Fitzpatrick Investments Pty Limited v Blacktown City Council (No 2)

[2000] NSWLEC 139

Land and Environment Court

of New South Wales

CITATION:	Fitzpatrick Investments Pty Limited v Blacktown City Council (No. 2) [2000] NSWLEC 139
PARTIES:	APPLICANT: Fitzpatrick Investments Pty Limited ACN 001 662 862 RESPONDENT: Blacktown City Council
FILE NUMBER(S):	30071 of 1997
CORAM:	Lloyd J
KEY ISSUES:	Compensation :- compulsory acquisition - land kept by development company for future subdivision - costs of locating and purchasing replacement land are losses attributable to disturbance - costs
LEGISLATION CITED:	Income Tax Assessment Act 1936 (Cth) s 160 ZZK Interpretation Act 1987 s 21 Land Acquisition (Just Terms Compensation) Act 1991 s 55, s 59
CASES CITED:	Cooper Brookes (Wollongong) Pty Limited v Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 297; Fitzpatrick Investments Pty Limited v Blacktown City Council, Lloyd J, NSWLEC, 28 April 1998, unreported
DATES OF HEARING:	26/05/2000
DATE OF JUDGMENT:	07/07/2000
LEGAL REPRESENTATIVES:	APPLICANT: J J Webster (Barrister) SOLICITORS: Gordon & Johnstone RESPONDENT: J A Ayling (Barrister) SOLICITORS: Taylor Kelso

JUDGMENT:

1

IN THE LAND AND Matter No: 30071 of 1997

ENVIRONMENT COURT Coram: Lloyd J

OF NEW SOUTH WALES Decision date: 7 July 2000

Fitzpatrick Investments Pty Limited

ACN 001 662 862

Applicant

v

Blacktown City Council

Respondent

REASONS FOR JUDGMENT (2)

1. On 9 May 1997 the land being lot 100 in deposited plan 863828 was acquired by the respondent by notice of compulsory acquisition published in the New South Wales Government Gazette. On 28 April 1998, after a hearing which occupied six (6) days, I determined the market value of the resumed land at $2.1 million for the purposes of sections 55(a) and 56 of the Land Acquisition (Just Terms Compensation Act) 1991 (“the Just Terms Act”): Fitzpatrick Investments Pty Limited v Blacktown City Council , Lloyd J, NSWLEC, 28 April 1998, unreported.

2. The basic facts are set out in my previous judgment and need not be repeated. It is sufficient to note that the land had an area of 4.172 hectares and had been kept by the applicant for purpose of development by way of a residential subdivision. At the request of the parties I deferred any hearing on the question of compensation for loss attributable to disturbance and the question of costs on the ground that agreement may be reached thereon. No such agreement has been reached and it has thus been necessary to hear further evidence and submissions on those questions.

3. In addition to the market value of the land at the date of its acquisition, section 55(d) of the Just Terms Act entitles the dispossessed owner to any loss attributable to disturbance. Section 59 of the Just Terms Act defines “ loss attributable to disturbance ” as meaning the any of following:

a)

legal costs reasonably incurred by the person entitled to the compensation in connection with the compulsory acquisition of the land;

b) valuation fees reasonably incurred by those persons in connection with the compulsory acquisition of the land;

c) financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs);

d) stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired);

e) financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage);

f) any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition.

4. The applicant makes the following claim for loss attributable to disturbance:

Legal costs reasonably incurred in connection with the compulsory acquisition of the land (section 59(a))	$13,770.74
Valuation fees reasonably incurred in connection with the compulsory acquisition of the land (section 59(b))	$41,720.00
Financial costs reasonably incurred in connection with the relocation of persons (including legal costs but not including stamp duty or mortgage costs) (section 59(c) or (f))	$18,699.99
Stamp duty costs reasonably incurred (or that might reasonably be incurred) in connection with the purchase of land for relocation (section 59(d) or (f))	$100,990.00 $175,180.73

5. The respondent admits that the applicant is entitled to compensation for legal costs reasonably incurred in connection with the compulsory acquisition under section 59(a) but says that the amount claimed of $13,770.74 is excessive and that $5,000.00 which has already been paid by the respondent is sufficient compensation under this heading.

6. The respondent says that there is no issue between the parties in relation to the valuation fees claimed under section 59(b) and it has paid the claimed sum of $41,720.00 in full.

7. The respondent denies any entitlement by the applicant to the balance of its claim and says there was no relocation of the applicant within the meaning of 59(c), that any land purchased by the applicant was not for relocation within the meaning of section 59(c) and any other financial costs claimed did not result from the relocation of the applicant for the purposes of section 59(c) or (f).

8. As to the applicant’s claim for legal costs under section 59(a) of the Just Terms Act, the applicant relies upon an affidavit of Miss A L Sefton, a solicitor employed by Gordon & Johnstone, its solicitors in the proceedings. The affidavit annexes a number of statements of account rendered by that firm to the applicant, including disbursements for counsel’s fees. The affidavit contains a statement that the legal costs set forth in the statements of account were incurred solely in relation to the applicant’s claim for compensation for the compulsory acquisition of the land and the deponent expresses an opinion that those costs are reasonable.

9. Mr J A Ayling, who appears for the respondent, submits that the costs on their face seem extraordinarily high, whereas section 59(a) refers to costs reasonably incurred. Miss Sefton was not, however, cross examined on her affidavit, neither was any evidence adduced by the respondent to support the sum it regards as being reasonable. In these circumstances I can only accept the sworn evidence of Miss Sefton. That is to say, I accept the applicant’s claim under this head of $13,770.74.

10. The substantial issue between the parties is the claim for costs related to the purchase of other land for relocation pursuant to paragraphs (c) and (d) of section 59. The applicant alternatively bases its claim for these costs on paragraph (f) of section 59.

11. Mr J J Webster, who appears for the applicant, submits that since the acquired land was an investment property held by the applicant for subdivision development, the compulsory acquisition of it has meant that the applicant had to reinvest the compensation money in another property for two reasons. Firstly, to place itself back into the position it previously enjoyed. Secondly, to avoid the possible imposition of capital gains tax by reinvesting the compensation money in a roll-over investment to secure the benefit of section 160 ZZK of the Income Tax Assessment Act 1936 (Cth).

12. In support of his submissions Mr Webster cited a number of authorities, none of which, it seems to me, are directly relevant since they arise as a result of different facts to those in the present case.

13. Mr Ayling, appearing for the respondent, submits that the question of whether the applicant can recover the legal costs and stamp duty associated with the purchase of other land is entirely dependent upon whether those claims fall within either paragraphs (c), (d) or (f) of section 59 of the Just Terms Act. Paragraphs (c) and (d) refer to the relocation of “ those persons ” entitled to compensation; that is to say, the relocation of the individuals concerned. The reference to “ those persons ” is not, in his submission, a reference to the relocation of the capital or the investment of those persons, which is what the present case is about. Although “ persons ” includes a corporation (section 21, Interpretation Act 1987), there has to be a relocation of a corporation and not a relocation of the financial interest of the corporation. Mr Ayling submits that there is no decided case where an acquiring authority has been required to pay a compensation for the purchase of a replacement property for the purpose of renewing an investment, rather than relocating a corporation in its business premises or relocating a domestic householder in residential premises. Paragraphs (c) and (d) refer to the relocation of persons, not a money. Moreover, in the present case the compensation money was put into an income-producing investment for some sixteen (16) months being invested in the purchase of other land, which income-producing investment produced income where none had previously been generated, so that the causal connection between the compulsory acquisition and the purchase of the other land was destroyed.

14. Neither, in Mr Ayling’s submission, are the costs recoverable under paragraph (f) of section 59. That paragraph refers to “ other financial costs ”, being costs of some kind other than those described in paragraph (c) and (d) of the section. Paragraph (f) imposes a requirement that the expenditure must relate to the “ actual use ” of the land and further requirements that the expenditure must be both “ a direct and natural” consequence of the acquisition, none of which are satisfied in the present case.

15. As I have noted, I do not derive much assistance from the decided cases referred to by Mr Webster, each of which are based upon their own facts and none of which raise for determination the entitlement to compensation for the items claimed in this case.

16. In my opinion the resolution of the claims may be determined by simply applying the plain words of the statutory provision, in this case section 59 of the Just Terms Act, untrammelled by authority or any gloss upon those words. The well-known principles explained by Gibbs CJ in Cooper Brookes (Wollongong) Pty Limited v The Commissioner of Taxation of the Commonwealth of Australia (1981) 147 CLR 297 should be applied:

It is only by considering the meaning of the words used by legislature that the court can ascertain its intention. And it is not unduly pedantic to begin with the assumption that words mean what they say: cf. Cody v. J. H. Nelson Pty. Ltd. ((1947) 74 CLR 629, at 648). Of course, no part of a statute can be considered in isolation from its context - the whole must be considered. If, when the section in question is read as part of the whole instrument, its meaning is clear and unambiguous, generally speaking “nothing remains but to give effect to the unqualified, words”: Metropolitan Gas Co. v. Federated Gas Employees’ Industrial Union ((1925) 35 CLR 449, at p. 455). There are cases where the result of giving words their ordinary meaning may be so irrational that the court is forced to the conclusion that the draftsman has made a mistake, and the canons of construction are not so rigid as to prevent a realistic solution in such a case: see per Lord Reid in Connaught Fur Trimming Ltd. V. Cramas Properties Ltd. ([1965] 1 WLR 892, at p. 899; [1965] 2 All ER 382, at p. 386). Examples of that sort of case may be found in Maxwell on the Interpretation of Statutes, 12th ed., (1969), at p. 228 et seq., and Craies on Statute Law, 7th ed., (1971), at p. 520 et seq. However, if the language of a statutory provision is clear and unambiguous, and is consistent and harmonious with the other provisions of the enactment, and can be intelligibly applied to the subject matter with which it deals, it must be given its ordinary and grammatical meaning, even if it leads to a result that may seem inconvenient or unjust (at 304-305).

17. Notwithstanding the general statement in section 54(1) of the Just Terms Act that a person is entitled to the amount of compensation as will justly compensate the person for acquisition of the land, section 55 limits the amount of compensation to which a person is entitled to only the matters set out therein. The words used in section 55 are:

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters onl y .. . (the emphasis is mine).

The matters listed in section 55 include, relevantly for the present case: “(d) any loss attributable to disturbance .” Section 59 provides that the phrase “ loss attributable to disturbance ” means any of the matters listed in the various paragraphs of that section, which I have set out in paragraph 3 above. The use of the word “ means ” in section 55 limits any claim for loss attributable to disturbance to those listed matters only; that is to say, the listed matters are intended to be exhaustive (Pearce & Geddes: Statutory Interpretation in Australia, 4th edition, para 6.36).

18. Paragraph (c) of section 59 refers to costs in connection with “ the relocation of those persons ”. The reference to “ those persons ” is a reference to “ the persons entitled to compensation ” described in paragraph (a). That is to say, a “ person ” (which includes a corporation - see section 21 Interpretation Act) who is relocated as a consequence of the acquisition of the land is entitled to the financial costs incurred in connection therewith. The express reference to “ person” means, in my opinion, that there must be a physical relocation of an individual or of a corporation. The paragraph says nothing about the person’s investments or assets. In the present case the applicant has not relocated as a consequence of the acquisition. It would be stretching the ordinary language of paragraph (c) if “ person ” was to be read so as to include the person’s investments or assets. I am thus inclined to the view that no compensation is payable to the applicant under this head.

19. Similarly, paragraph (d) of section 59 refers to stamp duty costs incurred by “ those persons in connection with the purchase of land for relocation ”. As with paragraph (c), since there has been no relocation of any “ person ” (or corporation) as a consequence of the acquisition, no compensation is payable under this head.

20. Paragraph (f) of section 59 is wider than the preceding paragraphs. It is a “catch-all” provision: “ any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition ”. As a “catch-all” provision, the words “ any other financial costs ” should not, in my opinion, be read down. This does not mean, however, that this paragraph opens the flood-gates. The costs must be “ reasonably incurred ” and must relate to the actual use of the land, as a direct and natural consequence of the acquisition.

21. In the present case the land, comprising 4.172 hectares, was held by the applicant for the purpose of development by way of a residential subdivision. Upon receiving the amount of compensation for the market value of the land, the applicant placed the money in an interest-bearing investment for some sixteen (16) months before purchasing other land. That other land was industrial land and was purchased by the applicant for development by way of subdivision.

22. I do not accept Mr Ayling’s submission that the purchase by the applicant of the industrial land for development by way of subdivision was unrelated to the actual use of the land which was acquired by the respondent. The applicant’s business is the development of land by subdivision. It is irrelevant, in my opinion, that the land which the applicant purchased is industrial land, whereas the land acquired by the respondent was residential land. In my view, the purchase of the land by the applicant for an industrial subdivision is related to the actual use for which it held the acquired land, namely for the purpose of development by way of subdivision.

23. Neither do I accept Mr Ayling’s submission that the purchase of the industrial land by the applicant was not a direct and natural consequence of the acquisition. The applicant had by reason of the acquisition lost its parcel of developable land. It replaced the developable land which it lost by acquiring other developable land. But for the acquisition, the applicant could have developed the land acquired by the respondent. If it wanted to continue to develop land by way of subdivision it had to purchase other land for that purpose. The fact that the amount of compensation for market value received by the applicant was earning interest for some sixteen (16) months does not, in my opinion, destroy the causal connection between the compulsory acquisition and the subsequent purchase of other land. It would be most unusual for a replacement property to be immediately available to the applicant upon its receipt of the compensation money. It is self-evident that the applicant would have to spend time locating a suitable property and then negotiating the purchase thereof.

24. Paragraph (f) of section 59 requires the amount of the applicant’s claim to be reasonable. Mr Ayling submits that the applicant’s costs were inflated by complexities which arose in its purchase of the industrial land, such as a complexities associated which the fact that the land was contaminated and had to be remediated by the vendor. Mr Ayling submits that a reasonable basis for such costs is a purchase which takes place in a normal conveyancing transaction. I accept the principle that the respondent should not generally be required to pay costs which are excessively inflated because the dispossessed landowner chose to purchase a replacement property which presented unusual complexities. In the present case there is evidence by the solicitor who acted for the applicant on a the purchase, Mr P A Clark, that the legal costs for the purchase of the replacement would have been the same if the purchase price was $2.1 million (rather than the actual purchase price of $6.4 million). Nevertheless, Mr Clark deposes to the fact the costs which he charged are fair and reasonable “ having regard to the complexity and protracted nature of the negotiations ” with the vendor “ and the amount of time spent on the matter ”. It seems that Mr Clark’s charges would not have been as great if the negotiations were neither complex nor protracted. I am inclined to infer that if this has been a normal conveyancing transaction those costs would have been somewhat less. Unfortunately there was no evidence in the present case as to what would be a reasonable amount of costs in a normal conveyancing transaction. Doing the best I can from an examination of Mr Clark’s itemised memorandum of costs and disbursements which are in evidence, I am prepared to reduce the costs claimed by 30%, which would ,in my opinion, then represent a reasonable sum. The claim for $18,699.99 is thus reduced to $13,090.00. I note that the claim for stamp duty is based upon an assumed purchase price of $2.1 million, which is reasonable.

25. For the above-mentioned reasons the applicant is entitled to the sum of $169,570.74 for disturbance, made up as follows:

Legal costs reasonably incurred in connection with the compulsory acquisition of the land (section 59(a))	$13,770.74
Valuation fees reasonably incurred in connection with the compulsory acquisition of the land (section 59(b))	$41,720.00
Financial costs reasonably incurred relating to the actual use of the land, as a direct and natural consequence of the acquisition, being costs on the purchase of the replacement property (section 59(f))	$13,090.00
Stamp duty costs reasonably incurred in connection with the purchase of the replacement property (section 59 (f))	$100,990.00 $169,570.74

26. On the question of costs of the proceedings, Mr Ayling’s submits that the issues between the parties on the disputed question of the market value of the land were (i) whether a larger sum than $2.1 million was justified on the basis that the land had a higher and better use as an exhibition village; and (ii) if not, whether the hypothetical subdivision which led to the $2.1 million valuation was one which was likely to obtain consent, bearing in mind the ecological value of the stand of Cumberland Forest woodland on the land. The figure of $2.1 million was an agreed figure in the event that the applicant was successful on issue (ii). The respondent was successful on issue (i) and the applicant was successful on issue (ii) and a proper award of costs, in Mr Ayling’s submission, would reflect the time spent on each issue on which the parties succeeded.

27. Mr Webster submits that the applicant should be entitled to an order for the general costs of the whole proceedings, noting that the respondent contended for a market value of $1.1 million on the basis that neither an exhibition village nor the hypothetical subdivision which led to a market value of $2.1 million were likely to receive consent, but rather a subdivision of much lower density which would preserve more of the Cumberland Forest woodland on the land.

28. At the hearing on the question of market value the respondent, as noted by Mr Webster, contended for a hypothetical subdivision which had greater regard to the value of the stand of Cumberland Forest woodland and thus contended for a hypothetical subdivision with a lower allotment yield, represented by a market value of $1.1 million. Although the respondent succeeded on a question of a hypothetical development for an exhibition village, the expert evidence ranged across the three possible hypothetical developments. The same expert witnesses were called to give evidence in respect of each proposal. It would be difficult to separate the time spent on any particular issue. Apart from contending for a market value of $1.1 million, the statutory valuation offered by the respondent in the present case was $1.65 million inclusive of the claim for disturbance. The applicant has achieved a result which exceeds both of these figures. In my opinion there should be an order that the respondent pay the applicant’s costs on the hearing on both the question of market value and the question of the loss attributable to disturbance.

29. I have previously determined the market value of the land at $2.1 million. I determine the loss attributable to disturbance at $169,570.74. I thus determine the total sum to which the applicant is entitled pursuant to section 54 of the Just Terms Act at $2,269,570.74.

30. The respondent must pay the applicant’s costs of the proceedings on the question of market value and of the proceedings on the question of the loss attributable to disturbance.

I