DBW Reynolds Pty Ltd as trustee for the DBW Reynolds Family Trust v Public Transport Authority
[2023] WASC 165
•22 MAY 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST -v- PUBLIC TRANSPORT AUTHORITY [2023] WASC 165
CORAM: KENNETH MARTIN J
HEARD: 3 - 7, 10 - 11, 14 OCTOBER 2022
DELIVERED : 22 MAY 2023
FILE NO/S: CIV 1456 of 2018
BETWEEN: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST
First Plaintiff
CENTURY WEST TRANSPORT SERVICES PTY LTD
Second Plaintiff
AND
PUBLIC TRANSPORT AUTHORITY
Defendant
Catchwords:
Compulsory acquisition of land - Assessment of compensation for resumed land - Contended inadequacy of market value compensation - Claim for additional compensation by owner as value to owner - Parcels of land acquired to suit particular industrial land use as road haulage transport depot - Land resumed for Forrestfield-Airport rail link - All of first plaintiff's land resumed - No severance - Highest and best use uncontroversially accepted as existing industrial use with potential for individual sale of the aggregate six titles as individual lots or in groups of lots - Utilisation of summation method of valuation as the preferred valuation methodology by all valuers
Business disruption to related corporate second plaintiff by reason of compulsory acquisition terminating second plaintiff's lease from first plaintiff landlord - Transport business relocated to new industrial premises being less suitable and less efficient - Claim for s 241(6) of the Land Administration Act 1997 (WA) economic losses by second plaintiff through loss of opportunity to obtain potentially lucrative storage and transport haulage work from third party which became no longer feasible at relocated business premises - Claim for loss of economic benefit of losing 'friendly landlord' relationship at the relocated premises held on lease from new landlord on arm's length terms
Legislation:
Land Acquisition and Public Works Act 1902 (WA)
Land Administration Act 1997 (WA)
Railway (Forrestfield-Airport Link) Act 2015 (WA)
Railway (Forrestfield-Airport Link) Bill 2015 (WA)Result:
Statutory compensation issues determined
Category: B
Representation:
Counsel:
First Plaintiff : P G McGowan & L E Rowley Second Plaintiff : P G McGowan & L E Rowley Defendant : I A Repper & B Loftus Solicitors:
First Plaintiff : Rowley Legal Second Plaintiff : Rowley Legal Defendant : State Solicitor's Office Cases referred to in decision:
Arcus Shopfitters Pty Ltd v Western Australian Planning Commission [2002] WASC 174; (2002) 125 LGERA 180
Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209
Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358
Hughes v St Barbara Mines Ltd [No 4] [2010] WASC 160
Italiano v The Water Corporation [No 2] [2020] WASC 112
Kelliher v Commissioner for Main Roads [No 2] [2015] WASC 478
Kenny & Good Pty Ltd v MGICA (1992) Ltd [1999] HCA 25; (1999) 199 CLR 413
Konowalow and Felber v Minister for Works [1961] WAR 40
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
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223
Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273
Pastoral Finance Assocation Ltd v The Minister [1914] AC 1083
Sellars v Adelaide Petroleum NL [1994] HCA 4; (1994) 179 CLR 332
Sharp v Western Australian Planning Commission [1999] WASC 223
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
Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259
Table of Contents
Introduction
Basic agreed facts
Nine issues in the trial
Statutory compensation for taken land under the LAA
The defendant's position
Th second plaintiff's loss claims
Legal principles: compensation claims under the LAA
'Value to the owner': the plaintiffs' arguments
The second plaintiff's costs for two relocations to alternative business premises
'Value to the owner' and 'market value': legal concepts
'Value to the owner': case authorities
'Value to the owner': four basic propositions from the case law
LAA: compulsory resumption and compensation provisions
LAA: s 241
Compensation issues in dispute
Second plaintiff's claim for two sets of 'removal expenses': issue six
Second plaintiff's claims for economic losses: issues three and four
First plaintiff's claims: issues one and two
Three misconceptions by the plaintiffs
The property valuers' expert evidence at the trial
Matters agreed upon between the expert property valuers
The property valuers: divergences
The property valuers' comparable sales evidence for the land
Comparable sales: rankings
The quantity surveyors' expert evidence at the trial
Rival positions of the quantity surveyors' evidence
The quantity surveyors: conclusions
The property valuers: general observations
Plaintiff's property valuer: Mr Garmony
Plaintiff's property valuer: Ms Jenny Le-Fevre
Defendant's property valuer: My Fyson
Summation method: Mr Fyson and Mr Hall
Preferred valuation analysis: Mr Fyson and Mr Hall
The property valuers: conclusions
Concluding observations
'Value to the owner'
Misconceptions underlying the second plaintiff's claims for economic losses
Second plaintiff's claim for loss of a chance of a profitable contract
Summary of conclusions
Concluding tables
KENNETH MARTIN J:
Introduction
1This is a statutory compensation action by related corporate plaintiffs under the same management, who separately claim over the loss of their interests (as owner and as lessee respectively) in industrial land at 249 Dundas Road, High Wycombe (sometimes referred to as the 'land', 'taken land' or 'subject land') - arising by reason of the compulsory acquisition of all that land for public purposes by the defendant, the Public Transport Authority ('PTA'), under a taking order registered at Landgate on 11 November 2015.
2The first plaintiff, DBW Reynolds Pty Ltd ('DBW Pty Ltd') as trustee for The DBW Reynolds Family Trust ('DBW Trust') (collectively, as the first plaintiff, 'DBW'), was before the taking order, the owner of six contiguous parcels of land ('lots') zoned and used for light industrial purposes at High Wycombe.
3The lots had been strategically acquired over time by DBW Pty Ltd. It had acquired all that land - in its capacity as the trustee of the DBW Trust.
4The acquired lots in question included Lot 757 on Deposited Plan 61088. That lot was itself a product of an amalgamation of three separate smaller lots as earlier acquired by DBW.
5Beyond Lot 757, the five further acquired lots were Lots 728, 729, 739, 740 and 741 - all on Deposited Plan 54700. A transport depot and road haul business had been operated from the land by the second plaintiff, Century West Transport Services ('Century West'). That business was also affected by the resumption. It needed to relocate after February 2016 to new business premises, relatively nearby on Dundas Road.
6For orientation purposes, an aerial photograph of the 249 Dundas Road, High Wycombe site (referred to thereon as '249 Dundas Road') showing its unique three frontages to Dundas Road, Sultana Road and Imperial Street, became exhibit 6 in the trial. It is also found as Appendix 4 in Ms Jacqueline ('Jacqui') Le-Fevre's expert report of 23 August 2019 (exhibit 31). Ms Jacqui Le-Fevre is the plaintiffs' expert business valuers at the trial. The aerial photograph (exhibit 6) is set out below.
7Unfortunately, this aerial photograph does not reveal the six different lots comprising the mostly black bordered location. These six taken lots are discernible, however, from another diagram set out below – taken from page 17 from the expert report of Mr Dale Hall of 22 August 2019 (exhibit 27). Mr Hall was one of the defendant's two property valuers who provided expert evidence at the trial.
8The six lots comprising DBW's land came to be compulsorily acquired under the taking order of late 2015.
9Because the compulsory acquisition was for purposes of a railway that was authorised by an Act of the Parliament of Western Australia ('Parliament') (namely for the Forrestfield-Airport rail link, the subject of the Railway (Forrestfield-Airport Link) Act 2015 (WA)), it was undisputed at the trial that the specific terms of s 241(2)(a) of the Land Administration Act 1997 (WA) (as amended) ('LAA'), are engaged.
10By the express terms of s 241(2)(a) of the LAA, regard is to be had to the 'value of the land' with any improvements or the interest of any claimant in the land - assessed on 'the first day of the session of Parliament in which the Act was introduced'. The relevant session of Parliament is the 39th Parliament which commenced on 11 April 2013. It is therefore the April 2013 date that must be the relevant valuation date for the land - by force of s 241(2)(a) of the LAA. That was fully accepted on both sides at trial.
11Consequently, 11 April 2013 is the agreed valuation date for the taken land, notwithstanding that the as introduced Railway (Forrestfield-Airport Link) Bill 2015 (WA) did not become law until some 30 months later. The reason for this curiosity concerning land compulsorily acquired for railway purposes is historic and does not need to be addressed further. The legislation is explicit on the valuation date.
12The taking order registered at Landgate on 11 November 2015 states that the land was resumed for purposes of 'Public Transport facilities in connection with a railway as authorized by the Railway (Forrestfield-Airport Link) Act 2015'.
Basic agreed facts
13What follows below are largely the uncontroversial agreed facts taken from the out of plaintiffs' submitted trial chronology of 15 September 2022. It became exhibit 35A in the trial.
14The plaintiffs' fact chronology for trial was responded to by the PTA and was mostly agreed with - subject to a small number of identified corrections and insertions as are found in the reply of 19 September 2022 (see exhibit 35B).
15Amalgamating these exchanged chronology documents towards those respectively agreed facts, as clarified, generates below my assembled and mostly uncontroversial facts, which I have re‑numbered below (along with some added accompanying observations of my own to assist):
(a)
22 March 2011
The second plaintiff (Century West) enters into a lease with the first plaintiff (DBW) with regard to the subject land.
(b)
11 April 2013
First day of the session of Parliament which introduced the Railway (Forrestfield-Airport Link) Bill 2015 (WA).
(c)
11 April 2013
The applicable valuation date for the compensation claim for the purposes of s 241(2)(a) of the LAA.
(d)
2 November 2015
The Railway (Forrestfield-Airport Link) Act 2015 (WA) is passed into law upon receiving royal assent.
(e)
11 November 2015
Registration of the taking order against the taken land at Landgate.
(f)
11 November 2015
The interests of the first and second plaintiffs in the subject land are terminated and converted into claims for statutory compensation.
(g)
17 November 2015
The first and second plaintiffs lodge respective claims for compensation.
(h)
7 January 2016
The defendant (PTA) makes an offer of compensation to the first plaintiff in the sum of $6,900,000.
(i)
18 January 2016
The first plaintiff rejects that offer of compensation, but requests an offer of an advance payment.
(j)
4 February 2016
The second plaintiff enters into a lease over 415 Dundas Road, High Wycombe.
(k)
29 February 2016
The second plaintiff vacates the land.
(l)
1 March 2016
The defendant makes an offer of compensation to the second plaintiff in the amount of $23,200
(m)
1 March 2016
Commencement date of the second plaintiff's lease of premises at 415 Dundas Road, High Wycombe.
(n)
15 March 2016
The defendant renders an advance payment to the first plaintiffs' mortgagee (Westpac) in the sum of $3,645,000 plus a separate sum to the first plaintiff of $4,094,720.55.
That advance payment is made up of:
$6,900,000 compensation
$690,000 solatium (ie, 10%)
$149,720.55 interest
The total compensation sum advanced to the benefit of the first plaintiff by the defendant was therefore $7,739,720.55 at this time.
(o)
17 March 2016
The second plaintiff rejects its offer of compensation
(p)
20 May 2016
The defendant makes an advance payment by a cheque for $25,872.39 to the second plaintiff.
This comprises:
$25,520 compensation including Solatium
$352.39 interest
(q)
2017
The first plaintiff takes steps towards pursuing a proposed purchase of longer term replacement premises at 2 Harrison Road, Forrestfield (but the acquisition does not ultimately proceed).
(r)
10 July 2017
Westpac Bank declines finance for a proposed purchase of premises at 2 Harrison Road, Forrestfield, by the first plaintiff.
(s)
2018
Variation of the lease over 415 Dundas Road, High Wycombe extending the lease term for the second plaintiff.
(t)
28 February 2019
Original end date of the initial term of second plaintiff's lease of the premises at 415 Dundas Road, High Wycombe.
(u)
2020
Variation of lease over 415 Dundas Road, High Wycombe extending term again for the second plaintiff.
(v)
31 August 2016
The first plaintiff alleges it 'reinvested' part of the advanced moneys received into acquiring a 'replacement' investment property of 14 Dupuch Close, Eagle Bay, which was land purchased then in the names of Haydn and Leida Reynolds.
The defendant's response to this suggested fact disputes any characterisation of the agreed purchase as being a 'reinvestment', or an 'acquisition' by the first plaintiff.
The defendant accepts Haydn and Leisa Reynolds did acquire a property at 14 Dupuch Close, Eagle Bay, on or about this day.
During the course of trial, I was told the property at Eagle Bay had been a vacant block without any residence or dwelling then built upon it, but that later, a residence was constructed by Mr and Mrs Reynolds - with the land and residence then at Eagle Bay being used as a holiday home (see ts 110).
(w)
21 January 2020
The defendant offers advance payments to first and second plaintiffs (accepting the correction offered under the defendant's reply to the chronology at par 2.5):
Additional amount to the first plaintiff $1,180,000
Solatium $118,000
Total $1,298,000
Additional amount to the second plaintiff $179,100
Solatium $13,710
Total $192,810
(x)
18 March 2020
Defendant pays the first plaintiff a further $1,635,764.49.
(y)
18 March 2020
Defendant pays the second plaintiff a further $239,654.91.
Nine issues in the trial
16By the written outline of opening submissions of the defendant of 27 September 2022 (folio 88) nine issues were identified therein - and they all came essentially, to be agreed with at the opening of the trial by counsel for the plaintiffs as correctly stating the core issues presenting for determination in the trial. I mention them all briefly in turn next. Some, such as issues five and nine, can be resolved immediately.
17 Issue one. DBW, as the affected landowner, claims it 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. The PTA disagrees. It submits that while 'value to the owner' is a common law principle sometimes found referred to in compulsory acquisition cases, it does not bear the meaning as is contended for by the plaintiffs. The PTA says that for the facts of this case and on the application of the LAA, 'value to the owner' is not a principle to which the expert land valuers in the trial may permissibly have regard.
18That, says the PTA, is the position, even if the two incorporated plaintiffs are viewed for present statutory compensation purposes, as one 'operation', and with them together making a 'global claim' for compensation. The PTA duly responds that a sum of compensation for market value (under s 241(2) of the LAA) to DBW and for any legitimate claims of Century West for its loss or damage under s 241(6) of the LAA - will provide all the permissible 'value to the owner' for the taken land.
19 Issue two. What is the market value of the land (including improvements)? Here, the agreed valuation date, by s 241(2)(a) of the LAA, is 11 April 2013. The PTA submits that based on the expert property valuation evidence put before the Court, this amount is no more than $8,500,000. DBW disagrees and says the correct amount is higher.
20 Issue three. The second plaintiff, Century West, as a lessee and affected business operator, claims separate compensation under s 241(6) of the LAA, for its 'additional costs of leasing temporary (business) premises'.
21The PTA responds that there were no such 'additional' costs. The amount of rent paid by the second plaintiff concerning the business premises to which it moved at 415 Dundas Road, High Wycombe (referred to thereon as '415 Dundas Road') from 1 March 2016 following the taking - under a new lease with a new landlord - was at significantly lesser rent than the level of rent Century West had earlier committed to pay the related corporation DBW, under the former lease over 249 Dundas Road entered prior to the taking and then, the necessary termination of that lease.
22 Issue four. Century West also claims to be entitled to compensation by s 241(6)(b) of the LAA for 'lost income', for a loss of future revenue obtainable upon profitable contracts that Century West believes it would likely have obtained with a third party, had the taking not occurred. Such future contracts and their allied future revenues and profits for Century West are said to have been lost, because Century West from 1 March 2016, at then, no longer had available the spare space at the relocated business premises that it came to rent - in order to make available for the use of customers for storage of their materials (by contrast to the greater levels of available spare space feature as a lost in their smaller, but more efficiently configured, former business premises).
23The PTA on issue four submits by par 8 of their written outline of opening submissions that:
(1)The Second Plaintiff is unable to establish it would have won these contracts.
(2)In any event, the Second Plaintiff would only be entitled to receive net profit, not gross profit, under these contracts. A cost involved in earning that gross profit is the cost of the land on which the materials would have been stored (that is, the rent that would have been paid for the land by the Second Plaintiff in order to make it available to its contractors). The Second Plaintiff is now paying less rent than it otherwise would have; and the net profits that it would have earned are less than the rent differential. The Second Plaintiff has lost nothing.
(3)If this 'lost income' was likely and profitable, a reasonable person in the position of the Second Plaintiff (or Plaintiffs) would have leased (or purchased) alternative land on which to store the materials, and hence earn the income said to be lost.
24 Issue five. A claim is made by DBW for 'stamp duty' (in an amount of $36,545.89) payable on the purchase of land at Eagle Bay which was later acquired by Haydn and Leida (also known as 'Lisa') Reynolds in their personal capacities. The defendant submits that this is not a claimable expense incurred by DBW. DBW relies on s 241(6)(e) of the LAA. I agree that this claim is conceptually misconceived at the outset and must be rejected.
25 Issue six. This is a small item claim to recover the amounts of the wages of Century West's permanent employees who had spent their time in February 2016 on work that was related to the move to 415 Dundas Road (along with imputed future wages costs of staff for a future move to 'permanent' premises).
26The PTA accepts it would have a compensation obligation for some level of claimed loss by reason of the enforced move to relocated business premises, such as for any extra overtime costs payable to employees incurred as a result of the 2016 move. However, it rejects any obligation to compensate for loss claims based on alleged losses of profit claimed for ordinary permanent employees engaged then on fixed wages by the Century West business - who became involved in relocating Century West's business to 415 Dundas Road.
27 Issue seven. A dispute emerges over whether the value of an acquired demountable building which was the property of Century West is to be compensated at the depreciated level for the building, or not.
28The PTA accepts that the depreciated cost is payable, consistent with its approach to compensating for other improvements.
29As matters emerged at trial, the amount claimed for the demountable building by the second plaintiff was reduced under its written outline of closing submissions of 13 October 2022 (folio 95) to $67,455 (see pars 1 and 90). The amount offered by the defendant was $64,241. (The fiscal gap of $3,200 is manifestly uneconomic to be cavilling over in the Supreme Court).
30 Issue eight. Whether leasing costs, leasing preparation fees, bank guarantee costs, interest on overdraft and 'administration costs' claimed are payable as compensation to Century West by s 241(6) of the LAA and, in any event, are they costs that should be offset against the alleged benefit it obtained by not paying a higher rent at the relocated premises - which higher rent otherwise would otherwise have been payable by Century West to DBW at the former business premises had the taking of the land not occurred? This, in effect, is a miscellaneous sundries claim for $25,336 (see par 76 of the defendant's written outline of opening submissions).
31The PTA says none of these claimed amounts are legitimately compensable, once other considerations are brought to account. The discrete items concerned are found identified under par 48 of the further amended statement of claim of 9 July 2021 (folio 68).
32 Issue nine. From when should interest be calculated? The PTA submits that by s 241(11) of the LAA interest should be paid from the date of service of the claims, being 17 November 2015.
33During the course of the trial the plaintiffs look to have accepted this to be the correct position (see ts 666).
Statutory compensation for taken land under the LAA
34By reason of s 179(b), residing within pt 9 of the LAA, registration of a 'taking order' in relation to 'taken land' will extinguish every registered and unregistered interest in the land - so that 'each person who formerly held such an 'interest' [see s 202(1) of the LAA] has that holding converted into a claim for compensation under Part 10'.
35Later, I set out the relevant components extracted from within Part 10 of the LAA and address how the compensation payable is to be determined.
36Here, an essential issue that has emerged as the key point of dispute in the trial concerns whether or not DBW as the first plaintiff and as the relevantly interested and dispossessed landowner ‑ in relation to its six taken lots (usually referred to in aggregate by their street address, as 249 Dundas Road) - is entitled to statutory compensation for the 'value of the land', at 11 April 2013, assessed at some level that is higher than its assessed market value? This dispute arises around the reliance by DBW on a valuation concept or principle it refers to as 'value to the owner' - applied to its taken land. I expand upon this key aspect of the dispute in more detail across the reasons in due course.
The defendant's position
37In this litigation the PTA, as defendant, accepts full responsibility to compensate DBW under s 241(2) of the LAA - as owner of the compulsorily acquired land.
38Nevertheless, the PTA objects to paying compensation at a level that would be more than the assessed market value of the taken land, at 11 April 2013.
39The PTA consequently accepts a responsibility to pay compensation to DBW for the land under s 241(2) of the LAA in the amount of $8,500,000 - worked out upon its and its valuation experts' assessments as to the value of DBW's interest in the land - for the purposes of s 241(2)(a) of the LAA. But the PTA rejects DBW's greater monetary claim of an asserted entitlement for an extra (higher) level of statutory compensation grounded conceptually upon a greater so-called 'value to the owner' amount - exceeding the assessed market value.
40The PTA's assessed amount of $8,500,000 is a revised upwards market value for the land – as assessed and revised (upwards) most recently by one of the defendants' two expert property valuers. It was a revised amount as assessed by Mr Jonathan Fyson, of McGees Property - under his calculations implementing a valuation methodology for the land including all its improvements by the so-called 'summation' method. That summation valuation methodology is likewise said by the plaintiffs to be the preferred approach. Four expert property valuers gave evidence at the trial - two on each side.
41One of two expert property valuers called on behalf of the plaintiffs at the trial (Mr Matthew Garmony) assessed the value of the freehold interest taken from DBW under the summation method - at a higher figure of $9,360,000.
42Working presently from those rival Fyson/Garmony positions, the gap between Mr Fyson's end assessment applying summation valuation methodology and Mr Garmony's result applying the same approach, is only $860,000. Contextually, for a property of these dimensions, that quantum gap is not that much, given the nature of the exercise involved and the elemental components of subjective opinion and professional judgment in play by experts.
43There was no dispute at the trial that by the terms of s 241(8) of the LAA that DBW should also receive a 10% further payment to be added to the as-assessed s 241(2) sum - as further (solatium) compensation to be added to the award to compensate for the taking of land without agreement.
44This 10% amount (compare s 241(9)) of the LAA must be added. That is appropriate.
45Working from Mr Fyson's summation number, a 10% (s 241(8) of the LAA) solatium award calculated on $8,500,000 would generate a further $850,000 sum payable (ie, $8,500,000 plus $850,000 = $9,350,000). On Mr Garmony's higher figure, the 10% solatium payment would be $936,000.
46Before the trial began, the PTA had made an advance payment of compensation to DBW of $6,900,000 (exclusive of solatium and interest). That was at 15 March 2016. There followed a second tranche of a $1,180,000 payment to DBW at 21 January 2020 - amounting then to $8,080,000 advanced and paid to DBW already for the land (again, exclusive of agreed solatium and interest amounts).
Th second plaintiff's loss claims
47As a result of the taking order, a transport haulage business operated by Century West from the land - under a lease from DBW - needed to relocate to new premises if it was to continue to operate.
48Century West at the end of February 2016 did relocate its business to new premises that it leased. But this arrangement was under a new lease it had entered with an unrelated and arm's length third-party landlord – since the former lease it had held from the related corporation owner DBW, could no longer continue - upon the land being taken.
49Century West duly vacated its leased business premises at 249 Dundas Road on 29 February 2016, handing over the keys to a representative of the PTA at 1 March 2016.
50However, Century West was given permission by the defendant to continue to use a loading ramp at the resumed premises for a further month, until 31 March 2016.
51Century West, as second plaintiff, lessee and haulage business operator is also accepted to be entitled to receive compensation by the PTA - based upon an accepted loss of its distinct and separate legal interest as lessee and also as a disrupted former business operator of the taken land - which claim Century West aside from DBW, independently pursues against the PTA. But there are conceptual disagreements over how much compensation Century West is lawfully entitled to receive.
52Essentially, a claim is advanced by Century West under s 241(6)(b) of the LAA - for claimed business disturbance losses to its road haulage and storage business as conducted at those former business premises. Century West as well also advances a solatium payment for itself.
53At the request of the PTA, Century West had left behind for the PTA's acquisition a demountable building that had been owned by Century West (essentially, a severable tenant's fixture) ‑ comprising three bedrooms, two bathrooms, a kitchen and living accommodation. The demountable building had been used by Century West for truck drivers' accommodation when needed, as an adjunct at the road transport haulage depot operations.
54The demountable building measured 57.6 sqm and had been installed adjacent to the workshop at the 249 Dundas Road premises.
55There is in the trial a claim by Century West for the value of the demountable building left behind and a small issue arises over its true depreciated value - which again, the PTA accepts is payable to Century West once correctly ascertained.
56Century West, after relocating, had entered a three-year lease for so-called 'temporary' accommodation. This was at the relocation premises relatively nearby, at 415 Dundas Road, and from which it continues to operate its road haulage transport business.
57Century 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.
58Century West also advances a further and distinct claim for economic loss. This arises, it says, by reason of it, in effect, having to deal post February 2016, with an arm's length new landlord of its relocated new business premises - rather than under its former and less rigid lease arrangements with the related DBW land owner corporation - under common family directors. This is a novel claim to say the least.
59To that end, Century West, as second plaintiff, by par 49 of the further amended statement of claim, pleads:
The rent and variable outgoings payable by the Second Plaintiff on the temporary premises at 415 Dundas Road are significantly more than the loan repayments payable to the bank in respect of the former mortgage on the land which rent and outgoings have put significant financial pressure on the cash flow and profitability of the business.
60Accordingly, Century West advances this further economic loss claim for $684,275. That loss amount is described as the 'additional costs' of it leasing the so-called 'temporary' premises at 415 Dundas Road ‑ as the difference between the level of the rent it now must pay at its relocated business premises at 415 Dundas Road at a level of rent that is above the (lower level) secured loan, interest only, payments once being made by the first plaintiff, DBW, to its mortgagee (Westpac) for 249 Dundas Road. There are immediate conceptual problems with such a claim - not the least of which is the conflation as between rent paid (by Century West) to an arm's length landlord under a lease in contrast to the interest paid by the borrower (DBW, not Century West) on a loan from a bank.
61It is necessary to point out that the borrowing arrangements at 249 Dundas Road were such that DBW, the first plaintiff (not the second plaintiff, Century West), had borrowed funds exceeding $3,000,000 from Westpac - secured by first registered mortgages over all the six lots - on which monthly interest was then payable by DBW on an interest only loan with the bank.
62DBW bore the legal responsibility as the borrower for meeting those interest payments to Westpac. It was DBW as owner and borrower, not Century West as a lessee of the land from DBW and the business operator, that was liable for the interest to Westpac on those loans. Century West paid rent to DBW and it seems the level of the rent (when paid) matched, or was close to the level of the loan interest repayments. But those back‑to‑back arrangements were friendly, rather than strictly legal. At times, there were unpaid arrears by Century West, that were not pursued. Century West's rent when paid was said, roughly, to have been at about the level of market rent. That as-received rent by DBW was then conveniently deployed by it to service the interest accruing due on its Westpac loan. That is what their accounts reflect. The 'rent' paid by DBW was claimed as a tax deductible business expense. Friendly as these arrangements obviously were, they were legally distinct and no doubt tax efficient.
63Both plaintiff corporations were and still are run by common directors, that is, Mr Haydn Reynolds and his wife, Mrs Leisa Reynolds. The PTA rejects any proper conceptual basis for it to render such an amount of 'additional costs' to the second plaintiff as proper compensation.
64Century West's claimed loss of a business opportunity around its lost storage space capable of being hired out to third parties, is also rejected. Under that claim, as alternately formulated, the level of the claim ranges from between $587,210 to $803,100. Whilst PTA rejects that lost opportunity claim as unprincipled, it does allow an amount of $13,500, for the reasons I will explain later.
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.66The 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.
67There are a number of smaller fiscal magnitude relocation cost and economic loss claims in the trial all advanced by Century West. They can be more usefully discussed later, in the running. By themselves they are not economic to pursue in Supreme Court litigation.
Legal principles: compensation claims under the LAA
68It is convenient to begin by revisiting the principles bearing upon land compensation and as to the valuation of taken land for public purposes.
69In Lenz Nominees Pty Ltd v The Commissioner of Main Roads [2012] WASC 6; (2012) 186 LGERA 58, Edelman J identified some basic legal propositions relevant to the task (see [66]). They in turn had been taken from, as he said, the principles canvassed in greater depth by Beech J (as his Honour then was) in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223.
70The summary of principles assembled by Edelman J canvassed 13 propositions, which for orientation purposes, I will set out below:
(1)Assessment of compensation must be conducted with regard only to the matters contained in s 241 of the Land Administration Act: s 241(1); Konowalow and Felber v Minister for Works [1961] WAR 40, 41 (Virtue J).
(2)No regard is to be had to the value of any improvements made without the consent of the Minister after the registration of the notice of intention on 13 December 2005: s 241(4) Land Administration Act.
(3)The purpose of the assessment of compensation for resumed land is to ensure that the person to be compensated is given a full money equivalent of his or her loss: Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd [1947] HCA 10; (1947) 74 CLR 358, 373 - 374 (Dixon J).
(4)Compensation for the value of the resumed land should be assessed in a theoretical, albeit artificial, fashion by assuming the land had been sold on the date of its acquisition by the resuming authority: Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575, 647 - 649 [265], [271] (Callinan J).
(5)This theoretical approach to assess compensation for the resumption of the land requires the court to identify the price which would be paid under a hypothetical bargain between a person 'desiring to buy the land ... to a vendor willing to sell it for a fair price but not desirous to sell': Spencer v The Commonwealth (1907) 5 CLR 418, 432 (Griffith CJ); Mount Lawley Pty Ltd v Western Australian Planning Commission [No 3] [2008] WASCA 158 [25] (the Court).
(6)In assessing the price payable in this hypothetical sale, it must be assumed that the hypothetical purchaser would be purchasing the land for the most advantageous use for which it is adapted: Spencer v The Commonwealth (441) (Isaacs J). This 'most advantageous use' is commonly referred to as the 'highest and best use' of the land: ISPT Pty Ltd v Melbourne City Council [2008] VSCA 180; (2008) 20 VR 447, 458 - 459 [40] (the Court); Commonwealth Custodial Services Ltd v Valuer-General (NSW) [2006] NSWLEC 400; (2006) 148 LGERA 38, 45 [15] (Biscoe J).
(7)The highest and best use of the land may be a single use or it may be a package of alternative uses: ISPT Pty Ltd v Melbourne City Council 462 [57].However, in the instance of a package of alternative uses, care must be taken to ensure that those alternative uses are not inconsistent: Love v Roads Corporation [2011] VSCA 434 [63] - [66].
(8)In assessing the highest and best use, the existing use will be a relevant, although not necessarily determinative, factor: ISPT Pty Ltd v Melbourne City Council 458 - 459 [40]; Commonwealth Custodial Services Ltd v Valuer-General (NSW) 45 [15] (Biscoe J).
(9)The hypothetical purchaser must be assumed to have regard to all relevant available information, and to be cognisant of all circumstances which might affect the value of the land: Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority [2008] HCA 5; (2008) 233 CLR 259; 276 - 277 [51] (the Court); Boland v Yates Property Corporation Pty Ltd [271] - [274] (Callinan J).
(10)However, the hypothetical sale and the determination of the value of the plaintiff's interest in the land taken, and the compensation payable to the plaintiff must be conducted by 'discounting any increase or decrease in value attributable to the proposed public work': Land Administration Act s 241(2).
(11)In conducting the valuation exercise it has been iterated and reiterated that a court must not usurp the skill and experience of a valuer. In other words, the court must not allow itself to become a 'third valuer': Bronzel v State Planning Authority (1979) 21 SASR 513, 523 (Wells J); Brewarrana Pty Ltd v Commissioner of Highways (No 2) (1973) 6 SASR 541, 544 ‑ 545); Arcus Shopfitters Pty Ltd v Western Australian Planning Commission (WA) [2002] WASC 174; (2002) 125 LGERA 180 [76] (Pullin J).
(12)However, the prohibition against a court becoming a 'third valuer' does not, and cannot, prevent the court from making its own adjustments to the valuations, particularly where a valuer's adjustments to comparative sales are not wholly accepted. Judicial adjustment to the valuation may sometimes be unavoidable because a court cannot adopt adjustments which it has rejected; the court would otherwise be left with no basis to assess the value of the subject land: McKay v Commissioner of Main Roads [2484] (Beech J).
(13)If any doubts exist in assessing the compensation payable, then those doubts should be resolved by a liberal estimate in favour of the dispossessed owner: Commissioner of Succession Duties (South Australia) v Executor Trustee and Agency Company of South Australia Ltd (373 - 374) (Dixon J); Boland v Yates Property Corporation Pty Ltd [100] (Gaudron J), [111] (Gummow J), [356] (Callinan J).
71In another compensaton action brought in this Court, Italiano v The Water Corporation [No 2] [2020] WASC 112, I discussed the same principles at [76] of those reasons. That resulted in my assembly for that case of 31 distinct principles. I will repeat them as well:
(a)The planning and development of land in Western Australia is, generally speaking, controlled by the Planning and Development Act 2005 (WA). Generally, a development of private land is not permitted without an approval from an authority, although there are many exceptions. Broadly speaking again, development will not be approved unless a proposed development is proposed as in accord with relevant planning instruments: see s 162 of the Planning and Development Act.
(b)By contrast, the compulsory acquisition of land in Western Australia by the State or by an authorised public authority is now governed by the LAA.
(c)Part 9 of the LAA deals with the processes for a compulsory acquisition of land. The process begins with an issue of a notice of intention to take: see s 170 - s 171. Subject to exceptions, required land cannot be developed or sold without the relevant Minister's approval: see s 172 - s 173. Once an objection period is allowed to run (s 175), the Minister may, absent a successful objection, issue a Taking Order: see s 177 - s 178. Upon the registration of a Taking Order (in contra distinction to an issue of the Taking Order), the compulsory acquisition takes effect: see s 179. The date of registration of the Taking Order is therefore the date of acquisition and is the date of valuation of the taken land for the purpose of assessing any compensation due to former landowners.
(d)Part 10 of the LAA then addresses the issue of the statutory compensation to be paid in respect of a compulsory acquisition of taken land. Within pt 10 lies s 241, some parts of which I have set out earlier. Section 241 assembles the considerations that must be included in any assessment of compensation exercise.
(e)Parts 9 and 10 of the LAA, generally speaking, apply to 'public works'. Again generally, pt 9 allows for the compulsory acquisition of land for the purposes of a proposed public work: see s 161.
(f)Parts 9 and 10 of the LAA enjoy a legislative history extending back to the terms of the former Public Works Act 1902 (WA). Part 9 of the LAA still defines a 'public work' by reference to a definition found in the Public Works Act: see s 151.
(g)The quantum of compensation payable in respect of taken land requires an assessment of the price at which the land would have been acquired, assessed objectively, as between a hypothetical seller and a hypothetical purchaser, with both further assumed as willing, but not anxious, to deal and with both the seller and the purchaser also assumed to be fully acquainted with the attributes of the land affecting its value. The law as famously stated by the High Court of Australia on this point in Spencer v The Commonwealth (1907) 5 CLR 418, 431 - 432 remains applicable to the phrase 'the value of the land', as it is used in s 241(2) of the LAA.
(h)It has been also said that the as assumed hypothetical seller and purchaser are also assumed to be 'cognizant of all circumstances which affect [the land's] value': see Wells J in De Ieso v Commissioner of Highways South Australia (1981) 27 SASR 248, 252. Among such familiar circumstances are the opinions of persons, 'regarded as authoritative in matters, with respect to value and factors affecting value' (De Ieso, 252) for the land.
(i)Wells J had continued in De Ieso at page 253 to observe that a court is not within this exercise:
called on to inquire ultimately whether, as a fact, the planning authorities would have approved a relevant plan of sub‑division. Rather it is called on to decide how a hypothetical prospective developer (who may be assimilated in the present context, with the willing, but not anxious, hypothetical purchaser posed by the judgments in Spencer's case) would have viewed [their] potential financial return if [they] were considering a proposal that included one or other of the proposed plans.
(j)In Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353; (2004) 135 LGERA 98, Ipp JA observed at [491] that information in the hands of a public authority as at the taking date, was presumed to be made available to the hypothetical seller and purchaser. His Honour further observed at [489]:
In my view, the overwhelming thrust of these authorities is to the effect that the hypothetical seller and purchaser are to be assumed, in the hypothetical situation postulated, to be aware of all information relevant to the market price, about which a prudent purchaser would inquire.
(k)As already seen, s 241(2) of the LAA provides that the value of the taken land is to be assessed on a basis of 'discounting any increase or decrease in value attributable to the proposed public work'. Such words are recognised in the cases as a legislative manifestation of a well-known principle applied in the area of statutory compensation, known as the Pointe Gourde principle: see Pointe Gourde Quarrying and Transport Co v Sub Intendent of Crown Lands (Trinidad) [1947] AC 565. See also McKay v Commissioner of Main Roads (No 7) at [206] where Beech J explained, in effect, that the legislative text, even if accepted as an attempt to reproduce that 'principle', is itself determinative.
(l)The discounting of increases or decreases in value that are assessed as being attributable to a proposed public work, are related counterpart provisions.
(m)As regards discounting increases in value, the acquiring authority should not be required to pay an acquisition price that is elevated by the market's knowledge of the intended public work: see Queensland v Murphy [1990] HCA 42; (1990) 95 ALJR 493, 496.
(n)Conversely, the acquiring authority ought not be allowed to adversely affect the value of land by imposing restrictions upon its use, so as to facilitate it to later acquire the land at a lesser value, by reason of the market's knowledge of such negative features.
(o)Thus, the hypothetical valuation exercise following a compulsory acquisition of land for a public work concerns the assessed value of the taken land upon the premise it had not been taken and, assuming further, that the public work for which it was taken, were not in prospect.
(p)One correlative consequence of the Pointe Gourde principle as codified by s 241 is that earlier 'steps' taken by a public authority towards the later taking of land, are also to be disregarded. Hence any public advertising of a scheme amendment so as to reserve land for a public work, or for the undertaking of preparatory physical works as preparatory steps along the process of an ultimate eventual taking, must, as regards their effect(s) upon value, also be disregarded. To that end, see the observations of Jacobs J in the High Court of Australia in Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196, 206 - 207. See also observations by the Court of Appeal of Western Australia in Mount Lawley Pty Ltd v Western Australian Planning Commission [2007] WASCA 226; (2007) 34 WAR 449 at [28] - [29].
(q) Applying the Pointe Gourde principle, it is usually asked what the position would be for the land had the taking not occurred, or been a subject of the planning steps to that end. In that context a series of hypothetical planning decisions for the unaffected scenario are to be made for the purposes of a valuation. See Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 257. But any previous irregular planning decisions are not admissible: see McKay v Commissioner of Main Roads [No 7] at [307].
(r)Towards the underlying hypothesis of orderly and proper planning towards the land: see Marshall v Metropolitan Region Redevelopment Authority [2015] WASC 226 at [178] ‑ [182]. Whilst there is generally an element of discretion, the objective of 'orderly planning' is to maximise the predictability of planning and development decisions, by minimising of ad hoc decisions, and particularly by also minimising any departures from established planning trajectories.
(s)Compensation is generally payable by an undertaking of a valuation conducted on the basis of the taken land's 'highest and best use'. That concept invokes the need to assume, through the knowledge of what is both possible and lawful, those uses of the land and any market for its possible future use - which assumed use would fetch the highest price for the taken land.
(t)Within the context of assessing the value of the land at its highest and best use, there must as well be considered the hypothetical 'potentiality' of the land. This will embrace consideration of a use other than the current use of the land, which after use is not presently lawful, but which use could become lawful in the future, if an amendment could be secured to the zoning or other planning or environmental restrictions upon current applications. Hence, land that is presently zoned rural is commonly said to have a potential for rezoning to urban. Consequently, a hypothetical purchaser of such land is assumed to be willing to pay something for the worth of this potentiality but, nevertheless, not the full value of the land, as if it had achieved that future potential: see Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 (Mount Lawley [2004]) at [162] ‑ [166].
(u)Potentiality is not to be fully equated to highest and best use. A court and valuers may not treat as an actuality that which is merely a potentiality: see Turner v Minister of Public Instruction (1956) 95 CLR 245; McKenna v Municipality of Burnie [1970] Tas SR 279 and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47. As it was vividly explained by Crisp J in Beard v Director of Housing (Tasmania) [1961] Tas SR 141, 149 '… there is a difference between an anticipated and a realised potential, between the unhatched egg and the chicken'.
(v)As regards the intersection of a valuation predicated upon highest and best use and the potential of a premium to be paid as ascribing some more value on account of future potential, Beech J in McKay v Commissioner of Main Roads [No 7] at [158] summarised the position this way:
Thus if the most profitable use of the land is one not permitted by its current zoning, the concept of highest and best use requires the potential of the land to be used for that more profitable use, after necessary planning approval, to be taken into account. It does not require or permit an assumption that the necessary planning approval will be forthcoming. The prospects of such approval as determined on the evidence, viewed from the prospective of the hypothetical parties, will bear on the assessment of the value of that potential use.
(w)In the exercise, the court is not standing in the shoes of a planning authority, but rather considering how the hypothetically assumed parties would have viewed the land's potential, or prospects. See again, McKay v Commissioner of Main Roads [No 7] at [1503].
(x)In conducting an assessment of value by reference to the highest and best use of land, what are only remote and speculative possibilities are to be disregarded. For instance in C A MacDonald v South Australian Railways Commissioner (1911) 12 CLR 221, a canvassed possibility of the owner obtaining a necessary licence to use the land for a special purpose, even if the land were adaptable for the special purpose, was assessed as being so remote as to be negligible and, therefore, to be disregarded in assessing the compensation payable. See also Davis Properties Pty Ltd v Roads and Traffic Authority of New South Wales [1995] NSWLEC 172 (18 October 1995).
(y) As stated by authors Newton G and Connelly C, Land Acquisition (7th ed, 2017) at par 3.17:
Determining whether resumed land has a better economic use than that to which it was being put at the time of resumption requires the valuer to assess probabilities. Where the valuer crosses the boundary into 'unacceptable guess work' the claim will be rejected: Gugusheff v South Australia Urban Land Trust (1990) 55 SASR 268. It may be added that a valuer's opinion that the resumed land has a highest and best use needs to be supported by convincing evidence.
(z) In an assessment of the value of the highest and best use of land, applicable planning schemes must be considered as a fundamental element in the decision‑making process: see Kirela Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 [2003] NSWLEC 135 at [159] ‑ [160].
(aa)In Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575 at [268] Callinan J, in terms of explaining the as assumed hypothetical parties being perfectly acquainted with the land at issue, rendered the following observations and in the process referred to the frequently cited passage by Isaacs J in Spencer v The Commonwealth as to parties:
... perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconvenience, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.
Callinan J then continued in Boland, at [269]:
The comprehensive language used by Isaacs J is clearly capable of embracing matters with which perhaps courts of the day have become more familiar, such as the value of a highly restrictive or very advantageous planning approvals, the changing value of money over time and opportunity cost. So too computerisation has in modern times enabled the testing of financial projections, the difference sensitivities, of time, interest rates, changing values of money, different occupancy rates and other contingencies both favourable and unfavourable relatively easily and expensively.
See also Mount Lawley [2004] at [162], to like effect, as regards the:
hypothetical vendor and purchaser being perfectly acquainted with the land and all of its characteristics … including those which render it suitable for development and, as well, those which militate in favour of reservation.
(bb)Principles applicable by reference to a use of a comparable sales approach as used by valuers are summarised by Pritchard J (as her Honour then was) in Kelliher v Commissioner for Main Roads [No 2] [2015] WASC 478 at [89] - [95].
(cc)As regards use of the conventional valuation methodology of comparable sales, I note cautionary observations of Pullin J (as his Honour then was) in Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180 at [78] to this effect:
It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land. Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.
(dd)If there is any doubt as to the amount properly payable by way of compensation, then the doubt should be resolved in favour of a more liberal estimate: see Commissioner of Succession Duties (South Australia) v Executor Trustee & Agency Company of South Australia Ltd (1947) 74 CLR 358, 374. Locally, that approach was endorsed by Anderson J in Cook & Edwards v City of Stirling (1991) 4 WAR 469, in a context of assessing what was competing valuation advice. His Honour had observed at page 473, '[a]s I am not able to regard one opinion as any more meritorious than another on this point, I must resolve the question in favour of the rate that will result in a more liberal award of compensation'. To the same effect were observations by Gaudron J in Marshall v Director-General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603 at [38]. Within that decision McHugh J at [48] also observed:
In the case of legislation dealing with compensation to be awarded in respect of the compulsory acquisition of land, however, a different presumption operates. The legislation is intended to ensure that the person whose land has been taken is justly compensated. Such legislation should be construed with the presumption that the legislature intended the claimant to be liberally compensated. That being so it would be wrong to construe a provision such as s 20(1)(b) as conferring compensation only for damage that results from an act that is 'the very thing, or an integral part of or step in the very thing, which the provisions of the Act' gave the constructing authority power to carry out. Whenever the constructing authority takes steps to achieve any purpose or carrying out any function that is incidental to the purpose for which part of the land was acquired, it should be regarded as an exercise of a statutory power within the meaning of s 20(1)(b).
(ee)The function of an award of solatium (see s 241(8) and (9) of the LAA as set out earlier) is to recompense a claimant for any distress, inconvenience and reluctance to lose their land or land interest, which is being resumed. Such recompense is in an amount over and above for matters otherwise compensable under various heads of claim - other than s 241(8) and (9). See R v Compensation Court of Western Australia (1990) 2 WAR 242 per Brinsden and Walsh JJ at 265 - 266.
72For present circumstances, however, the underlying facts are clearer than for the Italiano litigation.
73Here, the entire six taken lots owned by DBW at 249 Dundas Road, were the subject of the taking order. Consequently, no issues raising the sometimes encountered concepts of severance, or of an injurious affection against the residual land that is not taken, present in this trial.
'Value to the owner': the plaintiffs' arguments
74It is necessary to see how the first plaintiff, DBW, sought to lay a foundation to engage with this 'elusive concept'. First, I commence with the pleadings, noting that under the plaintiffs' further amended statement of claim they fashion DBW's 'value to the owner' claim at par 40 in the following terms:
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…
75Next follow 10 considerations assembled under given particulars, culminating in a concluding plea (which I treat as a plea of material fact) 'all of which collectively are said to support a compensation valuation for the land calculated on the basis of "value to the owner"'.
76The 10 matters under the particulars to par 40 which, as matters of fact, can all essentially (save for (j)) be accepted as proven at the trial, chiefly on the evidence of Mr and Mrs Reynolds, were as follows:
(a)the Second Plaintiff specialises in transporting extendable roads 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 of 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 in paragraphs 33 and 34 thereof; 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.
77The plea was denied by the defendant in its defence (see par 40 of the re-amended defence of 23 August 2022 (folio 80)). But, essentially, the dispute is one of principle, rather than raising any real arguments over most of these particularised features of the taken land - which are relied upon to support a compensation amount greater than market value on the basis of so-called 'value to the owner'.
78Essentially, the PTA says that compensation assessed by reference to true market value is the proper level of compensation, capturing the value of all attributes for the taken land - and without any further allowances made for what is claimed as 'value to the owner'.
79The PTA also says that to the extent the land's shape, configuration and improvements were suitable for an efficient running of the second plaintiff's business, that this suitability was reflected in the rent payable by the second plaintiff to the first plaintiff.
80The level of the rent payable under the lease arrangements as between the second plaintiff and the first plaintiff was said to be 'broadly speaking, aligned with market [rent]': see evidence of the defendant's expert property valuer, Mr Fyson, at ts 275. There is little suggestion to the contrary. I will accept that to be the position.
81Here, I ought first observe that merely because some of the four engaged expert property valuers under their revised conferral statement prepared for trial (exhibit 22) ventured to express views about 'value to the owner', that any such views will not be determinative, upon what is essentially a question of law for the Court concerning a potential engagement with such a principle in all the circumstances.
82One of the defendant's property valuers, Mr Hall, has consistently rejected that concept's potential application. The plaintiffs' valuers look to have been instructed towards considering its potential engagement (Mr Garmony and Ms Jenny Le‑Fevre).
83The defendant's other property valuer Mr Fyson, made some level of concession about a potential engagement with such a principle - as a consequence of the four property valuers' pre-trial conferral meetings ‑ at his concluding paragraph, seen between pages 15 and 16 in that document - by reference to his envisaged removal of his 'P & R' (profit and risk) factor, amounting to $250,000. That excision would have raised his summation method amount conclusion upwards (see ts 343), from $8,500,000 up to $8,750,000.
84However, as I will endeavour to explain by these reasons, conceptually Mr Hall was correct upon what is, essentially, a legal issue.
85By the plaintiffs' written outline of opening submissions of 20 September 2022 (folio 85), greater explanation is provided for the contended engagement with a 'value to the owner' or a 'special value' for DBW (see pars 67 - 80.3), reading:
67.Hayden Reynolds has been in the transport business for 44 years.
68.He started that career in 1978 occupying a corner of the Vinidex yard in O'Connor transporting the vinyl pipes and fittings manufactured by Vinidex. Vinidex remains one of his best and most constant customers today.
69.In the early 2000s (Mr Reynolds) started to purchase and assemble the lots which ultimately formed the Land and by 2008 had sufficient land to draw up plans for a transport depot (TB document 10A [TB refers to the tabulated documents assembled in the trial book - being the largely agreed documents spanning four lever arch files and 2782 pages of documentary materials for trial]). This required the giving up of land for drainage and to form the road reserve of what became Imperial Street thereby giving the Land its third street frontage.
70.Dundas Road, at the Valuation Date, could accommodate Rav 5 vehicles or road trains while the other two roads could not. However, that was not material as road trains only made up 30% of the vehicles and in any event the road trains were typically made up in the yard and driven through the front.
71.The valuers all agreed in conferral that High Wycome/Forrestfield was an expanding, established industrial area in close proximity to Perth Airport and that Dundas Road provided access to Abernethy Road, Tonkin and Roe Highways all four of which are road train rated (RAV 5 and above).
72.The regular shaped, three frontage yard afforded maximum efficiency for circulation, manoeuvrability and for the all important storage.
73.The storage on site accomplished two income producing functions: it produced rent for storage and it resulted in the transport contract for on delivery when the goods stored were required on mine and building sites. In the case of Austral it also produced an income from the repair shop for faulty equipment and machinery sooner than returning it to Melbourne for repair.
74.Two more lots were acquired in 2012 which completed the assembly and construction of a transport depot that regularly won awards (see for example TB 139). [Note: the additional lots were Lots 728 and 729 acquired in June 2012.]
75.The well-appointed two bedroom transportable unit on site accommodated drivers who needed to stay overnight and the 995 sqm depot accommodated administration offices, workshops with two pits, storage, staff amenity and a quarantine washdown bay.
76.The special relationship the Plaintiffs had with Austral will be described in the evidence of Peter Slack and underpins the broadening of the special value/value to the owner which the land had to the Operation claim.
77.The indivisibility of the commercial business interests of the two Plaintiffs, effectively run as one enterprise is described in the evidence of Hayden and Lisa Reynolds. It is extrapolated upon by Jacqui Le-Fevre in her evidence.
78.An example of how this has and does operate is TB document 38B, which is a summary of distribution of 2016 - 2020.
79.At TB document 38BA is an analysis of cash flow between the two Plaintiffs and Mr and Mrs Reynolds supported by the bank statements evidencing these cash movements.
80.The ability of the Plaintiffs to buy another property for the Operation to relocate to is explained by Mrs Reynolds in her evidence but may be summarised as follows:
80.1although advance payments were made by the Defendant:
(a)$3,645,000 was (without choice or option) [Note: see the mandatory terms of section 251 of the LAA as regards secured debts over taken land and their discharge from compensation] repaid to the Plaintiffs' bank;
(b)$443,600.51 CGT [capital gains tax] was paid by the First Plaintiff in FYE 2016 (TB 85CB);
(c)$331,971.33 CGT was paid by the First Plaintiff in FYE 2020 (TB 85CC);
(d)$65,904.85 CGT was paid by the Second Plaintiff in FYE 2020 (TB 85CC); and
(e)Deferred payments of $276,000 and $7,761.71 are still owed by the First and Second Plaintiffs respectively (TB 85CE).
80.2by 2015, mining had taken a downturn. The document TB 38B shows how a substantial amount of the balance of the advance payments went in and out of the Operation to shore it up. As acknowledged in the statement of claim this downturn is unrelated to and not caused by the public work but what was caused by the public work was the amount over and above the mortgage payments on the Land which had to be funded by the Plaintiffs to pay rent and higher outgoings on 415 Dundas Road;
80.3the inability of the Plaintiffs to service a loan to purchase property was directly caused by the higher outgoings which in turn were caused by the public work. This caused the Plaintiffs' bank to refuse to lend to them (TB 109B and 110).
86Broadly speaking, those facts seen underlying pars 67 - 80 (excising the accompanying advocacy) can be accepted vis-à-vis the features of DBW's six lots taken in November 2015. They, by reason of the unique terms of s 241(2)(a) of the LAA, must be valued as at 11 April 2013 - because the land was taken for the purposes of establishing the Forrestfield-Airport rail link under a special Act of Parliament.
87Next, I turn to how this 'value to the owner' concept came to be explained by counsel for the plaintiffs during his opening submissions at the trial commencing at ts 21. Mr McGowan had explained:
Now, the next matter which we've addressed in our submissions, and I want to deal with in opening, is the idea of value to the owner.
And the point - the short point about this is that in circumstances where land is compulsorily acquired, what we're determining is the value from the point of view of the vendor, not the value from the point of view of the purchaser. And - because that's the essence of what we're doing. It's something that the owner has built up, and particular attributes that relate to the way in which the land is put together or functioned are relevant to the way in which the valuation exercise should be undertaken.
88Mr McGowan referred to exhibit 22, in particular, see item 15 therein at pages 8 - 12. Likewise, I note the comments of the valuers made under item 18 at pages 12 - 13, and then item 19 at pages 13 - 17 of that document.
89Asked about the intersection of the 'value to owner' concept with the classical Spencerv The Commonwealth [1907] HCA 82; (1907) 5 CLR 418 approach towards ascertaining market value (ts 21 - 22) Mr McGowan, after referring me to Spigelman CJ's observations in Leichhardt Council v Roads & Traffic Authority of NSW [2006] NSWCA 353; (2006) 149 LGERA 439 [24], continued to explain (ts 22):
So that it still involves a recognition within the way in which the land is held and the way in which it's configured that there is a value to the owner which identifies, in effect, what the owner would expect to get. Now, that's not to take away from the Spencer exercise. Rather, it's to reflect that there are certain special characteristics we're dealing with here which enable, as happened, the valuers to approach the exercise by addressing what it is that we're dealing with in reality...
90Asked about the intersection of 'value to the owner' with 'special value', Mr McGowan further explained at ts 23:
They're interchangeable and ultimately, I think what Spigelman CJ captured is a fairly accurate description of where it's arrived at, that is, it's 'a unifying concept' and as he concludes:
Market value was in most cases the way of computing value to the owner -
provided in so doing (sic) you're recognising that that's what's occurring.
91The plaintiffs' written outline of closing submissions then addressed the approach in terms of the application of that principle (see pars 175 – 191). See pars 178 and 181, where it was put:
178.The evidence of Hayden Reynolds as to the work he put into acquiring land, including swapping lots with neighbours (which would have required a double stamp duty impost on the swapped lot: first upon acquisition of the lot to be swapped and second upon the acquisition of the lot acquired as part of the swap) to achieve the ideal configuration and shape serviced by three frontages at No 249 [Dundas Road] is uncontested [referring to par 7 of Mr Reynolds' witness statement filed 18 June 2019 (exhibit 3) and pars 13 - 15 of his subsequent witness statement filed 28 May 2021 (exhibit 4)].
179.Lots 723, 722 and 721 were first acquired (one by land swap) to form an amalgamated lot 757 on which the depot buildings were constructed (TB Documents 7, 8 and 9).
180.Lots 739, 740 and 741 were acquired in February 2008 (TB Documents 2, 3 and 4).
181.The combined site constitutes a rare piece of real estate to anyone but has particular value to the Plaintiffs who would undoubtedly have paid a premium sooner than lose it [being as I understand it a submission invoking the observations of Lord Moulton delivering the advice of the Judicial Committee of the Privy Council in Pastoral Finance Association Ltd v The Minister [1914] AC 1083 at 1088 - 1089 and this often referred words at the conclusion, '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'].
92Those 1914 words of Lord Moulton from Pastoral FinanceAssocation Ltd v The Minister [1914] AC 1083 have given rise to a need for consideration in numerous subsequent cases, including by Callinan J in Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209. The Full Court in Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 had also observed at [284]:
As Callinan J said in Boland v Yates (at [354]), the concept of the dispossessed owner (being regarded as the prudent purchaser in this context) paying above the market price for the land, rather than losing it 'may not be an entirely reliable guide' to the assessment of the special value to the dispossessed owner. However, Spencer might be expected to cover most situations, because:
'... it does not contemplate one who would likely relinquish a property which had a particular value to him or her for less than that value'.
The second plaintiff's costs for two relocations to alternative business premises
93The 2016 move of the Century West business to 'temporary' premises and a taking out of a lease at that time by the second plaintiff by relocating its road transport business to 415 Dundas Road, may indeed at then have been considered as only a temporary move of premises - with a more permanent move still then in prospect to a different and more suitable business location if found.
94However, at the time of trial in October 2022 the second plaintiff was still conducting the same transport business from the 'temporary' 415 Dundas Road leased premises location (see ts 17).
95In response to my question about that now, not so temporary situation, counsel for the plaintiffs advised at ts 17:
They are still there. And the position is, had - and their position remain, had a property which, as it were, would constitute a replica of what they had, come on the market, they would have grabbed it. But it hasn't. That remains their desire, apart from anything else, you know, to be able to own the property with the accrued benefits that flow from that is a much, much better proposition than paying several hundred thousand dollars a year worth of rent to a third party with, in effect, nothing to show at the end of it.
So that's how they [ended] up in the position they're in. They remain clear in their view that they would like to find the elusive property, but, as I say, if it was out there, you would have thought that amongst the four valuers giving evidence, someone would have said, 'Well, there it is.' Well, it isn't.
KENNETH MARTIN J: Well, six and a half years have gone by since 2016 so - - -
MR McGOWAN: It's diminishing.
96During the course of the trial I did come to receive the evidence-in-chief of Mr Haydn Reynolds and his wife, Mrs Leida Reynolds, provided then by reference to their respective witness statements (see exhibits 3, 4 and 5 for Mr Reynolds and exhibits 10, 11 and 12 for Mrs Reynolds). They were both mildly cross-examined on those statements on day one and day two of the trial.
97But in the main, their evidence was essentially unshaken or uncontradicted and may be largely accepted as reliable.
98Concerning the evidence of Mrs Reynolds, I assessed the answers given by her in the context of a reluctance to take on higher levels of debt again, due now to her and her husband's ages, was both truthful and insightful (see ts 111). She explained to me, frankly, that she and her husband were not prepared to put their house on the line, given she was 67 and he was 74, observing by reference to their house that '…we are not prepared to lose it'. The observation was made in the context of the refusal by Westpac of the Reynolds' enquiry seeking to borrow $3,200,000, which was a proposal concerning their interest at the time in possibly acquiring as business premises 2 Harrison Road, Forrestfield, at mid-2017. Their loan enquiry was ultimately rejected by Westpac (see ts 110).
'Value to the owner' and 'market value': legal concepts
99The concept of market value and the scope for some greater level of value for the dispossessed owner, was the centrally disputed theme in the present trial - giving rise to the major economic tier of disputation as between the PTA and DBW.
100In this realm I would, by reference to particular terms of s 241 of the LAA - which provides in some evolved contrast to provisions of the former Land Acquisition and Public Works Act 1902 (WA)) - first refer to some of the mere relevant case authorities below.
101First, in his McKay reasons, Beech J, at s 2.2, at a heading 'General Principles', addressed the meaning of the word 'value'. That was in the context of Pt 10 of the LAA. His Honour then observed at [144] - [145]:
[144]Compensation for the value of the land involves determining a money equivalent of the asset: Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547, 570. 'Value' means exchange value. Value is determined by presupposing a person who is willing to give the thing that is being valued in exchange for money and another willing to give money in exchange for what is being valued: Spencer v The Commonwealth (1907) 5 CLR 418, 431; Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 [79].
A trifling amount of $781 is claimed for staff wages in respect of 'claim preparation'. However, the defendant's submission at page 63 of its written outline of closing submissions to the effect that this is not in the nature of a true business cost - but rather is for work relating to the claiming process. That, I accept, is correct as a matter of principle.
Likewise, that claimed cost must also be rejected on the alternate basis of it being an ordinary cost to business for work conducted as part of the duties of a regular employee, whose fixed salary would have been paid out, in any event, as a sunk cost.
Another component for $1,205 as interest on an overdraft taken out was said, by the second plaintiff, to fund its relocation to 415 Dundas Road. This is also rejected by the defendant.
The defendant says that the second plaintiff was entitled to receive interest on all advance payments and judgment sums pursuant to s 241(11) of the LAA. Consequently, it says that to allow this interest claim would be to wrongly double count. I agree and so, reject the claim for $1,025.
450To the extent interest is payable under s 241(11) of the LAA, it was agreed between the parties at trial that interest would run from the date of the lodgement of the plaintiffs' claims, being 17 November 2015. I accept that to be the position.
Concluding tables
451By reference to adapting the tables found at pars 74 and 76 of the defendant's written outline of opening submissions (folio 88), being the defendant's claim positions by reference to the issues, I have added at the right a further column indicating the court's ultimate concluding position for each item.
452The defendant's position is that advance payments comprised the vast majority of the sums to which the two plaintiffs are entitled.
453The first table below sets out the claims by the first plaintiff, DBW, the defendant's position, and Court's various conclusions rendered by these reasons (highlighted items were not in contention.)
Trial Issue(s)
Claimed item
Sum claimed by First Plaintiff
Defendant's position
Court's conclusions
1 & 2
Value of the first plaintiff's interest in the land
$8,500,000 to $11,425,000, depending on methodology
$8,500,000
$8,500,000
5
Stamp duty / acquisition costs
Eagle Bay purchase
$36,545.89
$ nil
$ nil
Subtotal
$8,500,000
$8,500,000
10% solatium on the above
s 241(8) LAA
$850,000
$850,000
Total before interest
$9,350,000
$9,350,000
Subtract advance payments already paid
($8,888,000)
($8,888.000)
Additional sum now payable before interest
$462,000
$462,000
Plus interest from 17 November 2015
TBA
Final sum due to DBW
TBA
454The second table below sets out the claims by the second plaintiff, Century West, the defendant's position, and the court's various conclusions rendered by these reasons (highlighted items were not in contention.)
Trial Issue(s)
Claimed item
Sum claimed by Second Plaintiff
Defendant's position
Court's conclusion
6, 8
Cost of relocation
$126,282
$95,433
$95,433
6, 8
Cost of a second relocation
$85,150
$55,500
(conceded)
$55,500
Cost of inefficiencies
$98,955
$98,955
$98,955
4
Lost income
$587,210
to $803,100$ nil
$ nil
3
Additional costs of leasing temporary premises
$684,275
$ nil
$ nil
Rates and taxes
$16,004
$16,004
$16,004
7
Value of demountable building
$70,669
$64,241
$64,241
8
Other costs pursuant to paragraph 48 of Statement of Claim
$25,336
$ nil
$ nil
Subtotal
$343,632.09
$343,632.09
10% solatium on the above
s 241(8) LAA
$34,363.21
$34,363.21
Total before interest
$377,995.30
$377,995.30
Subtract advance payments already paid
($218,300)
($218,330)
($218,330)
Additional sum now payable before interest
$159,665
$159,665
Plus interest from
17 November 2015TBA
Final sum due to Century West
TBA
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
PP
Associate to the Honourable Justice K Martin22 MAY 2023
JURISDICTION : SUPREME COURT OF WESTERN AUSTRALIA
IN CIVIL
CITATION: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST -v- PUBLIC TRANSPORT AUTHORITY [2023] WASC 165 (S)
CORAM: KENNETH MARTIN J
HEARD: ON THE PAPERS
DELIVERED : 9 JUNE 2023
FILE NO/S: CIV 1456 of 2018
BETWEEN: DBW REYNOLDS PTY LTD as trustee for THE DBW REYNOLDS FAMILY TRUST
First Plaintiff
CENTURY WEST TRANSPORT SERVICES PTY LTD
Second Plaintiff
AND
PUBLIC TRANSPORT AUTHORITY
Defendant
Catchwords:
Final orders and costs orders - Calderbank offer considerations - Special costs orders - Turns on own facts
Legislation:
Land Administration Act 1997 (WA)
Result:
Post-trial orders issued
Category: B
Representation:
Counsel:
First Plaintiff : P G McGowan & L E Rowley Second Plaintiff : P G McGowan & L E Rowley Defendant : I A Repper & B Loftus Solicitors:
First Plaintiff : Rowley Legal Second Plaintiff : Rowley Legal Defendant : State Solicitor's Office Cases referred to in decision:
Italiano v The Water Corporation [No 2] [2020] WASC 112 (S)
McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S); (2011) 185 LGERA 118
Shephard v Tuanie Paul Galea and Carmen Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 (S)
Shephard v Tuanie Paul Galea as Executor and Trustee of the Estate of the late Joseph Galea [2020] WASCA 152
KENNETH MARTIN J:
455In the wake of the post-trial reserved reasons published on 22 May 2023 ('post-trial reasons'), the parties have conferred concerning final orders implementing those reasons and costs orders. These issues were agreed to be determined on the papers.
456To that end, I have now received on part of the plaintiffs:
(a)a minute of proposed orders (folio 102);
(b)their outline of written submissions of 30 May 2023 (folio 103);
(c)an affidavit of Linda Elizabeth Rowley sworn 30 May 2023 with annexures LER1 to LER10 (folio 104); and
(d)their further written submissions in reply of 2 June 2023 (folio 109).
457On behalf of the defendant, I have received:
(a)a minute of proposed orders (folio 106);
(b)its outline of written submissions of 30 May 2023 (folio 108);
(c)an affidavit of Belinda Jane Loftus sworn 30 May 2023 with annexures BJL1 to BJL4 (folio 107); and
(d)its further written submissions in reply of 2 June 2023 (folio 110).
458Final orders upon all issues issued on 2 June 2023, with the parties advised that my reserved reasons for those orders would follow shortly. These are those reasons.
Dispositive orders
459Towards the substantive dispositive orders concerning the residual compensation amounts payable, including solatium and interest, the parties, after conferral, essentially have now agreed the numerical end position. The differences as between their minutes in this respect were essentially stylistic.
460Consequently, orders (save as to costs) should issue essentially by way of slight adjustments to orders 1 to 4 as seen in the plaintiff's minute, in the following terms:
1. There is judgment for the first plaintiff in the sum of $462,000 (being the first plaintiff's assessed compensation of $9,350,000, after allowing for the part payments as already received by the first plaintiff, of $8,888,000).
2. The defendant shall pay to the first plaintiff interest on its assessed compensation calculated to 23 May 2023 pursuant to s 241(11) of the Land Administration Act 1997 (WA), in the sum of $206,786, after allowing for the receipt of interest already paid, being $487,485.04.
3. There is judgment for the second plaintiff in the sum of $159,665 (being the second plaintiff's assessed compensation of $377,995.30, after allowing for the part payments as already received, of $218,330).
4. The defendant shall pay to the second plaintiff interest on the assessed compensation calculated to 23 May 2023 pursuant to s 241(11) of the Land Administration Act 1997 (WA), in the sum of $80,936.68, after allowing for the second plaintiff's receipt of interest already paid, being $47,197.30.
461I am grateful to the parties for their conferral work in settling between themselves those residual compensation amounts and interest calculations as provided.
Costs orders
462Nonetheless, there remains a dispute to be resolved between the parties concerning appropriate costs orders that should issue in the wake of the publication of the post-trial reasons.
463From the perspective of the defendant, it proposes (essentially by reference to exposing two 'Calderbank' offers - about which it has now provided evidence through Ms Loftus' affidavit) costs orders in its favour framed under three alternatives.
464The alternative costs orders as proposed under orders 4, 4A and 4B of the defendant's minute are these:
4.The First and Second Plaintiffs pay the Defendant's costs of the action, excluding any disbursements relating to quantity surveyor evidence:
a.on a party/party basis up to and including 8 May 2020, such costs to be taxed, if not agreed; and
b.on an indemnity basis from 8 May 2020.
Alternatively:
4A.The First and Second Plaintiffs pay the Defendant's costs of the action, excluding any disbursements relating to quantity surveyor evidence:
a.on a party/party basis up to and including 30 September 2022, such costs to be taxed, if not agreed; and
b.on an indemnity basis from 30 September 2022.
Alternatively:
4B.The First and Second Plaintiffs pay the Defendant's costs of the action, excluding any disbursements relating to quantity surveyor evidence, such costs to be taxed, if not agreed.
465By some contrast, the plaintiffs' minute moves for costs orders seen under orders 5, 6 and 7 of that minute, in the following terms:
5.The Defendant pay the First and Second Plaintiffs' costs of the action on a party and party basis up to but excluding 8 May 2020 to be assessed if not agreed.
6.The Defendant pay 50% of the First and Second Plaintiffs' costs of the action on a party and party basis from 8 May 2020 up to but excluding 30 September 2022 to be assessed if not agreed.
7.The Plaintiffs pay the Defendant's costs of the action from 30 September 2022 on a part and party basis to be assessed if not agreed.
466The essential difference between the parties' minutes in relation to costs arises over the defendant's claims, in effect, for an award of indemnity costs, grounded upon its two Calderbank offers made to the plaintiffs - but which were not accepted after 8 May 2020, or then again at 30 September 2022 (which was the Friday before the two-week ensuing trial commenced the following Monday).
467For their part, the plaintiffs look to accept, as was the case, especially by reference to their proposed order 7, that they were ultimately unsuccessful in the result, following the trial. Hence, as seen, they would accept, in effect, that they must meet the defendant's party and party costs of the trial as from 30 September 2022. The dispute is over indemnity costs sought by the defendant.
468Prior to trial, the costs position of the plaintiffs is that they would seek 50% of their costs over, in effect, a two-year and four-month period leading up to the trial - between 8 May 2020 and 30 September 2022. Prior to that, up to 8 May 2020, the plaintiffs would seek all of their costs of the action on a party and party basis.
Calderbank principles
469I have had occasion in the past to consider 'without prejudice save as to costs' offer principles around rejected settlement offers. Two prior 'Calderbank' decisions of mine in particular come to mind. First was my decision in Shephard v Tuanie Paul Galea and Carmen Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 (S). In that decision I was ultimately satisfied that a Calderbank offer which had been made, but had been unreasonably rejected, thereby warranted orders for indemnity costs being issued for those particularly unique circumstances. Subsequently, those indemnity trial costs orders were upheld by the Court of Appeal (see Shephard v Tuanie Paul Galea as Executor and Trustee of the Estate of the late Joseph Galea [2020] WASCA 152 [196]).
470The other instance of Calderbank issues being considered, arose in the supplementary costs reasons delivered in Italiano v The Water Corporation [No 2] [2020] WASC 112 (S). The Italiano (S) decision in the Calderbank context is of greater significance here, in the sense that the context was another largely unsuccessful statutory land resumption compensation action - arising in circumstances where I needed to give extensive consideration to costs principles and, in particular, to the leading costs decision of Beech J (as his Honour then was) - by reference to his Honour's comprehensive costs disposition reasons in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 (S); (2011) 185 LGERA 118.
471For present purposes as to costs principles, it is enough just to repeat first, what I said in Shephard (S) in relation to Calderbank legal principles, at between [27] - [39]. Then from Italiano (S), I would incorporate, again without repeating verbatim, that discussion of costs principles - in particular concerning Calderbank offers and as to various non‑acceptance repercussions, at between [31] - [35], [36] - [45] and [46] - [47].
Evaluations upon costs
472For present purposes I would, by reference to the extensive discussion of costs principles by Beech J in McKay [No 7] (S), simply mention as important considerations within the present context that the court holds a very broad discretion concerning costs orders, by regard to s 223(9) of the Land Administration Act1997 (WA). A holistic view of all the relevant circumstances must be taken. The starting point is that if compensation ordered as ultimately payable is more than the statutory offer(s) made by the taking authority (as is the case here) then, leaving aside settlement offer considerations, the claimant is, prima facie, entitled to their costs.
473Nevertheless, the court will always need to look widely, realistically and pragmatically at the issues which have arisen in every action, particularly at the way a case was fought at trial and then, render a realistic assessment about where success lies in the end. Here, that was plainly with the defendant and there is no real contest about that result now.
474As Beech J also observed by his summary provided in McKay [No 7] (S) at [85]:
There is no principle in compensation cases that
(a)the amount of compensation fixed by the court should not be eroded by denying the plaintiff costs or requiring him or her to pay the costs of the taking authority; or
(b)only in an exceptional case should a claimant be deprived of his or her costs or ordered to pay the costs of the relevant authority; or
(c)a claimant should be free to run any arguable case without being constrained by the risk of an adverse costs order.
475To those observations, I would respectfully repat a point made in Italiano (S). It was open to the plaintiffs to advance their land resumption compensation claims elsewhere - in the State Administrate Tribunal. Ordinarily, that is a non-costs jurisdiction. For reasons unexplained, the plaintiffs have chosen to advance these claims in this Court - with the very real costs exposure consequences that are always live in the civil curial context.
476There is, of course, a very significant distinction as between an ordinary party and party costs order issuing in the wake of an unaccepted Calderbank offer, as opposed to that same rejected Calderbank offer occasioning the obligation to bear not merely party and party costs but, an indemnity costs exposure. An indemnity costs order is punitive and is only to be made in exceptional circumstances.
477Given the indemnity costs orders which are sought here by the defendant, it is essentially necessary for it to show here that the behaviour of the plaintiffs by not accepting the Calderbank compensation offer(s) was, and without using any degree of hindsight, to be assessed as unreasonable conduct at the time of rejection(s) in the circumstances then known to the rejecting party. As seen, I elaborated upon these principles in Italiano (S) at [48(f)].
478Two respective Calderbank offers now relied upon by the defendant are found in the parties' materials. I proceed by reference to Ms Loftus' affidavit and to her attachments BJL2 and BJL4. They are respectively the Calderbank offers of 8 May 2022 as made to the plaintiffs' lawyer and then, similarly, at 30 September 2022.
The 30 September 2022 Calderbank offer
479I must say at the outset, in respect of the 30 September 2022 Calderbank offer, that in the overall context of costs considerations, I am inclined to afford it on minimal weight. It issued, essentially, on the last working day before the trial was due to begin, on the following Monday, 3 October 2022. The further amount of $2,100,000 which it offered was only open for acceptance until the commencement of the trial at 10.15 am on that following Monday.
480It is certainly the case that had this offer been accepted, a two-week trial would have been avoided and the plaintiffs would undoubtedly then have been a lot better off in aggregate than their ultimate compensation achievement position under my post-trial reasons.
481The extra sum offered beyond what had already been advanced by way of payment to that point ($9,641,012.36), was offered then upon the basis of a final additional amount that was inclusive of solatium, interest and costs, taking the final amount that would have been payable up to $11,741,012.36 - a superior end outcome than eventually achieved.
482On my assessment, the 30 September 2022 Calderbank offer did not sufficiently break down the basis of the extra sum as then offered (available essentially, over the weekend) in a fashion that would enable an 'apples with apples' comparison of the constituent elements of the compensation, solatium, interest and distinct economic loss claims all in play then, as between the two plaintiffs.
483In essence, my opinion is that this Calderbank offer came too late, was too briefly available and not sufficiently clear enough as expressed. Consequently, I can afford only minimal weight, viewed alone, in the overall scheme of an assessment in terms of its bearing upon an indemnity costs order. But it is a factor to be weighed in the exercise of the court's discretion as to costs orders generally.
The earlier 8 May 2020 Calderbank offer
484More emphasis, however, can be placed upon the defendant's earlier 8 May 2020 Calderbank offer, which for convience, I will attach as Schedule 1 to these reasons.
485By reference to its components, I highlight that, in relation to the first plaintiff's case, this 8 May 2020 Calderbank offer at page 2 had effectively offered then to the first plaintiff, the $8,500,000 compensation amount that it did ultimately achieve at the trial (conducted some two and a half years later), together with $850,000 as solatium (10%) upon that amount. Again, that was the solatium position for the first plaintiff arrived at post trial.
486The 8 May 2020 Calderbank offer said, in relation to this offer at the time:
The offer allocates $8,500,000 for the value of the taken land, being the amount assessed by the plaintiffs' valuer, Ms Jenny Le Fevre as the market value of that land. An additional $850,000 is provided as solatium.
The defendant acknowledges that both Ms Jenny Le Fevre and Mr Matt Garmony have endeavoured to identify components of market value as 'value to the owner', but apparently not intending by that expression to identify evidence for the purpose of establishing 'special value to the owner' within the factual framework within which that expression is recognised in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 at [151].
487Further observations seen in the 8 May 2020 Calderbank offer, against the 'value to the owner' component within the claim by the defendant's letter, came also to essentially be vindicated in the result of the trial.
488Observations made in the 8 May 2020 Calderbank offer at that time should have put both plaintiffs on notice as to suggested conceptual deficiencies in their cases. This offer after taking account of those deficiencies, effectively, offered the plaintiffs at then close to, or possibly more than, what they ended up achieving - in terms of their ultimate compensation awards. From a quantitative perspective, these were also the largest disputed aspects of the trial and also became the dispute 'battlefronts' upon which the major components of trial resources were consumed upon.
489The 8 May 2020 Calderbank letter from the defendant's lawyers addressed the claim of the second plaintiff, effectively accepting liability for each of actual relocation costs, future relocation costs, inefficiencies of new premises, reimbursable costs, other costs, value of the demountable building and further sundry costs in the amount of $31,010. The amount then accepted, without challenge, was $448,276.97.
490Observations seen between pages 3 and 4 of the 8 May 2020 Calderbank offer concerning the economic loss claims of the second plaintiff but the highlighted conceptual deficiencies in the expert report of the second plaintiff's business valuer, Ms Jacqueline Le Fevre, over these claims, were also subsequently vindicated after trial. The defendant said at page 3:
The defendant's position is that the position reached by Mr Langridge at the conclusion of the expert conferral process (summarised in the table at paragraph 1.7 of the business valuers' conferral statement) represents the compensation to which the second plaintiff is entitled, for the reasons identified by Mr Langridge in his report and in the conferral statement.
…
491The 8 May 2020 Calderbank offer continued:
Given the offered sum is $478,500 (pre‑solatium and pre‑interest), it leaves over $30,000 to be attributed to the items described by the business valuers as 'additional cost of leasing' and 'lost income during relocation'. This is offered despite the defendant's firm position that, beyond the $13,500 allowed by Mr Langridge, the plaintiffs' claim for these items are conceptually and fundamentally flawed.
The rent paid by the second plaintiffs (sic) is a business expense in the after scenario, and was a business expense in the before scenario. They pay less rent after the taking than they did before. Therefore, there is no 'additional cost of leasing'.
Lost gross income during relocation is not compensable - the compensable item is lost net income. In relation to the lost income claim:
(a)the second plaintiffs have [sic] not established that any contract income was 'lost' as a result of no longer having appropriate storage space;
(b)the second plaintiffs have [sic] not established why such loss was not avoided by the rental or replacement storage space; and
(c)more fundamentally, any claim for lost income deriving from the inability to use the second plaintiffs' [sic] premises for storage must be reduced and offset (in this case to zero) by the saving in leasing costs enjoyed by the second plaintiff after the taking.
492By my assessment, those observations, made some two years and four months before the two-week trial actually began, all came substantially to be vindicated by the trial results.
493Accordingly, the second plaintiff, like the first plaintiff, had been put very carefully upon early notice of deficiencies in its two 'big ticket' economic loss claims made for the additional cost of leasing and lost income components. Yet the claims were pressed strongly forward to trial - with all that process entailed.
494Furthermore, the 8 May 2020 Calderbank offer made, what I would assess to be, a reasonable costs allowance to the plaintiffs at the time, to the effect:
The defendant considers an allowance of $375,000 for the plaintiffs' combined costs to be reasonable, given that the matter is not yet listed for trial.
495It may be seen by reference to the tables found at the end of the post-trial reasons for decision at [453] and [454] (for the claims of the first plaintiff and then claims of the second plaintiff respectively), that the Calderbank offer to the first plaintiff, in relation to the amount offered of $8,500,000 and 10% of that amount as solatium, was essentially available for taking at 8 May 2020 (see trial issues one and two in the post-trial reasons).
496In respect of the two 'big ticket' quantum claims of the second plaintiff for losses, these two trial issues three and four consumed the most trial time and trial resources - from the second plaintiff's perspective. They were both rejected as conceptually flawed in the ultimate outcomes of the trial. They were not lost at trial as a result of facts found that there were in doubt one way or the other beforehand. The problem was a longstanding problem of concept that the second plaintiff had been appraised of by the defendant - yet pressed.
497For such circumstances, I am (subject to a slight qualification) of the end view that the 8 May 2020 Calderbank offer was pitched at a very reasonable level. Had it been accepted, it would have avoided a two-week trial of issues one, two, three and four - which both the first plaintiff and then the second plaintiff fought, but ultimately lost.
498Prima facie then, the rejected 8 May 2020 Calderbank offer ought to carry at least a consequential effect of exposing the plaintiffs to meeting the costs of the defendant on a party and party basis - but from a time that is assessed as a reasonable period for digesting, then communicating an acceptance of, the 8 May 2020 Calderbank offer. The offer was open for a period of 28 days. That was a reasonable period for it to be digested and accepted with better judgment displayed than what eventuated.
499In all the circumstances, I am of the view that, at least, there should be an order that both plaintiffs pay the defendant's costs of the action on a party and party basis as from 5 June 2020 (save in respect of any disbursements relating to quantity surveyor evidence - which the defendant does not seek in light of the post-trial reasons).
Indemnity Costs?
500The residual question, however, is whether there ought be instead an order for indemnity costs against the plaintiffs - assessed upon that 8 May 2020 Calderbank offer as from that time?
501The indemnity costs issue assessment is finely balanced. Again, it has occasioned my 'anxious consideration' (see Italiano (S) at [48(g)]).
502In relation to the 'value to the owner' compensation claims as advocated on behalf of the first plaintiff as a land owner, I am of the end view that, whilst such claim arguments were always ambitious and marginal, there had been some support for it found within the property valuers' expert evidence obtained by the first plaintiff in the expert reports of Ms Jacqueline Le Fevre and Mr Matthew Garmony.
503In assessing if there has been, in effect, unreasonable conduct in rejecting the offer, hindsight is not to be used. Furthermore, I reiterate that an order for indemnity costs is an extreme and exceptional order made by a court. Caution is to be applied before issuing such a punitive costs order, generally issued in the face of conduct that is assessed as clearly unreasonable. Here, for the first plaintiff, the 'line' has been approached, but not crossed.
504On the other hand, the two economic claims pressed to trial in respect of issues two and three pursued on behalf of the second plaintiff, by my assessment, went beyond being ambitious. They were close to hopeless, conceptually.
505Even though there was fulsome support for them found in the second plaintiff's business valuer expert report of Ms Jenny Le Fevre there was, in the face of the receipt of the defendant's expert report from Mr Martin Langridge, clear notice provided to the second plaintiff's advisers upon the vulnerabilities and conceptual deficiencies of these economic claims - which did take some time to dispose of at the trial.
506Had they not been so firmly pursued, then the prospects, I assess, of an earlier settlement would have been considerably enhanced.
507However, I am, at the end, still not sufficiently persuaded that an order for indemnity costs overall is appropriate, given the greater resources devoted by the trial to the first plaintiff's 'value to the owner' claim. Instead, I am of the view, regarding the claims of the second plaintiff in respect of a component of taxed costs to which I would assess the plaintiffs otherwise have been entitled to receive up to 5 June 2020, that justice will be better served overall, if I order that only the first plaintiff (not the second plaintiff) receive its taxed costs to that point (that course will exclude any potential costs recoverable in respect for expert reports of the second plaintiff's business valuer, Ms Jenny Le Fevre - which I assess to be the significant contributor to a perseverance with these ultimately diverting and rejected economic loss claims of the second plaintiff).
Costs orders to issue
508Consequently then, the ultimate costs orders to issue will be, in addition to the four dispositive trial orders as seen articulated earlier:
5. The defendant shall pay the first plaintiff's costs of the action on a party and party basis up to 5 June 2020, to be assessed if not agreed (save for disallowing any disbursements related to quantity surveyor evidence).
6. The plaintiffs shall pay the defendant's costs of the action from 5 June 2020 and thereafter on a party and party basis to be assessed, if not agreed.
SCHEDULE 1
I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.
PP
Associate to the Honourable Justice K Martin9 JUNE 2023
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