Italiano v The Water Corporation [No 2]

[2020] WASC 112

JURISDICTION     :   SUPREME COURT OF WESTERN AUSTRALIA

IN CIVIL

CITATION:   ITALIANO -v- THE WATER CORPORATION [No 2] [2020] WASC 112

CORAM:   KENNETH MARTIN J

HEARD:   25 - 28 NOVEMBER 2019

DELIVERED          :   6 APRIL 2020

FILE NO/S:   CIV 1976 of 2016

BETWEEN:   ANTONIO ROCCO ITALIANO

ANGELINA ITALIANO

Plaintiffs

AND

THE WATER CORPORATION

Defendant

Catchwords:

Land resumption - Compensation dispute - Public work - Speculative premium sought above highest and best use value for resumed portion of land - Adjoining land issue - Town planners - Valuers - Disagreement over speculative component premium based on possibility of relaxation of zoning regime to permit multiple smaller sized hobby farms

Legislation:

Land Administration Act 1997 (WA)
Water Agencies (Powers) Act 1984 (WA)

Result:

Compensation awarded in the sum of $160,380

Category:    B

Representation:

Counsel:

Plaintiffs	:	Mr P Lochore
Defendant	:	Mr K de Kerloy & Mr C Hicks

Solicitors:

Plaintiffs	:	JNC Legal
Defendant	:	Herbert Smith Freehills

Case(s) referred to in decision(s):

Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180

Beard v Director of Housing (Tasmania) [1961] Tas SR 141

Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALE 575

C A MacDonald v South Australian Railways Commissioner (1911) 12 CLR 221

Commissioner of Succession Duties (South Australia) v Executor Trustee & Agency Company of South Australia Ltd (1947) 74 CLR 358

Cook & Edwards v City of Stirling (1991) 4 WAR 469

Davis Properties Pty Ltd v Roads and Traffic Authority of New South Wales [1995] NSWLEC 172 (18 December 1995)

De Ieso v Commissioner of Highways South Australia (1981) 27 SASR 248

Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196

Kelliher v Commissioner for Main Roads [No 2] [2015] WASC 478

Kirela Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 [2003] NSWLEC 135

Marshall v Director-General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603

Marshall v Metropolitan Region Redevelopment Authority [2015] WASC 226

McKay v Commissioner of Main Roads [2013] WASCA 135

McKay v Commissioner of Main Roads [No 7] [2011] WASC 223

McKenna v Municipality of Burnie [1970] Tas SR 279

Merrick Tyler Pty Ltd v Commissioner of Main Roads [2015] WASCA 82

Merrick Tyler Pty Ltd v Commissioner of Main Roads [2019] WASC 166

Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273

Mount Lawley Pty Ltd v Western Australian Planning Commission [2007] WASCA 226; (2007) 34 WAR 449

Pointe Gourde Quarrying and Transport Co v Sub Intendent of Crown Lands (Trinidad) [1947] AC 565

Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353; (2004) 135 LGERA 98

Queensland v Murphy [1990] HCA 42; (1990) 95 ALJR 493

R v Compensation Court of Western Australia (1990) 2 WAR 242

Spencer v The Commonwealth (1907) 5 CLR 418

Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 257

Turner v Minister of Public Instruction (1956) 95 CLR 245

Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47

KENNETH MARTIN J:

Introduction

1. In 2010, the defendant (the Water Corporation) exercised its compulsory powers under the Water Agencies (Powers) Act 1984 (WA) and s 178(1)(d) of the Land Administration Act 1997 (WA) (the LAA) to acquire (approximately) 17.5 ha of the plaintiffs' (Mr and Mrs Italiano's) (approximately) 279 ha dairy farm within the Shire of Harvey. The view from this land, which, as I will come to explain later, is of significance in this trial, looking west towards the ocean can be seen as follows (exhibit 2):

2. The purpose of the compulsory acquisition was to obtain elevated land upon which large water storage tanks could be erected to hold water that would be produced from a new Southern Seawater desalination plant that was to be established at Binningup, some 30 km away. 

3. The need for another desalination plant in Western Australia correlates with the rapid population growth of the city of Perth (150 kms to the north), but a declining historical rainfall pattern in the south‑west of Western Australia - making the availability of a reliable further fresh water source an essential public work.  That in consequence saw the establishment of the southern seawater desalination plant with all its associated infrastructure, including pipelines between the plant and the elevated water storage tanks (and possibly in future, to even further storage water tanks at this elevated location).

4. The required land area for the Water Corporation's elevated water tank storage site location and a required access thereto from nearby, being from Honeymoon Road, came to be 'carved' out of two of six lots which together, made up one of the Italianos' two dairy farming properties in the Shire of Harvey.  Mr and Mrs Italiano's other dairy farm has been owned for a longer period.

5. The plaintiffs' first, longer owned and operated dairy farm is located 'on the flats' much closer to the Harvey townsite.  Because there was limited proximate further land for the expansion of that farm, the Italianos' second dairy farm came to be established on higher land lots situated on the Darling escarpment and approximately six to eight kilometres to the north-east of the town of Harvey.  The second dairy farm was gradually acquired by the family on a lot by lot basis until all the six (6) lots making up the second dairy farm (being lots 553, 554, 3120, 2521, 265 and 997) were ultimately acquired. 

6. From out of the Italianos' second dairy farm land (in particular from out of what was once the lots 554 and possibly some of 2521), there has been taken and created a new lot 501 - which is now held in the fee simple registered proprietorship of the Water Corporation.  Lot 501 is constituted by the 17.5 ha of taken and acquired land from out of the Italianos' second dairy farm for the public work being pursued.  For convenience, I will henceforth refer to this land as 'the taken land' or as 'lot 501'.  For convenience, I refer to the Italianos' second dairy farm located on the Darling escarpment and made up of the six (6) lots (but no longer including lot 501) as 'the Italianos' land' or 'the escarpment land'.

7. The present litigation showcases a money dispute over only the correct level of statutory compensation required to be paid to the Italianos by the Water Corporation as a result of its compulsory acquisition of the taken land.

8. The Water Corporation fully accepts that some substantial monetary compensation must be paid to the Italianos in respect of the compulsory acquisition of the taken land.  Indeed, the Water Corporation in April 2012 unconditionally paid over $1 million to the Italianos on account of its compensation obligation towards the taken land.  The unilateral payment followed the Italianos' rejection of that same offered amount, on the basis the sum offered was inadequate.  The Italianos seek even more compensation money by this litigation. 

9. The over $1 million payment as already made is to be treated, effectively, as an instalment towards whatever is ultimately assessed as the correct level of compensation by this court once ascertained in this litigation.  Normally, such an exercise over a disputed compensation amount would be conducted before the State Administrative Tribunal (SAT).  The SAT holds particular specialist valuation expertise in such disputes.  I was not provided with any explanation for why the present dispute only over the level of compensation found its way to this court.  A path to this court should not be encouraged for the future.  Given the availability and expertise of the SAT, the uneconomic choice of this court to resolve such disputes over the quantum of compensation by a trial, is senseless.

10. It should be noted at the outset that the key date as agreed between the parties to be the relevant 'date of taking' by the Water Corporation of the taken land, for the purposes of assessing the plaintiffs' statutory compensation entitlement, is 30 June 2010.  There was no debate over that agreed fact.  The trial proceeded upon that fully agreed temporal premise.

11. The same date is also otherwise forensically significant in the trial.  For most evidentiary quarters, it signals a cut‑off date against a receipt of evidence concerning events or matters concerning the disputed worth of the taken land.  Events occurring after 30 June 2010 vis-à-vis positive or negative attributes or features about the compulsorily acquired land for a purpose of assessing statutory compensation are, generally speaking, to be put aside.  That is because the focus of the evaluation exercise is upon the worth of the taken land when it was taken at 30 June 2010 and events occurring after that time (almost a decade ago) do not assist from a reference perspective.

Evidence before the court

1. The evidence put before the court at the trial may be broken down into three distinct categories - the lay evidence, the planning evidence and the valuation evidence.

Lay evidence

1. The plaintiffs called two lay witnesses at the trial.  The first was Mr Charles Italiano, the plaintiffs' son.  Mr Charles Italiano holds a power of attorney for his now elderly parents (the plaintiffs).  He gave some very brief evidence‑in‑chief and was not cross‑examined.  Consequently, all of his trial evidence may be accepted.

2. The other lay witness called at the trial by the plaintiffs also gave only brief evidence.  This was a Mr Simon Michael.  He related that his family corporation owns the neighbouring land located at the northern border with the Italianos' second dairy farm on the escarpment.  The neighbouring land is to the immediate north of the Italianos' most northerly lot (lot 997).

3. Mr Michael gave some general evidence at trial about the positive amenity of the elevated land in this area.  This feature arises by reason of what he described as 'stunning' and 'unrivalled' views from the Italianos' land, particularly looking out to the west towards the ocean.

4. Reference was also made by Mr Michael to a photograph (said to be taken by someone from a non-specifically identified location on the Italianos' escarpment property) and looking out to the west towards the ocean. Mr Michael related that this photograph had been used by the Shire of Harvey as a screensaver for its website, effectively providing web browsers of the site with an aesthetically pleasing view of the Harvey locality and beyond, photographed from the Italianos' Darling escarpment dairy farm. A screen shot of this website became exhibit 2, with the photograph seen at [1] above.

Expert planning evidence

1. Each side called expert planners.

2. The plaintiffs called Mr Gary Fitzgerald, a town planning expert.  Mr Fitzgerald provided his formal report dated 10 December 2018.  This report became exhibit 4 (the Fitzgerald Report).

3. For the defendants, Mr Neil Foley was called.  Mr Foley is a town planning consultant.  He provided a comprehensive report of 28 September 2018, which became exhibit 6 (with a correction sheet to that report also being tendered as exhibit 6A) (the Foley Report).  Mr Foley also provided a supplementary report of 15 November 2018 which came to be tendered as exhibit 7 (the Supplementary Foley Report).

4. Pursuant to pre-trial programming orders, Mr Foley and Mr Fitzgerald had engaged in a pre-trial expert conferral on 5 February 2019, following which a joint memorandum by them was prepared.  The joint memorandum post conferral report, dated 8 March 2019, came to be tendered as exhibit 5 (the Foley/Fitzgerald memorandum).

5. Each of the planning experts gave evidence concurrently across day two of trial, being led and then cross‑examined upon various issues as the parties had largely agreed.  I posed some questions to these experts within that exercise as well.

6. The plaintiffs had also subpoenaed to attend at the trial a local planner, Mr Gary Barbour (who now works for the Shire of Bunbury).  Mr Barbour had, some time earlier, been engaged to provide a report for the plaintiffs about planning issues and prospects for the taken land.  This written report, dated 22 August 2013, became exhibit 1.53 at the trial (the Barbour Report).  Mr Barbour participated within the concurrent expert planning evidence taking exercise across day two of trial, essentially as a further planning expert for the plaintiffs, albeit he had not been a participant in any prior conferrals between Mr Fitzgerald and Mr Foley - putting Mr Barbour somewhat 'out of the loop' when he attended trial under the plaintiffs' subpoena.

Expert valuation evidence

1. Each side also relied on expert evidence regarding valuation issues.

2. The plaintiffs called Mr Glenndin Miller.  Mr Miller also provided a statement and report of 13 May 2019, which was tendered and became exhibit 8 (the Miller Report).  He also provided a supplementary report of 1 November 2019, which became exhibit 10 (the Supplementary Miller Report).

3. For the defendant, Mr Keith Wilson was called as its expert valuer.  Mr Wilson provided a report of 28 September 2018 (containing KW1 to KW3), which became exhibit 11 (the Wilson Report).  He later provided a supplementary statement of 28 October 2019 (containing KW1 and KW2), which came to be tendered as exhibit 12 (the Supplementary Wilson Report).

4. As with the planning experts, Mr Miller and Mr Wilson further provided a joint statement of expert witnesses following the pre-trial expert conferrals across March and April 2019.  A joint statement dated 10 April 2019 from them is exhibit 9 (the Miller/Wilson memorandum).  Mr Miller and Mr Wilson also gave concurrent evidence across day three of the trial.  Again they were examined and cross-examined by counsel across a largely agreed agenda of topics.  Again, I also posed some questions to both valuation experts within that exercise.

Other evidence and written submissions

1. By consent, the parties tendered a four lever arch volume largely agreed documents trial book (TB).  This was accepted as trial exhibit 1 with each tab of the TB being a sub‑exhibit ranging from 1.1 - 1.75.

2. I was also provided with written opening submissions by counsel for both parties.  To that end, I held the plaintiffs' written outline of opening submissions of 13 November 2019 (the plaintiffs' written submissions) and the defendant's written outline of opening submissions dated 20 November 2019 (the Water Corporation's written submissions).

3. I also accepted as an exhibit the plaintiffs' chronology of 13 November 2019, and which is not in contention.

4. Various other documentary evidence was tendered ad hoc by the parties during trial (see exhibits 13, 14 and 15).

5. At this stage, I should specifically note the parties submitted exhibit 16, being their table of agreed compensation as between the parties (the Compensation Table).  This is a key document of the trial.  A notable feature of the trial is that the parties as between themselves have agreed to the amounts of compensation that are to be payable to the Italianos -depending upon the potential outcomes they are able to achieve at the trial.  As will be seen, the Compensation Table identifies those agreed amounts of compensation (upon various contingencies and which I will refer to and utilise throughout the reasons).  I will incorporate the Compensation Table as Annexure A to these reasons.

Introductory trial factors

The first factor - the land, value and claim

1. The key issue generating the parties' ongoing discord over the correct level of statutory compensation that is to be payable to the plaintiffs arises from the in principle disagreement between the parties' rival valuers - upon really just one issue.  This is the issue variously referred to by the parties as the value of the 'speculative component', being a suggested extra value for the taken land (at 2010), and said somewhat fluidly to either be attributable to the value of the taken land but, alternatively, said to arise by reason of an injurious affection as against (some of) the Italianos' (residual) farming land.  Evidently then, this is a lost extra speculative value claim case argued in the alternative, being then said as grounded either on s 241(2), or as is also put upon s 241(7)(a) of the LAA. 

2. The value for this last speculative component, if it is payable at all, has actually been agreed as between the trial parties.  The as agreed amount is for an extra $1,156,453 to be payable to the plaintiffs (see the Compensation Table). 

3. As I will try to explain, there has been considerable pre-trial and during trial and, I have to say, still remains for me, uncertainty over how, conceptually, a claimed entitlement for the speculative component is provided by the plaintiffs, in reference to s 241 of the LAA. 

4. Shortly, I will set out some relevant components from s 241 of the LAA, from which a conceptual basis for the alternative claim for the extra money claimed for a lost extra element of speculative value might be derived as a matter of concept. 

5. Before that, however, I need to observe that there was also a secondary dispute of principle arising in the trial and which is of a much lesser financial magnitude and (hopefully) capable of an earlier and easier resolution. 

6. This lesser dispute arises as between the parties over whether or not, for the purposes of s 241(7)(b) of the LAA, three of the six lots making up the Italianos' escarpment land can meet the statutory description of being 'adjoining land', or not (ie, to the taken land). 

7. The Water Corporation, by a relatively late pre-trial amendment to its pleaded defence, had denied then that three of the farm's lots, namely lots 500, 502 and 265, met the legal threshold of being 'adjoining land', for the purposes engaging with s 241(7) LAA. 

8. For that secondary issue dispute, there is no real factual dispute. Rather, it is an issue of statutory interpretation and application concerning s 241(7)(b) LAA, and whether a satisfaction of the 'adjoining land' threshold is met or not.

9. I will return to this secondary issue shortly.

The second factor - the April 2012 compensation

1. A second factor that should be afforded an early recognition is that the plaintiffs hold already a tranche of compensation which was paid over by the Water Corporation in April 2012.  For the purposes of present proceedings it is agreed, pursuant to par 34 of the plaintiffs' statement of claim (as amended) that the Water Corporation has paid to the plaintiffs the amount of $1,017,500 as compensation on 20 April 2012 (the April 2012 compensation).

2. At that time, the payment was paid unconditionally.  It was explained by the Water Corporation as being made on the following basis:

   (a)$435,000 for the value of the taken land, pursuant to s 241(2) of the LAA;

   (b)$5,000 for loss and damage, pursuant to s 241(6) of the LAA;

   (c)$35,000 for severance damage, pursuant to s 241(7)(a) of the LAA;

   (d)$450,000 for reduction in value of adjoining land, pursuant to s 241(7)(b) of the LAA;

   (e)$92,500 in solatium, in accordance with s 241(8) and (9) of the LAA.

TOTAL $1,017,500.00

1. Of the amounts making up that April 2012 compensation, I assess that within this trial there is now only a residual conceptual disagreement subsisting over only items (a) and (d) amounts seen above.  During trial I rejected (as wholly unarguable), as a matter of law and principle, a claim of the plaintiffs seeking an extra solatium payment, then argued to arise by reason of the late amendment to the Water Corporation's defence which was made before the trial.  But that amendment raised the issue I have earlier mentioned, namely, of adjoining land.  The lateness of that amendment made under the rules of court without leave was said to support a claim to extra solatium for the plaintiffs - a proposition I could not accept.  I turn to this issue in some greater details later in the reasons.

1. It is also necessary to focus again upon the residual controversy over both of the component amounts (a) and (d) in the April 2012 compensation, because the plaintiffs' claim to the so‑called speculative component is advanced in the alternative. That extra claim elides, as I will explain, between either s 242(2) or s 241(7)(b) (or possibly even s 241(7)(a)), towards being either an element of compensation due in respect of the taken land or, alternatively, for a reduction in the value of the remaining adjoining land still held by the plaintiffs.

2. When the trial began, I had assessed from the pleadings and written submissions of the plaintiffs that the primary basis for the s 241(7) claim was as a severance claim under s 241(7)(a).  However, as I will seek to explain, the conceptual justification position of the plaintiffs then fluctuated continually during the trial.

The third factor - s 241 of the LAA

1. The next introductory factor required to be noted is the relevant compensation legislation itself. 

2. It should go without saying these days that any interpretive exercise conducted towards a statutory provision must be conducted within the framework of assessing holistically not only what is any problematic text in the statute at issue, but also the contextually surrounding legislative provisions and of course, the objectively assessed legislative purpose of these provisions viewed within the LAA itself. Only for reasons of convenience and brevity then do I limit what follows as next set out to extracted provisions from s 241 of the LAA. The section is found situate within pt 10 div 5 of the LAA.

3. Relevantly, I set out below from out of s 241 of the LAA the following text (and, at places, I have highlighted key text of particular importance to the exercise in bold):

   241.     How compensation to be determined

   (1)In determining the amount of compensation (if any) to be offered, paid, or awarded for an interest in land taken under Part 9, regard is to be had solely to the matters referred to in this section.

   (2)Regard is to be had to the value of the land with any improvements, or the interest of the claimant in the land, assessed as on -

   …

   (c)in the case of an interest to which paragraphs (a) and (b) do not apply - the date of the taking,

   and discounting any increase or decrease in value attributable to the proposed public work.

   (3)If a notice of intention was registered in relation to the interest on a date before the date referred to in subsection (2), and a transaction relating to the land made between those dates affected the value of the interest, regard may be had to the value of the interest assessed as at the date referred to in subsection (2) and discounting the effect of the transaction.

   (4)No regard is to be had to the value of any improvements made without the consent of the Minister after the registration of a notice of intention.

   ...

   (6)Regard is to be had to the loss or damage, if any, sustained by the claimant by reason of ‑

   (a)removal expenses; or

   (b)disruption and reinstatement of a business; or

   (c)the halting of building works in progress at the date when the interest is taken and the consequential termination of building contracts; or

   (d)architect’s fees or quantity surveyor’s fees actually incurred by the claimant in respect of proposed buildings or improvements which cannot be commenced or continued in consequence of the taking of the interest; or

   (e)any other facts which the acquiring authority, the court, or the State Administrative Tribunal considers it just to take into account in the circumstances of the case.

   (7)If the fee simple in land is taken from a person who is also the holder in fee simple of adjoining land, regard is to be had to the amount of any damage suffered by the claimant -

   (a)due to the severing of the land taken from that adjoining land; or

   (b)due to a reduction of the value of that adjoining land,

   however, if the value of any land held in fee simple by the person is increased by the carrying out of, or the proposal to carry out, the public work for which the land was taken, the increase is to be set off against the amount of compensation that would otherwise be payable under paragraph (b).

   (8)If the interest in land is taken without agreement, an amount considered by the court or the State Administrative Tribunal or, for the purposes of making an offer, by the acquiring authority, appropriate to compensate for the taking without agreement may be added to the award or offer.

   (9)The additional amount under subsection (8) must not be more than 10% of the amount otherwise awarded or offered, unless the court or the State Administrative Tribunal, or, for the purposes of making an offer, the acquiring authority, is satisfied that exceptional circumstances justify a higher amount.

   ...

   (12)Subject to subsections (10) and (11) -

   (a)when any amount representing an advance payment of compensation is paid to a claimant, interest on the total amount of compensation is payable only to the date of the first payment, and interest is payable thereafter only on the balance outstanding from time to time; and

   (b)when any amount is offered by the acquiring authority as an advance payment of compensation under section 248 and the offer is not accepted by the claimant within 30 days of the day on which it was made, no interest is payable thereafter in respect of the amount so offered.

4. It will become apparent that of key importance to the present trial are the terms of s 241(2) and (7)(a) and (b) above.

The fourth factor - the Italianos' land before and after take

1. The fourth early factor I need to mention is the 'before' and 'after' positions for the Italianos' second dairy farm land, vis-à-vis the taken land. 

2. An understanding towards the present dispute is, I venture to suggest, assisted by a visual appreciation of the 'before' and 'after' positions concerning the taken land (lot 501).  To that end, I will next refer to three maps, showing those situations.

3. Map A, as seen below (which is taken from the Certificate of Title Volume 1431 Folio 185 - see TB tab 62 page 7) shows the six (6) lots or parcels of land, which together had constituted the Italianos' escarpment land at 'before' 30 June 2010:

4. From Map A it is possible to see lots 997, 553, 554, 3120, 2521.  Whilst not visible, lot 265 is situated to the left of lot 2521.

5. Next, Map B below (see TB tab 32 page 431) shows the six individual lots of the Italianos' land (namely lots 553, 554, 3120, 2521, 265 and 997) at just before the take on 30 June 2010.  Seen cross-hatched in Map B is the proposed to be taken land, seen there as largely obtained from out of land formerly the former lots 554 and (possibly) from lot 2521.  The land that is seen cross-hatched on Map B does not show a small corridor strip to the right (eastern) side of that land which was ultimately not taken:

6. Map C, as seen below, shows the final 'after' position for the Italianos' land post 30 June 2010, now showing the taken land as the newly created lot 501 (see TB tab 64 page 23): 

7. From Map C, it may be seen, correlatively, the residue untaken land in former lot 554 was renumbered, to now be a new lot 502 (situated to the immediate north of lot 501).  Likewise, the land that remained out of former lot 2521, became a newly created lot 500, to the south.

8. Also visible in Map C is a small residual corridor of land to the immediate right (east) of the new lot 501.  That 'strip' of land forms a part of the new lot 502.

The adjoining land issue resolved

1. As mentioned, a secondary issue of characterisation arises at this trial over what is, or is not, to be accepted as adjoining land to lot 501, for the purpose of engaging with the terms of s 241(7)(b) of the LAA for compensation purposes.

2. Clearly, the newly created lots 500 and 502 are adjoining land to lot 501.  There is no dispute over that.  But it may be seen from Map C that the border of lot 501 does not actually 'touch' the adjacent eastern lot, namely, lot 3120.  That is due to the 20 m corridor that was left to become a part of lot 502 on the right of lot 501. 

3. There is no dispute from the Water Corporation that land within the new lots 500 and 502 fully meets a description of 'adjoining land'.  The Water Corporation also accepts that lot 265 (located to the south‑west of lot 501) is adjoining land vis-à-vis lot 501.  From Map C a degree of 'touch' can just be seen at the south-west corner of lot 501.

4. It may be seen from Map C that some part of the boundaries for all those three lots, at some point, are actually seen to 'touch' at the boundary with the Water Corporation's as taken lot 501.

5. However, there is a controversy over whether or not the land the subject of lots 553 and 997 (both lying to the north of lot 501) and, as well, lot 3120 (to the east of lot 501 but separated by the 20 m corridor), can meet the description of adjoining land for the purposes of engaging s 241(7)(b) of the LAA.

6. It may be seen from Map C that the boundary for those three lots in dispute as 'adjoining land' does not 'touch' any part of the boundary of lot 501. 

7. Hence, the question is whether the Italianos' residual escarpment land (being lots 553, 997 and 3120) is also to be assessed as 'adjoining land' or not for the purposes of engaging with s 241(7)(b) of the LAA.

8. If there is ascertained to be an engagement of s 241(7)(b), then by agreement there is no issue that some compensation is payable in respect of those as affected lots. The parties are agreed as to the compensation volume amounts for the purposes of s 241(7)(b). Per the agreed Compensation Table those agreed amounts are:

   (a) $100,000 for lot 553;

   (b) $30,000 for lot 997; and

   (c) $100,000 for lot 3120. 

9. But if those lots are not found by the court to be adjoining land, then s 241(7)(b) is not engaged. Then, no additional compensation will be payable. So it may be seen this minor aspect of the trial dispute is only over, at most, for the plaintiffs an extra $230,000.

10. Since an early resolution of the issue of the adjoining land might assist to clarify my subsequent trial determinations, I can state now that I am of the end view that towards my ascertaining as to whether the disputed lots are land to be characterised as adjoining land or not, for the purposes of meeting s 241(7) of the LAA, my assessment is that:

    (a)the exercise posed raises a question of mixed law and fact.  As to the facts at issue, every individual compensation case must be resolved by regard to the unique presenting circumstances of each different compulsory acquisition and compensation scenario;

    (b)the assessment ought not be an exercise of form over substance, to be conducted by reference solely to the ascertained 'touching' or not of cadastral boundary lines of designated lots drawn upon land diagrams which become the bases for issued certificates of title.  As earlier seen, the terminology that is seen used within s 241(7) is of 'adjoining land' not of 'adjoining lots'; 

    (c)the present determination needs to be approached with some extra caution.  It should be remembered, in the present context, that land for public purposes was taken from out of an operative rural dairy farming property.  On a working dairy farm, fine distinctions based upon lot designation boundary lines that do not physically exist on the ground (ie, each lot is not physically demarcated from the others), can result in artificial differentiations that do not accord with the 'on the ground' reality of how all six lots were used together as one operative dairy farm operation; 

    (d)physical features, on the other hand, if witnessed as in place on the ground (for instance, a 'road' acting as a dividing and real physical as barrier between various lands) are plainly a highly relevant consideration.  Such a physical feature that by its presence prevents land from being contiguous, and thereby not to meet the natural and ordinary meaning of 'adjoining' was explained towards s 241(7) by both Le Miere J and then, by the Court of Appeal in the Merrick Tyler litigation: see Merrick Tyler Pty Ltd v Commissioner of Main Roads [2019] WASC 166 and Merrick Tyler Pty Ltd v Commissioner of Main Roads [2015] WASCA 82;

    (e)in this particular case, my evaluation and determination as to whether or not the three lots in question are adjoining land ought to take into account the 'before' situation of the plaintiffs' operative dairy farm as a whole across those six (6) lots, evaluated against the 'after' position.  To that end, the taken land (lot 501) was, as now seen, once within parts of what was the land of the Italianos owned within their former lots 554 and 2521.

11. Taking all those features into account, I also must weigh, of course, what was the somewhat sparse factual evidence before me at trial towards the physical characteristics of the as taken lot 501 land itself, and its surrounds, at 30 June 2010.

Lots 553 and 3120

1. My end assessment is that lots 553 and 3120, which had prior to 30 June 2010 contained land that then had once 'touched' former lot 554 to the north and had touched the former lot 2521 to the east, are to be assessed as adjoining lands to lot 501.  Within the underlying context of an operative dairy farm situation, the land that became the subject of the taken lot 501 ought, as a matter of substance, be assessed as being physically adjoining land to the land in lots 553 and 3120, as well.

Lot 997

1. My assessment, however, is to the contrary as regards the lot 997 land, which is located somewhat further and remotely to the north of lot 553.  I assess that lot 997 is not adjoining land vis-à-vis lot 501, due to a greater physical distance of separation by its former, or current, distance and to a lack of any physical on the ground evidence of its proximity to the taken land in lot 501. 

2. However, were I wrong about that assessment, then the lot 997 extra s 241(7) compensation (agreed as to quantum) arising in consequence of it being counter-assessed would only be a further $30,000.

Compensation

1. Following my s 241(7)(b) adjoining land determinations, the as agreed quantum position payable to the plaintiffs from the agreed Compensation Table is this:

Land	Evaluation	Agreed compensation
Lot 553	ü Adjoining land (north)	$100,000
Lot 3120	ü Adjoining land (east)	$100,000
Lot 997	û Not adjoining land	$0 [however if, to the contrary, lot 997 were to be assessed as adjoining land then the agreed compensation under s 241(7)(b) is $30,000]

1. As earlier indicated, the adjoining land issue was only a secondary feature of the litigation.  I can turn now to relevant legal principles relevant to the disposition of the more substantive dispute arising in the trial concerning the 'speculative component' claimed by the plaintiffs.

Legal principles:  statutory compensation

1. What follows in these reasons is my brief conspectus of legal principles applicable within the realm of compulsory acquisition land law for Western Australia. 

2. The following as stated principles are not intended to be exhaustive.  They are assembled to facilitate the resolution of the core issues arising in the current litigation.  They are by no means intended to be read as any comprehensive catalogue of compensation principles.  For a comprehensive elucidation of principles in this area, I mention the exhaustive exposition of principles by Beech J (as his Honour then was)  in McKay v Commissioner of Main Roads [No 7] [2011] WASC 223 at [156] - [158], [162] - [163], [175] - [176], [179] - [198], [213], [228], [339] - [379], [478] - [479], [1503], [2213]. Then, on the appeal from an aspect of that decision, see McKay v Commissioner of Main Roads [2013] WASCA 135 at [137], [139] - [147] per Murphy JA, with whom Martin CJ and Buss JA (as his Honour then was) agreed.

3. Briefly then, I will mention only the following principles:

   (a)The planning and development of land in Western Australia is, generally speaking, controlled by the Planning and Development Act 2005 (WA). Generally, a development of private land is not permitted without an approval from an authority, although there are many exceptions. Broadly speaking again, development will not be approved unless a proposed development is proposed as in accord with relevant planning instruments: see s 162 of the Planning and Development Act.

   (b)By contrast, the compulsory acquisition of land in Western Australia by the State or by an authorised public authority is now governed by the LAA.

   (c)Part 9 of the LAA deals with the processes for a compulsory acquisition of land. The process begins with an issue of a notice of intention to take: see s 170 - s 171. Subject to exceptions, required land cannot be developed or sold without the relevant Minister's approval: see s 172 - s 173. Once an objection period is allowed to run (s 175), the Minister may, absent a successful objection, issue a Taking Order: see s 177 - s 178. Upon the registration of a Taking Order (in contra distinction to an issue of the Taking Order), the compulsory acquisition takes effect: see s 179. The date of registration of the Taking Order is therefore the date of acquisition and is the date of valuation of the taken land for the purpose of assessing any compensation due to former landowners.

   (d)Part 10 of the LAA then addresses the issue of the statutory compensation to be paid in respect of a compulsory acquisition of taken land. Within pt 10 lies s 241, some parts of which I have set out earlier. Section 241 assembles the considerations that must be included in any assessment of compensation exercise.

   (e)Parts 9 and 10 of the LAA, generally speaking, apply to 'public works'. Again generally, pt 9 allows for the compulsory acquisition of land for the purposes of a proposed public work: see s 161.

   (f)Parts 9 and 10 of the LAA enjoy a legislative history extending back to the terms of the former Public Works Act 1902 (WA). Part 9 of the LAA still defines a 'public work' by reference to a definition found in the Public Works Act:  see s 151.

   (g)The quantum of compensation payable in respect of taken land requires an assessment of the price at which the land would have been acquired, assessed objectively, as between a hypothetical seller and a hypothetical purchaser, with both further assumed as willing, but not anxious, to deal and with both the seller and the purchaser also assumed to be fully acquainted with the attributes of the land affecting its value.  The law as famously stated by the High Court of Australia on this point in Spencer v The Commonwealth (1907) 5 CLR 418, 431 - 432 remains applicable to the phrase 'the value of the land', as it is used in s 241(2) of the LAA.

   (h)It has been also said that the as assumed hypothetical seller and purchaser are also assumed to be 'cognizant of all circumstances which affect [the land's] value':  see Wells J in De Ieso v Commissioner of Highways South Australia (1981) 27 SASR 248, 252. Among such familiar circumstances are the opinions of persons, 'regarded as authoritative in matters, with respect to value and factors affecting value' (De Ieso, 252) for the land.

   (i)Wells J had continued in De Ieso at page 253 to observe that a court is not within this exercise:

   called on to inquire ultimately whether, as a fact, the planning authorities would have approved a relevant plan of sub‑division.  Rather it is called on to decide how a hypothetical prospective developer (who may be assimilated in the present context, with the willing, but not anxious, hypothetical purchaser posed by the judgments in Spencer's case) would have viewed [their] potential financial return if [they] were considering a proposal that included one or other of the proposed plans.

   (j)In Port Stephens Shire Council v Tellamist Pty Ltd [2004] NSWCA 353; (2004) 135 LGERA 98, Ipp JA observed at [491] that information in the hands of a public authority as at the taking date, was presumed to be made available to the hypothetical seller and purchaser. His Honour further observed at [489]:

   In my view, the overwhelming thrust of these authorities is to the effect that the hypothetical seller and purchaser are to be assumed, in the hypothetical situation postulated, to be aware of all information relevant to the market price, about which a prudent purchaser would inquire.

   (k)As already seen, s 241(2) of the LAA provides that the value of the taken land is to be assessed on a basis of 'discounting any increase or decrease in value attributable to the proposed public work'.  Such words are recognised in the cases as a legislative manifestation of a well-known principle applied in the area of statutory compensation, known as the Pointe Gourde principle:  see Pointe Gourde Quarrying and Transport Co v Sub Intendent of Crown Lands (Trinidad) [1947] AC 565. See also McKay v Commissioner of Main Roads (No 7) at [206] where Beech J explained, in effect, that the legislative text, even if accepted as an attempt to reproduce that 'principle', is itself determinative.

   (l)The discounting of increases or decreases in value that are assessed as being attributable to a proposed public work, are related counterpart provisions.

   (m)As regards discounting increases in value, the acquiring authority should not be required to pay an acquisition price that is elevated by the market's knowledge of the intended public work:  see Queensland v Murphy [1990] HCA 42; (1990) 95 ALJR 493, 496.

   (n)Conversely, the acquiring authority ought not be allowed to adversely affect the value of land by imposing restrictions upon its use, so as to facilitate it to later acquire the land at a lesser value, by reason of the market's knowledge of such negative features.

   (o)Thus, the hypothetical valuation exercise following a compulsory acquisition of land for a public work concerns the assessed value of the taken land upon the premise it had not been taken and, assuming further, that the public work for which it was taken, were not in prospect.

   (p)One correlative consequence of the Pointe Gourde principle as codified by s 241 is that earlier 'steps' taken by a public authority towards the later taking of land, are also to be disregarded.  Hence any public advertising of a scheme amendment so as to reserve land for a public work, or for the undertaking of preparatory physical works as preparatory steps along the process of an ultimate eventual taking, must, as regards their effect(s) upon value, also be disregarded.  To that end, see the observations of Jacobs J in the High Court of Australia in Housing Commission of New South Wales v San Sebastian Pty Ltd (1978) 140 CLR 196, 206 - 207. See also observations by the Court of Appeal of Western Australia in Mount Lawley Pty Ltd v Western Australian Planning Commission [2007] WASCA 226; (2007) 34 WAR 449 at [28] - [29].

   (q)Applying the Pointe Gourde principle, it is usually asked what the position would be for the land had the taking not occurred, or been a subject of the planning steps to that end.  In that context a series of hypothetical planning decisions for the unaffected scenario are to be made for the purposes of a valuation.  See Trandos v Western Australian Planning Commission [2001] WASCA 346; (2001) 117 LGERA 257. But any previous irregular planning decisions are not admissible: see McKay v Commissioner of Main Roads [No 7] at [307].

   (r)Towards the underlying hypothesis of orderly and proper planning towards the land:  see Marshall v Metropolitan Region Redevelopment Authority [2015] WASC 226 at [178] ‑ [182]. Whilst there is generally an element of discretion, the objective of 'orderly planning' is to maximise the predictability of planning and development decisions, by minimising of ad hoc decisions, and particularly by also minimising any departures from established planning trajectories.

   (s)Compensation is generally payable by an undertaking of a valuation conducted on the basis of the taken land's 'highest and best use'.  That concept invokes the need to assume, through the knowledge of what is both possible and lawful, those uses of the land and any market for its possible future use - which assumed use would fetch the highest price for the taken land.

   (t)Within the context of assessing the value of the land at its highest and best use, there must as well be considered the hypothetical 'potentiality' of the land.  This will embrace consideration of a use other than the current use of the land, which after use is not presently lawful, but which use could become lawful in the future, if an amendment could be secured to the zoning or other planning or environmental restrictions upon current applications.  Hence, land that is presently zoned rural is commonly said to have a potential for rezoning to urban.  Consequently, a hypothetical purchaser of such land is assumed to be willing to pay something for the worth of this potentiality but, nevertheless, not the full value of the land, as if it had achieved that future potential:  see Mount Lawley Pty Ltd v Western Australian Planning Commission [2004] WASCA 149; (2004) 29 WAR 273 (Mount Lawley [2004]) at [162] ‑ [166].

   (u)Potentiality is not to be fully equated to highest and best use.  A court and valuers may not treat as an actuality that which is merely a potentiality:  see Turner v Minister of Public Instruction (1956) 95 CLR 245; McKenna v Municipality of Burnie [1970] Tas SR 279 and Yates Property Corporation Pty Ltd (in liq) v Darling Harbour Authority (1991) 24 NSWLR 156; (1991) 73 LGRA 47. As it was vividly explained by Crisp J in Beard v Director of Housing (Tasmania) [1961] Tas SR 141, 149 '… there is a difference between an anticipated and a realised potential, between the unhatched egg and the chicken'.

   (v)As regards the intersection of a valuation predicated upon highest and best use and the potential of a premium to be paid as ascribing some more value on account of future potential, Beech J in McKay v Commissioner of Main Roads [No 7] at [158] summarised the position this way:

   Thus if the most profitable use of the land is one not permitted by its current zoning, the concept of highest and best use requires the potential of the land to be used for that more profitable use, after necessary planning approval, to be taken into account.  It does not require or permit an assumption that the necessary planning approval will be forthcoming.  The prospects of such approval as determined on the evidence, viewed from the prospective of the hypothetical parties, will bear on the assessment of the value of that potential use.

   (w)In the exercise, the court is not standing in the shoes of a planning authority, but rather considering how the hypothetically assumed parties would have viewed the land's potential, or prospects.  See again, McKay v Commissioner of Main Roads [No 7] at [1503].

   (x)In conducting an assessment of value by reference to the highest and best use of land, what are only remote and speculative possibilities are to be disregarded.  For instance in C A MacDonald v South Australian Railways Commissioner (1911) 12 CLR 221, a canvassed possibility of the owner obtaining a necessary licence to use the land for a special purpose, even if the land were adaptable for the special purpose, was assessed as being so remote as to be negligible and, therefore, to be disregarded in assessing the compensation payable. See also Davis Properties Pty Ltd v Roads and Traffic Authority of New South Wales [1995] NSWLEC 172 (18 October 1995).

   (y)As stated by authors Newton G and Connelly C, Land Acquisition (7^th ed, 2017) at par 3.17:

   Determining whether resumed land has a better economic use than that to which it was being put at the time of resumption requires the valuer to assess probabilities.  Where the valuer crosses the boundary into 'unacceptable guess work' the claim will be rejected:  Gugusheff v South Australia Urban Land Trust (1990) 55 SASR 268. It may be added that a valuer's opinion that the resumed land has a highest and best use needs to be supported by convincing evidence.

   (z)In an assessment of the value of the highest and best use of land, applicable planning schemes must be considered as a fundamental element in the decision‑making process:  see Kirela Pty Ltd v Minister administering the Environmental Planning and Assessment Act 1979 [2003] NSWLEC 135 at [159] - [160].

   (aa)In Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 167 ALR 575 at [268] Callinan J, in terms of explaining the as assumed hypothetical parties being perfectly acquainted with the land at issue, rendered the following observations and in the process referred to the frequently cited passage by Isaacs J in Spencer v The Commonwealth as to parties:

   ... perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconvenience, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.

   Callinan J then continued in Boland, at [269]:

   The comprehensive language used by Isaacs J is clearly capable of embracing matters with which perhaps courts of the day have become more familiar, such as the value of a highly restrictive or very advantageous planning approvals, the changing value of money over time and opportunity cost.  So too computerisation has in modern times enabled the testing of financial projections, the difference sensitivities, of time, interest rates, changing values of money, different occupancy rates and other contingencies both favourable and unfavourable relatively easily and expensively. 

   See also Mount Lawley [2004] at [162], to like effect, as regards the:

   hypothetical vendor and purchaser being perfectly acquainted with the land and all of its characteristics … including those which render it suitable for development and, as well, those which militate in favour of reservation.

   (bb)Principles applicable by reference to a use of a comparable sales approach as used by valuers are summarised by Pritchard J (as her Honour then was) in Kelliher v Commissioner for Main Roads [No 2] [2015] WASC 478 at [89] - [95].

   (cc)As regards use of the conventional valuation methodology of comparable sales, I note cautionary observations of Pullin J (as his Honour then was) in Arcus Shopfitters Pty Ltd v Western Australian Planning Commissioner [2002] WASC 174; (2002) 125 LGERA 180 at [78] to this effect:

   It is not satisfactory, in my opinion, for a valuer who values land using the comparable sales method to list a number of comparable sales, each one suggesting a different value for the subject land and each of which requires some adjustment, and then simply to state an opinion about the value of the subject land.  Such an opinion will only have any value if the valuer explains which is the most important of the comparable sales, why that is so, and what adjustments have been made to reach a conclusion about the value of the subject land.

   (dd)If there is any doubt as to the amount properly payable by way of compensation, then the doubt should be resolved in favour of a more liberal estimate:  see Commissioner of Succession Duties (South Australia) v Executor Trustee & Agency Company of South Australia Ltd (1947) 74 CLR 358, 374. Locally, that approach was endorsed by Anderson J in Cook & Edwards v City of Stirling (1991) 4 WAR 469, in a context of assessing what was competing valuation advice. His Honour had observed at page 473, '[a]s I am not able to regard one opinion as any more meritorious than another on this point, I must resolve the question in favour of the rate that will result in a more liberal award of compensation'. To the same effect were observations by Gaudron J in Marshall v Director-General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603 at [38]. Within that decision McHugh J at [48] also observed:

   In the case of legislation dealing with compensation to be awarded in respect of the compulsory acquisition of land, however, a different presumption operates.  The legislation is intended to ensure that the person whose land has been taken is justly compensated.  Such legislation should be construed with the presumption that the legislature intended the claimant to be liberally compensated.  That being so it would be wrong to construe a provision such as s 20(1)(b) as conferring compensation only for damage that results from an act that is 'the very thing, or an integral part of or step in the very thing, which the provisions of the Act' gave the constructing authority power to carry out.  Whenever the constructing authority takes steps to achieve any purpose or carrying out any function that is incidental to the purpose for which part of the land was acquired, it should be regarded as an exercise of a statutory power within the meaning of s 20(1)(b).

   (ee)The function of an award of solatium (see s 241(8) and (9) of the LAA as set out earlier) is to recompense a claimant for any distress, inconvenience and reluctance to lose their land or land interest, which is being resumed.  Such recompense is in an amount over and above for matters otherwise compensable under various heads of claim - other than s 241(8) and (9).  See R v Compensation Court of Western Australia (1990) 2 WAR 242 per Brinsden and Walsh JJ at 265 - 266.

1. With that summary of principles now completed, I can, with them in mind, return to the task of approaching the major disputed issue arising between the parties at the trial.

A speculative component of extra value claim:  the fundamental issue for determination

1. As seen, I have now resolved the (secondary) issue concerning the lots which meet the description of adjoining land for the purposes of s 241(7) of the LAA.  During the course of the trial I had also rejected a request for leave by the plaintiffs seeking to make an amendment to their statement of claim, by them seeking to claim additional solatium, by reason of the pre-trial amendment made to the Water Corporation's pleaded defence, then articulating the adjoining land controversy (see ts 279).  As such, there now only remains the one fundamental issue still required for determination in the trial.  For this evaluation, the principles now seen as (g) to (i) and (t) to (y), as they are summarised and collected in [76], carry a particular relevance to the task.

2. It is at the outset convenient to see the plaintiffs' speculative component for extra value claim by reference to its formulation from out of the Water Corporation's written submissions, at par 10.  There it was stated in the following terms, as 'issue 1':

   Is the compensation payable to the plaintiffs to be assessed on the basis that, as at the date of taking, a prospective purchaser, acting reasonably and prudently, would have purchased the Plaintiffs' Land at a 20% premium over and above its market value, because of the alleged speculative prospect of that land being rezoned in the medium to long‑term to permit that land to be subdivided into hobby farms of between 2 ha and 20 ha?  [Referring to page 9 of the Miller/Wilson memorandum.]

3. In the end, my answer to that question is 'No'.  However, reasons for reaching that end position conclusion require a rather torturous journey to be undertaken, on which I set forth.

How the speculative component claim is pleaded

1. When this trial commenced on 25 November 2019, it looked then that the state of the plaintiffs' pleadings, as regards the claimed speculative component for the loss of premium amount (seeking an extra $1,156,453), was advanced at then by reference to the prayer for relief as was found in the statement of claim seeking severance damage to the residual (untaken) dairy farm land, pursuant to s 241(7)(a) of the LAA.

2. However, by reference to the plaintiffs' outline of written opening submissions for trial, it had also then emerged that the plaintiffs were claiming that same amount on an alternative basis - and by reference to s 241(2) LAA (see par 40).  However, that alternative scenario was not then pleaded by the plaintiffs.

3. A change (or augmentation) of position upon this issue by the plaintiffs seemed to have arisen out of a supplementary report of their valuer, Mr Miller (see the Supplementary Miller Report).

4. Under the plaintiffs' opening written submissions for the trial, this had been said under the heading 'Severance damage' (see particularly pars 29 and 31):

   27.Section 241(7)(a) of the LAA permits compensation to be paid for damage suffered from the severing of the taken land from the adjoining land. 

   28.The valuers reached agreement on many, but not all issues.

   29.Mr Miller allowed severance compensation for the loss of the entirety of the Hills property of the premium or speculative component a purchaser might have paid for the potential of the land to have a higher and better use in the future.

   30.The Defendant's valuer, Mr Keith Wilson, disagreed, and made no allowance for this.

   31.As noted above at [25], Mr Miller's Supplementary Report says this loss of a premium could be assessed under s 241(2) of the LAA. 

5. Earlier under pars 25 and 26 of those submissions the plaintiffs said, under a heading, 'Section 241(2)':

   25.While the primary land value is agreed, the contentious s 241(2) claim arises from the Supplementary Report of the valuer engaged by the plaintiffs, Mr Glenndinn Miller, dated 1 November 2019.

   26.Mr Miller explains in his Supplementary Report that the premium for a potential future higher and better use can be alternately allocated as 'value to owner' within s 241(2) LAA compensation.  He otherwise relies upon substantially the same reasoning for the compensation calculation as in his primary report.

6. Obviously, however, as a matter of legal principle, a claim to compensation grounded under s 241(7)(a) for 'adjoining land' severance damage compensation is a different conceptual creature to a claim seeking the lost value to the owner of the as taken land itself, under s 241(2).  Such claims are, upon examination, the conceptual opposite of each other.

7. Furthermore, as mentioned, no claim for a speculative component allowance under s 241(2) had then been pleaded by the plaintiffs as at the commencement of the trial. 

8. The alteration of conceptual position by Mr Miller under his supplementary report, occurring, as it did, subsequent to two expert conferral conferences in March 2019 and April 2019, was unhelpful.  The change injected an aura of 'fogginess' in the trial towards the actual conceptual basis upon which a claim for the extra compensation was being sought and was to be justified.  The underlying conceptual basis for the claim now seemed to me to elide itself, almost effortlessly, as between alternatives, namely, between s 241(2) for the taken land, or under s 241(7)(a) for the adjoining land.  This imprecision was unhelpful.  Hence, I sought to clarify the position on day one of trial with counsel for the plaintiffs (see ts 99).

9. By day two of the trial counsel for the plaintiffs had circulated a minute of proposed amendment to the statement of claim.  An as proposed amended prayer for relief under prayer 4(b) now claimed $1,156,453 for 'loss of premium above rural value (Speculative Component)'.  I had enquired further about that proposed amendment in circumstances where those amendments were then to be unopposed (see ts 105 - 107).

10. However, there then ensued a considerable degree of vacillation for the plaintiffs as between reliance upon s 241(7)(b) of the LAA as a foundation for the claim in regard to the claimed speculative component. Counsel for the plaintiffs then told me that he had misspoken. Counsel then said (ts 106 - 107):

    So, the speculative component in 4(b) is part of severance.  So - no.  Yes.  Total severance.  Severance loss.  That is as at severance loss.  So, the speculative component, being 4(b), is definitely severance and severance is definitely 241(7)(a).  So claim three is under 241(7)(a) and claim 4(b) is 241(7)(a) and the …..

11. I sought to confirm the position (ts 107).  I then received an express confirmation that all the claims under prayers 3 and 4 by that proposed amended statement of claim in respect of which leave was then sought (and was then given) were claims for severance damage and were conceptually advanced under s 241(7)(a) of the LAA.

12. Nevertheless, on the third day of the trial things changed again concerning the plaintiffs' prayer for relief under that as amended statement of claim.  At that time the parties' respective valuers, Mr Miller and Mr Wilson were being sworn in to give their concurrent evidence.  Counsel for the defendant, Mr de Kerloy, now raised an objection in the terms seen below as to the Supplementary Miller Report (ts 270):

    The valuation report contains an opinion which relies on valuation under 247 - 241(2), and as I understand the amended pleading, the plaintiffs are no longer pursuing the speculative component under 241(2).  And so although the report can be tendered in relation to other matters that relate to the adjoining land, I would like your Honour to note that we object to that part of it that is now irrelevant. 

13. Responding to that objection, counsel for the plaintiffs, Mr Lochore, now said this (ts 270):

    Your Honour, we had prepared the case, certainly, on the basis that the plaintiffs were still advancing the alternative claim.  My friend has, as I understand the argument, advanced that it is not sufficiently pleaded to be advanced.  At this stage I don't have an application for a further amendment in the statement of claim, but something that the plaintiffs will give consideration to in the luncheon adjournment. 

14. That all led to my exchange with counsel for the plaintiffs set out below (ts 272 - 273):

    KENNETH MARTIN J:  I'm more concerned with Mr de Kerloy's point in terms of whether I have to deal with anything under 241(2) as regards that $1.156 million figure.  Because you will remember our discussion of yesterday when I gave you leave to amend.  And I think that you indicated the basis of the amendment.

    MR DE KERLOY:  Its transcript reference is 105 and 106. 

    KENNETH MARTIN J:  In terms of the [prayer for relief] under paragraph 4. 

    MR LOCHORE:  Yes.

    KENNETH MARTIN J:  Is referred to as being grounded upon section 241, subsection (7)(a).

    MR LOCHORE:  Yes, that was my answer to your Honour's question.  My friend is correct.

    KENNETH MARTIN J:  All right, so your proposal is that you note Mr de Kerloy's objections.  You don't have an application to amend.

    MR LOCHORE:  I don't immediately, but may I say we understand ‑ adjourn briefly for half an hour so I can consider the objection and that amendment ought be made your Honour.

    KENNETH MARTIN J:  Well, look, what I was going to say is that I don't think it's satisfactory to let that issue hang until lunchtime.  It needs to be resolved before we proceed with the joint evidence of both valuers who are here, sworn, ready to proceed with their reports.  If you need to take instructions from Mr Miller as part of that process, then, of course, I'm prepared to give you a limited amount of time to do that.  But you're holding up, essentially, two professional valuers, the whole court and the other side, so this is something that really needs to be sorted out pronto.

    MR LOCHORE:  Yes, your Honour.

15. After an adjournment, Mr Lochore for the plaintiffs said this (ts 276):

    Otherwise we could just deal with one [of the applications] first.  So I acknowledge, your Honour, that we ought to have made the change at the time in November after we received Mr Miller's advice and particularised the nature of the claim in this manner.  And, similarly in the amendment to the statement of claim we, as a matter of substance, the plaintiff[s] sought to see that it was understood the nature of the claim and that is reflected in the way that the written outline of submissions of both parties do address the alternative manners of the speculative component being raised and indeed I am grateful for my learned friend's solicitor's construction of the agreed table [referring to the Compensation Table] reflects the amended change.  Yet, I must also acknowledge what, before the break, your Honour and my learned friend, put that the error was mine in answering your Honour's question poorly and wrongly yesterday.  I ought to have realised the issue at that point and that is what leaves us with the difficulty that we face today and the reason for the application. …

16. The Compensation Table referred to, under column E, shows a claim for the amount of $1,596,453 made under s 241(2) as the value of the taken land, deducting $440,000 to derive the speculative component amount of $1,156,453. However, the same table at column F under the injurious affection claim that is advanced by reference to s 241(7)(b) also claims that same speculative amount, namely, $1,156,453, on what is inferred to be an alternative basis.

17. The exchange above is background to how it finally came to pass that by a further amendment made to the plaintiffs' statement of claim on day three of the trial, the plaintiffs obtained my leave then to add the words 'pursuant to s 241(2)' to their compensation claim for taken land which finally became the plaintiffs' prayer for relief par 1(a).

18. In response to the plaintiffs' application for further leave to make that further change to the prayer for relief on day three of the trial, counsel for the defendant said (see ts 277):

    Well, the only point we wish to make is that if you allow the amendment it should be noted that our fundamental contention is that section 241(2) cannot be availed of in the way in which the plaintiff seeks to avail itself.  It cannot be used to include the value of the adjoining land as part of a valuation of the taken land because fundamentally what 241(2) does is to say what is the value of the taken land, and Mr Miller's argument is well, the value of the taken land includes the speculative component which is now no longer payable.  Anyway that's a matter for argument …

19. Upon my assessment that there was ultimately no forensic prejudice to the Water Corporation by the further amendments as proposed, I gave leave for the further amendment.  I said then (ts 278):

    KENNETH MARTIN J:   I assess that there is no substantive forensic prejudice against the defendant in allowing the amendment even at this late stage so that the argument, at least concerning the alternative case, can be put.  But as I read the plea under the prayer, Mr Lochore, your primary argument is under s 241(2) and your secondary argument is under 4(b) is under s 241(7)(a).

    MR LOCHORE:  Yes, your Honour.  That is the way - - -

    KENNETH MARTIN J:   Well you can have leave then to further amend the statement of claim beyond the amendment I gave leave to make yesterday.  In due course there should be an electronic filing of the amendments made today, marked in a different way.  Italicised or something.  Just so they can be identified. 

20. I also dealt then with the plaintiffs' application for leave to amend the as pleaded reply, as regards claiming an increased level of solatium.  That amendment application was predicated upon the Water Corporation's pre-trial amendments to its pleaded defence and as against accepting a characterisation of 'adjoining land' being applicable to three of the six lots within the location of the plaintiffs' escarpment lots (see ts 278 - 279).  I refused leave to amend the Reply to claim extra solatium on that basis - which I assessed, in effect, as unprincipled and untenable.

21. In due course, the plaintiffs eventually came to file a substantively amended statement of claim (being electronic document 125, as filed on 27 November 2019).  The final prayers for relief seen at page 13 still present to read rather curiously.  They are a product of at trial changes of position and amendments by the plaintiffs made across days two and three of the trial.

22. The final prayer for relief reads:

AND THE PLAINTIFFS CLAIM:
1.	Compensation for the Taken Land pursuant to s241(2) of the LAA; and (a) for loss of premium rural value     (Speculative Component)	$   440,000 $1,156,453
2.	...
3.	Severance Damage to the Remaining Land pursuant to s241(7)(a) of the LAA comprising:
4.	(a) damage due to blight for Lot 502, creation of Pipeline Easement and access easement (b) loss of premium above rural value (Speculative Component) (in the alternative to the loss of premium under item 1(a) above)	$    81,000 $1,156,453

1. The ultimate final pleaded position in terms of the plaintiffs' plea is rather inelegant, particularly par 1(a), and then the amalgamation of pars 3 and 4.  But elegance is the least of the problems encountered.

2. By way of all amendments and the exchanges with counsel for the plaintiffs across day three, the primary conceptual basis for seeking a speculative value component had now shifted.  It was now to be grounded upon a claim for extra compensation for the taken land which was advanced in concept pursuant to s 241(2) of the LAA.  This change was a movement in concept in line with the change as was made under the Supplementary Miller Report.

3. But still alternatively, a claim for the same speculative component amount is conceptually tied (under combined pars 3 and 4(b) of the prayer for relief, as finalised) back to s 241(7)(a) of the LAA, as severance damage.

4. However, there remains a residual inconsistency in the plaintiffs' claim. The Compensation Table is seen to advance the plaintiffs' secondary basis of a claim for injurious affection under s 241(7)(b) (not under s 241(7)(a)) as the final plea under pars 3 and 4(b) of the prayer for relief now articulates.

5. There was a last opportunity for some conceptual clarification to be provided during counsel for the plaintiffs' verbal closing submissions.  Having spent considerable time addressing the (secondary level) adjoining land issue, counsel finally moved to address the speculative component (see ts 450).  However, the closing remarks did not satisfactorily explain the differentiation within the plaintiffs' case as between them seeking the speculative component amount under s 241(2) and then, alternatively, s 241(7)(a) or (b).  The claim for the speculative component amount was only addressed in broad brush fashion that unsatisfactorily elides between three founding conceptual alternatives under s 241 whenever intensively focussed on - something akin to the shape shifting characteristics of a piece of mercury when poked.

6. Having attempted to explain how the plaintiffs' speculative component claim is pleaded and conceptually grounded, I now turn to outline how the parties justify (or attempt to dismiss) that claim before turning to a deeper analysis of the expert valuation and pleading evidence at trial bearing on this primary issue dispute.

The justification for the claim

1. As I have mentioned, the plaintiffs' valuer, Mr Miller, under the Miller Report (see also the Miller/Wilson memorandum) looked initially to justify the speculative component claim by reference to an asserted reduced value of the Italianos' residual dairy farm land. 

2. A commencement point for the plaintiffs' speculative component argument, as I have attempted to summarise it, is that the 17.5 (approx) ha of taken land from the plaintiffs (being the newly created lot 501) was worth far more than the accepted sum of $440,000.  This, as put, is because of a unique aspect and the stunning aesthetic views from the taken land, particularly to the west and of the ocean.

3. Consequently, it is suggested by the plaintiffs that any hypothetical purchaser (also assumed to be a land developer) of the entire six lots comprising the Italianos' escarpment dairy farming land at 279 ha (approximately) would have offered to pay a sum in excess of $7 million so as to acquire all the land as at 30 June 2010.  By this argument, the conceptual basis for the hypothetical purchaser making an offer (as a hypothetical developer) is pitched at a figure a lot more than a highest and best use value of the taken land and is justified on the 'potential' of the land.

4. By contrast, the Water Corporation's valuer, Mr Wilson, is unshaken in his professional view that a claim for a so-called extra speculative component, however it may be sought to be rationalised, is wholly unsupportable as a matter of valuation principle in present circumstances and must be rejected.  This is regardless of whichever component of s 241 of the LAA it is attempted to be founded on.

The $440,000 figure

The starting $440,000 valuation figure for the taken land, which was otherwise agreed as between the valuers, was assessed by Mr Wilson, generously, as he saw it, on a basis of him assessing the highest and best use basis of the six lots, at 30 June 2010.  However, that assessment was reached on the basis of the taken land not being valued a functional dairy farm property (as the land was then used). 

1. Rather, Mr Wilson said he arrived at the $440,000 sum on the basis of the Italianos' six individual lots being evaluated for sale as six (6) individual rural lifestyle lots of approximately 40 ha or thereabouts and with each then being assessed potentially saleable for more when sold as lifestyle lots.  At 30 June 2010, such a disposition (ie, as to the existing six lots being sold off individually) would have been permitted then without any further subdivision approval required for the acquiring developer/purchaser.  The developer/purchaser could dispose of the six lots to some potential rural lifestyle oriented purchaser with a view to that purchaser building one dwelling on each lot so sold. 

1. On that basis, the taken land came to be valued by Mr Wilson on that highest and best use at approximately $25,000 a hectare.  Hence, he allowed $25,000 x 17.5 ha = $440,000. 

2. The disputed speculative component of extra value issue aside, Mr Miller accepts that valuation approach by Mr Wilson.

3. But against Mr Wilson's approach, Mr Miller contends further that there was an even greater speculative value in the plaintiffs' six (6) lots of their second dairy farm land, at 30 June 2010. 

The plaintiffs' case for the speculative extra value claim

1. Mr Miller's view is seen as premised upon him making of a number of favourable assumptions concerning the Italianos' escarpment land as a whole at 30 June 2010. 

2. Mr Miller's assumptions commence with a premise (that is not factually disputed and which I fully accept) of spectacular (views) amenity in all six lots, particularly looking out to the west and to the ocean (see again exhibit 2 at [1]). 

3. The existing local planning framework as at 30 June 2010 would not then have permitted closer density subdivisions for the six lots to make smaller hobby farms of approximately 2 to 20 ha in area.  However, by reason of the particularly pleasing amenity feature of the six lots, Mr Miller argues this existing framework could have been relaxed in the short to medium term.  This relaxation would then be more accommodating to allow such smaller, closer density subdivisions.

4. Mr Miller's assessment allows for the potential of smaller 2 - 20 ha rural subdivisions, which would permit hobby farms to be undertaken as a development venture by a hypothetical purchaser/land developer.  Such a developer would, as a result, be likely to offer more money to acquire all of the Italianos' escarpment land upon the optimistic premise of a more accommodating future planning environment emerging to then permit such a land subdivision and development project to be undertaken.

5. As regards Mr Miller's assumed more relaxed planning framework position in future, the origin of this prospect begins essentially with a draft local planning strategy (LPS) prepared by the Shire of Harvey in 2005 (see TB tab 2) (the 2005 draft LPS). 

6. In 2005 that draft LPS had been submitted by the Shire of Harvey for its acceptance and for certification under the prevailing statutory regime for such approvals by the WA Planning Commission (the WAPC).  As things later turned out, the 2005 draft LPS was never approved by the WAPC by 30 June 2010, or at all.  But the negative outcome after 30 June 2010 needs to be ignored by the court and put aside at the trial.  That is because the hypothetical exercise must be conducted and focused at 30 June 2010 and not beyond then.  At 30 June 2010 the 2005 draft LPS was submitted and had not yet been rejected outright by the WAPC. 

7. Hence, at 30 June 2010, it is said by the plaintiffs that there was a basis for local optimism about a more relaxed planning framework (under the 2005 draft LPS - should it be approved by the WAPC).

8. I will turn to a deeper analysis of the 2005 draft LPS later in these reasons.  For now, it is sufficient to note that had the 2005 draft LPS been approved, it could then have permitted the smaller subdivisions into 2 - 20 ha rural lots around Harvey. 

9. From the submitted and pending (yet unresolved) approval of the 2005 draft LPS basis at 30 June 2010, Mr Miller then theorises further that the hypothetical purchaser/land developer would at that time have had some grounds for optimism, to justify offering more money to acquire the Italianos' land.  As explained, that would allow such a developer to gain the opportunity to develop and to subdivide the Italianos' escarpment property with the stunning views and then to later sell off smaller hobby farm sized lots at a hypothesised handsome developmental profit. 

10. It is accepted by Mr Miller that this as assumed hypothetical purchaser/land developer in so acting would be paying a premium, based on taking a calculated risk that the future zoning for the Italianos' escarpment land could change. 

11. Regrettably for this hypothetical exercise, the reality of a Global Financial Crisis (GFC) at around October 2008 and its globally adverse economic repercussions happened before 30 June 2010.  It cannot be assumed out of existence.

12. I have to say now that, on my assessment, the multiple aggregating of these favourable assumptions as made by Mr Miller presents to me as grounded on nothing more tangible than wishful thinking.  Fully recognising that highest and best value can extend further to embracing the potentiality for more profitable uses in future - that latitude does not extend to draw in remote or wholly speculative possibilities.  Nor does it countenance hopeful guesswork.

13. Mr Miller's hypothesis to support his extra speculative value component started life with him grounded conceptually as being in the lost value of the adjoining land properties as a result of the taking - and so, grounded under s 241(7)(b) of the LAA from his loss of subdivisional perspective value assessment.

14. However, in the Supplementary Miller Report, Mr Miller shifted or added extra ground.  Mr Miller's position as later expressed as an alternative supporting rationale was to s 241(2) of the LAA, as regards this extra value component being alternatively justified by reference to the (extra) value of the taken land. 

15. As part of Mr Miller's speculative component rationale, it was also said that a hypothetical purchaser/developer at or around 30 June 2010 would likely have engaged a local town planner so as to get some professional planning advice about the future ongoing (subdivisional) prospects for the Italianos' land as a whole.

16. From that premise, Mr Miller says that the assumed as engaged hypothetical local town planner at before 30 June 2010, whilst fully recognising the existing and adverse limiting planning framework would nevertheless also have likely expressed to the assumed purchaser/developer some level of optimism about a future possible more relaxed change of zoning position.  This expressed optimism would be based on the subdivisional hope arising from out of the Shire of Harvey's 2005 draft LPS being eventually approved and certified by the WAPC - post its formal advertising, and after receiving the required inputs from all notified governmental agencies upon the Shire's 2005 draft LPS. 

17. Such as assumed optimistic town planning advice of that ilk by a hypothetical planner approached for advice before 30 June 2010 is said to be relevant to how the compensation valuers should approach their task. 

Initial evaluation of the speculative component

1. The derivation of the speculative extra value component claim when tied back to s 241(2) of the LAA is the observations by Mr Miller in his Supplementary Miller Report.

2. But the quest for an intellectual elaboration upon the nature of the claim for the speculative component remains foggy.

3. If there is an intellectual basis for an extra value speculative component compensation claim, then to be justified at all, it seems to me only to be capable of being pursued under s 241(2) of the LAA in respect of the taken land. I can ascertain no rational argument of persuasion to sustain a claim for that speculative component of compensation if it is to be linked to the Italianos' residual escarpment land post taking, either under s 241(7)(a) for severance, or s 241(7)(b) for an injurious affection.

4. Stripping aside the legalese as best I can, if the s 241(7) argument of the plaintiffs is that the remaining land was or has been injured by a future positioning of some unsightly water storage tanks upon the elevated lot 501, which thereby spoils the otherwise formerly beautiful views and amenity of the area, then I simply do not accept the proposition as sustained on the trial evidence.

5. To that conclusion, Mr Wilson's point for the defendant Water Corporation was that if there ever was to be allowed a speculative component applicable to the plaintiffs' land (when viewed in aggregate before the taking) then that same speculative component should also have applied to enhance the value of the residual land post the taking.  I must accept that logic of Mr Wilson.  In my view, it is irrefutable as regards a s 241(7) claim of any nature.

6. For that situation, all adverse impacts argued against the amenity of the residual land arises out of the subsequently erected unsightly water storage tanks would arise from the execution of the public work itself, not from the taking of the land at 30 June 2010.

7. Even more fundamentally, however, there was no evidence adduced at trial by any person as regards an aesthetically diminished or less appealing view when looking north, south, east or west from any position across the Italianos' remaining six lots.  No evidence was adduced in terms of the views from those lands being less aesthetic or less pleasing than they were before the taking.

8. Hence, the extra value for the speculative component claim if advanced conceptually by reference to either s 241(7)(a) or (b) of the LAA presents to me as untenable.

9. That leaves only a claim, conceptually grounded on the plaintiffs' eventual primary basis, tied to the lost value of the taken land (lot 501) at 30 June 2010, grounded on s 241(2). 

A handful of helpful documents

1. Before going further to complete the assessment of the plaintiffs' s 241(2) arguments, I pause to refer to a handful of some of the more important documents located within the parties' agreed four volume trial book (TB) and tendered for the purposes of the trial.

2. I reference the referred documents, of course, on a non-exclusive basis.

3. For convenience, unless otherwise noted, all page references are to the paginated TB.

The 2005 draft LPS

1. First, I must refer to the Shire of Harvey local planning strategy volume 2 strategy report, found in the TB at tab 2 (being the 2005 draft LPS).

2. This was, of course, only ever a draft strategy.  I refer, again non‑exclusively from that document, to section 1.1 (page 26 of the TB).  I mention also par 1.2, under the heading 'Objectives of the Strategy', and par 13, 'Structure of the Strategy', particularly page 27 and the concluding last two paragraphs therein.  See also page 43 under a heading 'Growth Opportunities For Inland Settlements'. 

3. See also par 54, at page 44, concerning the 'Guiding Statements' for hobby farms.  By these statements it was envisioned:

   Hobby Farms - Hobby Farms are seen as providing a mix of residential accommodation and some form of productive agriculture.  These lots would be anticipated to be in the range of 2 to 20 hectares ... Hobby farm lots would need to be located within reasonable proximity of townsite services.  The range of lot sizes envisaged in this land  use category means that there is an opportunity for lots to be located in areas of high scenic value provided adequate consideration is given to landscape issues in the design process.

4. I further refer to page 78, in reference to Policy Area Number 11, to the Northern Foothills (where the Italianos' escarpment land is located).  I note from there a policy statement, as regards '[t]he policy area has the potential to accommodate the lifestyle opportunities which can compliment the existing inland towns providing genuine lifestyle choice and economic growth prospects'.  I also mention subpar (i) of the ensuing section under the heading 'Policy Measures and Initiatives', namely:  '[c]ouncil will entertain proposals for Hobby Farms within the area nominated as landscape protection subject to specific guidelines being met.'

5. See also as regards to the same Policy Area Number 11 - Northern Foothills at the heading 'Guidelines' (page 79) the reference to hobby farms and to proposals potentially entertainable by the council, including the enumerated seven dot points as seen there.  See also section 3.6 under a heading, 'Specific Policies':  3.6.1 'Rural Subdivision' at page 108.

The 22 June 2006 WAPC communication

1. Next, I refer to the document at tab 5 of the TB, located at pages 143 ‑ 154.  This is a communication of 22 June 2006 from the secretary of the WAPC to the Shire of Harvey, then responding to the Shire's submission of its 2005 draft LPS.  At that time the WAPC secretary had advised the Shire that:

   ... the Commission considered the matter at its meeting of June 16, 2006 and resolved to:

   1.Request that the Shire of Harvey carry out the modifications to the Local Planning Strategy as detailed in the Schedule of Modifications (attached);

   2.On receipt of the modified documents certify the documents for advertising in accordance with section 12A and B of the Town Planning Regulations 1967; and

   3.Require the Shire to obtain comments from the following agencies:  Agriculture WA, Alinta Gas, CALM, Department of Environment, Department of Health, Department of Indigenous Affairs, Department of Industry and Resources, FESA, Forest Products Commission, Harvey Water, Main Roads WA, Public Transport Authority, Telstra, Tourism WA, Water Corporation, Western Power and Westrail.

2. There was no evidence at the trial in terms of any comments received from any of the as mentioned agencies (listed in par 3 of the 22 June 2016 communication).  Indeed, there was also no evidence as to if they ever were approached by the Shire of Harvey for their comments. 

3. Relevantly, a 'Schedule of Modifications' that was attached to that WAPC communication (TB page 144 - 148) identified a series of issues and suggestions by the WAPC across some 18 items.  From that, I set out only the items 1, 2, 3, 4 and 17 from the 'Schedule of Modifications':

Item	Issue	Suggested response
1.	Justification has not been provided for the need for 'new' development areas (both residential and lifestyle)	Justification should be provided for areas not currently zoned for Residential or Lifestyle use and not identified for such by the draft GBRS.  (e.g. supply demand analysis, opportunity/constraints, suitability comparisons)
2.	Document uses terminology which is inconsistent with Commission Policy - eg 'Small Rural Holdings' 'Hobby Farm', and 'Transitional Irrigation Lots', are used to described various types of 'lifestyle lots'.	Terminology should be consistent with SPP 2.5 which recognises 'Rural Small Holdings', 'Rural Residential' and 'Special Residential'. Lot sizes referred to in the document which relate to 'lifestyle lots' should be consistent with that set out in Commission policy eg. Rural Residential = 1 ha - 4 ha.
3.	Concerned at the amount of land identified as 'Landscape Protection' which has the potential for 'Rural Residential' subdivision, contrary to the objective of conserving the landscape.	Delete Landscape Protection designation.  If this area is to be subject to special controls in the new scheme, identify the land within the special control area.  Areas intended for 'Rural Residential' subdivision should be identified in accordance with SPP 3 and be shown on the plan as being within Development Investigation Areas.
4.	Rural lot sizes are not consistent with the Commission's policies and objectives i.e. to preserve agricultural land and to only allow subdivision for genuine intensive agricultural use.	Suggest review of proposed lot sizes in consultation with DoAg and Harvey Water.  The Warren Blackwood Rural Strategy, although not applicable to the subject area, may be a useful guide as to suitable lot size and assessment criteria, particularly for broad acre rural pursuits.
17.	Policy area 11 Major development issue 6 - sullage pit in the commonage is not disused, it is operational and has recently been expanded.  Buffer area should be considered if additional land uses are promoted.	Modify accordingly.

Development Service Committee minutes

1. Next, I mention the document to be found at TB tab 9, being minutes of a meeting of the Development Services Committee of 19 June 2007 of the Shire of Harvey - a publically accessible document.  Under a heading 'Summary', this document notes: 

   Further to the Council's previous endorsement of the Draft Local Planning Strategy, the document has been requested to be modified to satisfy concerns of the Western Australian Planning Commission (WAPC).  A number of modifications have now been undertaken.  In addition a late submission has been received, requesting that significant land holdings to the south of Brunswick, be identified for potential town site expansion and development. 

2. At the heading 'Background', after referring to council's October 2005 resolution concerning the draft local planning strategy, these minutes then note: 

   The document [the draft 2005 LPS] was subsequently forwarded to the WAPC, and a schedule of modifications produced, identifying issues that the Commission had with the document.  Subsequently, Staff and Council's planning consultants Thompson McRobert Edgeloe (TME) have had extensive discussions with the Department of Planning and Infrastructure (DPI) in order to resolve these issues.  A response to the schedule of modifications has now been prepared for submission to the WAPC.  It is hoped that this response will meet the concerns of the commission and allow the Strategy to progress.

3. At page 200, these minutes record that the council:

   1.Endorses the response to the Schedule of Modifications prepared by the Western Australian Planning Commission; …

4. Further minutes of a Development Services Committee of the Shire of Harvey (of 15 April 2008) are found at TB tab 16, commencing at page 271.  Within these minutes, under a heading 'Planning Report', there is a reference to a request to seek council's commitment to amend the 2005 draft LPS upon a submission of detailed documentation as mentioned in the comments section which says:

   Comment

   The draft LPS has not been progressed for some time due to WAPC requesting further information from the Shire, including population projections and growth to justify the amount of land proposed to be released.  One of the specific concerns raised by the DPI was that the current draft may facilitate a volume of land release which is inconsistent with growth patterns.  As a result Council's consultants are currently preparing this information for submission.

   Staff are cautious that any amendment to the draft LPS at this late stage will result in further delays and may jeopardize approval and justification of the current document.  It is considered that prior to any consideration of additional land identified for release under the LPS, Council needs to obtain the necessary growth information to assess the feasibility of the current draft.  Council would be in a position to further consider the proposal following the receipt of this information from its consultants.

5. Again, these minutes of the Shire of Harvey Development Services Committee are accessible in the public domain.  Hence, they were potentially accessible information at before 30 June 2010, by any hypothetical land developer or town planner then doing a due diligence enquiry prior to firming up on a view about a possible acquisition proposal for land in the Shire of Harvey within Policy Area 11, including for the Italianos' escarpment land.

6. If it is necessary for me to make a finding about the hypothetical likelihood of such minutes being accessed by a hypothetical land developer purchaser or an agent acting on their behalf, then my conclusion, on the balance of probabilities, would be that such materials are more likely than not have been accessed by a hypothetically diligent purchaser/developer.  I reach this conclusion given the fiscal scale of a hypothetical intended acquisition suggested in the order of some $7 million, on the assumption that such a developer/purchaser would make or cause there to be made proper and diligent enquiries of all accessible public materials relevant to a possible land development and acquisition in the Shire of Harvey locality.

The 12 May 2008 Greg Rowe and Associates communication

Croghan v Blacktown City Council [2019] NSWCA 248

Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1

Italiano v The Water Corporation [No 2] [2020] WASC 112

McKay v Commissioner of Roads [No 7] [2011] WASC 223 (S)

Shephard v Tuanie Paul Galea and Carmen Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 (S)

Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96

KENNETH MARTIN J:

Introduction

1. In the wake of my reasons delivered 6 April 2020 I found for the plaintiffs in the additional amount of $160,380:  see Italiano v The Water Corporation [No 2] [2020] WASC 112 (primary reasons). 

2. That conclusion essentially followed from my conclusions resolving the parties' disagreement over whether three of the plaintiffs' lots met the description of 'adjoining land' for the purposes of engaging with the compensatory criteria under s 241(7)(b) of the Land Administration Act 1977 (WA) (the LAA).  The trial was conducted on the basis of the parties' quantitative agreement in respect of all potential contingent outcomes upon the substantive issues between them under the Compensation Table - being exhibit 16 (Annexure A to the primary reasons).  Because of that agreement the $160,380 outcome essentially reflected the conclusions resulting from a resolution of the adjoining land issue - which I described at various places within the reasons as a 'secondary issue'.

3. Overwhelmingly, however, the primary and substantial issue at the trial concerned the plaintiffs' failed pursuit of what it sought as additional compensation on the basis of its claim for a 'speculative component' of extra compensation. 

4. It will be remembered that the plaintiffs had already received $1,017,500 as compensation paid over by the defendant (Water Corporation) in April 2012, under the regime for that advance payment to be received as provided by s 248 of the LAA.  Including interest, that sum now sits at $1,185,262.

5. As the primary reasons display, the plaintiffs' claim for that extra speculative component compensation amount (which, had I accepted the plaintiffs' arguments, would have been quantitatively agreed at the amount of $1,156,453) was, overwhelmingly, the economically significant and substantively complex issue (both as to fact, law and by all the disputed expert evidence submitted between the parties' rival expert planners and valuers) at the four-day trial.

Overview of the trial outcomes

The adjoining land issue

1. In the end result, the secondary issue came to be determined in relatively straightforward fashion - seen at between [58] - [72] of the primary reasons. 

2. In short, the plaintiffs were successful in establishing, contrary to the Water Corporation's argument, that two of the three lots then in dispute, namely lot 553 and lot 3120, did meet the statutory threshold of characterisation as adjoining land.  By reference to the agreed Compensation Table, success for the plaintiffs in respect of that adjoining land determination carried with it an as agreed economic worth of $200,000 (being agreed amounts of $100,000 each as regards lot 553 and lot 3120). 

3. However, as regards this secondary aspect of the trial, I did not accept the plaintiffs' arguments that their lot 997 met the statutory criteria of adjoining land.  The economic end consequence of that conclusion was agreed at resulting in the plaintiffs not being entitled to an additional $30,000 (again see the Compensation Table).

4. As can be expressly discerned from [58] - [72] of the primary reasons, the arguments and conclusions upon the adjoining land issue, were in the context of the trial as a whole, a relatively minor aspect of the parties' trial disagreements.  There had been no dispute at trial that the plaintiffs' other three lots, making up its (six lots in all) escarpment dairy farm (namely, other lots 500, 502 and 265), all met the description of adjoining land. 

5. On my assessment this adjoining land aspect of the trial occupied only a small component of trial time, minimal factual evidence, no expert evidence and no disagreement over its quantum ramifications - given the parties' agreement by the Compensation Table concerning such quantitative monetary ramifications.

Speculative component of extra value claim

1. By some contrast, the speculative value component claim of the plaintiffs for an extra $1,156,453 sought as further compensation - was the significant economic and forensic battleground of the trial.  Absent the parties' disagreements over this claim, I have little doubt that the parties' disputes would not have required a resolution by trial and could have been otherwise resolved.  Their disagreement over the adjoining land issue was both economically and numerically minimal in the overall context of this trial.  It was the extra component of value claims dispute that drove this dispute to its four-day trial in the Supreme Court.

2. Following the parties' conferral in the wake of my primary reasons there has ensued a substantive agreement over the final trial judgment and resulting orders.  But unfortunately, there was no agreement as to appropriate costs orders concerning the trial result. 

3. Consequently, I issued final judgment orders under that area of consent on 20 April 2020 (final judgment orders).

4. Order 1 of the final judgment orders has thus issued in the following terms:

   1.There be judgment for the plaintiffs in the sum of $160,380 (Judgment Sum) plus simple interest calculated at a rate of 6% per annum, being the rate prescribed under section 8(1)(a) of the Civil Judgments Enforcement Act 2004, from 2 September 2009 until the date of payment of the Judgment Sum.

5. Given a lack of agreement as to trial costs, by the terms of further orders under the final judgment orders as issued, I directed that the parties exchange written submissions concerning their rival positions over trial costs orders and that those issues would be determined on the papers.

6. In the wake of those orders I duly received the parties' primary written submissions as to rival costs orders from the plaintiffs and the Water Corporation of 30 April 2020 (electronic court documents 136 and 137 respectively).  Thereafter, I have received the parties' respective written responsive submissions (electronic court documents 138 and 139 respectively), filed 7 May 2020.

Rival positions on costs orders

1. It is an understatement to summarise the parties' contended end positions in respect of the costs orders sought as widely divergent.

2. The plaintiffs move for orders seeking that the Water Corporation meet all of their taxed costs of the action up until 9 May 2019, but thereafter, only 50% of the plaintiffs' costs of the action, including any reserved costs, until 6 April 2020, to be taxed if not agreed.

3. On the other hand, the Water Corporation seeks costs orders against the plaintiffs on a basis of its contended success on the significant trial issue - being its successful rebuttal of all of the plaintiffs' claim seeking the extra compensation of a magnitude exceeding $1 million. The Water Corporation contends that by reason of that outcome, it ought be viewed, expressly by reference to O 66 r 1(1) of the Rules of the Supreme Court 1971 (WA) (RSC), as the substantively successful party in the litigation.

4. Consequently, the Water Corporation as defendant, seeks orders for 90% of its costs of the action against the plaintiffs on a party-party basis up until 4 September 2019, and from then and after that date, all its costs (which would include the costs of the four‑day trial) including reserved costs ordered on a full indemnity basis against the plaintiffs. 

5. Alternatively, the Water Corporation, towards the period after 4 September 2019, would as a lesser preference, seek its costs orders in its favour effectively removing most scale limits under variously applicable Legal Profession (Supreme Court) (Contentious Business) Determination 2014 (WA), the Legal Profession (Supreme Court) (Contentious Business) Determination 2016 (WA) and the Legal Profession (Supreme Court and District Court) (Contentious Business) Determination 2018 (WA).  Those orders as sought are in respect of removing the Table A maximum hourly and daily rates and, further, removing the scale limits for the multiple Table B items generally including for the pleadings, particulars, discovery, inspection, chambers attendances, listing conferences, entry for trial, preparation of case, trial, pre-trial mediation, conferrals, other conferences and for various other disbursements.

The Calderbank offer by the Water Corporation of 4 September 2019

1. A further significant event underlying the Water Corporation's costs submissions emerges from a now (post trial) revealed fact (to the court) that the Water Corporation had made through its lawyers what is known as a Calderbank settlement offer, (a settlement offer expressed to be made without prejudice, save as to costs - see Calderbank v Calderbank [1975] 3 All ER 333) to the plaintiffs' lawyers on 4 September 2019 (the September 2019 Calderbank offer). 

2. By the terms of that September 2019 Calderbank offer (which was exhibit 3 to the Water Corporation's first wave of written submissions on costs of 30 April 2020), the Water Corporation had offered to the plaintiffs to settle (ie prior to the commencement of the four-day trial, spanning 25 - 28 November 2019) by a payment of a further amount of compensation in the sum of $193,600 (referred to as the 'Balance of Compensation').  In addition, the Water Corporation had then offered to pay simple interest on that Balance of Compensation at the rate of 6% per annum from the 'Date of Entry', plus the payment of '50% of [the plaintiffs'] party-party costs up to the date of [that] offer, to be taxed if not agreed'.

3. After explaining in that September 2019 Calderbank offer that the offer proposal was made on a non-admission of liability basis, in full and final release of all claims made by the plaintiffs, and on the basis that terms of settlement and a deed under which the settlement would be embodied, would remain confidential, that offer by the Water Corporation's lawyers concluded, as follows:

   The settlement offer set out above is made in accordance with the principles set out in Calderbank v Calderbank [1975] 3 All ER 333. If your clients reject this offer, our client reserves its right to draw this correspondence to the attention of the Court in support of any application for costs (including indemnity costs).

4. I have attached the full terms of that September 2019 Calderbank offer as Attachment A to these costs reasons.  I point out that no objection has been taken by the plaintiffs' lawyers to the September 2019 Calderbank offer being put as evidence before the court merely as an attachment to the Water Corporation's written costs submissions of 30 April 2020.  Ordinarily, such further evidence would be expected to be put before the court under an affidavit rather than attached to written submissions.  However, the plaintiffs raised no objection to the mode by which the Water Corporation has now put this evidentiary material before the court.  Consequently, the ramifications of the September 2019 Calderbank offer may be dealt with on its merits.

The primary decision

1. Given the level of disputation over costs as between the parties and, in particular, a submission of the plaintiffs as to costs contending, in effect, that it was the successful party at the trial, I find that I need to repeat some observations from my primary reasons at [32] - [35] concerning the key issue at the trial and the in principle trial disagreement as between the parties' rival valuers upon that one issue.  I had then said at [36] - [39]:

   36Before that, however, I need to observe that there was also a secondary dispute of principle arising in the trial and which is of a much lesser financial magnitude and (hopefully) capable of an earlier and easier resolution.

   37This lesser dispute arises as between the parties over whether or not, for the purposes of s 241(7)(b) of the LAA, three of the six lots making up the Italianos' escarpment land can meet the statutory description of being being 'adjoining land', or not (ie, to the taken land).

   38The Water Corporation, by a relatively late pre-trial amendment to its pleaded defence, had denied then that three of the farm's lots, namely lots 500, 502 and 265, met the legal threshold of being 'adjoining land', for the purposes engaging with s 241(7) LAA.

   39For that secondary issue dispute, there is no real factual dispute. Rather, it is an issue of statutory interpretation and application concerning s 241(7)(b) LAA, and whether a satisfaction of the 'adjoining land' threshold is met or not.

2. As mentioned, the secondary adjoining land issue was duly resolved under [58] - [72] of the primary reasons.  At [73], I said:

   73As earlier indicated, the adjoining land issue was only a secondary feature of the litigation.  I can turn now to relevant legal principles relevant to the disposition of the more substantive dispute arising in the trial concerning the 'speculative component' claimed by the plaintiffs.

3. Then, upon the primary issue at the trial, having weighed the parties' significant arguments, the trial expert planning evidence, documentary evidence and expert valuation evidence, I ultimately came to determine the substantive issue, adversely to the plaintiffs.  At [239], having rejected the plaintiffs' primary case as regards them obtaining an extra speculative value component of compensation, I said:

   239In substance, the plaintiffs have failed on their primary case as regards the significant trial issue concerning the speculative component.

4. Bearing in mind all those observations within my primary reasons as now revisited, the contention of the plaintiffs by their written submissions of 30 April 2020, that the Water Corporation was not the successful party overall at trial (par 15), so that the plaintiffs should therefore receive an award of half their party-party costs from 10 May 2019 onwards, is simply not a realistic position to take.

5. Nor can I accept the plaintiffs' submission that, somehow, they did not hold a full insight into terms of their own case (and thus prospects) until 9 May 2019, or that the stance of the Water Corporation by rejecting the plaintiffs' speculative component of extra compensation claimed, had been made somewhat less than clear.  Such suggestions falsely attempt to deflect the predominant responsibility from where it should properly lie for the costs incurred in defending this litigation, including a four-day trial in this court.  That responsibility lies with the plaintiffs.

Costs principles

1. Given the conceptual gulf between the parties on their rival submitted positions as regards costs, it is necessary to say something further considering general costs principles.

2. To that end, I would respectfully adopt and repeat, without laboriously citing verbatim, all of what Beech J (as his Honour then was) has most comprehensively assembled in McKay v Commissioner of Roads [No 7] [2011] WASC 223 (S) (delivered 2 December 2011) in terms of general costs principles for Western Australian land compensation cases, commencing at [43] and extending to [86] of those reasons.

3. For present purposes, however, it is necessary only to repeat, and again with respect, his Honour's own summary of those general principles commencing at [85], in the following terms:

   From this review of the authorities, I set out my view of the general approach to the exercise of the costs discretion in valuation cases, without regard to O 24A or Calderbank offers.

   (1)Section 223(9) of the [LAA] confers a very broad discretion in relation to costs.

   (2)The character of a valuation case, and the fact that it follows a compulsory acquisition of land owned by the claimant, are relevant circumstances in the exercise of the costs discretion.

   (3)A proper starting point is that if due compensation is more than the statutory offer by the taking authority, and more than the value contended by the authority at trial, then (leaving aside any settlement offers) the claimant has succeeded and is prima facie entitled to his or her costs.

   (4)However, that is a starting point, not a rule.  In exercising the costs discretion, the court can look realistically at the issues in the action, the way the case was fought, and assess who really succeeded and to what extent.  Where compensation is determined at a figure different from that propounded by either party, the rationale of the ultimate award can be considered against the arguments advanced by each party at the hearing.

   (5)There is no principle in compensation cases that:

   (a)the amount of compensation fixed by the court should not be eroded by denying the plaintiff costs or requiring him or her to pay the costs of the taking authority; or

   (b)only in an exceptional case should a claimant be deprived of his or her costs or ordered to pay the costs of the relevant authority; or

   (c)a claimant should be free to run any arguable case without being constrained by the risk of an adverse costs order.

4. That summary of general costs principles taken from McKay [No 7] (S) is enough to immediately rebut many of the contentions towards costs as submitted under the plaintiffs' written submissions.  Those submissions, with respect, express unsustainable views about the plaintiffs' claimed levels of success within the litigation.  By my assessment as trial judge, they pay insufficient regard to the trial result and particularly to what in the end was the wholesale failure of the plaintiffs' speculative component claim.  That primary issue had overwhelmingly been the reason for most of the time and resources consumed upon the documentary, evidentiary, preparatory and evaluative aspects of the trial. 

5. By my assessment, the plaintiffs' costs submissions unsuccessfully seek to rationalise what is (for the plaintiffs) an unpalatable reality that a four‑day trial in the Supreme Court involving significant evidence, submissions and significant expert evidence might have been completely avoided but for the pursuit of this speculative component of extra value issue to a resolution by trial.

Calderbank considerations

1. Moreover, the plaintiffs could have ended up here in a much economically superior position to that in which they now find themselves, had they accepted the Water Corporation's September 2019 Calderbank offer within the reasonable 14‑day period that was offered for its consideration.  I reject the contention that there was insufficient time allowed for the plaintiffs to consider this offer after it was made.  I also reject the plaintiffs' contention that the Calderbank offer was insufficiently reasoned as to its formulation.  As mentioned, I have appended it to these reasons.  Its content is clear and straightforward.  To that end, see some further observations by Beech J in McKay [No 7] (S) specifically directed to the further consideration of Calderbank considerations upon costs at [163]. They also present as apposite here. His Honour said:

   By its nature, an offer of settlement need not be, and often is not, premised on an acceptance of particular evidence and the rejection of other evidence.  Rather, an offer of settlement will often involve an element of compromise, producing an offer in an amount that does not reflect the evidence or case of either party.  Typically, an offer of compromise will be in an amount that falls between the outcomes achieved by success on the part of either party.

2. Here, evaluated in the overall scheme of things, an offer of a further $193,600 on 4 September 2019, manifested what was then a sensible compromise proposal from the Water Corporation.  It was, in effect, offering the plaintiffs that extra compensation plus simple interest, pitched at roughly the full level of the plaintiffs achieving complete trial success upon their adjoining land arguments (in the end, of course, they only succeeded on two of the three lots in contention as being adjoining land). 

1. Also implicit within the 4 September 2019 Calderbank offer was the rejection by the Water Corporation of the plaintiffs further claim for extra compensation of over $1 million in respect of the so-called 'speculative component' of extra value - the dominant issue both economically and forensically then looming for trial. 

2. By not accepting the offer and pressing on with a four‑day trial, the plaintiffs were from then on, in effect, banking everything on a successful outcome as regards that speculative component claim.  This was, as I have already said, the dominant issue at the trial both economically and in terms of its consumption of trial resources towards an ultimate resolution. 

3. Upon that issue, the stance of the plaintiffs was to, effectively, advance onwards, undaunted, and so to 'roll the dice' on the basis that their planning and valuation expert evidence would ultimately trump that of the Water Corporation at the trial.  The gamble failed.

4. Whilst not risky enough conduct to be assessed at a level of being classified as being 'unreasonable' in order to sustain an award of indemnity costs against them, the stance of the plaintiffs nonetheless occasioned the resulting need for all of the expense of the trial and, thereby, an otherwise avoidable consumption of scarce public resources by that process. 

5. A further component of the plaintiffs' costs submissions has invoked attempted support from a recent decision of the New South Wales Court of Appeal, Croghan v Blacktown City Council [2019] NSWCA 248 and, in particular, to some observations of Meagher JA at [18], [40] and [41].

6. This was an appeal to set aside orders of a primary judge as to costs - whereby the primary judge had ordered the applicant (for compensation) pay the council's costs on an indemnity basis, in circumstances where the applicant had rejected a pre-trial offer that had been $1 million more than the compensation that was in the end ultimately obtained at the trial. At first instance, the primary judge had exercised discretion pursuant to rule 42.1 of the Uniform Civil Procedure Rules 2005 (NSW). On the appeal, the adverse costs decision was reversed and the applicant was awarded his costs on the usual basis.

7. With respect, however, I must agree with the Water Corporation's responsive observations concerning the distinct New South Wales land compensation legislative regime and for the result of that appeal to be presently distinguished, on the basis it concerned what was there an underlying and different statutory regime to that of Western Australia.  Nevertheless, as the Water Corporation has also observed, at [41] of Croghan Meagher JA had observed that the exaggerated claim of the applicant '... did not separately result in unnecessary delay or expense'.  Factually, that was not the resulting position at this trial.  In fact, it was very much the opposite.

8. For present circumstances, a more reliable level of assistance as to costs principles in these cases is obtained, in my view, from the principles as comprehensively collected and explained by Beech J in McKay [No 7] (S).

Calderbank offers - orthodox v indemnity costs - general principles in McKay [No 7] (S)

1. Towards this further aspect of his costs decision in McKay [No 7] (S) Beech J had relevantly observed at [109]:

   In my view, there are important distinctions between party-party costs and indemnity costs.  The distinction is not, as the plaintiffs submit, merely a matter of quantum.  The power to award indemnity costs is exceptional in character.  There needs to be some special or unusual feature to justify a departure from the ordinary practice:  Lo Presti v Ford Motor Company of Australia Ltd [No 2] [2008] WASC 12 (S) [8]. Most of the situations in which indemnity costs have been awarded involve an element of improper or unreasonable conduct on the part of the party or its advisers in the conduct of the case: Flotilla Nominees Pty Ltd v Western Australian Land Authority [2003] WASC 122 (S); (2003) 28 WAR 95 [9]; Colgate-Palmolive Company v Cussons Pty Ltd (1993) 46 FCR 225, 233 - 234. In my view, the exceptional character of an award of indemnity costs explains and justifies the need to demonstrate unreasonableness, judged at the time of the offer, to enliven the discretion to award indemnity costs based on the rejection of the Calderbank offer.  The same considerations do not apply to the award of party-party costs.  To my mind, that difference supports or would explain the view that there is a lower threshold for an award of party-party costs than for indemnity costs.

2. After a review of a number of the case authorities at [101] - [104] and [110] -[117] (including Ford Motor Company of Australia Ltd v Lo Presti [2009] WASCA 115; (2009) 41 WAR 1), Beech J then concluded at [119]:

   The Calderbank offer is a consideration to be weighed in the costs discretion.  The weight to be given to that offer is a matter for the discretion of the court in all the circumstances of the case.  This approach is not tantamount to equating a Calderbank offer with an O 24A offer.  In the latter case, the offeror knows its presumptive costs consequences.  An offeror of a Calderbank offer takes the chance that, when the court exercises its discretion in all the circumstances, the offer will lead to costs consequences.

Final evaluations and conclusions as to costs

1. For reasons which follow and particularly by reference to the costs principles now seen as comprehensively explained by Beech J in McKay [No 7] (S) both as to general costs principles (see [43] - [86]) and further, as regards the ramifications of Calderbank offers (see [87] - [98]) I am of the view that:

   (a)For relevant purposes by reference to RSC O 66 r 1(1), here the Water Corporation was the substantially successful party in this action, by reason of its clear success at the trial by wholly defeating the plaintiffs' substantive claims advanced under its so‑called speculative component of extra value claim for an extra $1 million of compensation.

   (b)Correlatively, I must reject a contention that the plaintiffs were the successful party at the trial - on a basis of obtaining a monetary end judgment of $160,380 plus simple interest at 6% from 2 September 2009 until the date of payment of the judgment sum.  On my assessment, in the context of all the trial events evaluated as a whole, the plaintiffs' two (of three) adjoining lot success on a secondary issue - was dwarfed by their failure in respect of their speculative component of extra value claim.

   (c)I also reject an implicit entreatment as contended for by the plaintiffs to embark upon a minute item by item scrutiny of pre‑trial events extending back to 2016 and up to the period 9 May 2019, for a purpose of rendering some costs apportionment determinations.  Such an exercise is generally unprincipled, impracticable, unjustified and wholly uneconomic within the context of what is already uneconomic enough litigation.  A broader approach is called for.

   (d)I also reject an implicit contention of the plaintiffs, in effect, as to the alleged significance of the Water Corporation's pre-trial amendments to its defence pleading at 9 May 2019, to from then putting at issue the adjoining land questions which, prior to that point, had not been raised.  Although the plaintiffs sought at trial, and still seek, to make much of that defence pleading change, my own assessment is that in the overall scheme of the matters at issue, that this was a relatively low level movement in the Water Corporation's defensive stance.  Measured against the parties' level of economic disagreement over the extra value of speculative land component, that change to the defence pleading was never as impacting in its ramifications as the plaintiffs would seek to portray it.  Rather, it bears a hallmark of a legal contention and characterisation argument which emerged as a part of the Water Corporation's intensified preparations towards a then looming 2019 trial.

   (e)Had it not been for the extra considerations generated from and required by the Water Corporation's 4 September 2019 Calderbank offer, my inclination towards an appropriate costs order under such circumstances would have been that the Water Corporation should have received 75% of its taxed costs of this action, and including therein for the four-day trial period.  The 25% costs apportionment made against the Water Corporation would, on my assessment and in the plaintiffs' favour, encompass the making of a reasonable costs allowance for the plaintiffs' end success monetarily, in recovering the additional compensation of $160,380 at the trial (beyond the April 2012 tranche of compensation) plus simple interest at 6%.  Reducing the plaintiffs' end overall costs exposure by 25%, on my assessment, would have been a just allowance to take account of pre-trial matters realised in the plaintiffs favour and then the monetary trial outcome, balanced against the dominant issue at trial.  It would also allow for all of the expert evidence getting up trial time and trial book documents assembled surrounding what was an unsuccessful pursuit of the plaintiffs' speculative extra claim across a four-day trial in the Supreme Court.

   (f)But by reference to costs principles as explained towards statutory compensation by Beech J in the environment of unaccepted Calderbank offers in McKay [No 7] (S) there are further considerations to be weighed.  To issue an extraordinary costs order as the Water Corporation seeks for indemnity costs against the plaintiffs by reason of the non-acceptance of the Calderbank offer and end outcome, I would need to be satisfied, without hindsight, that the plaintiffs' rejection of the Calderbank offer was, when holistically assessed at that time against all applicable circumstances and at the time the offer was made, was 'unreasonable'.  In a context of indemnity costs and Calderbank offers, see also my recent reasons as to indemnity costs orders delivered in Shephard v Tuanie Paul Galea and Carmen Byrne as Executors and Trustees of the Estate of the late Joseph Galea [2019] WASC 164 (S), there referencing the applicable indemnity cost case authority by reference to Calderbank offers.  In particular, see my references to a recent decision of the Court of Appeal in Strzelecki Holdings Pty Ltd v Jorgensen [2019] WASCA 96 in a context of that claim for indemnity costs, which in the end, I ordered.

   (g)For present circumstances at the time the 4 September 2019 Calderbank offer was put, and bearing in mind particularly the expert planning evidence and the expert valuation evidence which the plaintiffs had then assembled and duly adduced at the trial (but which I largely rejected in the end in preference to the Water Corporation's expert planner and valuer), I am, after some anxious consideration, on balance of the view ultimately, that the plaintiffs' pursuit of a speculative component claim, whilst incautious, does not rise to the level of being evaluated then (around the time the offer was made and was open to accept) as lacking in a potentially arguable basis.  Due chiefly to that consideration, having weighed the whole question carefully, applying various considerations as to indemnity cost orders I discussed in Shephard v Galea, I am ultimately not persuaded here that an order for indemnity costs in the Water Corporation's favour is the appropriate costs order here.

   (h)Nevertheless, I am of the view that in terms of weighing all the various factors under the court's overall discretion as to an appropriate and just order as to costs under present bespoken circumstances, that the unaccepted Calderbank offer as made by the Water Corporation in the amount of $193,600 (along with its further terms as to interest and costs) is a relevant consideration to be weighed in the overall balance of factors - as a relevant further consideration, when applying relevant Calderbank principles as regards a potential issue of the more usual level of costs - ie costs order as to legal costs ordered on a party-party basis.  In that context of issues on foot, the offer of half of the plaintiffs' taxed costs was, if anything, on the generous side.

   (i)Weighing such considerations, including again the terms of the unaccepted September 2019 Calderbank offer, it is now clear that the plaintiffs have effectively done a lot worse in the ultimate wash‑up of this trial, than say had they accepted the pre-trial offer of $193,600 plus simple interest, plus 50% of their party‑party costs up to 4 September 2019.  By saying that, of course, I do not suggest that numerically 'beating' at trial the offer outcome, is the sole consideration.  It is merely one consideration amongst the others to be weighed in the balance as to costs.

   (j)In all these circumstances, my end view is that an appropriate order as to costs is that for the period up to 18 September 2019 (ie, 14 days after the September 2019 Calderbank offer was made and left open to be accepted) that the Water Corporation should receive 75% of its party-party costs to be taxed, if not agreed.  Then, after 18 September 2019 I am of the end view that the plaintiffs should from then be responsible for 100% of the Water Corporation's legal costs on a taxed party-party basis and therein including, thereby, all the costs of the four-day trial in this court.  By 18 September 2019 the plaintiffs would have had the reasonable period of 14 days to consider that Calderbank offer.  The offer was made at a time relatively close to the trial occurring, so that then the plaintiffs should have been well appraised of their risks at a looming trial and could then consider the Calderbank offer made by the Water Corporation on a properly informed basis.

   (k)But, with one category of exception, I must reject, as inappropriate and unjustified, the Water Corporation's further proposal for an award of party-party taxed costs made in its favour, to be ordered on a basis of an as proposed removal of most of the cost scale determination limits.  The exception is in respect of making a scale adjustment upwards to increase by a further 50% the otherwise applicable scale limit for the hours allowed (not the rates) under the relevant costs determination for preparation of the Water Corporation's case for trial (120 hours).  I reach that position on the basis of my assessment as trial judge that greater work than the norm would have been required here in respect of preparing the defendant's written opening outline of submissions, as they were provided for purposes of commencement of the trial.  Such work on those opening submissions was particularly necessary and helpful here.  It proved to be of utility and assistance in addressing a complicated underlying planning framework of laws and regulations which was helpfully assembled under those written submissions.  That would have been a laborious and time consuming task.  In the end the planning framework proved essentially uncontroversial at the trial, no doubt I assess because of all that comprehensive work making a complicated position clear to the defendant's lawyers.  As the primary reasons reflect, a significant component of the Water Corporation's planning framework opening written submissions was able to be incorporated within my reasons (see [178]). 

   On that basis, the scale limit allowance for the defendant should be adjusted up for the purposes of any taxation to the extent of a further 50% in the maximum level of hours allowed, to accommodate a more just allowance for the extra work associated with that component of the preparation of the case for trial by the written opening submissions of the Water Corporation. 

   Otherwise, my assessment is that here there is no real basis shown in evidence put before the court to suggest that a taxation that is conducted by reference to the applicable scale limits, for the purposes of s 280(2) of the Legal Profession Act 2008 (WA), would be likely to generate an end outcome that might deliver an inadequate recompense to the Water Corporation in respect of its party-party taxed legal costs.

Orders

1. In the end, my orders as to costs which will issue upon the publication of these reasons will be as follows:

   1.The plaintiffs pay the defendant's party-party costs (such costs to be taxed if not agreed) on the basis of their responsibility for:

   (a)75% of the defendant's costs for the period up to 18 September 2019; and

   (b)100% of the defendant's costs for the period after 18 September 2019 (including the costs associated with the costs application).

   2.For the purposes of the implementation of order 1, the scale limit under the relevant determinations shall be adjusted upwards to allow an increase of 50% in the numbers of hours allowed for the defendant in preparing its case for trial (to a total of 180 hours).

2. To be clear, the costs orders reflected under (1) above include the costs of the present exercise to determine the parties' costs, conducted as it was on the papers.

ATTACHMENT A

Without Prejudice save as to costs

Italiano v the Water Corporation — CIV 1976 of 2016

We refer to the above matter.

As you are aware, on 31 May 2012, our client made an advance payment to your clients of
$1,017,500 (Advance Compensation), plus interest. The total amount of the advance
payment, including interest, was $1,185,262 (Advance Payment).

The valuation experts agree that, excluding the 'speculative component', and including 10%
solatium, your clients are entitled to compensation of $1,211,100 (Agreed Compensation).
The difference between the Agreed Compensation and the Advance Compensation is
$193,600 (Balance of Compensation). It remains our client's position that this is the only
amount that your clients will recover at trial, plus any applicable interest.

In order to bring these proceedings to an end, and to avoid further time consuming and costly
litigation, our client has instructed us to make the following offer on its behalf, in full and final
settlement of all matters arising out of or in any way connected with these proceedings. Our
client offers to pay to your clients:

•         the Balance of Compensation;

•         simple interest on the Balance of Compensation at the rate of 6% per annum from
         the Date of Entry, being 2 September 2009, to the date of payment; and

•         50% of your clients' party-party costs up to the date of this offer, to be taxed if not
         agreed.

This offer is in addition to the Advance Payment already paid to your client. It is made subject
to the parties entering into a settlement deed addressing the usual matters, including that:

•        the settlement is made on a non-admission of liability basis;

•        the settlement is in full and final release from all claims made by your clients; and

•         the terms of the settlement and the deed remain confidential.

The settlement offer set out above is made in accordance with the principles set out in
Calderbank v Calderbank [1975] 3 All ER 333. If your clients reject this offer, our client
reserves its right to draw this correspondence to the attention of the Court in support of any
application for costs (including indemnity costs).

This offer is made on a without prejudice, save as to costs, basis and remains open for
acceptance in writing until 5pm on 18 September 2019, at which point the offer will expire.

We look forward to hearing from you.

I certify that the preceding paragraph(s) comprise the reasons for decision of the Supreme Court of Western Australia.

DW
Associate to the Honourable Justice Martin

27 MAY 2020