Formosa v Maroochy Shire Council (No 2)
[2012] QPEC 21
•16 March 2012
PLANNING & ENVIRONMENT COURT
OF QUEENSLAND
CITATION:
Formosa & Anor v Maroochy Shire Council (No 2) [2012] QPEC 21
PARTIES:
LEWIS XAVIER FORMOSA and JANET LYDIA FORMOSA
(Appellants)V
MAROOCHY SHIRE COUNCIL
(Respondent)FILE NO/S:
Appeal no 245 of 2006
DIVISION:
Planning and Environment Court
PROCEEDING:
Claim for interest
ORIGINATING COURT:
Planning and Environment Court, Maroochydore
DELIVERED ON:
16 March 2012
DELIVERED AT:
Brisbane
HEARING DATE:
5 March 2012
JUDGE:
J.M Robertson DCJ
ORDER:
The Respondent is to pay by way of compensation to the Appellants (including interest) the sum of $515,626.71 in respect of the reduction in the value of the Appellants’ interest in land at 92 Memorial Drive, Eumundi (properly described as Lots 201 and 203 on RP80220), arising from the change in the Respondent’s planning scheme on 7 May 2002
CATCHWORDS:
COMPENSATION: where appellants awarded compensation for reduction in value of their land as a result of Planning Scheme Amendment
INTEREST: where respondent submits that this Court’s practice of applying the default judgment rate should not be followed, and that commercial rates should apply
DELAY: where appeal lodged against refusal of claim for compensation and no steps taken for (4) years- where leave to proceed given only after Court initiated activation of file- whether in all the circumstances the delay was unreasonable
Legislation
Integrated Planning Act 1997 (now repealed)
Supreme Court Act1995
Cases
Gould v Vaggelas (1984) 157 CLR 215
Interchase Corporation Limited (in liq.) v Grosvenor Hill (Queensland) Pty Ltd (No 3) (2003) 1 Qd. R. 26
Lubrano v Brisbane City Council (1995) Q.P.L.R. 81
Mario Piraino Pty Ltd v Roads Corporations (No 2) (1991) 2 V.R. 531
Palfery v Brisbane City Council (2002) Q.P.E.L.R. 218
Sam Industries Pty Ltd v Mulgrave Shire Council (1995) Q.P.L.R. 161
Tonak Pty Ltd v Cairns City Council (2003) Q.P.E.L.R. 373
COUNSEL:
Mr E. Morzone for the appellants
Mr A. Skoien for the respondent
SOLICITORS:
Andrew Morris Legal Practice for the appellants
Sunshine Coast Regional Council for the respondent
On 16 December 2011, I ordered the respondent to pay to the appellants the sum of $350,000.00 for injurious affection being the amount assessed by me pursuant to s 5.4.2 of the Integrated Planning Act (the “IPA”) as being the reduction in value of the appellants’ land at 92 Memorial Drive, Eumundi as a result of amendments to the respondent’s Planning Scheme which came into effect on 7 May 2002. The appellants now claim interest on that sum.
It is common ground that this Court has a broad discretion to award interest on unpaid compensation monies, and that s 47(1) of the Supreme Court Act1995 applies.
Section 47(1) is in these terms:
“47(1)In any proceedings in respect of a cause of action that arises after the commencement of the Common Law Practice ActAmendment Act 1972 in a court of record for the recovery of money (including proceedings for debt, damages or the value of goods) the court may order that there shall be included in the sum for which judgment is given interest at such rate as it thinks fit on the whole or any part of that sum for the whole or any part of the period between the date when the cause of action arose and the date of the judgment.”
In Lubrano v Brisbane City Council (1995) Q.P.L.R. 81, Quirk DCJ, in applying the approach adopted by Gobbo J in Mario Piraino Pty Ltd v Roads Corporations (No 2) (1991) 2 V.R. 531; (1993) 1 V.R. 130, held (in relation to s 72(1) of the Common Law Practice Act which was in the same terms as s 47(1)), that a claim such as this (albeit under the then existing statutory regime) constitutes “proceedings” for the purposes of s 72(1). That approach was endorsed by Daly DCJ in Sam Industries Pty Ltd v Mulgrave Shire Council (1995) Q.P.L.R. 161 at 166, and White DCJ in Tonak Pty Ltd v Cairns City Council (2003) Q.P.E.L.R. 373 at 385, and by implication Judge Robin QC in Palfery v Brisbane City Council (2002) Q.P.E.L.R. 218 at 225. Mr Skoien on behalf of the respondent does not submit otherwise.
The Date from which Interest is to be Calculated
Although Mr Morzone on behalf of the appellants in his outline filed on 22 February 2012 submitted that his clients “cause of action” arose at the date of the Planning Scheme amendment i.e. 7 May 2002; he properly conceded at the hearing that as his clients’ claim is entirely based on statute, it was only when the necessary pre-conditions as to an entitlement “to be paid reasonable compensation” under s 5.4.2 of the IPA have been satisfied, that a “cause of action” i.e. a right to claim to compensation, arose. It follows that interest is to be calculated from the date of the dismissal of the appellants’ appeal to this Court from Council’s refusal of its application for Sunday markets i.e. 25 November 2005.
Delay
Mr Skoien has mounted a spirited argument to the effect that from the date of lodgement of their appeal against Council’s refusal of the claim for compensation on 8 September 2006 until it was “kick-started” by a review initiated by this Court in October 2010, the appellants have “unreasonably delayed” their claim such that the interest component should be calculated for only 2.5 years of the six years approximately between the date of refusal of their Development Application and judgment on 16 December 2011. At first blush, his argument is appealing.
The appeal was filed on 8 September 2006 and no further step was taken until as a result of the initiative of this Court to ensure that dormant matters are activated or withdrawn, an order was made by consent in late 2010 granting leave to the appellants to proceed notwithstanding the failure to take any step for a period in excess of two years.
On 24 May 2006 the appellants claimed compensation from the respondent in the sum of $1,635,000.00 based on a report of D.G. Cupitt dated 3 May 2006, which claim was refused on 11 August 2006. Given the very significant reduction in the claim as later prosecuted by the appellants based on the evidence of Mr Sheehan, it is not surprising that their original claim was met with refusal.
It is common ground that mere delay is not enough to lead to a reduction in the time over which interest is to be paid; it is only if the circumstances permit of the description “unreasonable delay” that a court might (not must) reduce the period of time. In relation to the authorities, it is only necessary to turn to the judgment of McPherson JA (with whom the President and Thomas JA agreed) in Interchase Corporation Limited (in liq.) v Grosvenor Hill (Queensland) Pty Ltd (No 3) (2003) 1 Qd. R. 26 at 52. In his usual elegant and erudite style his Honour wrote:
“It is, to my mind, not immediately apparent why, as a matter of justice, that delay should operate to defeat or reduce a plaintiff’s right to receive interest as compensation or damages for the whole of the period during which the amount was not paid. Quite apart from the loss to the plaintiff, the defendant has had the benefit of the money, and may be assumed to have put it to good use. In giving the reasons of the Full Court in Serisier Investments Pty Limited v English [1989] 1 Qd. R 678, 679, Thomas J. (as he then was) referred to circumstances in which it would sometimes be unfair to order a defendant to pay interest for the whole period between accrual of the cause of action and the date of judgment. Among the examples given by his Honour was the case “where the plaintiff has been guilty of unreasonable delay in prosecuting the claim”. In Serisier, the trial judge had awarded interest from the date of accrual of the cause of action, and had done so despite a delay of four years and four months between issue of the writ and the commencement of the trial…”.
(After referring to the judgment of the primary judge in Interchase, White J (as her Honour then was)) his Honour went on to say:
“…her Honour went on to record that, although Serisier Investments Pty Limited v English [1989] 1 Qd. R 678, 679 recognised that delay was a factor to be taken into account, it was only “unreasonable delay” that would lead to a reduction in the period for which interest was awarded. Having found that no such delay had been shown on the part of Interchase, and in the absence of any particular detriment to the defendant calling for compensation that was less then full, her Honour decided not to reduce the period during which interest was to be awarded…”.
A careful analysis of the circumstances that pertained during the four year period now characterised as an unreasonable delay by the respondent, as set out in the affidavit of Louise Formosa filed 1 February 2012 (solicitor for the appellants) persuades me that the delay in all the circumstances was not unreasonable. Mr Sheehan was retained in August 2007 and, over the following 12 months approximately was provided with detailed information and made site inspections leading to advice in June 2008 which was to the effect that compensation “was considerably less” than that set out in the claim. Ms Formosa also deposes to the fact that she had difficulties in getting Councils’ reasons for refusal which were not in fact given until well after the appeal had been activated in late 2010. I can infer that the appellants were understandably anxious to receive full advice as to their prospects and that from a relatively early stage it would have been apparent that Council regarded its Town Planning reasons for refusal of the Sunday trading application as strong. It is also clear that as well as having to abandon their original valuer, their Town Planner Mr Ryter became ill and sadly died just before leave to proceed was given. From late 2008, there were a number of “without prejudice” meetings between the parties, and correspondence which involved delays by Council in responding and consequent delays in progressing the matter on behalf of the appellants. At no time did Council complain that the appellants were engaging in unreasonable delay and properly did not oppose the application for leave to proceed after initially stating that leave would be contested.
Mr Skoien submits that the appellants have never explained in explicit terms why the matter took so long to progress in that relevant period. Having considered Ms Formosa’s affidavit which was not in any way challenged I am satisfied that although the appellants did delay, the delay could not be characterised as unreasonable in all the circumstances. It follows that the appellants are entitled to interest for the whole period from 25 November 2005 to judgment.
The Rate to be Applied
The practice of this Court, at least in a series of decisions at the end of the last century and some in the early part of this century seems to have been to apply the rate applicable to default judgments when judgment is given. Only Judge Robin, QC in some comments in Palfery v Brisbane City Council (supra) seems to have cast doubt on that general practice by intimation apparently in the course of the hearing. In this case the appellants submit that the Court should follow the practice adopted by previous Courts in this jurisdiction which would mean relevantly applying interest rates of 9% up to 30 June 2007 and 10% thereafter, rates considerably above commercial rates applicable during those periods. The respondent submits that the Court should allow interest at 5.5% being the average rate since 2006 by reference to the ten year Government Bond Rate published by the Reserve Bank of Australia. These various rates including term deposit rates are confirmed by analysis of Exhibit 1 tendered by Mr Skoien which also includes the default interest rates as directed by Practice Directions issued by the Chief Justice. Mr Skoien takes some comfort from the observations of Judge Robin whose reasons succinctly set out the issue now joined at [25] of Palfery:
“[25]So far as interest is concerned, at the hearing (page 167) I intimated a view that interest would run from 24 August 1993, being the date of completion of the sale, and the point to which the Act deferred any entitlement to compensation. I further intimated (page 168) the interest might be allowed at the rate which the appellants could show they might have obtained otherwise for their money, which might well be less than the “common law practice interest rate” which Mr Hughes suggested. Mr Hinson’s final written submissions states that the Court’s practice as to interest has been to allow it from the date the claim for compensation is received by the local government to the date of judgment at the rate applicable to default judgments when judgment is given, citing Marchese v Emerald Shire Council (1999) Q.P.E.L.R., 342G-H and also Sam Industries Pty Ltd v Mulgrave Shire Council (1995) Q.P.L.R 166F-G and Smith v Brisbane City Council (No. 2) (1995) Q.P.L.R. 265C-E. On this basis, the date from which interest should be calculated would appear to be 13 April 1994 (Exhibit 10) when the Council were advised the amount of the claim (then $500,000) pursuant to the “formal notification” by letter of 21 October 1993. In Lubrano, interest at 11% was allowed. At page 168, the parties were content to leave the issue of interest for possible resolution by them, when the Court’s view as to compensation was known. For the moment I proceed on this basis.”
It is apparent that his Honour was not called upon to decide the issue as the parties reached agreement.
Mr Skoien’s argument is essentially that the appellants are entitled to interest as part of “reasonable compensation” as a result of the respondent’s failure to pay the sum prior to the assessment of compensation by the Court. The difficulty with his reliance on Palfery is that although his Honour intimated during the hearing that interest might be allowed at the rate which the appellants could show they might have obtained otherwise for their money, it is clear that both parties appear to have been in agreement as to the Court’s practice to apply the default judgment interest rate.
Mr Skoien’s argument however is that “reasonable compensation” should not, in relation to the interest component, simply be a reference to the court’s “usual practice”, but should be calculated at ordinary commercial rates applicable during the relevant period. I have not been able to find any case (nor was I referred to any by the parties) in which the rate of interest to be applied seemed to be in dispute. It seems to have been accepted that the default judgment interest rate applies without any analysis as to why in a particular case that should be so. The point at issue in Lubrano, to which all subsequent decisions defer, was as to the applicability of the then equivalent provision in the Common Law Practice Act 1867 now contained in s 47 of the Supreme Court Act 1995. His Honour decided that it did apply and that is not in issue before me, but he then went on to apply the relevant default judgment interest rate without comment because presumably that was not an issue. The only case in which a contrary view was expressed is in Palfery and that was merely by intimation from his Honour Judge Robin QC in the course of argument.
Mr Skoien’s argument is based upon non-controversial statements of principle in Interchase (supra) and Gould v Vaggelas (1984) 157 C.L.R. 215. In Interchase, McPherson JA wrote at 52 (by reference to s 47(1)):
“The section confers a discretion which, it is said, is to be exercised judicially with a view to compensating the successful plaintiff for the injury or loss sustained: see Haines v Bendall (1991) 172 C.L.R. 60, 63. The purpose or function of an award of interest under the section is restitutionary. It is not to punish the defendant but to compensate the plaintiff for being kept out of the money represented by the judgment sum in the period between accrual of the cause of action and judgment: Batchelor v Burke (1981) 148 C.L.R. 448, 455; Grincelis v House (2000) 201 C.L.R. 321, 328. In a perfect world, a defendant who injured a plaintiff would immediately recognise the wrong done and pay the amount of compensation required to make good the loss. For reasons that are self- evident, that never happens in practice, and the justification for awarding interest is, as s 47 recognises, to compensate for the delay in payment between the time when the cause of action arises and the date of judgment …” (my emphasis).
Gould v Vaggelas involved an appeal to the High Court in relation to various claims including deceit and misrepresentation and breach of contract in which the issue of interest on an award for damage arose incidentally as it had been inadvertently overlooked in argument. The argument concerned a different point, namely the setting of an interest rate under the equivalent of s 48 of the Supreme Court Act 1995. At 275 Gibbs CJ, Wilson, Brennan and Dawson JJ said:
“Clearly, an award of interest is necessary to preserve to the appellants the full benefit of their judgment. When interest is allowed, it should be allowed at ordinary commercial rates…” (citations removed)
Of the interest rate selected by the trial judge in that case, their Honours described it “to be fair and just” in the circumstances of that case.
Mr Skoien’s point is that a simple application of the default interest rate in this case, given the averages based on yield from Australian Government Bonds and indeed the term deposit rates would not be restitutionary or at commercial rates or fair and just. Mr Morzone points to the difficulties of extrapolating a fair and just rate from market rates as identified by White J who was the trial judge in Interchase and confirmed by McPherson JA at 54, and that is that the market rates are compound rates. At 54 of Interchase McPherson JA wrote:
“At common law the practice has always been to express interest on judgment sums at simple interest rates: McGregor on Damages (14th ed., (1980) para 479.”
There is no evidence here to suggest that after 25 November 2005 the appellants were in financial difficulties and had to for example resort to an overdraft to keep their business afloat. There is no evidence from them as to what they would have done with the money had it been paid to them on 25 November 2005. From the evidence at the trial I can comfortably infer that their various business enterprises based on Parkside Markets and from 2006 Eumundi Square were highly profitable. I think I can also comfortably infer that had the money been paid to them on 25 November 2005 they would have placed it in a long term deposit with a bank.
I am satisfied that the default interest rates throughout the relevant period were well above the commercial rate and doing the best I can I will fix a rate of 7.5% per annum to be applied throughout the relevant period as being fair and just. I have taken into account that generally bank term deposit rates were higher than Bond yields and I infer that the appellants would have re-invested the monies for another 3 years prior to the significant drop in term deposit rates in late 2008 consequent upon the Global Financial Crisis. I calculate interest over the 6 year period at that rate of $157,500.00 but I will be guided by the parties as to the mathematics. In not applying the default rates, I am conscious of the fact that I am not following the practice adopted in earlier courts in this jurisdiction and I only do so for what I hope are principled reasons.
Costs
Mr Morzone concedes that the court’s statutory jurisdiction to award costs pursuant to s 4.1.23 of the IPA and s 457 of the Sustainable Planning Act 2007 (the “SPA”) is not enlivened in this case. He has indicated that an offer was made and, depending on the award for interest, there may be a claim under Part 9 of the Uniform Civil Procedures Rules 1999. In the circumstances, I indicated to the parties I would provide them with my reasons in advance of final orders which I will give in Brisbane on a date to be fixed in the two weeks commencing 12 March 2012. In the light of these reasons I invite the parties to confer in relation to final orders.
The matter was formally mentioned on the 16 March 2012 at which time the parties had agreed on the orders to be made in line with my reasons. In accordance with that agreement the Respondent is to pay by way of compensation to the Appellants (including interest) the sum of $515,626.71 in respect of the reduction in the value of the Appellants’ interest in land at 92 Memorial Drive, Eumundi (properly described as Lots 201 and 203 on RP80220) arising from the change in the Respondent’s planning scheme on 7 May 2002.
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