Heavey Lex No 64 Pty Ltd & S Paino v Chief Executive, Department of Transport
[2001] QLAC 4
•22 February 2001
|
OF QUEENSLAND
IN BRISBANE A97-43
BETWEEN: HEAVEY LEX NO 64 PTY LTD & S PAINO
Appellants/Claimants
AND: CHIEF EXECUTIVE, DEPARTMENT OF TRANSPORT
Respondent
Reasons for Judgment
Delivered at Brisbane this 22nd day of February 2001
Introductory Observations
On 22 December 1999, the Land Court determined a claim for compensation by the appellant, Heavey Lex No 64 Pty Ltd under s 20 of the Acquisition of Land Act 1967 consequent upon the resumption, on 22 March 1996, by the respondent Chief Executive, Department of Transport, of land owned by the appellant at Smithfield. Also determined on that day was a related claim for disturbance by Salvatore Paino. The determination was as follows –
Heavey Lex
Compensation for loss of land and palms $3,335,000.00
Disturbance $160,362.65
Mr Paino
Disturbance $8,821.39
Salvatore Paino is, and was at relevant times, a director and the controller of the appellant company. He was also a claimant, but for convenience Heavey Lex will be referred to in these reasons as the appellant.
At the time of the notice of intention to resume, Heavey Lex was the registered proprietor of a 37.43 hectare parcel of land located some 16 km north-west of Cairns. The land, roughly square in shape, had the Captain Cook Highway as its western boundary, McGregor Road as its northern boundary and the McGregor Road roundabout provided the frontage to its north-western truncated corner.
The land was purchased by the appellant in 1987 with a view to developing it as a tourist resort. In 1988, the appellant obtained the requisite planning approvals.
At the date of resumption, 6.057 ha of the land in an area adjoining the Captain Cook Highway was zoned medium density residential. The balance of the land was zoned rural. 28.873 ha of the land zoned rural was the subject of a current consent issued by the local authority on 20 April 1988 for use of the land for the purpose of accommodation units and ancillary uses. That consent was sufficient to enable the claimant to proceed with its proposed resort development.
The resumed parcel of 5.973 ha was taken as a road corridor for the future Smithfield by-pass. It runs from the location of the McGregor Road roundabout in the north-west corner of the land in a south-easterly direction bisecting the subject land and leaving a balance area of about 8.5 ha in the south-west of the resumed area and a balance area of about 23 ha in the north-east.
At first instance, the parcel of medium density residential land was referred to as parcel 1; the 28.87 ha parcel the subject of the Town Planning consent was referred to as parcel 2; and a further area of 2.5 ha which the valuers regarded as suitable for commercial development was referred to as parcel 3.
The hearing at first instance extended over 22 sitting days, well in excess of 100 documents were tendered and some 29 witnesses were called.
The scale of the case resulted from fundamental differences between the parties as to value and appropriate methods of valuation. The appellant claimed $14,425,000 under the heading “Land, severance and injurious affection”. The appellant’s claim, before hearing, was reduced to $11,300,000. The respondent assessed compensation at $1,420,000. The gulf between the parties in relation to the appellant’s amended disturbance claim totalling $5,125,934.87 was similarly wide.
The principal reason for divergence in the respective assessments of land value, severance and injurious affection was that the appellant argued that parcel 2 should be valued on the basis of a highest and best use for tourist resort development, whereas the respondent contended that residential subdivision was the highest and best use. The member found this issue in the respondent’s favour and there is no challenge to that finding on this appeal. The matters for determination then are rather less extensive than those confronting the member whose careful and scholarly reasons occupied some 242 pages.
Having provided the foregoing brief description of the background to this appeal, it is convenient now to go to each of the matters raised for determination by the nature of appeal and by the respondent’s cross appeal.
The learned member erred in failing to conclude that the before resumption value of the subject land included a premium for the prospect of its development for an integrated resort, because:
(a)he wrongly concluded that required a finding that the whole of parcel 2 be regarded as having a highest and best use as a tourist resort site;
(b)he ought to have applied the principle that a dispossessed owner is entitled to –
(i)the full return which may reasonably be expected from the sale of the land;
(ii) a resolution of doubts in favour of a liberal estimate.
Mr Gore, who appeared on behalf of the appellant on the first day of the appeal (Mr Connor, the appellant’s solicitor, appeared on the second), although not challenging the member’s determination that the highest and best use of parcel 2 was single lot residential development, submitted that the member erred in not making some allowance in assessing market value for an additional value attributable to the parcel’s “resort potential”.
The argument may be summarised as follows. Parcel 2 was zoned “tourist resort development”. The appellant had devoted a great deal of time, energy and money to planning and developing a tourist resort development on that parcel. Town planners and others testified to the suitability of parcel 2 as a site for the development of an integrated tourist resort. A joint venture agreement and contract were entered into on 15 January 1996 for the development of a resort on parcel 2 and an expert financial feasibility study by Deloitte Touche Tohmatsu expressed the opinion that a resort on the land would have been financially viable as at the resumption date. Persons with experience in property development and in the tourist industry gave evidence of a perceived demand for a resort such as that planned by the appellant. In those circumstances, it was argued, commonsense and logic dictated that parcel 2 had some value, over and above that arising out of its highest and best use, conferred by its unrealised potential for development as a tourist resort.
No specific premium was put forward by the appellant but it was submitted that “even a nominal amount of $100,000 only reflects about 3 per cent of the assessed residential value and about 1 per cent of the resort value (excluding the trees)”. In support of its contentions, the appellant placed reliance on the following expressions of principle –
“. in a resumption case ‘doubts are resolved in favour of a more liberal estimate (Commissioner of Succession Duties (SA) v Executor Trustee & Agency Co. of SA Ltd 1947 74 CLR 358, 374; Gregory v FCT 1971 123 CLR 547, 565; Boland v Yates Property Corp Pty Ltd 1999 74 ALJR 209, 279-280);
.the valuation must be approached ‘in a generous rather than a niggardly spirit’ (Latimer v North Coast NA & I Society 1938 17 LVR (NSW) 67, 73);
.‘such obscurity as there is ought to be resolved in favour of the person whose property is taken away’ (Robinson & Co v Collector of Land Revenue 1980 1 WLR 1614, 1621);
.what must be ascertained is ‘the full return … (and) … not the most conservative value’ (Turner v Minister of Public Instruction 1956 95 CLR 245, 264).”
The submission does not sit comfortably with the findings contained in the following passage from the member’s judgment, which was not the subject of challenge on the appeal –
“When I consider this market-based evidence together with the earlier comments that I have made on the location of the subject land at what might reasonably be called ‘suburban Smithfield”, I am confident in the view that it is not a site for an integrated tourist resort site. Indeed, the evidence tells me that any investor embarking on the development of such a project, particularly on the subject land, would be embarking on a folly.”
A further, and in our view insurmountable, hurdle for the appellant is that its argument invites this Court to overturn a carefully reasoned decision based on orthodox valuation principles in reliance on a theory entirely lacking in evidentiary support. Mr Gore accepted in the course of argument that there was no evidence at first instance which would support the appellant’s argument in this regard.
That the member applied orthodox principles in determining compensation on the basis of the highest and best use of the land as found by him may be seen from the following observation of Callinan J in Boland v Yates Property Corp Ltd[1]-
“It is now settled, and for good reason, that a dispossessed land owner should be compensated for the value of his or her land on the basis of its highest and best use.”
[1](1999) 74 ALJR 209 at 265. See also R O Rost and H G Collins, Land Valuation and Compensation in Australia, 3rd ed 1984 at 90, 91 and Spencer v The Commonwealth (1907) 5 CLR 418.
Accordingly, this ground of appeal fails.
The learned member erred in deciding that the offer of $1,800,000 could not be taken into account directly in the process of valuing the subject land after resumption, because:
(a)he wrongly decided that the offer was simply rejected by Mr Paino without negotiations, when –
(i) there was no evidence to that effect;
(ii) fresh evidence, if admitted, would be to contrary effect;
(b)there was no other proper justification for not taking the offer into account.
The appellant’s assessment of the value of the balance parcel of the subject land after resumption was $1,477,250, compared with the respondent’s assessment of $4,222,000. The member’s finding was $2,830,000.
Mr Crawford, a valuer who gave expert valuation evidence on behalf of the appellant, expressed the opinion that the offer provided “an indication of the maximum value after resumption and after rezoning is obtained”. Mr Gould, a valuer called by the respondent, did not accept the offer as worthwhile evidence of value because, inter alia, he concluded that the property had not been “fairly exposed to the market”. The member rejected Mr Gould’s opinion concerning marketing but concluded that the offer could not be taken into account directly in determining the value of the balance of the parcel. The member’s reasons, relevantly, are set out in the following passages from his reasons for judgment –
“The first of these relates to the date of the offer which was October 1997, a substantial time after the date of resumption, particularly with regard to the fluid and declining market of residential land in the Cairns area … The second difficulty I have with the offer of $1,800,000 is the fact that the offer was simply rejected by Mr Paino who did not enter into negotiations to establish whether a higher price might be extracted from the offeror. In such circumstances the offer figure should be understood to represent the lowest price that the offeror was willing to pay for the balance land on the basis of the conditions included in the offer.
I have considered the circumstances surrounding the offer and the absence of negotiations and have formed the view that the offer of $1,800,000 cannot appropriately be taken into account, directly, in the process of valuing the subject land after resumption. I am concerned that the price offered could have been increased following negotiations and that the conditions of the offer are quite different from those that would normally attach to a cash contract. In saying this, I acknowledge that such conditions would not usually have the effect of deflating the price. I am also concerned that the offer was made in a less robust market than prevailed at March 1996. I think it inappropriate that the offer be considered as reflecting the value of land as at the date of resumption, however, I think that the level of value indicated in the offer and the fact that only one offer was received may be referred to as a moderating influence in considering the application, for example, of inglobo sales in striking the after resumption value.”
It was argued that the member’s findings were affected by error as the evidence demonstrated that –
“(a)neither side raised the issue as to whether there were any negotiations which preceded the making of the $1,800,000 offer;
(b)the evidence simply showed that there were no negotiations after the $1,800,000 offer was rejected;
(c)the issue of negotiations was not raised by either the learned member or any witness;
(d)the respondent made no submission during the course of the hearing that the offer was in any way unreliable or should be attributed less weight because a higher price might have been extracted from the offeror during further negotiations.”
It was submitted that in those circumstances it was not open to the member to make positive findings concerning the existence, duration or pattern of negotiations. Mr Needham, who appeared for the respondent, submitted that the member’s factual findings were open on the evidence.
We find it unnecessary to resolve the conflict between the parties in this regard as, in our view, the member’s approach was unexceptionable. As may be seen in the above extract from the reasons for judgment, the member did not reject the offer as having no evidentiary value. He said that it could not be taken into account “directly”. Later in the reasons, he observed that he saw it as a “moderating influence” in his treatment of the sales evidence.
There is a body of authority for the proposition that a genuine offer to purchase has evidentiary value.[2] Mr Needham accepted the correctness of those decisions and argued that they had been correctly applied.
[2]Freestone v Parramatta City Council (1974) 34 LGRA 35, 49; Yates Property Corp. Pty Ltd v Darling Harbour Authority (1990) 70 LGRA 187; Goold v The Commonwealth (1993) 42 FCR 51, 57-60; Henderson v Amadio Pty Ltd (1995) 140 ALR 391, 501-502; Hall & Hedge v DOT, unreported, Land Court (Q) 14 November 1997, pp 74-75; see also Brown “Land Acquisition” 4th ed para 4.12; McDonald v The Deputy Federal Commissioner of Land Tax (NSW) (1915) 20 CLR 231, the authority formerly cited the other way, involved an offer by the owner to sell his land.
The limitations generally inherent in the treatment of offers to purchase as evidence of market value were cogently discussed in the following passage from the judgment of Wilcox J, Goold v The Commonwealth [3] -
“Of course, before placing reliance upon a mere offer, a court must
consider carefully the question of its genuineness. The offer might be a sham, designed to prop up an inflated compensation claim or to reduce rates and taxes; in either case without any cost to the offerer. It might be an attempt to manipulate the market for some other ulterior purpose, perhaps a purpose extraneous to the litigation. If the offer was genuine when made, it might not have led to a concluded contract, even if resumption had not intervened. The offer might have been withdrawn. The purchaser might have failed to complete the transaction. Because of matters such as these, even a genuine offer cannot be regarded as direct evidence of value. But it seems to me that, once the court is satisfied about genuineness, an offer by an arm’s length party to purchase the land under valuation is something that the judicial valuer ought to take into account in considering the possibility of a sale at a price different from that indicated by conventional evidence, such as an analysis of comparable sales, or of a hypothetical development, or a calculation of the capitalised value of the rental return. How much weight should be given to such an offer is a question to be determined by reference to the facts of the particular case. In some cases, the appropriate weight may be minimal; in others considerable.”
[3](1993) 42 FCR 51 at 60.
The offer under consideration was contained in a letter to the appellant. It stipulated a purchase price of $1,800,000, a deposit of $100, identified the property to be purchased and contained a provision relating to an exemption under the Land Sales Act 1984. It also provided –
“DEVELOPMENT APPROVALS
The contract is to be conditional on the purchaser obtaining approvals for re-zoning and subdivision by way of a combined application to facilitate the purchaser’s proposed development as indicated in general terms in the precinct plan forming annexure 13 in the site analysis report and to adequately deal with the constraints for future development of the land specified in the site analysis Report. The approvals must be on terms and conditions satisfactory to the purchaser (and, in this regard, the purchaser is to have an absolute discretion) and the approvals must deal with the future development constraints in a manner satisfactory to the purchaser (and, in this regard, the purchaser is also to have an absolute discretion). The time in which these conditions must be satisfied will be 18 months from the contract date. However, if the purchaser or any objector appeals, the purchaser will be entitled to extend this time limit by a further twelve months if the purchaser elects to appeal or to be a party in an objector’s appeal proceedings.
SETTLEMENT
Settlement will be 30 days after the above conditions have been fulfilled.” (emphasis supplied)
Any contract entered into by acceptance of the offer was thus expressed to be conditional on re-zoning and subdivisional approval and was to be on terms and conditions satisfactory to the purchaser. Such satisfaction was to be to the offeror’s “absolute discretion”. Also, it was to be a term of the contract that “the approvals deal with the future development constraints in a manner” acceptable to the offeror in its absolute discretion.
Such a contract is rather akin to an option to purchase on terms extremely beneficial to the offeror. It enables the grantee to tie up the land for up to 30 months for nominal consideration.
The above considerations were not lost on Mr Paino who rejected the offer because of the conditions attaching to it and, particularly, because of his view that the offer amounted to an open ended option which could tie the property up for up to two years. Mr Paino’s approach may be thought to be similar to that of most other persons in his position. There is no evidence that he made or sought a counter-offer or that the offeror made another offer.
Mr Gore argues that the considerations just discussed point to a market value rather below the offer price of $1,800,000. The submission is not without substance, but there was no evidence as to the genuineness of the offer or, generally, as to the circumstances in which it was made. It is impossible to tell whether the offeror was merely exploring the possibility of securing the land at below market value, whether he intended to use the offer to commence a process of negotiation or whether he had some other unrevealed purpose.
In these circumstances, we are unable to see that the member erred in not attributing any greater weight to the offer. Accordingly, this ground of appeal fails.
The learned member erred in his treatment of the disputed Heavey Lex claims for professional fees and related expenses (claims A, C, D, E, F, G, I, L and M), in that:
a.he took too narrow a view of what costs ought reasonably be incurred in the preparation of a claim;
b. his assessment of the quantum of individual fees was arbitrary.
This ground of appeal encompasses claims for the fees of professionals and other consultants engaged in relation to the preparation of the appellant’s claim for compensation. It also encompasses claims by the appellant for time spent in that regard by Mr Paino and a Mr Colin Smith.
The evidence reveals that Mr Paino took an active role in the preparation of the compensation claim but does not disclose that the appellant paid Mr Paino any moneys in addition to the moneys (if any) paid to him for performance of his duties as managing director in respect of that preparatory work. Nor is there any evidence which suggests, let alone attempts to quantify, financial loss flowing to the appellant as a result of Mr Paino’s inability to perform other work for the appellant as a result of time spent by him in relation to the preparation of the claim.
Mr Smith at relevant times was the financial controller of a group of 8 or so companies controlled by the Paino family. The appellant is a member of that group. He deposed to having spent four weeks “performing various tasks” in relation to the compensation claim. He estimated that his time cost his “employer” $50 per hour, including superannuation and leave entitlements. As was the case with Mr Paino, there was no evidence that the appellant had paid Mr Smith any additional moneys as a result of the work done by him in relation to the compensation claim. Nor was there evidence that, having regard to the time spent by Mr Smith in this regard, moneys were lost by the appellant. The identity of his employer was not revealed but there was evidence that his remuneration was paid by Mr Paino and Paino Holdings Pty Ltd, a company which operates a hotel in Sydney.
It is submitted on behalf of the appellant that the member erred in not allowing the claims in respect of Mr Paino and Mr Smith’s work. Mr Gore conceded that there were a number of Queensland cases which denied the recovery of such costs.[4] He submitted though, that the Court should follow instead a line of contrary authority in the United Kingdom and Victoria. The Victorian cases relied on were King v Minister for Planning and Housing,[5] Benton v Road Construction Authority (No 2),[6] Mario Piraino Pty Ltd v Roads Corporation (No 2)[7], and Kozaris v Roads Corporation, [8] all decisions of Gobbo J.
[4]Shann v Commissioner of Water Resources (1987) 11 QLCR 194; Hill v Director-General, Department of Transport (1992) 14 QLCR 205 and Thirty-fourth Philgram Pty Ltd v The Crown (1993) 14 QLCR 13.
[5][1993] 1 VR 159.
[6][1992] 2 VR 495.
[7][1991] 2 VR 534.
[8][1991] 1 VR 237.
Disturbance has long been held to include the costs of preparing a claim for compensation.[9] In Brisbane City Council v Lamont [10], it was said –
“This Court and the Land Court have held that valuation fees and legal fees incurred by a dispossessed owner up to the date of lodgment of the claim in the Court are properly allowable as items of disturbance.”
[9]Murray v Queensland Electricity Generating Board (1984) 10 QLCR 69, 72 (LAC); Merrivale Motel Investments Pty Ltd v Brisbane Exposition and South Bank Redevelopment Authority (1985) 10 QLCR 268, 271 (LAC).
[10](1981) 7 QLCR 120 at 127.
The following definition of disturbance was approved by Callinan J in Boland v Yates Property Corp Pty Ltd,[11] –
“… economic losses which result naturally, reasonably and directly from acquisition. It may include such items as removal expenses, costs of necessary replacement of furniture and fittings, legal and other costs of purchasing (an alternative site) and loss of local good will.”
[11][1999] 74 ALJR 209 at 270.
In Horn v Sunderland Corporation, [12] Scott LJ, after referring to relevant statutory provisions, none of which made express provision for compensation for disturbance, observed –
“These extracts from the only relevant sections show clearly that a claim for disturbance connected with the land taken must be made as part and parcel of the claim for purchase money. It cannot come under the head of compensation for severance or for injurious affection to the other lands of the owner, and the statute knows no tertium quid in the way of compensation. None the less, the owner in a proper case – that is, in a case where he really does incur a loss of money by disturbance due to the taking over and beyond the loss for which he is to be reimbursed in respect of the land taken – is entitled, because it has to do with the land, to have that element of personal loss taken into the reckoning of the fair price of the land, as has been held by the Courts from a very early stage.”
[12][1941] 2 KB 26 at 45.
The authorities discussed earlier make it plain that disturbance is a claim for economic loss. In Horn v Sunderland Corporation, Scott LJ spoke in terms of “a loss of money by disturbance”. In Boland, the reference was to “economic losses”. The concept under consideration is one which relates to compensation for losses sustained by a dispossessed owner. Losses, to be recoverable, must be actually incurred and quantifiable. Are the claims in respect of Mr Smith’s and Mr Paino’s time losses actually incurred and quantifiable?
The claims were rejected by the member in reliance on a substantial line of authority in Queensland to the effect that costs attributable to the time spent by a claimant in preparing a compensation claim are not recoverable. The basis for denying recovery is that the activities of a claimant are “akin to a vendor in the market place seeking to recoup from the purchaser his expenses for the time he spent to negotiate a purchase price”.[13] We doubt the validity of a comparison between a person’s activities in voluntarily marketing his land and the work done by an owner, whose land has been compulsorily acquired, in endeavouring to secure proper compensation.
[13]Hill v Director General, Department of Transport (1992 ) 14 QLCR 205 at 222. See also the discussion in Shann v The Commissioner of Water Resources (1987) 11 QLCR 194 at 224-5.
As this Court has observed[14] -
“… compulsory acquisition cases differ from the normal run of civil cases in that the claimant in the former, unlike a plaintiff or applicant in the latter, has no real choice as to whether to make a claim or not. The mere acquisition by compulsory process gives the claimant a claim to compensation which he or she could hardly be expected to renounce.”
[14]Chief Executive Department of Transport v Stanbroke Pastoral Company Pty Ltd (unreported Land Appeal Court, 18 November 1999).
Another possible basis for denying recovery is to conclude that a claimant suffers no compensable loss merely through diverting to the preparation of the claim time and labour which the claimant would otherwise have devoted to income earning pursuits.
In damages claims there is precedent for the recovery of compensation for work done by a plaintiff or an employee of the plaintiff which did not result in any increase in the plaintiff’s normal overheads. In Price v Commissioner of Highways,[15] a motor vehicle owned and operated by a carrier was damaged in a collision with a vehicle owned by the defendant. The carrier repaired the damaged vehicle himself with the help of an employee. The defendant contended that the plaintiff was not entitled to recover damages for that work. Bray CJ, after referring to the judgments of Lord Halsbury and Lord Brampton in The Mediana[16] said –
“Why should the defendant claim to have that time [the time expended by the plaintiff and the employee in effecting repairs] for nothing? Merely to lose time by the fault of another is surely a detriment sounding in damages even if the lost time would otherwise have been employed in meditation or in playing ducks and drakes. … However, I bear in mind the effect of Lord Halsbury’s words that the actual market hire of a damaged article is only a measure which the jury may, not which they must, adopt in assessing general damages, and I think I should assess the damages under this head in a broad way and not by precise mathematical calculations which might be necessary if actual economic loss had been proved, and make some deduction for its absence.”
[15][1968] SASR 329.
[16]Mediana (Owners) v Comet (Owners); The Mediana [1900] AC 113 at 333.
In Tate & Lyle Food and Distribution Ltd v Greater London Council,[17] the defendant authorities were found liable to the plaintiff for failing to dredge deposits of silt which prevented the effective use by the plaintiff of barge moorings at the plaintiff’s premises. It was held that the plaintiff’s could properly recover damages for the managerial and supervisory expenses directly attributable to the defendants’ failure to dredge. However, the plaintiffs had kept no record of time expended and it was held that, as the damages could not be quantified, they were unable to be recovered.
[17][1982] 1 WLR 149.
The decisions of Gobbo J referred to in paragraph [34] hereof also offer support for the conclusion that the time and labour expended by a claimant or by a claimant’s employer in preparation of the claim may be compensable without proof that the expenditure of such time and labour has caused the claimant’s overheads to be increased or income to be lost.
In Kozaris, the claimant for compensation was a farmer, part of whose farm property had been resumed. He and his son, who were partners in a farming business, claimed $450 for disturbance on the basis that they had spent some 30 hours “in connection with this matter before any proceedings commenced” and had thereby been unable to spend that time in farming activity. Speaking of the claimant, Gobbo J said at 253 –
“He was engaged in the conduct of a busy farm operation and also some house building. Any absence from that was obviously going to mean a loss of productive time. The evidence supports a view that all the time was spent in dealing with the authority but even if some of the time was spent in consulting advisers in relation to the impact of the acquisition and in particular access problems I see no reason in principle why that time lost at a cost should not also be loss that ought to have been foreseen by the authority.”
His Honour then went on to discuss the time spent by the claimant’s son, concluding that the rate claimed of $30 per hour was reasonable and observing “there was evidence that the time spent by the son was at a cost to the partnership and to the father”.
The statutory provision under consideration, s 112B(1) of the Lands Compensation Act 1958 (Vic), relevantly provided –
“The compensation in addition shall include an amount equal to the legal and other costs that will necessarily be incurred by the owner of the land by reason of the acquisition of the land and an amount equal to any direct pecuniary loss caused by the acquisition of the land in respect of which compensation is not otherwise payable under this section.”
In King v Minister for Planning and Housing, Gobbo J considered, inter alia, a claim for disturbance loss for time spent in relation to preparation for a claim for compensation. One of the claimants, a dispossessed land owner based his claim on the number of hours spent by him on relevant work. The other claimant was that person’s secretary. Her claim was for that portion of her time which was spent in connection with the compensation claim. At 184-185, his Honour said –
“Turning then to the present claim for loss attributable to disturbance I reiterated at the outset that time spent by a claimant is capable of being a compensable loss.
…
The claimants expenditure of time and money before then [the point at which the resuming authority had made it clear that a resumption would take place] is, in my opinion, not a loss that was the natural direct and reasonable consequence of the eventual divesting of the interest in 1989. It was remote from it. After that point, however, it can in my view be properly said that the expenditure of time and money by the claimants was a natural direct and reasonable consequence of the divesting of their interest … Therefore I conclude that I should allow the time spent by the claimants as put forward, but only from 19 October 1983.”
His Honour found that the hourly rates claimed for such time was reasonable. In both King and Kozaris, Gobbo J appears to have assumed that a direct pecuniary loss was established if a claimant proved, without more, that: a certain amount of time had been devoted to the preparation of a compensation claim; the amount charged for that time was reasonable; in the case of an employee who did such work, he was an employee of the claimant and was remunerated for the work which he normally did as an employee and, in the case of a self employed claimant, he was income earning and did the work in preparation of the claim instead of his normal work, or perhaps in addition to it.
In Coastal Estates Pty Ltd v Bass Shire Council, [18] Gobbo J rejected a claim for disturbance based on time spent by a director of the claimant company due to lack of evidence as to the payment of remuneration by the claimant to the director and concerning the pecuniary consequences to the claimant of being deprived of the benefit of the director’s time. His Honour observed at 214 –
“The difficulty is that the claimant either quantifies its loss on the basis of a salary payment or by reference to actual consequential loss to it because of the loss of the services of an unpaid managing director. It is a somewhat remote and not a ‘direct’ consequence if the company was merely deprived of an employee’s time but no other loss was otherwise suffered. In the absence of evidence on either basis, I am left to treat Mr Wise’s lost time as being that of the claimant by treating the two as the same.”
[18](1993) 79 LGERA 188.
The learned authors of Compulsory Purchase and Compensation,[19] state –
“Claimants, themselves, are likely to devote considerable time to protecting their interests during the period of dispossession and it would seem that the cost of this time may be a proper item of claim.”
[19]London, Sweet and Maxwell 1995 at 194
The authority cited for this proposition is Smith v Birmingham Corporation[20] and D B Thomas & Son Ltd v Greater London Council.[21] In the former case the resuming authority resumed the land on which the claimant carried on his business. He was allowed sums on account of disturbance described as “Mr Smith’s business time” and “men’s time as claimed (to include labour, overheads and profit)”. The sums were in respect of time spent in finding and acquiring a new premises and in relocating the business. It does not appear from the decision whether there was any argument about whether these costs were properly allowable. But they are different in nature from a claim for claimant’s own time or that of an employee engaged in carrying on an existing business, for preparing a claim for compensation.
[20](1974) 29 P & CR 265.
[21](1992) 262 EG 991.
In D B Thomas & Son, however, the claimant was allowed, by way of disturbance, loss calculated by reference to the time a director of the claimant spent on various matters such as removal of factory operations from the resumed premises to new premises and assembling information to enable the disturbance claim to be prepared. In Tobin v LCC [22] the Lands Tribunal held that the costs incurred by a claimant in formulating his claim are “proper subjects of compensation”. The decision was upheld on appeal.[23]
[22](1957) 882 CR 453.
[23]LCC v Tobin [1959] 1 WLR 354 CA.
In our view, the above authorities and the principles they express strongly suggest that the approach previously taken in this State to claims of the nature of those under consideration may be unduly restrictive.
However, in this case, the appellant’s claims fail at the threshold as there is no evidence that the appellant remunerated Mr Paino at relevant times. The appellant is but one company in a group of 8 companies controlled by Mr Paino and the financial relationship between the companies was unexplained. Whether the appellant suffered the “loss” claimed or whether, if suffered, it fell on another company or other companies in the group is a matter of speculation. There is no warrant for ignoring the existing corporate structure.[24] Mr Smith was remunerated at relevant times for the services he performed by Mr Paino and Paino Holdings Pty Ltd, but the evidence does not suggest that any charge for Mr Smith’s services was made to the appellant or that the appellant was under any legal obligation in relation to the provision of those services to it. Consequently, even if recovery of costs for time spent by a claimant’s employees in preparing the claim is allowable on the broader basis suggested by the English and Victorian decisions, the evidence does not disclose the existence of any relevant compensable loss.
[24]Hadoplane Pty Ltd v Edward RushtonPty Ltd [1996] 1 Qd R 156.
We now turn to the second area covered by this ground of appeal.
The assessment of professional and other consultancy fees
The amounts claimed and the amounts allowed by the member are set out in the following table.
Claim No. Item Payee Claimed Amount Assessment Amount A Solicitors Connor O’Meara McConnaghy (COMM) $81,893.98 $30,000.00 C Valuers John Robertson Taylor Byrne Keith Brady 54,084.50
455.00
3,482.3828,848.70
455.00
3,000.00D Accountants Deloittes Pritchard Adams 63,965.00
31,571.83
25,000
nil
E Architects and Builders McKerrell Lynch Obserkey &Jarmey
JB Design James Architects James Architects19,105.00
2,300.00
310.00
2,269.00
85.008,000.00
2,300.00
310.00(
( 800.00F Tourism Analyst Bramley Tourism Analysts 21,889.95 18,364.95 G Modelling
Photography ArtistsPeter Sands
Architectural Models
Architectural Art
Australia
Studio 1 Photography3,635.60
1,622.00
1,000.00
nil
nil
nil
I Town Planning Buckley Vann Planning Far North 14,291.80
700.00
9,000.00
nil
L Landscaping Pawsey & Prowse 25,995.28 4,925 M Property Consultants JLW Transact 18,700.00 nil
On the hearing, Mr Gore did not press claims F – M inclusive. In claim C, the claim in respect of John Robertson was the only one pressed and in claim E, only the McKerrell Lynch claim was pressed.
It was submitted that the member erred in assessing disturbance in two ways –
(a) by applying the wrong test for recovery; and
(b) by making an arbitrary assessment of the quantum of the subject fees.
The erroneous tests said to be applied by the learned member were –
“1.… the costs should … reflect such reasonable, economical and straightforward preparation and presentation as is necessary to properly present the owner’s case to the Board.
2.The owner should not be allowed the cost of unnecessary work or other expenses or costs incurred through over-caution or over preparation.”
The above quotation is incomplete. Paragraph 1 in the reasons for judgment, from which the words quoted were extracted, commences with the sentence –
“Full costs of and incidental to an application properly made pursuant to the Act by the owner should be paid by the expropriating authority.”
The reasons, in another paragraph, stated –
“3. The owner should not be allowed costs which are the result of misconduct, omission or neglect by the owner.”
The three paragraphs were introduced by the words – “Four principles were stated in Amdue [a Canadian case].[25] After stating the four principles, the member said – “With appropriate modification to reflect the Queensland context, these principles are, I think applicable here”.
[25]Amdue Holdings Ltd et al v City of Calgary (No. 2) (1976) 11 LCR 370.
It is not clear what “appropriate modification” was thought to be necessary by the member. He had earlier found –
“The test of reasonableness is not one which, in my view, takes into account any expenditure on such fees beyond what is reasonably necessary to formulate the claim. A level of preparation undertaken because of a real or perceived view of the attitude of the resuming authority or because of the level of concern and anxiety of the claimant is not a reasonable standard in my view. The adoption of such a standard goes beyond the rationale for this Court awarding compensation for professional fees as was expressed in quite simple and direct language by the Land Appeal Court in Merivale:
‘Dispossessed owners are entitled to seek professional advice and assistance in order to comply with the requirements of the Acquisition of Land Act insofar as lodging claims for compensation are concerned.’”
The member then went on to observe that his conclusions found some support in the earlier cases including Amdue. The “test” which the appellants made the focus of their challenge to the member’s reasons thus does not appear to be the test he applied. Rather, it was a judicial pronouncement considered by the member to support the principles he found applicable. It was submitted also that the member had “incorrectly interpreted the Canadian cases” discussed in his reasons. We doubt the validity of this criticism but do not propose to spend time discussing it further as it raises a false issue. What is relevant to the determination of this appeal is the identification of the test actually applied by the member and the determination of its correctness.
Earlier in his reasons[26], when discussing applicable principles, the member said –
“Expenditure on professional fees will be justified, in my opinion, if the decision to incur the expense would have been supported by a hypothetical prudent solicitor or other relevant person. That is the standard that I intend to apply.”
He then said that any such standard should not be affected by hindsight.[27]
[26]At 211.
[27]At 211.
Speaking of the care which may be lavished on the preparation of a claim, he said ‑[28]
“The real question is whether the level of care was such that it went beyond what is reasonable for the purpose of the formulation of the claim for compensation.”
[28]At 212.
Referring to submissions by the appellants to the effect that a resuming authority must take a claimant as they find him and thus must bear additional costs occasioned by a claimant’s unusually pedantic compulsive or meddlesome disposition, the member said –[29]
“I do not agree. I think that the approach must be one where the reasonable costs be allowed, having regard to the objective standards I described earlier in these reasons.”
[29]At 216.
The starting point for the determination of costs recoverable as an item of disturbance is the determination of whether the costs claimed are costs incurred in the preparation and lodgment of the claim. But are any costs incurred by the claimant allowable no matter how extravagant or unreasonable? The concept of reasonableness has long been imported into the assessment of compensation claims. In Harvey v Crawley Development Corporation.[30] The principle was expressed as follows –
“…any loss sustained by a dispossessed owner … which flows from a compulsory acquisition may properly be regarded as the subject of compensation for disturbance, provided, first, that it is not too remote and, secondly, that it is the natural and reasonable consequence of the dispossession of the owner.”
As may be seen from paragraphs [36] and [38] above, disturbance is defined in terms of “economic losses which result naturally, reasonably and directly from acquisition”.
[30][1957] 1 QB 485, 494.
Mr Gore submitted that, in Harvey, the test of reasonableness was used in the context of causation and not as a determinant of the level of fees able to be claimed. That may well be so but Harvey does not support the view that once it is accepted that professional or other fees may be claimed in and about the making of a claim for compensation, there is no limit to the work which may be done or the fees able to be charged and recovered.
In Director of Building and Landsv Shun Fung Ironworks Ltd,[31] Lord Nicholls of Birkenhead, who delivered the judgment of the judicial committee on the question under consideration, expressed the opinion that unreasonable expenditure by a claimant could not be characterised as expenditure caused by the resumption. His Lordship said[32] –
“The application of the general principle of fair and adequate compensation bristles with problems. As useful guidelines there are three conditions which must be satisfied. First, it goes without saying that a prerequisite to an award of compensation is that there must be a causal connection between the resumption or acquisition and the loss in question. It will be necessary to return to this prerequisite when considering the third issue arising on this appeal.
…
Fairness requires that claims for compensation should satisfy a further, third condition in all cases. The law expects those who claim recompense to behave reasonably. If a reasonable person in the position of the claimant would have taken steps to eliminate or reduce the loss, and the claimant failed to do so, he cannot fairly expect to be compensated for the loss or the unreasonable part of it. Likewise if a reasonable person in the position of the claimant would not have incurred, or would not incur, the expenditure being claimed, fairness does not require that the authority should be responsible for such expenditure. Expressed in other words, losses or expenditure incurred unreasonably cannot sensibly be said to be caused by, or be the consequence of, or be due to the resumption.”
[31][1995] 2 AC 111.
[32]At 126.
The member quoted the above passage from Shun Fung and made express reference to it in discussing the level of fees charged by the consultants.
The concept of reasonableness is also one which permeates the law relating to damages. For example, where a plaintiff claims the cost of the work necessary to put him or his property into his or its pre-injury condition, the work must not merely be necessary for that purpose but “it must be a reasonable course to adopt” to do that work.[33] The costs of doing the work must be reasonable also.[34] Reasonable steps must be taken in mitigation of a plaintiff’s loss.[35]
[33]Bellgrove v Eldridge (1954) 90 CLR 613 at 618. See also Halsbury’s Laws of England 4th ed vol 12, par 1163.
[34]Dodd Properties (Kent) Ltd & Anor v Canterbury City Council & Ors [1980] 1 All ER 928.
[35]British Westinghouse Electric & Manufacturing Co Ltd v Underground Electric Railways Co of London Ltd [1912] AC 673.
In our view, the authorities support the proposition that outgoings in respect of the preparation of a compensation claim to be recoverable must be reasonable. What is reasonable needs to be determined, not by reference to some principle analogous to the “egg shell skull” principle, as Mr Gore submitted, but by application of an objective standard or standards. That conclusion is supported by the authorities already discussed in the related areas of damages and compensation for compulsory acquisition and by the decision of the Court of Appeal in London County Council v Tobin.[36] In that case the Court proceeded on the assumption that, to be recoverable, the costs of preparing a claim needed to be both properly incurred and reasonable. In our view a claimant can recover for work of a nature and within the scope of that which a reasonable person in the position of the claimant would have done or caused to be done. The fees and charges for the work must also be reasonable.
[36][1959] 1 WLR 354.
In our view the tests ultimately formulated by the member, in their broad effect, were consistent with those just expressed.
The second limb of the appellant’s argument was that the member’s reductions to fees claimed were arbitrary. It was submitted –
“For example, while the member gave qualitative reasons for reducing the solicitor’s fees from over $80,000 to $30,000, there was no identified justification for selecting an amount of $30,000 rather than some other figure.
However, the main criticism of the member’s treatment of the professional fees claims is his adoption of an incorrect test of the amounts claimed or established by the evidence and, upon adoption of the correct test, should have been allowed.”
In oral submissions, the argument that the member had used the incorrect test was developed at some length but we were not addressed on the other limb of the appellant’s argument. Nor were we taken to evidence with a view to showing that the apportionments effected by the member worked to the disadvantage of the appellants. Consequently, this Court is not in a position to effect an apportionment in lieu of the member’s. However, the argument advanced in the outline was not resiled from and it seems to us to have substance in some instances.
The member gave extensive reasons in support of his conclusion that fees claimed were unreasonable in various respects. For example, he pointed to:
· the use of consultants who checked (“shadowed”) the work done by other consultants;
· the holding of “numerous conferences” attended by consultants at which the work of “the various consultants (was) discussed”;
· the daily contact between Mr Paino and his solicitors.
· the overuse of consultants including, inter alia, the procuring of Mr Bramley to conduct enquiries in South America, Italy and the United Kingdom.
· The preparation of reports which were suitable for and designed for the purposes of being tendered in evidence and thus went beyond what was necessary to support the formulation of the compensation claim.
We now turn to a consideration of the separate areas of claim.
Solicitor’s fees
The member observed that the solicitor’s fees were particularly amenable to the criticism of “over preparation” having regard to the very extensive contact between the solicitors and Mr Paino and their central involvement in the claims formulation “project”. The member then discussed three relatively minor heads of claim, made adjustments to them and concluded –
“Doing the best I can, I will allow an amount of $30,000 for solicitor’s fees.”
The reasons explain why the member regarded the level of solicitor’s fees as excessive but provide no explanation of how he reached the assessment of $30,000. In our view, the member erred in failing to explain how that figure was determined.
A court from which an appeal lies must state adequate reasons for its decision[37] so as to –
[37]Sun Alliance Insurance Ltd v Massoud [1989] VR 8 at 18, 19; Pettitt v Dunkley [1971] 1 NSWLR 376 at 388; Soulemezis v Dudley (Holdings) Pty Ltd (1987) 10 NSWLR 247 at 270, 279.
(a) enable an appeal court to ascertain the reasoning upon which the decision is based; and
(b) allow justice to be seen to be done.
Reasons sufficient to meet the above requirements do not need to be lengthy or elaborate but “.. it is necessary that the essential ground or grounds upon which the decision rests should be articulated”.[38]
[38]Soulemezis at 280 per McHugh JA.
In Soulemezis, Mahoney JA said -[39]
“And, in my opinion, it will ordinarily be sufficient if – to adapt the formula used in a different part of the law … by his reasons the judge apprises the parties of the broad outline and constituent facts of the reasoning on which he has acted.”
[39]At 273.
Samuels JA in Strbak v Newton [40] expressed the principle as follows –
“What is necessary, it seems to me, is a basic explanation of the fundamental reasons which led the judge to his conclusion. There is no requirement, however, that the reasons must incorporate an extended intellectual dissertation upon the claim of reasoning which authorities the judgment which is given.”
[40]CA NSW. 18 July 1989.
In Yates Property Corporation Pty Ltd (In liq) v Darling Harbour Authority,[41] the necessity for the tribunal of fact “to give some indication of the basis of his decision” was accepted by Handley JA.[42]
[41](1991) 24 NSWLR 156.
[42]At 189.
Some determinations involve a high degree of subjectivity and in such cases there will be a decreased need to explain the basis for the decision. In Yates Property Corporation Pty Ltd (In Liq) v Darling Harbour Authority, it was held that a judge assessing compensation by reference to the value of land “is not obliged to explain each step in his reasoning, having regard to the larger scope for intuition, evaluation, judicial impression and guesswork in such decisions”. See also Cypressvale Pty Ltd v Retail Shop Lease Tribunal.[43]
[43][1996] 2 Qd R 462 at 484.
We do not suggest that a tribunal, in the position of the member, must resolve its task by precise mathematical analysis. To a degree, members of the Land Court are appointed by virtue of their specialist skill or experience. That skill and experience may be used in the making of value judgments involving the process of estimation and impression. That, however, does not relieve Land Court members from the obligation of showing a basis of reasoning sufficient to indicate why one sum is selected in respect of a head of disturbance rather than another.
In Gamser v The Nominal Defendant,[44] Gibbs J said –
“But the assessment by a judge must be a process of methodical consideration, not one of ungoverned intuition. It will often – indeed usually, be convenient for the judge to reveal the details of his reasoning, if not the amounts forming the main components of the global sum, so that if he has fallen into error, that may be revealed and corrected on appeal. I have read what my brother Stephen has said on this subject in his judgment in the present case, and would respectfully express my agreement with his remarks.”
[44](1977) 136 CLR 145 at 148.
Stephen J said[45] –
“So long as compensation takes the form of a lump sum award, arrived at by an evaluation of evidence and by processes of reasoning, there must necessarily be involved some assessment of each item of detriment and some process of computation in order to arrive at the ultimate sum to be awarded. There will very often be detriments suffered or risks of detriment to which a party has been exposed which are incapable of precise quantification. In such cases estimates must suffice and the notion that some false impression of precise mathematical accuracy may be given can readily be dispelled by a few words of explanation. There is no occasion to abandon altogether the task of explaining the components of the award.”
[45]At 149-150.
Those observations apply with more force where, as is the case here, an apportionment must be made between work and charges which are allowable on the one hand and ones which are not on the other.
Accountants – Deloittes and Pritchard Adams
The member rejected the claim for work done by Mr Cronin of Pritchard Adams in its entirety. Mr Cronin assisted Mr Paino in the preparation of correspondence, checked and reviewed the work of Deloittes and other consultants and assisted Mr Paino in his understanding of them. He also acted as a “sounding board” in connection with the work of the consultants. The member found that Mr Cronin’s costs could not be regarded as “the reasonable and natural consequence” of the resumption, but arose by virtue of the independent decision of the claimant to conduct his affairs in a particular way”. Implicitly, he found the charging of Mr Cronin’s fees unreasonable. In our view, the learned member’s approach in this regard was correct. It is not reasonable for an entity with a director and an employee experienced in business matters to claim for the use of a double tier of experts in the preparation of a compensation claim, particularly as the solicitors were already fulfilling something of a co-ordinating and checking role.
Deloittes carried out a feasibility study and did work in that regard. Their fees were $63,925. The member, after a brief review of the scope of the work conducted by Deloittes, referred to an opinion expressed by another accountant that the overall level of their fees “did not appear to be unreasonable for the work produced”. He then said –
“That may be so, however, I conclude that there was a large component of the work carried out by Messrs Johnson and Gillman which went beyond the supply of a report for the purpose of formulating a claim and extended to the development of a case for the justification of the claim. I employ a broad-axe approach in discounting the claimed amount of (sic) $25,000.”
Having regard to the foregoing discussion of principle, we consider that it was incumbent on the member to identify those elements of the fees which were disallowed in full, those which were disallowed in part, and to explain the basis for the apportionment where fees were disallowed in part. In the absence of such elaboration, it is not possible for the parties to form an appreciation of the justness of the award or for an appellate court to assess its appropriateness.
For the reasons given under the heading “solicitors’ fees”, the member’s reasons were inadequate in respect of the claim for Deloitte’s fees.
We do not intend to convey that it was necessary for the member to effect a precise apportionment of every item of work in the claims under consideration. Compensation may be assessed by reasonable estimation where precision cannot be expected. In the analogous field of damages, where a loss has been suffered, the Court must do its best to arrive at a figure for damages, even if there is a degree of speculation or even guesswork involved.[46] Such a jury assessment though, is possible only where there is sufficient evidence available to permit the making of the assessment. The question of the appropriate level of fees is not one which, necessarily, must be left to the opinion or judgment of the court, acting at large, as is the case in the assessment of damages for personal injuries.[47]
[46]Chaplin v Hicks [1911] 2 KB 786; Fink v Fink (1946) 74 CLR 127 and Enzed Holdings Ltd v Wynthea Pty Ltd (1984) 4 FCR 450.
[47]Ted Brown Quarries Pty Ltd v General Quarries (Gilston) Pty Ltd (1977) 16 ALR 23 at 37.
It might be that on the material presented, the member was able to do no more than form a conclusion that a particular percentage of the work carried out by the accountants was referable to the preparation and formulation of the claim. But, if that were the case, the appropriate course was to identify such a percentage and the reasoning by which it had been set. The difficulty with the member’s approach is that it gives little inkling of the process by which the figure of $25,000 was reached.
Valuer’s fees
In this case, the member set out the relevant itemised invoices of Mr Robertson. The member accepted Mr Robertson’s hourly charge out rate, but stated that he would not be allowing the following items -
· his work as a result of his role in the claim “project”;
· preparation of a model;
· perusal of documents obtained under freedom of information legislation;
· a separate hourly rate for inspection of the land in addition to the fee charged for the valuation.
We can see no error in the member’s conclusions in this regard.
The member then, following the numerology of Mr Robertson’s itemised account, set out the sums he was prepared to allow in respect of each item, observing –
“In employing the summary figures I provided earlier under this heading and in determining, as best I can, that which would appear to be a reasonable level of fees for formulation of the claim, I will allow these amounts.”
The member noted that he had allowed disbursements in full. Again, it is not possible to ascertain how the member determined the “reasonable level of fees” and consequently, how he arrived at his apportionment. We conclude that the reasons in this respect are inadequate.
McKerrell Lynch
McKerrell Lynch were retained to prepare an architectural report on the appellant’s proposed Gemini Resort. They also provided an assessment of “proposed landscaping and recreational facilities and whether they ‘added value’ to the proposed resort” and advice on accommodation mixes. The member concluded that McKerrell Lynch’s professional advice was appropriate in the preparation of the claim but that “a large part of the resource expended on Mr Lynch’s services was devoted towards preparation for trial”. He used what he described as “a broad-axe approach to the matter” and reduced his fees from $19,105 to $8,000. On the basis discussed earlier, the reasons are inadequate.
Claim for maintenance of the palms
Mr Paino claimed $143,391 for maintaining the palms which remained on the resumed land after resumption. As the member pointed out, ownership of the palms passed to the respondent at the date of the taking of the land (s 12(1)(a) Acquisition of Land Act). Compensation was assessed on the basis that the palms became the property of the respondent. It seems that the trees were kept alive by means of an irrigation system which straddled the boundaries of the resumed land and the retained land and which was under the control of the appellants. The alteration of the appellants’ irrigation system would have cost a considerable sum. Any work done and moneys expended by Mr Paino in the maintenance of the palms was for the benefit of the respondent (absent some agreement between the respondent and Mr Paino as to the transfer of property in the palms). Mr Paino or the appellant may thus have a claim against the respondent for work done or services rendered at the request of the respondent or a claim based on the principles of unjust enrichment.
However, we agree with the member’s conclusions that any such claim is not a claim for compensation. Mr Paino was compensated for loss of the palms. The further expenditure is too remote from the resumption to be recoverable and was not the natural and reasonable consequence of the resumption.[48]
[48]Harvey v Crawley Development Corporation [1957] 1 QB 485 at 494.
The learned member erred in reducing the quantum of the Paino claim for a new irrigation system (claim A), in that:
he relied upon the respondent being bound in honour but perhaps not in law to give notice of any change in the current arrangement;(a)
his assessment of $5,000 was arbitrary.(b)
The evidence was that modification of the irrigation system in order to permit the appellant to continue to water the palms on the balance parcel without using the part of the irrigation system on the resumed land would cost $24,500. The respondents contended that as the appellant’s land, both before and after resumption, was not valued on the basis of use as a palm plantation but on the basis of its highest and best use, no allowance should be made for disturbance in the guise of an alteration to the new irrigation system. The respondent argued at first instance that as no works would be carried out on the resumed land for a number of years there would be no need to construct a new irrigation system at all, as the palms would be sold and the balance land subdivided by the time the respondent’s activities were likely to interfere with the irrigation system. The member accepted the submission purporting to apply the Milledge principle.[49]
[49]The Commonwealth v Milledge (1953) 90 CLR 157.
The member concluded that there was an agreement between the appellants and the respondent under which the respondent agreed to give four weeks notice of any works on the resumed land which would have a potential to “impact on the (watering) system”. He also accepted that the arrangement between the parties would probably remain on foot for about 10 years and that suitable arrangements should be made within that time for disposal of the palms on the resumed land. He concluded though that some modification to the existing irrigation system would be required and allowed $5,000.
In our view, the appellants had a prima facie entitlement to a sum which would enable them to make appropriate modification to the existing watering system. The palm trees on the balance parcels were of the nature of stock in trade. The learned member had found that, at the date of resumption, the palms possessed value to the owner of $60,000. Had it not been for the arrangement between the parties the appellants, potentially, would have lost the ability to make use of the existing watering system. However, the evidence disclosed that it was unlikely that the appellant would ever need to do more than modify it. The claim was based on a new watering system but there was no evidence as to the estimated cost of modification in terms of the arrangement between the parties. The member took the view that damage had been incurred by the appellants and, doing the best he could, allowed the amount of $5,000 for the potential modification. It is true that the assessment was an arbitrary one but there is nothing to suggest it was unreasonable or inequitable in the circumstances.
The appeal on this ground is rejected.
The learned member erred inrejecting the Paino fencing claim (claim D), in that he wrongly concluded that any fencing along the boundaries of the resumed land should be left to individual land holders following development of single unit residential lots.
Mr Paino claimed $35,078.45 for the construction of the galvanised welded mesh fence on galvanised steel posts along the boundary between the resumed land and the retained land over a length of 1,357 metres. The fence had not been constructed at the date of the hearing at first instance, but Mr Paino said he intended to construct one. The member found that no fence would be needed for the balance parcel to be developed in accordance with its highest and best use of single unit residential lots. We were not taken to any evidence which might tend to cast doubt on the member’s findings which, on their face, seem reasonable. Accordingly, we reject this ground of appeal.
The Respondent’s cross-appeal
The respondent contended that the member erred in concluding that the highest and best use of the 8.461 hectares of the appellant’s land to the west of the resumed land (“parcel A”), after resumption, was not medium density residential. It was submitted that the member, having concluded that the highest and best use of parcel A prior to resumption was medium density residential, should have reached the same conclusion when considering the subject land after resumption. It was submitted that although there was evidence that parcel A “was constrained in the post-resumption situation, there was no evidence from any of the experts called by either side that this land could not be used for medium density residential purposes.” It was further submitted that the learned member’s conclusions as to the highest and best use of parcel A post-resumption was not open on the evidence.
In the alternative, it was argued that if the member was correct in determining that the highest and best use of parcel A post-resumption was that of single lot residential land, the member erred in not finding that the highest and best use of some 6.057 ha of parcel B was medium density residential.
In their valuation reports, Mr Gould for the respondent and Mr Crawford for the claimant each valued the balance parcel after resumption on the basis that 6.057 ha of parcel A was either zoned or had the potential to be rezoned to medium density residential. Their conclusions in this regard were supported by the evidence of the Town Planners called to give evidence, and no town planner was challenged in relation to the point.
Mr Warren, another valuer called by the claimant, did not value the subject land on a post resumption basis but accepted, in cross-examination, that medium density residential usage on parcel A after resumption would have been appropriate.
Mr Gould was fairly clearly of the view that if, for some reason, medium density residential development did not take place on parcel A, it could be accommodated on parcel B. That view was consistent with an unchallenged opinion expressed by Mr Challinor, the claimant’s town planner.
Mr Gould, in the member’s opinion, expressed the view that the highest and best use of parcel A after resumption was single lot residential. In the course of Mr Gould’s cross‑examination, this exchange occurred -
“Q Do you think it’s medium density in the after case or don’t you? - - Well are you talking about my assessment of compensation or my commercial advice in the real world?
Q The latter ? - - My commercial advice is no, I would think there’s possibly more reasons in the after to push it towards medium density but I think it would be high risk …
If I was advising a valued client of mine at the relevant date, I would not have included the medium density residential component at the higher value.”
In Mr Gould’s report, he stated –
“At the relevant date I certainly had doubts about the need for this much medium density land, and I would most certainly have taken a negative view of it had I been valuing the property for mortgage security or some other purpose … For the purpose of assessing compensation, I believe that I should resolve a reasonable doubt in favour of the land owner and I intend to assess the highest and best use of all the 6.057 ha of [parcel 1] as medium density residential.”
The member formed a very favourable view of Mr Gould’s expertise and local knowledge and concluded that Mr Gould was acting on a mistaken legal premise in valuing parcel A on the basis of a medium density use in the after case. The evidence to which reference has just been made, if considered in isolation, would provide sufficient foundation for the member’s conclusion.
Having carefully considered the totality of Mr Gould's evidence it appears to us that he attempted, as he was required to do, to resolve doubts in favour of the claimant in his assessment of loss consequent upon the resumption. He was able to demonstrate, not surprisingly, that the loss in value was greater if parcel 1 before resumption, and parcel A after resumption were valued as having a highest and best use for medium density residential rather than for low density residential in each case. It is clear that he was convinced that, in the absence of any consequence of the resumption operating to destroy medium density use potential, he should take a consistent highest and best use valuation approach in both the before and after assessments. No such consequence was identified by him or by the appellant’s valuer.
Mr Gould admitted in cross-examination that in reality his after valuation was not market related, and too high, due to the valuation being based on a highest and best use of medium density residential. Not surprisingly, his cross-examination was then directed to that admission and the lower valuation he would have placed on parcel A had he valued it as low density residential. Obviously, the lower the after resumption valuation, the greater the loss - if the before valuation remained undisturbed.
As we have observed, Mr Gould's oral evidence was to the effect that there was a clear need to take a consistent approach, because the potential use of the land was comparable both before and after the resumption. That indicates to us that, if he was wrong in accepting that, for compensation assessment purposes, the highest and best use of parcel A after resumption was not for medium density residential but single lot density residential, then the highest and best use of parcel I before resumption should have been for single lot density residential also.
Instead, the member reasoned as follows:[50]
“Had Mr Gould placed a single lot residential valuation on that western land before resumption because he thought such a highest and best use was appropriate given ‘commercial reality’ as his guide, he would have still held the opinion that there was a ‘reasonable doubt’, only, of MDR development not comprising the highest and best use of that land and I must assume would have expressed that view in evidence. In such circumstances I would have had no hesitation in leaning in favour of the claimants and resolving the doubt towards adoption of an MDR usage for that parcel.”
[50]At 164.
The end result of the member's deliberations was that he resolved an "assumption" as to Mr Gould's degree of doubt of highest use potential in favour of the claimant in the before resumption scenario, and then used Mr Gould's oral admission as to the commercial reality of lower use potential in the after resumption scenario to conclude that Mr Gould accepted a different before and after potential use. If the member's approach was wrong, then an element of “double dipping” would result.
It is difficult to condone Mr Gould’s valuation approach if it was his opinion that medium density residential potential was not present on part of the subject land before resumption. It was his task in a before and after resumption valuation exercise to find the true market value of the land based on its highest and best use potential. If there were negative factors influencing value, such as lack of demand, or development constraints, it would be expected that those factors would be identified in the level of market value assessments, both before and after the resumption. If potential for a particular highest and best use before resumption was not destroyed as a consequence of the resumption, but affected in some way either in a positive or negative manner, then that enhancing or deleterious effect needed to be identified in the after resumption valuation. It was clearly Mr Gould's opinion that the resumption in this case did not destroy potential for medium density residential use on some part of the subject land. It was his written valuation opinion that the medium density residential potential remained with parcel A albeit with some increased constraints compared to the before scenario. Indeed, it was his verbal evidence, earlier quoted, at para [113], that he thought "there's possibly more reasons in the after to push it towards medium density" although he thought it would be "high risk". In his oral evidence, he also revealed the opinion that if, for any reason, the medium density potential attributed to parcel 1 before resumption had been lost to parcel A after resumption, then that potential would not be lost to the overall balance area, but transferred to the eastern severance. That would have had the effect of increasing the after resumption valuation of the eastern severance, whilst decreasing the value of parcel A.
It may have been a means to an end which led Mr Gould to restrict his medium density residential valuation considerations to parcels 1 and A in the before and after resumption scenarios, if it was his genuinely held view that his after resumption valuation of parcel A should have been based on single lot residential use. However, there is no expert evidence including town planning evidence, which would indicate that medium density residential potential had been destroyed on the subject land or that such potential did not remain within parcel A.
We are persuaded that if medium density residential potential existed on part of the subject land before resumption as was found by the member, then it remained in some form after resumption. We are not in a position to provide an assessment in substitution for that arrived at by the member, but we see no reason, for ease of reconsideration, why the continued existence of that potential should not be restricted to parcel A in the after valuation approach.
We are fortified in that conclusion by the fact that this approach accords with the case presented by both sides at first instance. We conclude also that the learned member erred in finding that the medium density residential potential which existed before resumption did not continue to exist after resumption. As we have pointed out, that conclusion was not supported by a consideration of Mr Gould’s evidence as a whole or by the other valuation and town planning evidence.
Orders
In order to give effect to the above findings, we make the following orders –
(a) The cross-appeal of the respondent Chief Executive Department of Transport is allowed and the determinations of compensation at first instance in respect of loss of land and palms in favour of the appellant Heavey Lex No 64 Pty Ltd are set aside.
(b) The determination of disturbance compensation payable to the appellant Heavey Lex No 64 Pty Ltd is set aside to the extent stated in these reasons.
(c) The matter is remitted to the learned member for further consideration and determination in the light of these reasons.
Muir J
Justice of the Supreme Court
R E Wenck
Member of the Land Court
N G Divett
Member of the Land Court
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