Hubertus Schuetzenverein Liverpool Rifle Club Ltd v The Commonwealth of Australia
[1995] FCA 485
•13 JULY 1995
CATCHWORDS
COMPENSATION - Lands Acquisition Act 1989 (Cth) ss 55, 58, 91 - compulsory acquisition of land for airport - owned by club - reinstatement basis - net acquisition cost agreed - amount which will "justly compensate" dispossessed owner - whether interest under s 91 can be taken into account to reduce amount of compensation otherwise payable - whether s 55(1) is an overriding provision - operation of s 55 and s 58
Lands Acquisition Act 1989 (Cth) ss 55, 58, 91
Australian Law Reform Commission, Report No 14,
Lands Acquisition and Compensation
Dunning v The Commonwealth (1960) 104 CLR 517
HUBERTUS SCHUETZENVEREIN
LIVERPOOL RIFLE CLUB LIMITED
v
THE COMMONWEALTH OF AUSTRALIA
No NG 871 of 1994
Davies, Whitlam, Tamberlin JJ
Sydney 13 July 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 871 of 1994
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
BETWEEN: HUBERTUS SCHUETZENVEREIN
LIVERPOOL RIFLE CLUB
LIMITED
Appellant
AND: THE COMMONWEALTH OF
AUSTRALIA
Respondent
CORAM: DAVIES, WHITLAM and TAMBERLIN JJ
PLACE: SYDNEY
DATED: 13 JULY 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
(1)The appeal be allowed.
(2)Paragraphs 1 and 2 of the Orders made by Wilcox J on 18 November 1994 be set aside.
(3)In lieu thereof, order that:
The appellant is entitled to compensation of $2,107,560 together with interest thereon in accordance with the Lands Acquisition Act 1989 (Cth).
(4) The respondent pay the appellant's costs of this appeal.
NOTE: Settlement and entry of orders is dealt with in accordance with Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 871 of 1994
GENERAL DIVISION )
ON APPEAL from a single judge of the Federal Court of Australia
BETWEEN: HUBERTUS SCHUETZENVEREIN
LIVERPOOL RIFLE CLUB
LIMITED
Appellant
AND: THE COMMONWEALTH OF
AUSTRALIA
Respondent
CORAM: Davies, Whitlam & Tamberlin JJ.
PLACE: Sydney
DATE: 13 July 1995
REASONS FOR JUDGMENT
Davies J: The facts and issues are sufficiently set out in the reasons for judgment of Tamberlin J, which I have had an opportunity to read. I need not repeat them.
The crucial provisions of the Lands Acquisition Act 1989 (Cth)("the Act") read as follows:-
"55 (1) The amount of compensation to which a person is entitled under this Part in respect of the acquisition of an interest in land is such amount as, having regard to all relevant matters, will justly compensate the person for the acquisition.
(2) In assessing the amount of compensation to which the person is entitled, regard shall be had to all relevant matters, including:
(a) except in a case to which paragraph (b) applies:
(i)the market value of the interest on the day of the acquisition;
..."
"58 ...
(2)The market value of the acquired interest on the day of acquisition shall be taken to be the greater of:
(a)the amount that, apart from this section, would be the market value (if any) of that interest on that day; and
(b)the net acquisition cost in relation to the interest in the new land.
(3) The net acquisition cost, in relation to the interest in the new land, is the amount calculated in accordance with the formula:
CA + E - FI
where:
CAis the amount of the cost, or the likely cost, to the person of the acquisition of the interest in the new land;
Eis the amount of the expenses and losses incurred, or likely to be incurred, by the person as a result of, or incidental to, ceasing to use the old land and commencing to use the new land for the same purpose; and
FIis the present value of any real and substantial saving in recurring costs (relating to land or an interest in land) gained by the person as a result of the relocation."
"91(2) The claimant is entitled to payment by the Commonwealth of interest on the compensation at the rate specified in, or ascertained in accordance with, the regulations from the day of the acquisition until the day on which the compensation is paid or, where payment is delayed through a default or delay of the claimant, until the day on which the compensation would have been paid but for the default or delay."
On 21 April 1994, the learned trial Judge answered two preliminary questions posed by the parties and, on 17 June 1994, he published his reasons for those answers. Subsequently, when the matter came back before him on 4 October 1994,
counsel for both parties informed his Honour that the net acquisition cost, calculated in accordance with section 58(3) and without taking into account the entitlement to interest on the award of compensation, was $2,107,560. On 28 October 1994, his Honour delivered reasons dealing with the issue which is pertinent to this appeal and also the issue as to how interest should be calculated under s.91 having regard to interim payments which the Commonwealth had made. On 18 November 1994, when the parties were agreed on the figures, his Honour made the following order:-
"The Court Orders that:-
1.The Applicant is entitled to an amount of compensation of $1,694,273.15.
The Court Notes that:-
2.The parties agree that the amount of the statutory interest payable to the Applicant as at 18 November 1994 is $413,286.85 so that the total of that interest and the compensation determined in paragraph 1 above is $2,107,560.00 as at 18 November 1994."
The reasoning of the trial Judge for this order is more fully described in the reasons of my brother, Tamberlin J. It is sufficient to say that the trial Judge reduced the sum of $2,107,560, the agreed "net acquisition cost" calculated in accordance with s.58, by the sum of $413,286.85 "to take account of the fact that the club will be entitled to interest on the assessed compensation as from the date of resumption".
In doing so, the trial Judge erred, in my opinion, in failing to have regard to the market value of the acquired interest as determined in accordance with the Act. The parties were agreed that the "net acquisition cost" calculated under s.58 of the Act was $2,107,560. Section 58(2) then operated and required that "The market value of the acquired interest on the day of acquisition shall be taken to be ... the net acquisition cost", that is to say, $2,107,560. Section 55(2)(a)(i) required the Court to have regard to "the market value of the interest on the day of acquisition", that is, to the $2,107,560. There was no other relevant matter specified in s.55(2) or arising for consideration under s.55(1) to which the Court ought to have had regard.
In my opinion, the trial Judge failed to have regard to the market value of the acquired land on the day of its acquisition and had regard rather to the fact that elements of the net acquisition cost were to be expended after the date of acquisition. Section 58(3) required the calculation of net acquisition cost to be based on, inter alia, "the likely cost ... of the acquisition of the interest in the new land" and "the amount of the expenses and losses ... likely to be incurred ... as a result of ... ceasing to use the old land and commencing to use the new land ...". In having regard to the fact that certain of the expenditure would be incurred in the future and in discounting the expenditure because it was future expenditure, the trial Judge failed to give effect to s.58(2), which deemed the net acquisition cost to be the market value of the acquired interest on the day of acquisition.
In making calculations for other purposes, it is often appropriate to add interest to past expenditure and to discount future expenditure, so as to arrive at a fair monetary value as at the date of the calculation. That practice, however, provides no basis for discounting an amount which the Act has deemed to be the market value of the acquired interest as at the relevant date, the day of acquisition.
I would allow the appeal and would set aside paragraphs 1 and 2 of his Honour's orders, substituting therefor an order that the applicant be entitled to an amount of $2,107,560, together with interest calculated in accordance with s.91 of the Act. The respondent should pay the costs of the appeal.
I certify that this and the 4 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.
Associate:
Date: 13 July 1995
IN THE FEDERAL COURT OF AUSTRALIA )
)
NEW SOUTH WALES DISTRICT REGISTRY ) NG 871 of 1994
)
GENERAL DIVISION )
On appeal from a judge of the Federal Court of Australia
HUBERTUS SCHUETZENVEREIN LIVERPOOL RIFLE CLUB LIMITED
Appellant
COMMONWEALTH OF AUSTRALIA
Respondent
Coram: Davies, Whitlam and Tamberlin JJ
Place: Sydney
Date:13 July 1995
REASONS FOR JUDGMENT
WHITLAM J
I agree that this appeal should be allowed for the reasons given by Davies J.
The statutory entitlement to interest cannot, in my opinion, be a "relevant matter" within the meaning of s 55 of the Lands Acquisition Act 1989 ("the Act"). This is because, as Tamberlin J points out, the structure of s 91 of the Act emphasizes the distinction between interest and compensation.
I certify that this is a true copy of the reasons for judgment herein of the Hon. Justice A.P. Whitlam.
Associate:
Date:13 July 1995
IN THE FEDERAL COURT OF AUSTRALIA )
NEW SOUTH WALES DISTRICT REGISTRY ) No. NG 871 of 1994
GENERAL DIVISION )
ON APPEAL FROM A JUDGE OF THE
FEDERAL COURT OF AUSTRALIA
BETWEEN: HUBERTUS SCHUETZENVEREIN
LIVERPOOL RIFLE CLUB
LIMITED
Appellant
AND: THE COMMONWEALTH OF
AUSTRALIA
Respondent
CORAM: DAVIES, WHITLAM AND TAMBERLIN JJ
PLACE: SYDNEY
DATED: 13 July 1995
REASONS FOR JUDGMENT
TAMBERLIN J:
This appeal raises a short but important question as to whether in a reinstatement case the respondent is entitled to discount the amount of compensation agreed to be payable by having regard to the fact that interest is payable under s 91 of the Lands Acquisition Act 1989 (Cth) ("the Act").
Background
Prior to December 1989 the appellant rifle club, owned 2.02 hectares of land at Elizabeth Drive, Badgerys Creek, New South Wales.
On 20 December 1989 the land was compulsorily acquired by the Commonwealth for the construction of a new airport. The appellant claimed compensation under the Act. There were unsuccessful negotiations between the parties and proceedings were commenced in this Court.
The parties agreed that s 58 of the Act applied. That section relates to what is commonly referred to as the "reinstatement" basis of compensation and reads as follows:
"No general market for interest acquired
58 (1)This section applies where:
(a)an interest in land (in this section called the 'old land') is acquired from a person by compulsory process;
(b)immediately before the acquisition, the person was using the old land, or intended to use the old land, for a purpose other than the carrying on of a business;
(c)but for the acquisition, the land would have been, or would have continued to be, used for that purpose; and
(d)at the time of the acquisition, there was no general demand or market for land use for that purpose; and
(e)the person has acquired, or intends to acquire, another interest in other land (in this section called the 'new land') in substitution for the acquired interest and intends to use the new land for the same purpose.
(2)The market value of the acquired interest on the day of acquisition shall be taken to be the greater of:
(a)the amount that, apart from this section, would be the market value (if any) of that interest on that day; and
(b)the net acquisition cost in relation to the interest in the new land.
(3)The net acquisition cost, in relation to the interest in the new land, is the amount calculated in accordance with the formula:
CA + E - FI
where:
CAis the amount of the cost, or the likely cost, to the person of the acquisition of the interest in the new land;
Eis the amount of the expenses and losses incurred, or likely to be incurred, by the person as a result of, or incidental to, ceasing to use the old land and commencing to use the new land for the same purpose; and
FIis the present value of any real and substantial saving in recurring costs (relating to land or an interest in land) gained by the person as a result of the relocation."
When the hearing commenced the parties asked the trial judge, Wilcox J, to determine two preliminary matters. The first related to the existence of a development consent for an outdoor shooting range. The second was whether there should be included in the acquisition cost, the whole of the likely cost of the purchase of a larger parcel of land, and also whether there should be included the additional costs of locating the
club house at the rear, rather than at the front of the new land. His Honour considered that there was a development approval for the use of the old land as an outdoor shooting range. However, his Honour considered that there should not be included in the costs of acquisition the whole of the cost of the purchase of the new land being a 25 acre block as opposed to the cost of the purchase of a 5 acre block only, the acquired land being only 5 acres. He also considered that the cost of acquisition should not include the additional cost of locating the club house at the rear, as opposed to the front of the new land.
Having considered the reasons for decision of the trial judge, the parties reached agreement on the following matters:
The net acquisition cost within s 58(3) of the Act without taking into account any entitlement of the appellant to interest on the award of compensation, was $2,107,560.
On 21 December 1989, the day after the acquisition, the Commonwealth paid the rifle club $990,000 on account of the compensation to which it was entitled.
On 18 September 1992 the Commonwealth paid the club a further $163,500 on account of compensation, plus $72,268.75 for accrued interest between acquisition and that date.
Reinstatement expenditure was not incurred by the club until 1991 when it purchased at a cost of $346,522.40 land on which to relocate its activities. There were some incidental expenses but the money expended by the club up to 28 October 1994 was well below the sum of $990,000 advanced to the appellant.
The Commonwealth agreed that the rifle club is entitled to interest at the specified rate from the date of acquisition to the date of payment under s 91 of the Act.
Section 91 of the Act relevantly provides:
"91(1)This section applies where the Commonwealth is liable to pay compensation to a claimant under this Part in respect of the acquisition of an interest, other than a mortgage interest.
(2)The claimant is entitled to payment by the Commonwealth of interest on the compensation at the rate specified in, or ascertained in accordance with, the regulations from the day of the acquisition until the day on which the compensation is paid or, where payment is delayed through a default or delay of the claimant, until the day on which the compensation would have been paid but for the default or delay.
........
(5)Interest is not payable to the claimant on the whole or any part of the compensation otherwise than in accordance with this section."
The Commonwealth submitted that because the club had a statutory entitlement to interest, in a reimbursement case the Court was required to take account of the interest component, when calculating compensation, in order to avoid double counting.
His Honour accepted this submission and decided that the statutory entitlement to interest was a matter that he could, and ought, to take into account when deciding what amount was necessary to "justly compensate" the appellant for the acquisition.
In his judgment delivered on 28 October 1994, His Honour referred to the "overriding" effect of s 55(1) of the Act, which provides:
"55(1)The amount of compensation to which a person is entitled under this Part in respect of the acquisition of an interest in land is such amount as, having regard to all relevant matters, will justly compensate the person for the acquisition."
He then said:
"In the result, a resumee's statutory entitlement is to such amount as (sic) compensation as will justly compensate him or her for the acquisition, having regard to all relevant matters; that and no more. If the effect of the entitlement to statutory interest on an award of compensation calculated merely by reference to the formula in s 58(3) would be to provide more than the amount required to "justly compensate" the resumee, it is to that extent excessive.
Compliance with s 55(1) requires the Court to sheer away the excess."
........ .
"It seems to me that the only way of complying with s 55(1), without contravening any other provision in the Act, is to take the course suggested by counsel for the Commonwealth: to discount the agreed $2,107,560 in such a way as to take account of the fact that the club will be entitled to interest on the assessed compensation as from the date of resumption, even though the assessment is based on expenditure incurred, or to be incurred, long after that time and at current prices." (Emphasis added)
On 18 November 1994 his Honour ordered that the appellant was entitled to an amount of compensation of $1,694,273.15 and further ordered that the respondent pay the appellant's costs. His Honour noted that:
"(2)The parties agree that the amount of the statutory interest payable to the applicant as at 18 November 1994 is $413,286.85 so that the total of that interest and the compensation determined in paragraph 1 above is $2,107,560.00 as at 18 November 1994."
The appellant club appealed these orders on the ground that his Honour erred in ordering that the agreed compensation of $2,107,560 be discounted to take account of the fact that the appellant will be entitled to interest as prescribed under the Act. There was a second ground of appeal which related to costs but this was not pressed on the hearing before this Court.
The appellant seeks an order that it is entitled to an amount of $2,107,560 plus interest on that sum under the Act.
Relevant Provisions
Apart from ss 55 (1), 58 and 91 of the Act which have been set out above, it is necessary to consider s 55(2), which as far as relevant provides:
In assessing the amount of compensation to which the person is entitled, regard shall be had to all relevant matters, including:
(a)except in a case to which paragraph
(b) applies:
(i)the market value of the interest on the day of the acquisition;
(ii) ....
(iii) ...
(iv)where the acquisition has the effect of severing the acquired interest from another interest, any increase or decrease in the market value of the interest still held by the person resulting from the nature of, or the carrying out of, the purpose for which the acquired interest was acquired; ...."
"Market value" is defined in s 56 as the amount that would have been paid for the interest if it had been sold at the relevant time by a willing but not anxious seller, to a willing but not anxious buyer.
Section 55(2)(b) is not relevant in the present circumstances. It should be noted that s 55(2) does not purport to be an exhaustive list of all matters which are required to be taken into account in assessing the amount of compensation.
The Questions
The issues before the Court were succinctly formulated by the respondents as follows:
Whether s 55(1) is an overriding provision.
If it is, does the concept "justly compensate" include a reduction of the compensation otherwise payable?
Is the payment of interest as provided for in s 91 a relevant matter for the purposes of determining an amount that will "justly compensate" the person from whom the land is acquired?
First Question - Overriding Provision
Both parties agree that s 55(1) is an overriding provision in the sense that the amount of compensation ultimately determined, having regard to the specific provisions of the Act and all other relevant matters must "justly compensate" the resumee.
This is supported by Report No 14 of the Australian Law Reform Commission on Lands Acquisition and Compensation ("the Report"), paragraph 237 of which relevantly reads:
"237 A 'just compensation' override.
... It is important, in terms of both constitutional validity and justice to the claimant, to provide a means whereby the court may increase the award of compensation to a figure which, in its judgment, will fully compensate the loss. With this in mind it would be desirable to start the statutory list by a formula providing that the amount of compensation payable to a person who had an interest that has been divested.... by the acquisition is such amount as will justly compensate the person in respect of the acquisition."
The paragraph also refers to "the overriding compensation formula".
This recommendation found expression in clause 35 of the Draft Bill posed by the Commission which is substantially similar to s 55 of the Act.
The Second Question
This is whether the words "justly compensate" can, in particular circumstances require the Court to reduce the amount of compensation payable.
The trial judge took the view that the words "justly compensate" are not "one-sided" and that the appellant was
entitled to "just compensation" having regard to all relevant matters, and no more. If the effect of reliance on the formula in s 58(3) of the Act together with the statutory entitlement to interest is to provide more than "just compensation" then it is excessive, in his Honour's view, and the excess should be deducted from the compensation.
In view of the conclusion I have reached on the third question it is not necessary to decide this question.
The Third Question
The final question is whether the entitlement to s 91 interest is relevant when determining the amount of compensation and whether the amount of compensation will "justly compensate" the appellant.
The award of interest and the rate of interest are not matters in respect of which the Court is given any power, discretion or function. It is fixed by statute. This is common ground between the parties.
Section 91(5) makes it clear in terms that s 91 is the sole basis on which interest is payable under the Act.
The distinction between compensation and interest gains some support from the High Court in Dunning v The Commonwealth (1960) 104 CLR 517. After stating that s 40 of the Lands Acquisition Act 1906 (Cth) covered the topic of interest exhaustively, the Court said:
"... The right to interest is thus separately conferred by the statute, and when interest becomes payable the cause of action is separate from the cause of action for compensation.... where, as here, the purpose of the action is to have the amount of compensation determined, it is premature to consider the question of interest in that action."
A second matter which should be taken into account, on this third question, is the statements in the Report as to interest in compulsory acquisition cases. At paragraph 223 of the Report it is stated:
"Justice to the dispossessed owner requires that interest be paid to him on the moneys outstanding from time to time. The rate of interest should be that appropriate to a government security. Essentially, the claimant is in the same position as a person who has lent money to the government..."
The above approach is consistent with the view that the compensation is taken to be fixed as at the date of acquisition. As from that date interest is to accrue on the amount of compensation until payment is made as specified in the Act. The interest is not expressly made part of the compensation amount itself, but is something quite distinct.
A third consideration is that if it had been intended to require that interest should be taken into account as a relevant matter in determining or adjusting the amount of
compensation, so that such amount will justly compensate the dispossessed owner in reinstatement situations, one would have expected that express reference would have been made to this matter. As can be seen from the present circumstances the amount of interest in respect of which a discount might be made can be substantial.
A fourth matter is that in terms the interest to which an applicant is entitled under s 91 is "interest on the compensation". This reference is to interest on the compensation amount as determined and it presupposes that the quantum of compensation has been determined prior to the time when interest commences to accrue, that is to say, as at the date of acquisition.
Section 91(5) also makes it clear that it is designed to exclusively provide for payment of interest on the compensation.
The structure of s 91 emphasises the distinction between interest and compensation. They are treated as discrete matters. This legislative structure, in my view, supports the applicant's submission that the payment of interest is not meant to be a relevant matter within s 55(1) when calculating the amount of compensation to be paid as at the date of acquisition.
A fifth matter is that s 58(2) has the effect that, where there is no general demand or market, the market value of the land is deemed to be the net acquisition costs incurred, or likely to be incurred, in relation to the new land. The net acquisition "cost" has been agreed between the parties in the present case as $2,107,560. That agreement must be taken to include cost, or likely cost increases or decreases as the result of factors CA and E, referred to in s 58(3). The compensation must then be calculated under s 55 using this figure as the market value. It is on the amount of compensation so determined that interest must be calculated under s 91 and it is not open to discount the compensation fixed as at the acquisition date by reference to interest that the statute imposes the amount of compensation and after that date.
Accordingly, my opinion is that the amount of statutory interest required to be paid under s 91 of the Act is not a relevant matter to be taken into account when considering, under s 55, whether the amount determined will justly compensate the dispossessed owner.
Conclusion
For the above reasons I consider that the appellant is entitled to an amount of compensation of $2,107,560 together with interest thereon calculated in accordance with the Act.
Orders:
(1)Appeal allowed.
(2)Set aside paragraphs 1 and 2 of the Orders made by Wilcox J on 18 November 1994.
(3)In lieu thereof, order that :
The appellant is entitled to compensation of $2,107,560 together with interest thereon in accordance with the Act.
(4)The respondent pay the appellant's costs of this appeal.
I certify that this and
the preceding fourteen (14)
pages are a true copy of the
Reasons for Judgment herein of
his Honour Justice Tamberlin.
Associate:
Date: 13 July 1995
Counsel for Appellant: Mr M H Tobias QC
Mr A A Hyam
Solicitors for Appellant: Matthews Folbigg
Counsel for Respondent: Mr D F Jackson QC
Ms C E Adamson
Solicitor for Respondent: Australian Government Solicitor
Date of Hearing: 1 June 1995
Date Judgment Delivered: 13 July 1995
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