter for ultimate determination. Some improvements increase the value of land to a greater extent than the cost, but in other circumstances the cost of an improvement may greatly exceed its value, e.g., because its wasteful design renders it unnecessarily expensive to construct, or because it is redundant or out of place and cannot be put to profitable use having regard to its situation.
…
It was erroneous for the Land Appeal Court to regard the cost of construction [of an improvement] as the proper measure of value; the cost was only one of the facts to be considered in arriving at the value and the weight to be given to it would depend on the other evidence …
[54] Collins v Livingstone Shire Council [1972] HCA 35; (1972) 127 CLR 477, 483 - 484 (Barwick CJ), 489 (Menzies J), 493 (Walsh J), 500 - 501 (Gibbs J); Blue Mountains City Council v Mulcahy (1998) 45 NSWLR 577, 584 ‑ 585 (Beazley JA (as her Honour then was) with whom Sheller and Powell JJA agreed).
[55] Collins v Livingstone Shire Council (500 ‑ 501).
The Spencer test of market value has been consistently applied in numerous cases both in this court and in other Australian jurisdictions.
However, there is an acceptance in the authorities that in some circumstances the Spencer market value test will not be appropriate and instead the 'value of the land' should be determined on the basis of the 'value to the owner'.
Pastoral Finance Association Limited v The Minister - 'value to the owner'
One of the first decisions considering the concept of value to the owner is Pastoral Finance Association Limited v The Minister,[56] where the Privy Council considered an appeal from a decision of the New South Wales Supreme Court concerning the directions by the trial judge to the jury regarding the assessment of compensation for land compulsorily acquired. The appellant had purchased the land for the purposes of moving its successful wool and frozen meat business to the land on the basis that the location would result in increased savings and additional profits for the business. Prior to constructing the necessary buildings to complete the move, the land was compulsorily acquired. The trial was conducted on the basis that the appellant was entitled to compensation for the market value of the land, plus a capitalised amount representing the savings and increased profit that the move would have generated for the appellant's business.
[56] Pastoral Finance Association Limited v The Minister [1914] AC 1083 (Pastoral Finance).
Two important principles can be discerned from the decision. The first is that the Privy Council accepted that the appellant was entitled to the value of the land to the appellant. The second is that the appellant was entitled to compensation for the value of the land to them, but not the savings or additional profits. As explained by Lord Moulton:[57]
That which the appellants were entitled to receive was compensation not for the business profits or savings which they expected to make from the use of the land, but for the value of the land to them. No doubt the suitability of the land for the purpose of their special business affected the value of the land to them, and the prospective savings and additional profits which it could be shewn would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them. But that is a very different thing from saying that they were entitled to have the capitalized value of these savings and additional profits added to the market value of the land in estimating their compensation. They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land. Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.
[57] Pastoral Finance (1088).
The reason why an amount additional to the market value of the land was considered appropriate in this case was because the land had a 'special suitability for the use to which the appellant proposed to put it'.[58] The reasons for this 'special suitability' were the location of the land, being within the city boundary and having frontage to Darling Harbour,[59] and the effect of these features on the business being run by the appellant.
Boland v Yates
[58] Pastoral Finance (1086).
[59] Pastoral Finance (1085).
A second significant case considering the concept of value to the owner is the High Court decision of Boland v Yates. The appellants in the present case place significance on this decision, and in particular the reasons of Gleeson CJ. The appellants also submit that the trial judge placed too great a reliance on the reasons of Callinan J. Accordingly, it is necessary to consider this case in some detail.
Boland v Yates was a decision concerning a claim by the respondent alleging professional negligence against his solicitor and barrister for the manner in which the respondent's underlying compensation claim was conducted. The alleged negligence concerned the manner in which the appellants had run the case of special value to the owner. The respondent's case was that the appellants should have run the case on the basis that a hypothetical purchaser in the position of the owner would have paid more for the subject land than an ordinary hypothetical purchaser because the hypothetical purchaser in the position of the owner would have commenced development of the land faster than any other hypothetical purchaser ('the head start case'). The appeal from the Full Court of the Federal Court was allowed, and the High Court concluded that there had been no professional negligence. In order to resolve the question of whether there had been any professional negligence (excluding any issue as to practitioner immunity), the High Court was required to consider the concept of value to the owner, and its application to the facts of that case.
The land in question was located in Darling Harbour, and the respondent proposed to develop the land as a retail marketplace. The respondent undertook investigations and developed plans, which were approved by the Sydney City Council. The existing buildings on the land were demolished, but prior to any construction taking place, the Darling Harbour Authority indicated its intention to resume the land. Pursuant to s 12C and s 124 of the Darling Harbour Authority Act 1984 (NSW), the respondent was entitled to receive compensation for the acquired land, and for the purpose of ascertaining the compensation to be paid, regard was to be had to (relevantly) the value of the land taken. There was no statutory equivalent to s 241(6) of the LAA in the relevant statutory regime.
Gleeson CJ commenced by acknowledging that the Spencer test of market value was the common starting point for determining the market value of the land.[60] However, the Chief Justice held that in some circumstances, the land in question may have a 'special value' which reflects a value to the owner over and above the price which a hypothetical purchaser may pay.[61] Gleeson CJ referred to the passage from Pastoral Finance outlined earlier in these reasons, and described this as a 'useful explanation of the concept'.[62]
[60] Boland v Yates [15] (Gleeson CJ).
[61] Boland v Yates [16], [80] (Gleeson CJ).
[62] Boland v Yates [16] (Gleeson CJ).
Gleeson CJ described the application of the value to owner concept by reference to the decision of Bray CJ in Arkaba Holdings:
[80]It was established in Pastoral Finance Association Ltd v Minister which, has been followed in many subsequent cases, that in some circumstances land may have a special value to the owner which exceeds the market value. If, in a given case, it is contended that such special value exists, that also raises an issue for factual judgment. The subject matter of such factual judgment was explained by Bray CJ in Arkaba Holdings Ltd v Commissioner of Highways:
It is, of course, well established that it is the value to the owner which must be paid, even if that value exceeds the market value . . . The additional element is commonly called 'special value to the owner' . . . But this special value must in my view arise from some attribute of the land, some use made or to be made of it or advantage derived or to be derived from it, which is peculiar to the claimant and would not exist in the case of the abstract hypothetical purchaser. Would a prudent man in the position of the claimant have been willing to give more for this land than the market value rather than fail to obtain it or regain it if he had been momentarily deprived of it?
[81]Bray CJ went on to give, as a typical example of special value, a case where the land is peculiarly adapted to a certain use made of it by the claimant, such as agricultural land worked in connection with a neighbouring residence or farm buildings. (citations omitted)
Of particular significance in the decision of Arkaba Holdings, as approved by the Chief Justice, is the emphasis on the value to the owner arising because of some attribute of the land, or some use made of it or to be made of it, or advantage derived from it or to be derived from it, which is peculiar to the claimant, and which would not be captured by the Spencer market value test.
Gleeson CJ acknowledged a degree of tension between the concept of value as an exchange value, and the concept of special value to the owner over and above the price that a hypothetical purchaser would pay. However, consistent with the Pastoral Finance decision, Gleeson CJ emphasised that the question for consideration at all times remained the value of the land (or other acquired asset) and not the fixing of compensation for all loss resulting from the resumption or acquisition (leaving to one side any claim for damages founded upon the relevant statutory provisions).[63]
[63] Boland v Yates [83] (Gleeson CJ).
Gleeson CJ noted that the dividing line between the value of the land and loss arising from the resumption or acquisition sometimes becomes blurred by claims for special value based on upon what is called 'disturbance' or 'upon wasted (abortive) expenditure'. In this regard, Gleeson CJ referred with approval to the reasons of Dixon CJ and Kitto J in Commonwealth v Milledge,[64] and noted that in a statutory context such as that before the High Court, disturbance or wasted expenditure:
[64] Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157.
[83]… can only be justified if they support the conclusion of special value, and not merely some form of loss or damage to the dispossessed owner. In Commonwealth v Milledge Dixon CJ and Kitto J said:
There remains the item of the plaintiff's claim described as business disturbance. Though it was considered convenient in this case, as it often is, to deal with this topic as a separate matter, it must always be remembered that disturbance is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of his land lies in the fact that the compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner, that is to say with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land . . . Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date.
[84]Their Honours went on to make a point about consistency, which has some bearing on the present case. They observed that if the market value of land is determined on the basis of the suitability of land for the more profitable form of use to which the owner was putting it, there could be no justification for finding a special value, on the basis of disturbance, related to such use. That, it was said, would involve an obvious inconsistency, the inconsistency arising out of the assumption on which market value had already been ascertained … (citations omitted)
It is relevant to note here that the statutory regime under the LAA, unlike the regime in Boland v Yates, does include loss or damage arising from 'disruption and reinstatement of a business' under s 241(6)(b) of the LAA.
Ultimately, Gleeson CJ held that the respondent's 'head start' claim failed because it was based upon facts which were not found by the trial judge, and it was inconsistent with the manner in which the expert valuers had assessed the market value of the land.[65]
[65] Boland v Yates [89] - [92] (Gleeson CJ).
In the present case, the trial judge did not refer to the reasons of Gleeson CJ. Rather, his Honour referred to the reasons of Callinan J, observing that the appellants referred his Honour to these reasons in their written opening submissions.[66]
[66] Primary Decision [126].
Callinan J also agreed that the appeal should be allowed and that there was no negligence on the part of the appellants. Callinan J agreed that the decision of the Full Court of the Federal Court proceeded on the basis of errors of fact.[67] His Honour also held that the facts before the Full Court negatived any 'head start' advantage to the respondent over and above that already accounted for as part of the Spencer test of market value.[68]
[67] Boland v Yates [313] - [329] (Callinan J).
[68] Boland v Yates [298] (Callinan J).
Callinan J observed that all statutes authorising resumptions of land in Australia effectively require that the relevant compensation court should calculate the value of the resumed property as if it were sold on the date of its acquisition.[69] Further, his Honour observed that it has long been accepted in Australia that the various statements made by justices of the High Court in Spencer v The Commonwealth correctly formulate the principles to be applied in calculating that value.[70] Finally, Callinan J noted that a dispossessed landowner should be compensated for the value of the land on the basis of its highest and best use.[71]
[69] Boland v Yates [265] (Callinan J).
[70] Boland v Yates [266] (Callinan J).
[71] Boland v Yates [271] (Callinan J).
Callinan J then went on to consider the concepts of disturbance and special value to the owner together. His Honour described value to the owner as arising where:[72]
The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it.
[72] Boland v Yates [292] (Callinan J).
Callinan J went on to express the view that value to the owner will not often arise:[73]
There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.
[73] Boland v Yates [292] (Callinan J).
In relation to disturbance, whilst Callinan J referred to the passage quoted by Gleeson CJ from Commonwealth v Milledge, his Honour preferred and endorsed the following explanation of disturbance used by the Australian Law Reform Commission in its report Lands Acquisition and Compensation:[74]
[294]…'cover[ing] economic losses which result naturally, reasonably and directly from acquisition. It may include such items as removal expenses, costs of necessary replacement of furniture and fittings, legal and other costs of purchasing [an alternative site] and loss of local goodwill'. Some of these items may however also fall under the head of valuation previously referred to as reinstatement. (footnotes omitted)
[74] Australian Law Reform Commission, Lands Acquisition and Compensation, Report No 14 (1980) [241].
Callinan J observed that in most Australian jurisdictions each of disturbance and special value is a separate statutory head of compensation.[75] Ultimately, his Honour concluded that no question of disturbance loss arose on the facts.
[75] Boland v Yates [296] (Callinan J).
Callinan J also considered two decisions said to underpin the application of the 'head start' claim of the respondent and therefore support a claim of value to the owner: Kennedy Street Pty Ltd v Minister,[76] and Baringa Enterprises v Manly Municipal Council.[77] Both are decisions of Hardie J in the Land and Valuation Court of New South Wales.
[76] Kennedy Street Pty Ltd v Minister [1963] NSWR 1252; (1962) 8 LGRA 221 (Kennedy Street).
[77] Baringa Enterprises v Manly Municipal Council (1965) 15 LGRA 201 (Baringa Enterprises).
In Kennedy Street, Hardie J considered the valuation of land which the plaintiff had agreed to purchase. The plaintiff was a company that was established for the purpose of acquiring, subdividing and selling land. The plaintiff had paid a deposit and spent money preparing a survey plan, preparing and applying for subdivision approval and undertaking some other work with a view to implementing the approval. The land was then resumed. Hardie J valued the plaintiff's interest in the land as the market value, plus an additional sum representing value to the plaintiff, being a sum which the plaintiff would have paid above the market value. The matters which Hardie J relied on to award value to the owner were that the plaintiff had given close and careful consideration to the problems associated with the proposed subdivision; it had paid stamp duty to acquire it; it had also paid survey fees, engineering fees and the council fee in relation to the subdivision application; that the plaintiff's principal shareholders had acquired knowledge and experience and spent time examining the land and taking the steps appropriate to ensure an expeditious approval of the subdivision; and the length of time that the plaintiff reasonably would require to undertake another similar venture.
Callinan J considered that Hardie J erred in concluding that these matters justified an award of compensation on the basis of value to the owner and ought not be followed:[78]
To regard these matters as ones entitling the plaintiff to an allowance for special value is to ignore or misunderstand the formulation in Spencer's case of the principles to be applied in assessing compensation. A vendor armed with the relevant materials, an approval and information which might enable a property to be profitably subdivided would be foolish not to seek and to insist upon obtaining full value for the land or any estate or interest in it having regard to those matters, from any purchaser. And a prudent purchaser would need to be prepared to pay a price accordingly as the utilisation of those materials would enable that purchaser to realise the highest and best use of the property. Everything the plaintiff had in its possession in Kennedy Street was, as is the situation in this appeal, readily transmissible to, and of value to, any purchaser coming into possession of the property.
[78] Boland v Yates [336], (Callinan J). See also [339], [348] (Callinan J).
In Baringa Enterprises, Hardie J assessed compensation for land which had been resumed by including a component for value to the owner. Hardie J reasoned that, at the time of the resumption, the plaintiff stood a better chance of obtaining a renewed building approval for the land and successfully undertaking a development than the hypothetical purchaser. By the time of the resumption, the plaintiff had demolished some structures on the land; obtained building approval in principle for the construction of a building to contain shops and flats; obtained plans prepared by an architect; and called for and received tenders for the construction.
Callinan J considered that Hardie J had not explained how or why the facts of Baringa Enterprises supported an award of compensation assessed on the basis of the value to the owner and considered that it was a highly questionable decision:[79]
His Honour's statement of the facts does not reveal why a fully conversant purchaser could not, and would not, have been put in possession of all of the information and advantages that the plaintiff was said to have. … Nor did his Honour explain why the highest and best use might not have been for the construction of a building that had been approved and was beyond the dispossessed landowner's means. If that were the highest and best use there would have been no need for a notional purchaser to seek an approval for a smaller building.
[79] Boland v Yates [343] (Callinan J). See also [344].
Gaudron J agreed with the conclusion and reasoning of Gleeson CJ, save that her Honour also agreed with Callinan J that Kennedy Street was incorrectly decided and should no longer be followed.[80] Gummow J also agreed with the reasons of Gleeson CJ, save that his Honour agreed with the reasoning of Callinan J in relation to both Kennedy Street and Baringa Enterprises.[81]
Cases considering Pastoral Finance and Boland v Yates
[80] Boland v Yates [99] - [100] (Gaudron J).
[81] Boland v Yates [110] - [111] (Gummow J).
A number of authorities have considered the concept of value to the owner as considered in Pastoral Finance and Boland v Yates.
The appellants referred to the decision of the High Court in Northern Territory v Griffith. This case concerned the assessment of compensation for the extinguishment of native title rights. The subject matter and statutory context were accordingly very different from the present case. However, in the course of the various reasons, both the plurality (comprising Kiefel CJ, Bell, Keane, Nettle and Gordon JJ) and Edelman J, referred to the Spencer test for market value, and the value to the owner. The Spencer test for market value being relevant to assessing the economic value of the native title rights and interest that had been extinguished, with value to the owner being relevant to the assessment of compensation for the additional non-economic or cultural loss occasioned by the consequent diminution of connection to country.[82]
[82] Northern Territory v Griffith [84] (Kiefel CJ, Bell, Keane, Nettle & Gordon JJ), [304] (Edelman J).
Edelman J observed that value to the owner is exceptional in compulsory acquisition cases, but is unexceptional in cases involving native title.[83] His Honour referred with approval to the decisions of Pastoral Finance and the previously cited portion of Bray CJ's decision in Arkaba Holdings in describing the concept of value to the owner.[84] Edelman J also adopted the example used by Callinan J in Boland v Yates of the blacksmith with the protected non-conforming use which will be lost on transfer of ownership as an example of a situation in compulsory acquisition cases where value to the owner is applicable,[85] before going on to conclude that:[86]
The principles of special value, as enunciated, need not be confined to uses made of, or advantages derived from, land that can be immediately translated into money. Indeed, even in cases where the special value concerns a business prospect of financial gain to an owner, the increased or ' special' value of the land is not the capitalised expected profits from the business but the amount that a purchaser in the position of the owner would reasonably pay to obtain the land. Special value can encompass every matter of value to a claimant that extends beyond market value other than issues that are often described as mere 'sentiment'.
[83] Northern Territory v Griffith [304] (Edelman J).
[84] Northern Territory v Griffith [306] (Edelman J).
[85] Northern Territory v Griffith [307] (Edelman J).
[86] Northern Territory v Griffith [308] (Edelman J).
In the present case, the trial judge referred to a number of additional authorities which considered the concept of value to owner.
In Leichhardt Council v Roads & Traffic Authority of NSW,[87] the New South Wales Court of Appeal was required to consider the interpretation of specific sections of the relevant legislation. It is not necessary to set those out in detail. Rather, it is sufficient to observe that in the course of considering the concepts of value to the owner and market value, Spigelman CJ (with whom Beazley, Bryson and Basten JJA and Campbell J) agreed, referred with approval to the following passage of Lord Tucker in Minister for Public Works v Thistlethwayte:[88]
It must not be forgotten that it is the value of the land to the owner that has to be ascertained, and that the willing seller and purchaser is merely a useful and conventional method of arriving at a basic figure to which must be added in appropriate cases further sums for disturbance, severance, special value to the owner and the like.
[87] Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353; (2006) 149 LGERA 439 [25].
[88] Minister for Public Works v Thistlethwayte [1954] AC 475, 491.
This passage was also referred to with approval by Gleeson CJ in Boland v Yates.[89]
[89] Boland v Yates [83] (Gleeson CJ).
In terms of Western Australian authorities, the trial judge referred to two decisions concerning prior compensation legislation applicable in Western Australia: St John Ambulance Association of Western Australia Incorporated v East Perth Redevelopment Authority[90] and Arcus Shopfitters Pty Ltd v Western Australian Planning Commission.[91] In both decisions, reference is made to the Spencer test for market value and the concept of value to the owner. In each decision, the authorities of Pastoral Finance and Boland v Yates are considered.
[90] St John Ambulance Association of Western Australia Incorporated v East Perth Redevelopment Authority [2001] WASC 85; (2001) 114 LGERA 112 (St John Ambulance Association).
[91] Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174; (2002) 125 LGERA 180 (Arcus Shopfitters).
In St John Ambulance, the former Compensation Court concluded that:[92]
The reasoning of the High Court [in Boland v Yates] suggests that unless a claimant shows that another method of determining the value of the land should be adopted, the generally accepted approach is to apply the market value approach in Spencer's case. Where a claim for additional special value is concerned, the reason why there is an onus upon the claimant to substantiate the claim is because the claim is based on the vendor's peculiar perspective. Thus, a claimant may not be entitled to compensation for special value on the basis that its land could, in the future, be subdivided because this would be taken into account by properly applying the Spencer test.
[92] St John Ambulance Association [92].
The trial judge outlined that the former Compensation Court also cited with approval extracts from A E Radford's article 'Land: Market Value and Special Value in the High Court',[93] to the effect that value to the owner is concerned with 'some feature of the land itself which will excite a higher offer from a potential purchaser over and above the market value of the land' and a claim for value to the owner must be carefully distinguished from disturbance loss, severance and solatium. Further, value to the owner must have nothing to do with the vigour of the personality of the owner nor sentiment for the land.[94]
[93] Radford A E, 'Land: Market Value and Special Value in the High Court' (2000) 74 Australian Law Journal and Reports 773.
[94] St John Ambulance Association [97] - [98].
In Arcus Shopfitters, Pullin J held that the usual method of determining the value of land is to apply the Spencer test of market value. However, land may have a special value to the owner over and above the market value. That special value must be something 'objective and ascertainable, derived from the land or some attributable [sic: attribute or] property of it, and cannot be recognised if it rests in mere subjective affection or emotional involvement'.[95] Pullin J also accepted that value to the owner is not to be ascertained by reckoning out savings and additional profits to be derived for the land and then capitalising those savings and additional profits.[96]
[95] Arcus Shopfitters [73] and the authorities cited therein. See also [69] - [70].
[96] Arcus Shopfitters [75].
The trial judge also referred to the decision of Mount Lawley Pty Ltd v Western Australian Planning Commission.[97] This decision concerned the amount of compensation payable under s 36 of the former Metropolitan Region Town Planning Scheme Act 1959 (WA) in relation to land which had been reserved for parks and recreation which the respondent chose to acquire, and a claim for injurious affection in relation to land reserved for a controlled access highway, which the respondent had not elected to acquire. When considering the concepts of market value and value to the owner, the Court of Appeal held that:[98]
In our view, it is likely to be a rare case in which there is a difference between the market value of land and its special value to the owner. That is because the factors of special value are likely to be components of the market value which are recognisable as such by a notional vendor and purchaser who are 'conversant' or 'perfectly acquainted' with the land and all its features.
[97] Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273.
[98] Mount Lawley Pty Ltd v Western Australian Planning Commission [286].
Disposition of ground of appeal 3
For the reasons set out above, ground 3 should therefore be dismissed.
Ground of appeal 4
Summary of the reasons of the trial judge
The trial judge described Century West's claim for compensation based on the loss of storage contracts as follows:
57 Century West claims for a loss of a business opportunity suffered, for it to earn further revenues over time under a third‑party storage area utilisation arrangement - that it says was feasible at the former premises, due to its more utilisable configuration for spare space. However, such an arrangement around storage use for third parties was not feasible, it says, at the relocated business premises, although, in fact, they are of a greater area.
The quantum of Century West's claim ranged between $803,100 (for the Austral contract) and $587,210 (for the alternative contracts).
The trial judge outlined that the respondent denied the lost opportunity claim as being unprincipled, and described the legal issue arising in the following terms:
65There is a conceptual issue arising in the trial over whether, as a matter of law, a claim for statutory compensation under s 241(6) of the LAA can legitimately support a claim to what is, in effect, a claimed economic loss of a chance, or a lost business opportunity. This is the claim for the allegedly lost business opportunity of obtaining greater revenue through the (lost) opportunity to enter more profitable third-party contractual arrangements, albeit such arrangements were never actually ever perfected.
66 The PTA's contrary position is that ss 241(6)(a) and (6)(b) of the LAA in particular, cover only 'loss or damage' that is 'sustained' by reason of a disruption or a reinstatement of a business. Hence, it is said that, the loss of a mere economic opportunity, or of a chance, does not engage with that required statutory threshold, according to the PTA.
In terms of the legal principles relevant to this aspect of the appellants' claim, the trial judge referred to the decision of Edelman J in LenzNominees as being instructive. Lenz Nominees concerned a claim for compensation under s 241 of the LAA following the resumption of part only of the plaintiff's land for the purposes of the Forrest Highway. The trial judge referred to that portion of the reasons which considered a claim under s 241(6)(e) of the LAA:[263]
Section 241(6)(e) does not permit the recovery of losses which have not been suffered for several reasons. First, s 241(6)(e) is concerned with loss or damage 'sustained' by the claimant. The focus of these introductory words of the section is upon loss or damage actually incurred. The words of s 241(6)(d) do not detract from this. Those words refer to architect's fees or quantity surveyor's fees 'actually incurred by the claimant in respect of proposed buildings or improvements'. The reference to 'actually incurred' narrows those fees which are recoverable. This is perhaps in contrast with s 241(6)(c) which may include future lost profits from the termination of building contracts. Or it could be to emphasise that only those fees incurred prior to the Taking are recoverable. (the trial judge's emphasis in bold)
[263] Primary Decision [180] citing Lenz Nominees [423].
The trial judge observed that the appellants' relied on s 241(6)(b) of the LAA but concluded that:
182Edelman J's observations made at [423] in Lenz Nominees, by reference to the word used in the preface of s 241(6)(e) of the LAA, namely, 'sustained', must in my assessment be equally applicable by parity of reasoning to a s 241(6)(b) claim.
183In Lenz Nominees, Edelman J had earlier observed, by reference to case authority under the former compensation legislation, to the reasons of Virtue J in Konowalow and Felber v Minister for Works [1961] WAR 40,41, observing:
[417] The genus in s 63(aa)(i) - (iv), which Virtue J identified, is 'compensation for loss or damage resulting from interference with the activities being carried on by the plaintiff on the land'.
The trial judge dismissed this aspect of Century West's claim for the following reasons:
184 On my assessment, the conceptual character of the as-articulated loss of a chance claim raised by Century West - in respect of a claimed lost opportunity to win additional revenues potentially obtainable from the storage and consequent additional road haulage work from its existing customer, Austral - does not align to the legal character of a permissible claim for loss or damage that has been sustained, under s 241(6) of the LAA.
185 Nor, in my view, does that lost future revenue opportunity claim meet the threshold textual criteria of s 241(6)(b) - in regard to showing loss or damage suffered by reason of 'disruption and reinstatement of a business'. Hence, the claim is too wide by Century West.
186 A loss of the chance of gaining a future assumed profitable contract relationship, is a claim of a different ilk to a consequential loss and damage cause of action, as is envisaged by s 241(6) of the LAA. This claim must fail.
The trial judge went on to find that even if he were to allow the claim based on possible future contracts with Austral, consistent with the approach of French J (as his Honour then was) at first instance in Sellars v Adelaide Petroleum NL,[264] he would apply a discount of at least 50% to that claim to take into account the 'real prospect that it might not have ever eventuated, or may have been derailed by other circumstances before it was perfected'. This discount resulted in an amount of $401,550 in relation to the Austral lost income claim.[265]
[264] Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332 (as discussed in Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160 [908]).
[265] Primary Decision [434] - [436].
The trial judge also held that this amount would then need to be set off against the benefit flowing to Century West by reason of its lesser rent payable at the new premises as explained by Mr Langridge.[266]
[266] Primary Decision [445].
The trial judge concluded that he would not allow the alternative claim for lost contracts on the basis that it was insufficiently proved.[267]
Parties' submissions
[267] Primary Decision [437].
The appellants' case in relation to ground 4 is that the trial judge erred 'in principle' by rejecting Century West's claim for lost income that Century West would have obtained if it had entered into a new agreement with Austral.
Senior counsel for the appellants confirmed that the ground of appeal alleged that the trial judge made an error of law in rejecting this aspect of Century West's claim.[268] The appellants submit that the trial judge erred in law by:
(1)concluding that the loss of a future profitable business opportunity was not 'loss or damage sustained' for the purposes of s 241(6)(b) of the LAA. The appellants submit that such a loss (if factually established) is an example of a loss of a chance or a loss of an opportunity that is recoverable for breach of contract, in tort and in misleading and deceptive conduct cases. The appellants rely on a number of the authorities in this regard, including The Commonwealth v Amann Aviation Pty Ltd[269] and Sellars v Adelaide Petroleum NL. The appellants' case is that there is no reason why such a loss is not 'loss or damage' that is 'sustained', which the appellants submit should be given its ordinary meaning;
(2)concluding that the loss or damage was not suffered by reason of 'disruption and reinstatement of a business'. The appellants submit that the loss or damage was suffered because of the taking of the Land, and by the inability of Century West to provide storage services at the new location; and
(3)concluding that Century West's claim was of a 'different ilk' from a consequential loss and damage cause of action as envisaged in s 241(6) of the LAA. The appellants submit that the trial judge provided no reasons for this conclusion, but that the loss or damage suffered is of the same genus as the other examples contained in s 241(6) of the LAA.
[268] Appeal ts 54.
[269] The Commonwealth v Amann Aviation Pty Ltd [1991] HCA 54; (1991) 174 CLR 64.
Senior counsel for the appellants confirmed that the appellants' claim was based only on s 241(6)(b) and not s 241(6)(e) of the LAA.[270]
[270] Appeal ts 68 - 69.
The appellants' ground of appeal also refers to the trial judge making an error in concluding that if such loss did fall within the scope of s 241(6)(b) of the LAA, it was appropriate to apply a 50% discount to the loss or damage claimed for contingencies and uncertainty. However, in oral submissions, senior counsel for the appellants accepted that there was no 'error in principle' in applying such a discount.[271] Rather, senior counsel submitted that the trial judge erred 'in principle' in relying on 'commercial experience' in concluding that a 50% discount was appropriate, when there was no evidence to that effect.[272] Senior counsel for the appellants accepted that the ground did not allege an error of fact in relation to the conclusion that the figure of 50% was appropriate to be applied.[273]
[271] Appeal ts 55, 58 - 59.
[272] Appeal ts 64.
[273] Appeal ts 56, 59.
The appellants do not advance any claim that the trial judge erred in law in dismissing the alternative basis of the claim for loss of profits from other lost contracts on the additional basis that it was 'insufficiently proved'.
The respondent accepts that, in light of the authorities referred to by the appellants, the conclusion of the trial judge that a loss of a future profitable business opportunity (if established) was not loss or damage 'sustained' for the purposes of s 241(6)(b) of the LAA, is an error of law. The respondent accepts that, consistent with the authorities, such a loss would be 'sustained', meaning 'suffered'.[274] However, the respondent submits that for two different reasons there was no error on the part of the trial judge in relation to his Honour's ultimate conclusion not to allow any compensation for this aspect of Century West's claim.
[274] Appeal ts 86 - 87.
First, the respondent submits that s 241(6) of the LAA is concerned with consequential loss or damage arising from the interference with activities carried out on the taken land. Properly construed, s 241(6) does not extend to loss of a chance or opportunity to use the land to engage in an income earning activity. Rather, this is an aspect of the land's potential and something that properly falls within the market value of the land, or in this case the market value of the leasehold interest in the Land, which is addressed in s 241(2) of the LAA. The respondent relies on the authorities of Moloney v Roads and Maritime Services[275] and Roads and Maritime Services v United Petroleum Pty Ltd[276] in support. To this extent, the respondent submits that the conclusion of the trial judge that the claimed loss was of a different 'ilk' to the loss or damage addressed in s 241(6) of the LAA is correct. The respondent's case is that Century West has not made a claim for compensation under s 241(2) of the LAA, which the respondent says is not surprising given the rent previously being paid by Century West to DBW Reynolds was market rent and the business was not destroyed, but rather relocated.
[275] Moloney v Roads and Maritime Services [2018] NSWCA 252; (2018) 98 NSWLR 651.
[276] Roads and Maritime Services v United Petroleum Pty Ltd [2019] NSWCA 41; (2019) 99 NSWLR 279.
Secondly, and in any event, the respondent submits that if the claimed loss does fall within s 241(6)(b) of the LAA, then it is necessary to offset that loss against the benefit obtained by Century West from the new lease, being the reduced rent. The amount of this reduced rent is in the vicinity of $890,000. When this is done, the respondent submits that Century West has not suffered any loss or damage (irrespective of whether a 50% discount for uncertainty is applied). The respondent submits that this second issue alone is sufficient to resolve the ground of appeal without determining the first issue.
Is a loss of a business opportunity loss or damage 'sustained'?
Resolution of this ground of appeal is largely a matter of statutory construction of s 241(6) of the LAA.
The appellants' case, which the respondent accepts, is that a loss of a future profitable business opportunity from an established customer (if factually established) can be loss or damage 'sustained' for the purposes of s 241(6) of the LAA.
The term 'sustained' is not defined in the LAA. The appellants submit that it should be given its ordinary English meaning. The Macquarie Dictionary and the Oxford English Dictionary each define 'sustained' as including to undergo or experience or suffer injury, loss, damage. The respondent accepts this to be correct, and we agree that the text, context and purpose of the relevant provisions of the LAA support the application of the ordinary meaning to this term in the context of s 241(6) of the LAA.
The question that arises is whether, as a matter of construction, a loss of a future business opportunity is loss or damage which is 'sustained' - or suffered - by an individual, or whether sustained has a more limited meaning. Damages for a loss of a chance or an opportunity to obtain a commercial benefit can be awarded in the context of breach of contract claims, in tort and for misleading and deceptive conduct.[277] In such cases, the question of causation is required to be established by the plaintiff on the civil standard of the balance of probabilities. For a breach of contract, the opportunity will usually be established by proving the contract itself. In the context of a tort or misleading and deceptive conduct, the plaintiff must prove on the balance of probabilities that they have suffered some loss. The question of the value of that lost opportunity is then ascertained by reference to the court's assessment of the prospects of success of that opportunity had it been pursued. That is, by reference to the degree of probabilities or possibilities.
[277] Sellars v Adelaide Petroleum NL; The Commonwealth v Amann Aviation Pty Ltd; TC Industrial Plant Pty Ltd v Robert's Queensland Pty [1963] HCA 57; (1963) 180 CLR 130.
The position was explained by the plurality of Mason CJ, Dawson, Toohey and Gaudron JJ in Sellars v Adelaide Petroleum NL as follows:[278]
… the general standard of proof in civil actions will ordinarily govern the issue of causation and the issue whether the applicant has sustained loss or damage. Hence the applicant must prove on the balance of probabilities that he or she has sustained some loss or damage. However, in a case such as the present, the applicant shows some loss or damage was sustained by demonstrating that the contravening conduct caused the loss of a commercial opportunity which had value (not being a negligible value) the value being ascertained by reference to the degree of probabilities or possibilities.
[278] Sellars v Adelaide Petroleum NL (355).
In The Commonwealth v Amann Aviation, and TC Industrial Plant Pty Ltd v Robert's Queensland Pty Ltd, the compensable loss was the loss of the opportunity of obtaining a renewal or extension of a contract.
The appellant relies on the reasons of Brennan J in Sellars v Adelaide Petroleum NL who held that:[279]
There is no rational basis for distinguishing between a loss for which more than nominal damages may be awarded in contract and a loss for the purposes of s 82(1) of the Act and the law of torts.
[279] Sellars v Adelaide Petroleum NL (364).
The appellants submit that there is no rational basis for adopting a different approach in the context s 241(6) of the LAA. As a matter of statutory construction, we agree that there is no reason in the text of s 241(6)(b) of the LAA, when considered in its statutory context, that would exclude loss or damage for the loss of a commercial opportunity from being loss or damage which is 'sustained' - that is 'suffered'. There is also nothing inherent in the nature of a claim for compensation following the compulsory acquisition of the land which would suggest that a loss which is sustained in the context of a breach of contract, in tort or as a result of misleading and deceptive conduct, would not also be a loss which is 'sustained' in the context of s 241(6)(b) of the LAA.
Accordingly, the trial judge erred in holding that the loss of an opportunity to win additional storage contracts was not loss or damage 'sustained' for the purposes of s 241(6)(b) of the LAA. However, it is necessary to go on to consider whether this error was material to his Honour's final conclusion to dismiss this aspect of Century West's claim.
Has Century West in fact suffered any loss or damage?
It is first convenient to consider the second of the respondent's submissions in relation to this ground of appeal, being whether Century West has in fact suffered any loss at all as a result of missing the opportunity of the storage contract with Austral, or the alternative contracts.
Century West's claim is quantified by Ms Jacqui Le‑Fevre in her expert report. Ms Jacqui Le‑Fevre undertook the exercise of comparing the terms of the lease between Century West and DBW Reynolds, and then the terms of the lease between Century West and the new third-party landlord. Ms Jacqui Le‑Fevre then calculated the total amounts that Century West would be likely to pay under each lease for the four-year period between when Century West vacated the Land, and 29 February 2020. The amounts are as follows:[280]
(a)rent and outgoings under the terms of the former lease with DBW Reynolds: $3,016,691; and
(b)rent and outgoings under the terms of the new lease with the third‑party landlord: $2,091,167.
[280] Witness statement of Jacqueline Andre Le-Fevre dated 20 March 2020, appendix 7, GAB 682.
As these figures reveal, Century West paid a total of $925,000 less over the four‑year period under the new lease. Mr Langridge, in the joint report of the accountants agreed with these figures, save that Mr Langridge deducted some additional costs.[281]
[281] Joint report of Martin Langridge and Jacqueline Andre Le-Fevre dated 18 March 2020 [6.25] - [6.31] GAB 1016.
However, in par [444] of the Primary Decision the trial judge refers to the figure $990,000. It is submitted by the respondent, with no objection from the appellants, that this is a typographical error, and it should in fact be $890,000. The respondent submits that the figure should be the sum calculated by Ms Jacqui Le‑Fevre as representing the difference in rent and outgoings between the terms of the two leases over the relevant period - being $925,000. From this figure, the trial judge has offset two costs incurred by Century West in leasing the new premises, being $5,695 (being for lease fees) and $23,350 (being for the provision of a rental bond). This results in a figure of $895,955, which presumably has been rounded to $890,000.[282] We have proceeded on this basis for the purposes of the appeal.
[282] Primary Decision [444]; appeal ts 94 - 96; Witness statement of Jacqueline Andre Le-Fevre dated 20 March 2020, appendix 7, GAB 682. See also Mr Langridge's calculation at Joint report of Martin Langridge and Jacqueline Andre Le-Fevre dated 18 March 2020 [6.25] - [6.31(b)] GAB 1016.
The amount claimed by Century West for the loss of income from the chance of the Austral contract over the same four-year period is $803,100.[283] The amount claimed by Century West for the loss of income from the chance of the other alternative contracts over the same four-year period is $587,210.[284] Whilst described in the pleadings as being lost income, Ms Jacqui Le‑Fevre's calculation is actually the estimated lost gross profit of the contracts. Ms Jacqui Le‑Fevre did not take the amount of rent into account when calculating this figure on the basis that Ms Jacqui Le‑Fevre considered it was not appropriate to do so as rent is not a direct cost but rather an overhead that would need to be incurred in any event. Ms Jacqui Le‑Fevre's evidence was that it would conflate two different issues to take the rent into account.[285]
[283] Witness statement of Jacqueline Andre Le-Fevre dated 20 March 2020 [136] GAB 635.
[284] Witness statement of Jacqueline Andre Le-Fevre dated 20 March 2020 [136] GAB 635.
[285] ts 564 - 566.
The period of four years was adopted by Ms Jacqui Le‑Fevre because originally the move by Century West to the new rented premises was intended to be temporary, until DBW Reynolds could find a suitable premises to purchase. At that point, any losses would end. At the time of the expert reports, the length of the lease at the temporary premises had been extended to four years.[286]
[286] ts 546, 548.
Assuming that the loss of a commercial business opportunity does fall within the scope of s 241(6)(b) of the LAA, the respondent submits that when determining the quantum of any such loss it is necessary to have regard not only to the income that has been lost as a result of the disruption and reinstatement of the business, but also any savings or other benefits that have resulted because of that disruption and reinstatement. In the present case, that means accounting for the reduced rent that Century West paid. The respondent submits that when this is done in the present case, it reveals that Century West cannot demonstrate that it has sustained any loss, even if the 50% discount for uncertainty is not applied.
In response, the appellants submit that as a matter of statutory construction, s 241(6)(b) does not require any benefits conferred as a result of the disruption and reinstatement of the business to be set off against any losses that are sustained.
The appellants submit that there is no reference in the text of s 241(6)(b) to the requirement to 'set off' any such sums. In contrast, in s 241(7) of the LAA, there is a reference to the requirement to set‑off certain sums. The appellants submit that as a matter of statutory construction, this is an indicator that no such set off is required under s 241(6)(b) of the LAA.
Section 241(7) is concerned with compensation for severance and injurious affection. It only applies in a specific circumstance, namely where the fee simple in land is taken from a person, and that person is also the holder in fee simple of adjoining land.
If the fee simple in land is taken from a person who is also the holder in fee simple of adjoining land, regard is to be had to the amount of any damage suffered by the claimant —
(a) due to the severing of the land taken from that adjoining land; or
(b) due to a reduction of the value of that adjoining land,
however, if the value of any land held in fee simple by the person is increased by the carrying out of, or the proposal to carry out, the public work for which the land was taken, the increase is to be set off against the amount of compensation that would otherwise be payable under paragraph (b).
(emphasis added)
As a matter of construction, we consider that s 241(6)(b) of the LAA does require consideration to be given to any benefits or savings that have resulted as part of the disruption and reinstatement of a business. We have reached this conclusion for the following reasons.
First, s 241(6)(b) of the LAA requires regard to be had to 'the loss or damage, if any, sustained by the claimant by reason of … disruption and reinstatement of a business'. The expression 'by reason of' requires that there be a casual nexus between 'the loss or damage, if any, sustained by the claimant', on the one hand, and the 'disruption and reinstatement of a business', on the other. The disruption and reinstatement of a business may produce individual or discrete items of loss or damage and may also produce individual or discrete items which involve benefits or savings. The text of s 241(6)(b) is not concerned with individual or discrete items of loss or damage. Rather, it is concerned with the totality of any loss or damage. The determination of the totality of any loss or damage sustained by the claimant by reason of disruption and reinstatement of a business requires that all individual or discrete items of loss or damage and all individual or discrete items which involve benefits, or savings, by reason of disruption and reinstatement of the business be brought to account.
Secondly, in any event, it is implicit in the text of s 241(6)(b) of the LAA that consideration must be given to any benefits or earnings. The text of s 241(6)(b) requires the following steps, or considerations:
(a)identifying any loss or damage claimed to have been sustained by the claimant;
(b)demonstrating the causal connection between that loss or damage and the 'disruption and reinstatement' of the business; and
(c)valuing that loss or damage.
The ordinary meaning of the term 'sustained' is to suffer, which the appellants accept is the appropriate meaning to apply to the term. In order to establish that loss or damage has been suffered as a result of the disruption and reinstatement of the business, it is necessary to consider the entire position of the person claiming the loss or damage. This includes not only any loss or damage suffered arising from the disruption and reinstatement of the business, but also any benefits or savings conferred by the disruption and reinstatement of the business. To disregard any benefits or savings conferred, results in an incomplete picture of the extent of the loss or damage that has been suffered. A determination of whether there has in fact been any loss or damage, and if so the quantum, can only be arrived at after considering all relevant factors.
The issue is not one of whether a set off is required because the initial calculation already includes and requires the consideration of any benefits or savings conferred. When the task imposed by s 241(6)(b) is properly understood, the lack of any express requirement in the text to set off any sums is therefore not material, as it is simply not required.
Thirdly, the position adopted in the other subsections of s 241 of the LAA is consistent with the above construction. In both s 241(2) and s 241(7) the value of land is required to be ascertained. In s 241(2) it is the value of the land which is taken and in s 241(7) it is the value of adjoining land. In both subsections there is (relevantly) a requirement to disregard any increase in value caused by the public work.
The requirement to disregard any increase in value caused by the public work is consistent with an approach under s 241(6)(b) of requiring regard to be had to any benefits or savings which have resulted from the 'disruption and reinstatement' of the business as part of ascertaining whether (or to what extent) there has been any loss or damage. However, unlike the assessment of loss or damage sustained by the 'disruption and reinstatement' of a business, the task of assessing the value of a property does not implicitly include consideration of any increases (or decreases) in value caused by any specific item or activity. In this regard, the concept of value is different from the concept of loss or damage. Accordingly, unlike the task of assessing loss or damage in s 241(6)(b), express language is required in each of s 241(2) and s 241(7) if the legislature intends the valuation task to expressly have regard to or to disregard, any factor, including any increase in value caused by the public work.
Fourthly, the above construction of the component parts of s 241 of the LAA is consistent with the broader context and purpose of pt 9 and pt 10 of the LAA, which is to ensure that a person whose interest in land is taken, is awarded compensation for the loss of that interest in land. The scheme developed by the legislation provides for an award of compensation to ensure that the person is compensated for any loss caused by the taking and the associated public work. As part of that regime, any positive impact caused by the taking and public work must either be disregarded or also be taken into account.
Accordingly, we agree with the respondent's submission that on the facts of this case, when assessing the quantum of the loss of opportunity of the Austral contract, or the loss of the alternative contracts, it was necessary to have regard not only to the total claimed loss of $803,100 (for the Austral contract) or $587,210 (for the loss of the alternative contracts), but also the saving in rent over the same period of $925,000.
The loss as claimed by Century West is the estimated lost gross profit of the particular contracts. In calculating that estimated lost gross profit, Ms Jacqui Le‑Fevre has characterised the rent paid by Century West as being an overhead, and not an expense, and has not included this in her calculation. The proper approach is not one of accounting practice. Rather, the proper approach is to apply the statutory text and requirements to the facts.
The saving in rent occurred because of the disruption and reinstatement of the business at the new premises which could not accommodate the same amount of storage. Accordingly, to the extent that the loss claimed arises from the disruption and reinstatement of the business at the new premises which did not have sufficient room for the storage activities of Century West, it is also necessary to have regard to the savings in rent consequent upon the new premises not having those storage facilities. The result is that Century West has not suffered any loss or damage as a result of the disruption and relocation of the business. This is the case even without the 50% discount for uncertainty being applied.
This factual failing in relation to Century West's case alone is sufficient to dispose of ground 4, which should be dismissed.
Other matters raised by the parties
The submissions of the parties raise two other issues in relation to this ground of appeal: being whether the trial judge erred in law in applying a discount of 50% to the estimated lost gross profit figure of Ms Jacqui Le‑Fevre for uncertainty; and whether the loss of a commercial opportunity is 'loss or damage' falling within the scope of s 241(6)(b) of the LAA. This second issue includes whether the loss arises because of the 'disruption and reinstatement of a business' and whether such a loss is something properly assessed in the context of s 241(6)(b) of the LAA or whether it is instead a component of the value of the interest in land which has been taken and is therefore assessed in the context of s 241(2) of the LAA.
In light of the facts underlying this aspect of Century West's claim, and given our conclusion that on these facts, Century West has not suffered any loss or damage as a result of the loss of the opportunity to enter into storage contracts, it is not necessary or appropriate to consider these issues.
Disposition of ground of appeal 4
Notwithstanding our conclusion that the trial judge erred in holding that the loss of an opportunity to win additional storage contracts was not loss or damage 'sustained' for the purposes of the s 241(6)(b) of the LAA, as Century West has not in fact suffered any loss, this ground should be dismissed.
Conclusion
For the above reasons, we are of the view that the appeal should be dismissed.
We will hear further from the parties in relation to the appropriate orders and as to costs.
Schedule 1
Aerial photograph of the Land
Diagram showing the individual lots comprising the Land
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
HY
Associate to the Honourable Justice Seaward
2 APRIL 2025
0
25
3