Hosken, Ian John v Telstra Pty Ltd
[1998] FCA 326
•2 APRIL 1998
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 205 of 1994
BETWEEN:
IAN JOHN HOSKEN
First ApplicantBERENICE ANN HOSKEN
Second ApplicantAND:
TELSTRA PTY LTD (ACN 051 775 556)
RespondentJUDGE:
RYAN J
DATE OF ORDER:
2 APRIL 1998
WHERE MADE:
MELBOURNE
MINUTES OF ORDER
THE COURT ORDERS:
That the respondent pay to the applicants the sum of $179,803.18.
That the application be adjourned to a date to be fixed for the taking of submissions on interest and costs.
Note:Settlement and entry of orders are dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 205 of 1994
BETWEEN:
IAN JOHN HOSKEN
First ApplicantBERENICE ANN HOSKEN
Second ApplicantAND:
TELSTRA PTY LTD (ACN 051 775 556)
Respondent
JUDGE:
RYAN J
DATE:
2 APRIL 1998
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
This action is brought by way of a claim for compensation pursuant to s 134 of the Telecommunications Act 1981 and at common law for damages in trespass or negligence. Section 134 provides, so far as is relevant:
(1)In exercising its powers under this Division, a carrier must take all reasonable steps to ensure that it causes as little detriment and inconvenience, and does as little damage, as is practicable.
(2)If a person suffers financial loss or damage because of anything done by a carrier under section 128, 129 or 131 in relation to any property owned by the person or in which the person has an interest, there is payable to the person by the carrier such reasonable amount of compensation as is agreed between them or, failing agreement, as is determined by a court of competent jurisdiction.
...
(4)In this section:
“court of competent jurisdiction”, in relation to property, means:
(a)the Federal Court;
Sections 128, 129 and 131 respectively confer powers on a carrier to enter land for purposes of inspection, to construct or attach a facility on to land and carry out necessary ancillary works, and alter, remove, replace or maintain a facility so constructed on, or attached to, land.
THE FACTUAL BACKGROUND
The first applicant has, since 1989, owned a property near Finley in New South Wales known as “Glen Cluan” comprising 283.6 hectares or 702 acres. Since 1961 he has, in partnership with his wife, the second applicant, conducted a mixed farming business on the property. The history of the farming operations reveals that the applicants have traditionally derived income first from cattle and sheep raised for sale to abattoirs, secondly from variously cropping wheat, barley, sorghum, rice and, more recently, oaten hay, and thirdly from the sale of pasture hay.
In 1978, Mr Hosken suffered a head injury in a serious motor cycle accident. Those injuries have affected his ability to readjust his farming techniques or the staples of the business which he and his wife have conducted.
In 1987, the applicants were persuaded to concentrate on oaten hay as their staple crop. They persevered with that crop for some years but encountered difficulty in obtaining prompt payment from their principal purchasers. In 1991, Mr Cal Wilson became established as a reliable purchaser of oaten hay for export and entered into a contract to buy the whole of the applicants’ oaten hay crop for 1992.
In about December 1991, employees or agents of the respondent, (“Telstra”) were observed carrying out repairs to a telephone line near the western boundary of the applicants’ property which abuts Walkers Road. It seems that, in the course of the work, temporary lines were laid inside the boundary of the applicants’ property for a distance of at least 465 metres along the whole of the western edge of a 21 hectare or 52 acre paddock designated as “Paddock 2”. There were two lines each of a single strand of thin copper wire encased in an outer coating of plastic. After the work had been completed, the temporary lines were not removed and the applicants were not told of their existence.
Consequently, in March 1992 when Mr Hosken came to prepare Paddock 2 for the planting of part of his oaten hay crop, the wire was broken up and distributed in the course of disc ploughing, scarifying and harrowing. Thereafter, the crop was sown and it was not until July 1992 when the crop of oaten hay was approximately five inches high, that Mr Hosken, in the course of looking for weeds, detected pieces of wire in Paddock 2. He thereupon contacted Mr Douglass of Telstra who confirmed that the wire represented remnants of the temporary line which had been laid in December 1991.
In December 1992 Telstra conceded that the temporary lines had extended into Paddocks 1 and 3. The applicants were also told that the wire was not degradable in the ground and would, in effect, remain indefinitely. Subsequently, further lengths of wire were found, some of them hundreds of metres from the western boundary of Paddock 2.
By letter dated 5 July 1992, Mr Hosken wrote to Mr Douglass of Telstra recounting the discovery of the wire and continuing:
In March this year I commenced preparing the paddock to sow oats to fulfil a contract I have to supply hay to Japan. This has been a major part of my income for some years. Initially I was not aware that your Telecom staff had left behind in the dry grass considerable amounts of plastic covered wire. Consequently the scarifier, harrows and combine have chopped and spread the wire over the paddock. These implements are tyned and the wire has wrapped around the tynes, worn through by the friction of the earth passing through, broken into pieces and spread over the paddock. Having walked the paddock on two occasions and again today with your Mr Douglass I am appalled how far the wire has spread and am utterly at a loss how I can be sure no pieces will be picked up as the crop is being mowed, raked or baled. I know my crop will be rejected if a tiny piece of wire is found in the hay. Recently a shipment of hay to Japan was rejected and returned to Australia because of the finding of a clod of earth in a bale. I have budgeted on this paddock yielding a return of $20,000. I am already in debt for fuel, seed, super, labour and machinery costs. I urgently need your assurance that all wire will be off that paddock.
By October 1992, an inspection of the crop was carried out by Mr Plumbe, the Field Manager for Telstra, who advised that he had been informed by Cal Wilson that he would not purchase the current crop because of the risk of contamination by wire. Thus, on 8 October 1992 Mr Hosken wrote to Mr Plumbe a letter which included these passages:
You stated you had spoken to Mr Rod and Mr Cal Wilson in regard to their purchase of the oats for Japanese export. Yesterday I spoke to both Wilsons and have now been told they will not accept that crop for export because of the risk of contamination with wire. They also require written confirmation from your Department that wire has not been left in other paddocks where I also have oats for export this year. They have also stated that unless the paddock or paddocks can be guaranteed free of this copper wire they cannot take the risk of buying the oats in following years.
I am devastated - I have budgeted on 30 days’ payment from the time of delivery to Wilsons. I estimate the crop will be ready to harvest in approx. two weeks.
Please tell me what action you plan to take as soon as possible because I will be urgently needing that income.
That letter elicited this reply dated 12 October 1992 from Mr Deadman, Administration Manager, Riverina Murray District for Telstra:
With regards written confirmation that Telecom wire has not been left in paddocks owned by you, these paddocks being one opposite PineLea Telephone Exchange and another located in Walkers Road, Telecom advises that cable was not temporarily laid out on these paddocks. This is the only assurance Telecom can give regarding the condition of the two paddocks in question.
The paddock on your western boundary, where Telecom wire was discovered by yourself in early July is a separate matter. To allow for an accurate assessment of possible compensation regarding this paddock could you please formalise, in writing, your claims upon this Corporation addressing correspondence to this office.
Mr Hosken next wrote on 16 October 1992 to Mr Blount, the Chief Executive Officer of Telstra asserting, amongst other things:
In order to harvest the crop, the hay must be cut, raked and baled and, in the process, wire already lying on the surface and buried wire brought to the surface, will be baled in the hay. Messrs. Rod and Cal Wilson from Wilson Pastoral Company have informed me that their company will not accept contaminated hay to fulfil the Japan contract. The contract contains strict quality control provisions. Recently, a shipment of hay to Japan was rejected and returned to Australia because of contamination with a clod of earth. Wire in hay would be considered far more injurious to animals.
Furthermore, my oaten hay crop cannot be sold for domestic use in Australia because it is contaminated and a danger to stock. Produce merchants would not accept the hay, and I could not knowingly sell contaminated hay, because of the danger to stock and possible legal action.
In addition, Wilson Pastoral Company, and other produce merchants, will not accept hay from my oaten hay paddocks in future years once it becomes widely known, as it generally does in the country, that my paddocks have been contaminated with wire. I require a commitment from you that Telecom will undertake whatever steps are necessary to decontaminate my property from wire, both on and beneath the surface of the soil. I will require evidence from you that the task has been completed satisfactorily so that I may assure Wilson Pastoral Company that there will be no danger to future hay crops.
Because the hay cannot be cut and used as planned because of the wire, the only option available to mitigate my loss will be to strip and sell the oat grain. Such an operation would result in a nett return to me of approximately $11,000. As indicated earlier the anticipated return from the oaten hay contract was $60,000. Therefore, my anticipated loss on the oaten hay contract, because of the negligence of your employees is, $49,000.
Under normal trading conditions, I would expect to be paid by Wilson Pastoral Company within 30 days of delivery of the hay, ie by early December 1992.
Accordingly, as your employees have been negligent and have caused damage to my property and my income and representatives of your organisation have admitted negligence, I demand that Telecom pay me damages in the sum of $49,000.
One response from Telstra dated 27 October 1992 acknowledged the claim for compensation and concluded:
With regards to ensuring that your paddock will be returned to its original condition, by the removal of the copper wire, it is planned to utilise the services of the Department of Agriculture to ensure a satisfactory result for all parties concerned.
On 9 November 1992, Mr Deadman of Telstra forwarded to the applicants a cheque for $49,000 under cover of a letter which concluded:
I have had discussions with Mr John Lacey, Department of Agriculture, Finley, regarding restoration work for your paddock. The Department of Agriculture will act in an advisory/mediating role to effect repairs. An on site visit after the crop has been stripped will be required. This meeting will have in attendance Mr Lacey, Mr Pat Plumbe, O.I.C. Telecom lines staff, Mr S Deadman, O.I.C. Accounting Services Telecom Wagga, and yourself.
Please advise when you plan to strip your crop so that this meeting can be arranged at your earliest convenience.
There was a bumper oat crop in 1992 and the applicants harvested 381 tonnes of grain in that year. They sold 98.9 tonnes at $105 per tonne but the market collapsed and they retained the balance which they fed to their own cattle.
Further traces of wire were found in Paddock 2 after it had been cropped. In December 1992, the first trace of wire in another paddock was located in Paddock 1 approximately one hundred metres from the western boundary of the property.
A meeting at “Glen Cluan” on 19 January 1993 was attended by the applicants and three representatives of Telstra together with an officer of the New South Wales Department of Agriculture and Mr Sharman, an agronomist and friend of the applicants. In the course of that meeting, Telstra proposed to conduct trials by 19 February 1993 with a metal detector to ascertain the location and distribution of pieces of wire. The trials were not in fact attempted until 16 March 1993 when it became apparent that the metal detector proposed to be used would not react when passed over actual pieces of wire. After the Telstra representatives conducted a desultory examination of Paddock 2, the attempt was abandoned and an assurance was given that a proper check would be carried out on 19 March 1993. That did not eventuate but after an oral assurance that Paddocks 3 to 7 inclusive had been “cleared” of wire, the applicants resolved to plough those paddocks. That intention was frustrated by rain in late March and, after letting cattle on to eat down the weeds, it was impossible by May 1993 to achieve a satisfactory level of cultivation. Only Paddocks 3, 5 and 15 were ploughed and a self-sown crop was left to grow on Paddock 2.
The applicants cut six hundred round bales of sub-clover pasture hay from Paddock 4 in 1992 but it was not offered for sale because of the perception (shared by Mr Deadman of Telstra) that it might have been contaminated by wire. In November 1993, the applicants advertised that hay for sale in the “Country News” without disclosing the risk of contamination but received no offers. Had it been sold at prices equal to the average achieved in previous years, the applicants would have derived $24,000 at an average price of $40 per round bale. The six hundred round bales were fed to the applicants’ own stock thereby avoiding the need to mow and bale a further six hundred round bales at an approximate cost of $5,700.
The applicants harvested only 27 tonnes from the oaten crop in Paddocks 2, 3 and 5 in 1993. That was fed to cattle on “Glen Cluan” at an estimated saving of not more than $60 per tonne.
Subsequent inquiries by Telstra suggested that two strands of telephone wire had been laid inside the western boundary of “Glen Cluan” to a total length of between 930 and 1000 metres of which approximately 130 metres have so far been recovered. Pieces of wire have been recovered in Paddocks 1, 2, 3, 4, 5, 8, 11 and 12.
At a meeting on 8 June 1993 between representatives of Telstra and the applicants it was agreed that a mutually selected agricultural consultant should be retained to make an independent assessment of the losses sustained by the applicants as a result of the presence of the wire. Mr Lynch was the consultant retained and he visited the property on 25 June 1993 and prepared a report dated August 1993. In that report Mr Lynch assessed the actual and likely future losses incurred by the applicants as a result of the presence of wire on their property at $217,274. That amount was made up as follows:
a) Specifically Quantifiable Losses :
(i) 1993/94 Crop $17,869
(ii) 1992 Hay - not sold $15,600
(iii) 1993/94 Pasture Hay sales/premium $8,000
(iv) Future losses on hay premium $72,972
________
Subtotal $114,444
________
Less Adjustment On 1992 Claim Paid -$4,370
________
Net $110,074
________
b) Other Potential Losses
(i) Hay premium 7 years @ $5,000/year $35,000
(ii) Cattle losses say $2,000
(iii) Land Value $70,200
________
Subtotal $107,200
________
TOTAL CALCULATED POTENTIAL LOSSES $217,274
Mr Lynch also suggested that it was reasonable to allow a further $9,000 by way of consultant’s fees which he considered would be incurred in securing management assistance to mitigate losses and work out necessary changes in farm management.
ASSESSMENT OF COMPENSATION
It is accepted on both sides that the applicants have suffered financial loss or damage as a result of Telstra’s having left the wire on their property. In the absence of agreement, it is necessary for the Court to determine, pursuant to s 134 of the Telecommunications Act, what is a reasonable amount of compensation for that loss or damage. The applicants, in their particulars of damage “updated to 26 April 1996” which were filed on 24 April 1996 claimed compensation in a total amount of $1,125,615. It is convenient, in quantifying reasonable compensation for the purposes of s 134, to examine each of the components of that claim.
Consequential Losses from Crop Management from 1992 to 1996
The applicants’ claim under this head was calculated by reference to four seasons, including the 1992/1993 season in which the actual loss attributable to the presence of wire was incurred. I shall analyse the claim by reference to the same four seasons:
1992/1993The claim for this season has been particularized as follows:
1.Oaten Hay
Less actual value of oat crop $12,437.00
Net Loss$50,813.00
Expected return from hay $63,250.00
Less paid by respondent $49,000.00
$1,813.00
2.Pasture Hay
Expected return from hay cut and baled $24,000.00
I accept the submission of Mr Almond of Counsel for Telstra that the sum of $49,000 which was paid by Telstra on account of its liability to pay compensation to Mr and Mrs Hosken was at large and was not specifically attributable to the losses incurred, or to be incurred, in respect of the 1992/93 season. That conclusion is borne out by the full text of Telstra’s letter of 9 November 1992 which accompanied that payment in which it was recited:
Please find enclosed a cheque payable to Mr I J Hosken to the value of $49,000.00 being compensation “without prejudice” for loss of income due to contamination of a paddock on the western boundary of your property, caused by Telecom copper wire.
I have had discussions with Mr John Lacey, Department of Agriculture, Finley, regarding restoration work for your paddock. The Department of Agriculture will act in an advisory/mediating role to effect repairs. An on site visit after the crop has been stripped will be required. This meeting will have in attendance Mr Lacey, Mr Pat Plumbe, O.I.C. Telecom lines staff, Mr S Deadman, O.I.C. Accounting Services Telecom Wagga, and yourself.
Please advise when you plan to strip your crop so that this meeting can be arranged at your earliest convenience.
Accordingly, I shall set off the amount of $49,000 against the total amount of the compensation which I find to be payable by Telstra and shall not take it into account in quantifying the applicants’ net losses from crop management for the 1992/93 season.
(a)Oaten Hay
The applicants contend that, but for the potential contamination by wire, they would have taken approximately 750 tonnes of oaten hay from the 50 hectares which had been sown to that crop and which they said would have realised $110 per tonne making a gross total return of $82,500. They acknowledged that harvesting expenses would have been incurred in bringing that crop to market. They also accept that credit has to be given for the oaten grain stripped from that crop which would otherwise have been sold as part of the oaten hay.
The respondent, on the other hand, disputes the yield of oaten hay for this season of 15 tonnes per hectare and contends, by reference to past average yields and the yield of 11.1 tonnes per hectare adopted by Mr Lynch in his report of August 1992, that the yield to be used in calculating this part of the applicants’ loss should be 11.1 tonnes per hectare. It is said that, given the rule of thumb that oaten grain is taken from oaten hay in the ratio of 1:2, the evidence of sales of 98.9 tonnes of grain and of the storage capacity of the farm makes it unlikely that 276.1 tonnes of grain were retained and consumed on the property. In the absence of more precise evidence of actual yields and, given that 1992/93 was a significantly better than average season, I consider it reasonable to impute a yield of 12 tonnes per hectare of oaten hay for that season. Since the price of $110 per tonne to be allowed for that oaten hay is not disputed, it follows that the gross loss attributable to that item for 1992/93 is $66,000.
It is further accepted that mowing, raking, baling and cartage costs have to be deducted from that gross figure. Experts’ estimates of those costs have varied between $16,540 and $19,250 and I consider it reasonable to adopt a roughly intermediate figure of $18,000 for those expenses. It is also necessary to credit Telstra with the value of oaten grain taken off which would not have been realised had the whole crop been sold as oaten hay.
It is common ground that 98.9 tonnes of oaten grain harvested in 1992/93 were sold for $10,384.32. There has been no agreement as to the quantity of oats which remained unsold but, consistently with the assumed yield of 12 tonnes per hectare of oaten hay adopted above, I have calculated the total yield of oaten grain at 300 tonnes leaving a balance unsold of 201.1 tonnes. The evidence of Mr Hosken was to the effect that he had tried to sell that balance into the No 1 Oat Pool established by the Australian Wheat Board but had been unsuccessful. It seems that the Board established a No 2 Oat Pool which was open between 27 January and 29 April 1993 and paid $70 a tonne for grain received into it. Mr Hosken was unaware of the opening of the No 2 Pool and expressed some doubt whether it had opened at all at the receival point at Deniliquin which the applicants would ordinarily have used. Being unable to sell the balance on the open market, even at a price as low as $50 per tonne, the applicants elected to feed it to their own stock over the ensuing months leading Telstra to contend that a value should be imputed to that grain equivalent to the profit derived from the increase in the live weight of the cattle to which it was fed. Reference was made in this context to British Westinghouse Electric and Manufacturing Co Ltd v Underground Electric Railways Company of London Ltd [1912] AC 673 where Viscount Haldane LC observed at 690:
I think that this decision [in Staniforth v Lyall 7 Bing 169; 131 ER 65] illustrates a principle which has been recognized in other cases, that, provided the course taken to protect himself by the plaintiff in such an action was one which a reasonable and prudent person might in the ordinary conduct of business properly have taken, and in fact did take whether bound to or not, a jury or an arbitrator may properly look at the whole of the facts and ascertain the results in estimating the quantum of damage.
However, Staniforth v Lyall to which his Lordship there referred was a case where the owner of a ship lost the benefit of an intended charter and put her to another use which turned out to be more profitable than the intended charter would have been. The whole of the profit derived was referable to the alternative use of the ship. In the present case, it cannot be said that the whole of the profit from fattening cattle was attributable to the use of the oaten grain. In my view, the correct principle requires a value to be attributed to that grain which it would have had on the open market during the period in which it was fed to the applicants’ cattle. In the light of all the relevant evidence, I regard it as reasonable to fix that value at an average of $50 a tonne.
(b)Pasture Hay
It has been established that, before the 1992/93 season, the applicants had been able to sell their high quality pasture bay into a niche market at $40 per round bale representing a premium of $10 a bale above the going market price. I accept that it was not reasonably to be expected that the applicants would have sold any of this potentially contaminated hay after making full disclosure of the risk. I consider that to be so even if a significant discount from the ruling market price had been offered. However, I also accept the contention advanced on behalf of Telstra that some allowance needs to be made for the possibility that the whole 600 tonnes estimated as the yield of pasture hay might not have been sold at the premium price of $40 a bale.
I have therefore assessed this part of the applicants’ loss on the basis that they would have received, on average, a price of $37 a round bale for pasture hay in 1992/93. Mr Hosken accepted that “we recouped a portion of that loss by feeding those 600 round bales to our own stock, thereby saving the cost of mowing and baling another 600 round bales”. His estimate of those savings at $5,700 was not disputed. Consistently with the principle applied above in relation to oaten grain fed to stock, some allowance needs to be made for the contribution made by the retained pasture bay to the applicants’ cattle raising operation. I fix that allowance for 1992/93 at $7,500. Accordingly, the loss flowing from the applicants’ inability to sell pasture hay should be quantified as follows:
600 round bales at $37 a bale $22,200
Less costs saved 5,700
_______
16,500
Less benefit of on-farm consumption 7,500
_______
$ 9,000
Total 1992/93 Loss
In the result, I have assessed the total crop management losses sustained by the applicants in respect of the 1992/93 season at $39,560.68 comprising:
Oaten hay - expected return $66,000
Less harvesting and cartage 18,000
_________
48,000.00
Less oaten grain sold 10,384.32
_________
37,615.68
Less benefit of balance of grain
retained and fed to stock -
201.1 tonnes @ $50 per tonne 10,055
_________
27,560.68
Pasture Hay - net loss 9,000.00
_________
$36,560.68
_________
1993/94
(a)Oaten Hay
The applicants contend that in this year, but for the wire contamination, they would have planted a further 50 hectares to oaten hay which, assuming a yield of 10 tonnes per hectare and an average price of $115 a tonne, would have produced a gross income of $57,500. It is accepted on both sides that harvesting and marketing costs of $450 per hectare have to be deducted to arrive at a net loss flowing from the inability to produce oaten hay. For the reasons indicated above in respect of pasture hay in 1992/93, I consider that some reduction needs to be made from the imputed price of $115 a tonne to acknowledge that a significant premium above the base market price of $100 a tonne might not have been achieved for the whole crop. I have therefore calculated this part of the applicants’ loss by assuming an average price for the hypothetical 1993/94 oaten hay crop of $108 a tonne.
For Telstra it has been argued that the applicants should have mitigated their loss in this season by sowing and harvesting a substitute crop. However, Mr Hosken pointed to Telstra’s delay until 23 March 1993 in notifying him that he could proceed to plough Paddocks 3 and 5. As a result, he says, he was prevented by rain from ploughing as he would normally have done. Paddock 2 was self-sown with oats and he was eventually advised to leave it as it was. The preparation of Paddocks 3 and 5 was impeded, Mr Hosken says, first by Telstra’s delay which precluded him from burning off stubble and then by rain followed by unusually dry weather. As a result it proved impossible to prepare a proper seed bed and only a very poor crop was taken off.
I am not persuaded that the applicants’ management of the substitute crop in 1993/94 was so unreasonable in all the circumstances as to amount to a failure to mitigate. However, by the same token, the total hypothetical income from oaten hay needs to be discounted to allow for the risk that the high rainfall recorded in the harvest months of October, November and December 1993 might have caused the whole crop to be commercially unsaleable. Deductions also have to be made for the price actually obtained for oaten grain in this year and the benefit to the overall farming operation from grazing cattle on Paddock 2. That benefit was apparently accepted by Mr Hosken as being of the order of $3,780.
Accordingly, my assessment of this part of the 1993/94 losses is:
50 hectares at 10 tonnes per
hectare x $108 a tonne $54,000
Less costs at $450 per hectare 22,500 ______
31,500
Less discount for risk of total loss (15%) 4,725 _______
26,775
Less oaten grain sold 1,620 _______
25,155
Less benefit from grazing on Paddock 2 3,780 _______
Oaten Hay - net loss $21,375
_______
(b)Pasture Hay
No pasture hay was in fact cut in 1993/94. In light of the possible presence of wire and the adverse consequences of disclosing that risk to potential purchasers, I am not persuaded that the applicants could reasonably have mitigated their loss by cutting and baling pasture hay and selling it at a discount from the premium price of $40 per round bale obtainable for similar hay free of the risk. I consider that it is appropriate to treat this item in the same way as the corresponding loss allowed for 1992/93. Although the fact that no pasture hay was cut precludes my making an allowance for the benefit obtained by feeding it to cattle, a similar allowance needs to be made to acknowledge the agistment value of the uncut pasture on which the applicants’ cattle grazed in 1993/94 or the alternative cost of buying in feed. Accordingly, I shall allow a further net loss of $9,000 as flowing from the applicant’s inability to cut and sell pasture hay which would have been grown in 1993/94.
Total 1993/94 Loss
It follows that this must be assessed at $30,375 represented by the net loss attributable to the inability to produce oaten hay plus $9,000 allowed in respect of pasture hay.
1994/95
(a)Oaten Hay
In this season, the applicants planted a different substitute crop, canola, with negative results. I find in the circumstances and in the light of advice given to the applicants that it was not unreasonable for them to have adopted that expedient. The poor performance of the canola crop partly reflected the drought conditions which prevailed in 1994/95 and which were responsible for the low level of income which Mr and Mrs Hosken derived from the wheat crop sown in that year. Mr Naunton, an agricultural consultant, whose evidence was adduced by Telstra had inspected “Glen Cluan” in January 1995 and from an examination of the stubble from the canola and wheat crops and the presence of week infestation, deduced that an oaten hay crop grown in similar conditions would have produced a relatively low yield of five tonnes per hectare. Mr Lynch, on the other hand, assumed what was accepted to be a quite high yield for drought conditions of seven tonnes per hectare. Having regard to the evidence that the Hoskens in the past had been relatively successful and efficient growers of oaten hay, I consider it reasonable to assume a yield in the middle of that range of six tonnes per hectare. The ruling price of $140 per tonne for oaten hay harvested in that year is not disputed. Nor is the amount of $23,947 which would have been the costs incurred in producing oaten hay from the same 46.5 hectares. It is therefore appropriate to quantify this part of the applicants’ claim as follows:
46.5 hectares x 6 tonnes per hectare
@ $140 per tonne $39,060
Less production and cartage costs 23,947 _________
15,113.00
Plus loss on canola crop 1,499 _________
16,612.00
Less net income from wheat crop 3,085.50 _________
$13,526.50
_________
(b)Pasture Hay
The applicants contended that but for the presence of wire they would have cut and baled hay from a larger area of 69 hectares to take advantage of higher prices obtained for pasture hay as a result of the drought. This contention formulated with the advantage of hindsight attributes to Mr and Mrs Hosken a degree of prescience which I am not prepared to assume. There is also much force in Mr Naunton’s observation that the dedication of an increased area to pasture hay in a time of drought distorts the water balance on an irrigated property with correspondingly detrimental effects on other areas of production. As well, an allowance would have to be made for the higher agistment value of pasture hay notionally left standing or the alternative cost of buying in feed. I therefore allow a further amount for the inability to cut pasture hay in 1994/95 in the same sum of $9,000.
Total 1994/95 Loss
This is accordingly assessed at $22,526.50.
1995/96
(a)Oaten Hay
In this season the applicants carried out cropping on a nearby leased property known as “Carters” which they did in an effort to offset the diminished income from “Glen Cluan”. Paddock 5 at “Glen Cluan” comprising 8.9 hectares was sown to barley and Paddock 2 (21 hectares) was sown to wheat. It had also been intended to sow wheat in Paddock 7 (14.4 hectares). However, work on “Carters” intervened and heavy rains fell which prevented the sowing of anything on Paddock 7. It is contended that, but for the presence of wire, oaten hay would have been grown on the entire 44.3 hectares comprised in Paddocks 2, 5 and 7 on “Glen Cluan” yielding a net return of $27,687. After allowing for the net profit of $13,811 from the substitute wheat crop and $2,640 from the barley grown on Paddock 5, the applicants claim a net loss under this head of $11,236. However, this approach assumes that Paddock 7 would have been sown to produce oaten hay. That assumption requires the further assumption that work on “Carters” would have been deferred or not undertaken at all. Since the applicants have not brought the income derived from “Carters” to account in this part of their claim, I prefer the approach embodied in “Scenario 2” set out in Mr Lynch’s further report prepared in February 1996 where a net loss of $1,841 under this head is arrived at in the following way:
8.3Oaten Hay 1995/96 Loss Calculation
Actual Alternate Income: Calculated Profit
Wheat 21 ha
Income 21 ha x 4.3t/ha @ $200 = $18,200
less Variable Costs 21 ha @ $209/ha= $4,389_______
Net Profit $13,811
($657/ha)
Barley 8.9 ha @ 2.8t/ha @ $180 = $4,500
less Variable Costs 8.9 ha @ $209/ha $1,860_______
$2,640
NET MARGIN (30ha) $16,451
Foregone Oaten Hay Income
Scenario 1 (full area planted) 44.3 ha @ 9.5t/ha @ $120/t $50,502
less Variable Costs $515/ha @ 44.3 ha $22,815________
$27,687
(=$785/ha)Range of Outcomes
NET LOST INCOME - Scenario 1 $11,235
=======
Scenario 2 (Assume part of Carters not sown in lieu of paddock 7 being sown)
Net Lost Income (as per Scenario 1) $11,236
less Value of 14.3ha wheat @ $657/ha $9,395_______
NET LOST INCOME - Scenario 2 $1,841
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(b)Pasture Hay
As they have done for 1994/95, the applicants have contended that but for the presence of wire they would have produced a high volume of pasture hay in this season by dedicating 75.6 hectares to that form of production. Telstra, on the other hand, points to the average production of 512 round bales of pasture hay over the six years from 1987/88 to 1992/93. For reasons explained above in relation to the pasture hay claim for 1994/95, I consider it inappropriate to assume pasture hay production significantly greater than 600 round bales without giving credit for offsetting reductions in income from other productive centres on “Glen Cluan”. Accordingly, I shall confine to $9,000 the loss attributable to the inability to cut pasture hay in 1995/96.
Total 1995/96 Loss
This is assessed at $10,841 after adding the net loss for oaten hay of $1,841 imputed by Mr Lynch’s “Scenario 2” to the average figure of $9,000 per annum which I have adopted for pasture hay.
Diminution in Value of “Glen Cluan”
Evidence on this aspect was given by four expert witnesses, three of them registered valuers. The fourth, Mr McNamara, is a real estate and stock and station agent who has carried on business in Finley for over twenty years. His valuation of Finley, unaffected by wire, was the highest of the four witnesses ascribing a market value of $842,000. Other valuations on the same basis were $585,000 (Mr Judd), $708,000 (Mr Robinson) and $772,000 (Mr Hann). Mr McNamara’s assessment of the extent of the diminution in value was also the highest, putting it at between $250,000 and $300,000. Mr Hann, whose evidence was also adduced on behalf of the applicants, expressed the opinion that the diminution in the value of the property due to the contamination was $231,700.
Of the two experts called by Telstra on the other hand, Mr Robinson assumed a 10% discount of $71,000 “affected by the wire” and opined that “if the pieces of wire could be removed from the worst affected areas any diminution in value would be negligible”. Mr Judd similarly expressed the opinion that the presence of the wire might deter a purchaser intending to grow oaten hay for export but would not have any significant impact on a purchaser who intended to use the property for other purposes such as grazing, dairying, rice or grain producing. In conclusion Mr Judd’s opinion was that “any reduction in value which would result from any actual or apprehended potential contamination from the copper wire would not exceed 10% of the current market value of the property. On this basis the maximum reduction would be $58,000.”
The resolution of the issues raised by this conflict of evidence must necessarily be largely a matter of impression. After a careful review of the whole of the expert evidence, including the cross-examination of the four witnesses, I am led to find that the capital value of “Glen Cluan” in 1996, had it been uncontaminated by wire, would have been $730,000. I regard a reasonable allowance for the diminution in value brought about by the presence of the wire as 15% making the amount recoverable under this head $109,500.
Future Losses
It was contended on behalf of the applicant that “future losses” in respect of oaten hay and pasture hay should be allowed for two more years after 1995/96. In my view that contention is contrary to the principle that once compensation has been assessed for a diminution in the capital value of an income producing asset, no further amounts are recoverable for the reduction in income derived from that asset; see e.g. Livingstone v Rawyards Coal Co (1880) 5 App Cas 25.
In the present case it was reasonable for the applicants to claim, and be allowed, consequential losses of income from 1992 to 1996 but once their claim for diminution of the capital value of “Glen Cluan” has crystallised as at 1996, to allow future losses of the income which they would have received had their land been unimpaired would be to compensate them twice over for the same injury. This component of the applicants’ claim is therefore disallowed.
Relocation Expenses
A claim has been made for $50,000 representing the costs of relocation which would be incurred by Mr and Mrs Hosken if they sold “Glen Cluan” including legal fees, agent’s commission, stamp duty and removalist’s charges. In my view, those costs would not be incurred as a result of the presence of the wire or any other action of Telstra. They would be a normal incident of vacating the property whenever that might occur and irrespective of any diminution in its value. It would be otherwise if the expenses were attributable to a temporary relocation while the damage to the land was being made good. However, that is not this case. Moreover, the evidence does not indicate that the applicants have any intention of vacating “Glen Cluan” to establish another property on which oaten hay would be produced. Accordingly, no allowance should be made for an expense which is not in contemplation as a response to the respondent’s actions; Hole & Son (Sayers Common) Ltd v Harrisons of ThurnscoeLtd [1973] 1 Lloyd’s Rep 345. Even if there were evidence that Mr and Mrs Hosken intended to interrupt and re-establish their farming operations in this way, the relocation expenses would have to be amortised having regard to the expected, as against the actual, life of their business at “Glen Cluan”. For these reasons, this part of the applicants’ claim is disallowed.
Consultants’ Fees
It will be recalled that Mr Lynch’s original report of 10 August 1993 recommended “some allowance for management assistance to mitigate losses and work through the management change process may be appropriate; i.e. consultant support”. Mr Lynch at that time put the cost of that support at $9,000. Although the applicants’ further particulars of damage included a claim of $15,000, Mr P. Riordan of Counsel for the applicants, in his final submissions, accepted Mr Lynch’s estimate as reasonable. The propriety of making some allowance under this head was not disputed by Telstra, and, accordingly, I shall allow $9,000 for this item.
Detection and Removal Expenses
Undisputed evidence was adduced from Mr McGuinness, an expert in the detection and disposal of metal, explosives and other hazardous material, that an exhaustive process of detecting and removing all the remaining wire would be prohibitively expensive, costing in excess of $1,000,000 if carried out over the whole property. However, there was also evidence from Mr Watters of Trackline Detectors that a less sophisticated process could be carried out at a cost of $10,000 over the 50 hectares considered most likely to contain wire. This process, according to Mr Watters, would afford excellent prospects of detection and recovery of wire to a depth of five centimetres and fairly good prospects to a depth of between five and nine centimetres. It is clear that Mr Watters’ proposal is unlikely to recover all of the wire, but recovery of a significant proportion should give the applicants some increased peace of mind. They should therefore have the opportunity of attempting a process of the kind described by Mr Watters if it can be undertaken without undue expense. I regard it as reasonable to allow Mr Watters’ estimate of $10,000 under this head.
CONCLUSION
For reasons which I have endeavoured to explain I have determined that a reasonable amount of compensation payable to the applicants is $179,803.18 made up as follows:
Crop management losses:
1992/93 $36,560.68
1993/94 30,375.00
1994/95 22,526.50
1994/96 10,841.00
__________
$100,303.18
Diminution in value of “Glen Cluan” 109,500.00
Consultants’ fees 9,000.00
Detection and removal expenses 10,000.00__________
228,803.18
Less paid by Telstra on 9 November 1992 49,000.00__________
$179,803.18
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I shall hear Counsel, or receive their written submissions, on the orders which should be made in respect of interest and costs in consequence of this conclusion.
I certify that this and the preceding twenty-two (22) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.
Associate:
Dated:
Counsel for the Applicants: Mr P Riordan Solicitors for the Applicants: Riordan & Partners Counsel for the Respondent: Mr P W Almond Solicitors for the Respondent: Mallesons Stephen Jaques Date of Hearing: 30 April 1996
1, 2 and 3 May 1996
20 May 1996Date of Judgment: 2 April 1998
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