LGM Enterprises Pty Ltd v Brisbane City Council
[2009] QLC 178
•27 November 2009
LAND COURT OF QUEENSLAND
CITATION: LGM Enterprises Pty Ltd v Brisbane City Council [2009] QLC 0178 PARTIES: LGM Enterprises Pty Ltd
(claimant)v. Brisbane City Council
(respondent)FILE NO: AQL 820/07 formerly A2007/0820 DIVISION: Land Court of Queensland PROCEEDINGS: Claim for compensation pursuant to the Acquisition of Land Act 1967 HEARD ON:
2, 3, 4 and 5 November 2009
DELIVERED ON: 27 November 2009 HEARD AT: Brisbane DELIVERED AT: Brisbane MEMBER: Mr RS Jones ORDER: 1. Compensation is determined in the amount of one hundred and fifty two thousand two hundred and fifty dollars ($152,250).
2. I order that the respondent pay interest at the rate of 5.25% per cent per annum on the amount of $152,250 from the date of resumption, 7 January 2005, to the date of the payment of the advance, 11 July 2009, and thereafter on the amount of $116,594 up to the day immediately proceeding the day upon which the balance of the compensation is paid.
CATCHWORDS: COMPENSATION – Acquisition of Land Act 1967 – Compensation For Loss Of Business – Compensation For Loss Of Business During Construction Period – Compensation For Future Economic Loss – DISTURBANCE – Claim For Compensation For Time Of Director Of Claimant Company – Legal Costs Associated With Proceedings Other Than In The Land Court – Legal Fees Incurred In Proceedings Not Under Acquisition of Land Act 1967 – Professional Fees
Acquisition of Land Act 1967 s.12(5), s. 20
Retail Shop Leases Act 1994 s. 43
Goods and Services Tax Ruling 2006/9Nevis Pty Ltd v Department of Main Roads (1999-2001) 22 QLCR 231
Barns v Department of Transport (1996-1997) 16 QLCR 22
Marshall v Department of Transport (2000-2001) 205 CLR 603
Sorrento Medical Service Pty Ltd v Department of Main Roads (2007) 151 LGERA 328
Harvey v Crawley Development Corp (1957) 1 All ER 504
Director of Buildings and Lands v Shun Fung Ironworks Ltd (1995) 1 All ER 846
Heavey Lex No. 64 Pty Ltd v Department of Transport (2001) 22 QLCR 177 (LAC)
Robertsons Furniture & Design (Qld) Pty Ltd v Department of Main Roads (2005) QLC 001APPEARANCES: Mr LG McGinn, Director and Secretary of LGM Enterprises Pty Ltd, for the claimant
Mr Hinson SC, instructed by Ms S Green of Brisbane City Legal Practice, for the respondent
Background
Pursuant to the Acquisition of Land Act 1967 (ALA), on 7 January 2005 the respondent resumed 36m² of land located on the corner of Appleby Road and Rode Road, Chermside. The purpose underlying the taking of the land was the upgrading of the Appleby Road/Maundrell Terrace and Rode Road intersection and associated roadworks. The resumed land is now described as Lot 1 on Survey Plan 172404 and the parent parcel is described as Lot 2 on Registered Plan 117943.
Constructed on the parent parcel of land is a relatively small shopping centre containing a floor area of about 484 m2 which is divided into five tenancies. At the date of resumption the whole of the land was owned by Australian Property Holdings Pty Ltd (APH). That company still retains ownership of the parent parcel and the shopping centre. At the date of resumption the claimant, LGM Enterprises Pty Ltd (LGM) was the lessee of one of the tenancies (Tenancy 1). The lease between LGM and APH, subject to renewal, expires on 31 March 2011. The business being operated by LGM at all material times was that of a video store operating as a BlockBuster video franchise.
While no areas of the tenancies making up the shopping centre were directly affected by the resumption, located within the resumed land were a number of pathways which provided pedestrian access to and from the shops located within the centre. Pedestrian access was also available via a set of stairs and two vehicular entrance/exit driveways, one fronting Rode Road the other Appleby Road. The shopping centre has on site car parking. No loss of car parking space occurred as a consequence of the taking of the land.
On 27 November 2008 the Land Appeal Court determined that, for the purposes of s.12(5) of the ALA, LGM held a compensable right or interest in the land taken.[1]
[1] LGM Enterprises Pty Ltd v Brisbane City Council (2008) QLAC 0214.
The Claims for Compensation
A number of claims for compensation were filed in the Court. It is not necessary to go into the details of each of them other than to identify that the major element of each claim was for economic loss. The particulars of the claim before the Court at the commencement of the hearing were:[2]
Claim for business loss (actual to June 30 2008) $208,624
Estimated business loss (to end of lease 2011) $258,074
Reasonable costs (s.20(g) of ALA 1967) $40,872
Legal costs (to date of proceedings) $1,736
Legal costs (Retail Shop Leases Tribunal proceedings) $37,297
Professional costs (to date) $5,170
GST $55,177The total claim was in the amount of $606,950.
[2] Ex. 17 p. 111.
The claim does not specify whether the loss of business claims fell under the heading of injurious affection, severance or disturbance. As at the date of resumption the ALA, in s.20, expressly recognised the first two heads of compensation but not the last. The ALA as amended in February 2009 now expressly recognises the right to claim costs and losses attributable to disturbance.[3] It is not disputed that the ALA as at the date of resumption is the applicable statutory law. At the end of the day nothing really turns on the correct categorisation of the nature or description of the right to compensation for economic loss. However, for the sake of completeness I should say that I agree with the submissions made by Mr Hinson SC, senior counsel for the respondent, that economic losses of the type claimed have been held in the past, quite correctly in my respectful opinion, to fall within the head of compensation described as injurious affection.[4] As Gleeson CJ, Gummo, Kirby and Cullinan JJ (Gaudron J agreeing) said in Marshall v Department of Transport[5]
“(Injurious affection) is a neat, expressive way of describing the adverse effect of the activities of a resuming authority upon a dispossessed owner’s land.”
[3] s.20(1)(b) and s.20(5).
[4] Barns v Department of Transport (1996) 16 QLCR 22 at 76-77 (LAC); Robertsons Furniture and Design (Qld) Pty Ltd v Department of Main Roads (2005) QLC 0001 at [159] – [174].
[5] (2000-2001) 205 CLR 603 at [32].
Whether it will be argued that economic claims of this kind, since the February 2009 amendments to the ALA, now fall to be determined as an item of disturbance pursuant to s.20(5)(f) is a matter for another day.
In Marshall it was also held that compensation for injurious affection was to be assessed by bringing into account the damage caused by the constructing authority exercising its statutory powers that injuriously affected the balance land, and it was not a condition of a right to compensation for injurious affection that there be actual works undertaken on or about the resumed land. The bulk of the roadworks carried out by the respondent in the exercise of its statutory powers, which caused the vast majority of the economic loss sustained by LGM, occurred on existing public land (road and footpath) and not on the resumed land.
For the sake of convenience, in determining this claim I will broadly follow the various heads of compensation as particularised by LGM and set out above.
Nature and duration of works
The nature, extent and duration of the roadworks carried out by the respondent in the vicinity of the subject land were matters touched on by nearly every witness called to give evidence. Not surprisingly the level of observation and recollection of detail varied significantly between witnesses. The best evidence about the nature, extent and duration of the works was that given by Mr Arneil. Mr Arneil was the project manager employed by the respondent. Mr Arneil is a qualified civil engineer and a registered professional engineer of Queensland. His duties as the project manager included the programming and timing of the works and management of the construction teams employed to complete the roadworks. Mr Arneil was on site daily during the construction period. Most of his evidence was not seriously challenged.
The works are set out in some detail in the affidavit of Mr Arneil[6] and there is no need to repeat them here other than to identify that major elements of those works included drainage works, road surface works (including gullies, rock walls and asphalting) and pavement works. The works also included the relocation of street lighting and traffic signals at and about the intersection of Appleby Road/Maundrell Terrace and Rode Road and the relocation of a bus shelter from the south western side of the intersection to the north western side some distance from the subject land.
[6] Ex. 12.
In total the works continued over about 220 days and 30 additional nights. Substantial water filled barricades were erected where works were taking place which not only obstructed access to and from the centre but also made viewing the centre and its access points difficult from time to time. The Appleby Road driveway had to be entirely replaced. There is no doubt that on a regular basis the intersection suffered significant traffic congestion and access to and from the centre was materially interfered with. There is also evidence that from time to time customer car parking might have been made inconvenient but not to the extent of there being insufficient parking spaces to satisfy customer demand.
As Mr McGinn acknowledged, the actual nature of the works is not the real issue. The real issue is whether or not the roadworks carried out by the respondent, whatever they were, interfered with the business of LGM and, to a significant extent, that impact should be able to be derived from an analysis of the trading figures and business projections of LGM.
Having regard to the totality of the evidence surrounding this issue I have concluded that the roadworks carried out by the respondent both during and after the actual construction phase had a material and deleterious impact on the business of LGM. However, in this context I agree with the submission made by Mr Hinson SC that Mr McGinn, in a number of instances, tended to exaggerate or overstate the extent of inconvenience. Mr Hinson was at pains to point out that this was not an attack on the credibility of Mr McGinn but rather a statement of fact. The evidence is quite clear that Mr McGinn found the roadworks an extremely stressful period and it is not surprising that at least in some instances he might have been prone to see things worse than they actually were.
As to the duration of the works, at the end of the day there was not as much dispute as first thought. The evidence of Mr Arneil, supported by the evidence of Mr Kretschmann, a civil engineer who was a superintendent of the project, was that the works commenced in June 2005 and were practically completed by April 2006. There is evidence that some relatively minor works were still occurring through to June/July 2006, particularly in the vicinity of the original bus stop location to the south of the intersection. However, on balance I have concluded that these works would have deterred only the most sensitive pedestrian customers of the business of LGM. As only some 7% of the company’s business was from pedestrian traffic,[7] any impact on the business of LGM would have been marginal, if not negligible, after April 2006. The same can be said about the interference with and changes to pedestrian access via the pathways through the landscaping bordering the carpark.
[7] T. 1-39 L. 42-60: Ex 17, p. 39 para 36(b).
Business losses during the construction period
The business losses of LGM were assessed on behalf of the company by Mr Crawford and on behalf of the respondent by Mr Calabro. Both of these gentlemen are chartered accountants. The major differences between Messrs Crawford and Calabro could be summarised as
i.The duration of the works;
ii.Whether all of the losses incurred by the business in that period ought be sheeted home to the works or whether some allowance had to be made for other external influences.
iii.Whether or not the losses of the business extended beyond the actual construction period.
In carrying out his assessment, Mr Crawford proceeded on the basis that the works extended over a period of twelve to thirteen months. This evidence was I think based primarily on information provided by Mr McGinn. Mr Calabro, relying on advice provided on behalf of the respondent, adopted a period of ten months being from July 2005 to April 2006. For the reasons given above I have concluded that the relevant construction period is ten months.
Notwithstanding that Mr Calabro adopted a shorter construction period than Mr Crawford his estimate of business losses during construction was $52,558. Mr Crawford’s estimate for the longer period was $50,476.[8] In circumstances where these figures are so close I do not see the need to carry out a close analysis of the valuation exercises carried out by the accountants and will adopt Mr Calabro’s figure, which favours LGM, of $52,558. There is no probative evidence in my opinion to support the claim for actual business losses to 30 June 2006 in the amount of $208,624. This is the amount particularised in LGM’s latest amended claim for compensation.[9]
[8] See ex. 14 (joint experts statement) at table 3.
[9] Ex. 17 pp 109 – 111.
However, according to Mr Calabro, the revenue losses which occurred between June 2005 and April 2006 could, to a large extent, be attributed to factors other than the roadworks. According to Mr Calabro some 67% of the revenue losses incurred by the company during that period could be attributed to these other external factors.[10] In this context it is worth setting out in full Mr Calabro’s written analysis on this issue:[11]
[10] Whilst Mr Calabro’s analysis suggested only a 33% loss of revenue due to the roadworks he adopted 50% for the purposes of his assessment of compensation.
[11] Ex. 20.
“Estimated gross revenue 2005/2006 $599,196
Actual gross revenue $444,731
Reduction in gross revenue $154,465
Contributing factors:
General downward trend (BlockBuster Qld) - 6.14%, 23.82% $36,791
Lower customers spend – 11.3%, 43.83%, $67,709
Other – some could be roadworks, etc – 32.35% $49,965
100% $154,465
In trying to assess the full impact of the roadworks it has been assumed that some of the lower spend may have been as a result of the roadworks if prices were reduced to induce customers. However the lower spend may also be attributed to the general downward trend, economic trend or pattern changes.
Adopt 50% as a reasonable approximation.”
While particulars of these other factors were not set out in any detail in his report, Mr Calabro, in oral testimony, also said that they would include the highly competitive nature of the industry, a general downturn in the industry in 2006, the introduction and development of alternate entertainment sources including pay television, computers and other electronic diversions. Mr Crawford made no allowance for any external factors. According to him all of the identifiable losses could be attributed to the roadworks.
Having regard to the whole of the evidence and, in particular, the evidence of Mr McGinn and Mr Williams, a person with considerable experience in the video industry, I have concluded that Mr Calabro has overstated the impact of these other external factors. However, it is important to recall that 2006 was the first year that BlockBuster statewide recorded negative growth. This was after a period of significant growth between 2003 and 2005 even allowing for the increase in the number of video stores statewide.[12] Bringing these factors into account I intend to discount this part of LGM’s economic loss by 30%. This results in a figure of $36, 791 which I will round off to $36,800.
[12] Annexure to statement of Mr Cook, Ex. 2.
Before moving on to the next issue I should deal with one further matter.
Before discounting his calculations for business losses incurred during the construction period Mr Calabro brought into account what he described as “rent savings” in the amount of $18,752. The background to this rent saving is as follows. LGM considered that there were only two entities who might be responsible for the company’s loss of trade resulting from the roadworks, the respondent and the landlord APH. At the time the respondent was denying any liability because it believed the company had no estate or interest in the land resumed, so LGM commenced legal proceedings against APH in the Retail Shop Leases Tribunal alleging, in particular, breaches by APH of the terms of the lease and/or s.43 of the Retail Shop Leases Act 1994. Section 43 is relevantly concerned with the liability of a lessor to pay a lessee reasonable compensation for loss or damage suffered because of the lessor’s unlawful interruption and restriction of the lessee’s customer (existing and potential) access or otherwise unlawful disruption to the lessee’s trade. LGM commenced these proceedings for two reasons. To get some compensation from APH and force the respondent “to the table”. The first was a success the second a failure. The proceedings in the Tribunal were settled and the terms of settlement recorded in a deed.[13] The deed records that in consideration of LGM releasing APH from any and all claims arising from or contributed to by the subject roadworks, APH would waive any and all claims to existing rental arrears.[14] At the relevant date rental arrears were in the amount of $31,302.67. APH also agreed, subject to certain reporting conditions imposed on LGM, to pay a total amount of $30,000 to be used by LGM on advertising and promoting its business.[15] The respondent was not a party to the proceedings in the Tribunal and was not a party to the deed of settlement. There is no probative evidence as to what APH considered its legal liabilities to be arising out of or in connection with the roadworks.
[13] Annexure 5 to the Statement of Mr McGinn, Ex. 3.
[14] Clause 4.1(a).
[15] Clause 4.1(b) and 5.
According to Mr Calabro, the sum of $18,752 represented rent savings between June 2005 and April 2006 which flowed from the terms of the settlement. Mr McGinn quite candidly acknowledged that as the facts existed at the hearing of these proceedings it was probably appropriate to bring that rent saving into account. However, he argued that, as far as he was concerned, he would prefer not to be bound by the terms of the lease and, if properly compensated by this Court, would happily forego the benefits of the deed of settlement and repay to APH any financial benefits already paid to LGM. The reality is that I cannot ignore the terms of the deed of settlement and consider that Mr Calabro’s treatment of the rent is appropriate. Mr Crawford made no allowance for any savings in rent.
Business Losses after Completion of Roadworks
According to Mr Calabro, LGM would not have suffered or did not suffer any financial losses after the works were completed for essentially two reasons. First, after the completion of the works, access to the shopping centre and to LGM’s premises was as good, if not better, than before the works commenced. In the joint experts statement[16] Mr Calabro said: “… Calabro is of the view that once the roadworks were finished access was restored and maybe improved and therefore no loss could be attributed to the roadworks.” The second reason was that almost immediately after the roadworks were completed the average weekly new membership figures (on a monthly basis) returned to normal.[17]
[16] Ex. 14 at p. 4 para 9a(ii).
[17] Ex. 13 p. 11 table 5.
Mr McGinn strongly refutes Mr Calabro’s assessment of the impact of the roadworks on the business after they were completed. According to him, prior to the roadworks commencing the store maintained an active customer base (on a four week rolling average) of 2,234 customers. During the construction phase that average fell to 2,067. The reduction in active members in combination with the falloff in new memberships during the road construction phase caused the average number of active members to fall as low as 1,748 in 2007. With the capital made available by virtue of the settlement of the legal proceedings against APH, LGM has been able to carry out marketing and promotion of the business which has seen the number of active members increase to 1,809 and new membership numbers increase to 49 per week on average by 2009.[18] By late 2009 however, membership was still below the 2006 figures but rising.
[18] Ex. 3 paras 135 to 142 and Annexure 51.
As I understand the evidence, the loss of custom arose out of the fact that the inconvenience caused by the roadworks was such as to deter current active members from using the business and new members from joining. These members and potential members, finding the business of LGM too inconvenient during the roadworks, then formed relationships with other local video suppliers. Up until recently there were about four other stores operating in the general area. Once these new relationships were formed, while some customers might have returned voluntarily almost immediately, others would have to be lured back by various marketing strategies and some may not return at all. Overall, I prefer the evidence of Mr McGinn to that of Mr Calabro about the impact of the works after completion. Mr McGinn’s evidence is, broadly speaking, supported by the company’s business figures and by the evidence of Messrs Smith and Williams who both have considerable experience in the video industry.[19] In many respects the evidence of Mr McGinn was not seriously challenged and I do not accept that the other industry indicators and economic factors which might have influenced Mr Calabro, sufficiently explain the weakened economic performance of the company post construction. The differences between the trading figures of the company pre, during and post the roadworks up to 2009 are significant.[20]
[19] See eg T. 1-5 L. 30 – 42 and T. 1-6 (per Mr Smith) and T. 3-13 (per Mr Williams).
[20] See Ex. 13, table 3.
While accepting LGM’s case that business losses caused by the roadworks extended beyond the actual construction dates, I do not accept its estimate of economic loss after April 2006. According to Mr Crawford, prior to the works commencing, the company would have been worth between $250,000 and $300,000. His estimate of the post roadwork economic loss is $630,331.[21] Significant inputs to Mr Crawford’s assessment are that, but for the roadworks, the business would have had constant growth at a rate of about 10% per annum through to the termination of the lease in 2011 and that the company would continue to suffer material economic loss through to the termination of the lease.
[21] Ex. 14 p. 3 table 3.
Mr Crawford’s analysis does not provide a reliable basis for assessing the losses suffered by LGM. No attempt has been made to bring future losses back to a present value. Also, Mr Crawford’s analysis does not bring into account all of the interest paid by the company on its various business loans. Interest on business loans ranged from $10,744 in 2005 to $44,263 in 2008 and $35,540 in 2009. As I understand the evidence, the lower interest payments in 2005, 2006 and 2007 were because at that time the company was paying interest only whereas in 2008 and 2009 repayments were being made on principal and interest. The failure to bring these costs into account is of significance. For example, if the loan repayments for the 2005 financial year of $10,744 are bought into account, it is more likely than not, that in that financial year the company would have in fact made a loss rather than a small profit.
Also, there is no reasonable basis to assume that the company would continue to make significant losses through to the expiration of the lease in 2011. Mr McGinn called Mr Williams, a person with vast experience in the video industry. During his evidence in chief, Mr Williams agreed with a proposition advanced by Mr McGinn namely that three of the essential features of a successful video store were position, convenience and product. There must of course be a degree of overlapping of the first two features. The first of course is not affected by the roadworks. As to the second it was not satisfactorily explained to me why, if it was convenient for customers to use the subject store in the before case, it was not just as convenient for those same customers to use the store in the after case. In this regard I agree with Mr Williams’s evidence to the effect that with a strong marketing and promotional campaign there would be no reason why LGM could not expect to recover most of its original customers. Such a campaign would also be likely to generate an increase in new membership enrolments. According to Mr Williams such an advertising campaign could cost up to $40,000 over a period of 6 months.[22]
[22] T. 3-13 L 5-11.
As to the last of the features of a successful video store I do, however, accept that absent sufficient product and an appropriate product mix no amount of advertising and promotion will attract meaningful custom. On the evidence before me I consider it likely that LGM, after the roadworks had been completed, would have had to expend significant monies not only on advertising and promotion but also on increasing and improving its product to attract most of its customers back. However, once that was done there was no reason to think that eventually normal or expected trading volumes would not be largely restored.[23]
[23]A conclusion generally supported by Messrs Smith (T. 1-6) and Williams (T. 3-13 L1 1-40).
It is also clear that Mr Crawford, based largely on what he was told by Mr McGinn, proceeded on the basis of wrong information concerning the affect of the nature and duration of the roadworks on the business. For example, he proceeded on the basis that the roadworks extended over a period of about 13 months and during that time access to and from the business was almost constantly hindered.[24] This is not supported by the evidence and gives a false impression of the duration and inconvenience the customers of LGM were actually subjected to. Mr Crawford also proceeded on the basis that the location of the bus stop was also a “fairly important asset for the business”.[25] The evidence about the bus stop is to the contrary. In this regard, again largely due to information provided by Mr McGinn, I also consider that Messrs Williams and Smith have probably proceeded on the basis that the inconvenience caused to LGM’s customers was materially worse than it was in reality. In the case of Mr Smith’s evidence regarding his video store, I also consider that in the after works situation, the future impact on his business was likely to be considerably worse than that of LGM. Mr Smith’s video store at Nundah has lost customer parking spaces and access from one street as a consequence of a resumption for roadworks.
[24] T. 2-63 L. 1-5; T. 2-67 L. 20-35.
[25] T. 2-63 L. 32-37.
Further, I do not accept that it would be reasonable to assume that, but for the works, the business would have continued to grow at a steady rate of 10% per annum. This approach is far too simplistic and tends to ignore the competitive nature of the industry and ignore or misunderstand industry trends. While consistent annual growth at this level might have been achievable from a relatively low base from 2002 to 2005 when Mr McGinn was in a “building stage”[26] trying to capture market share,[27] there is no probative evidence which would justify the conclusion that that rate of growth would continue unchecked through to 2011. Mr Williams gave evidence to the effect that there were indications that prior to the recent economic crisis the video industry was on the decline but since then, with an emphasis on cheaper entertainment, the industry had a good “last year”.[28] Mr McGinn himself acknowledged that the video industry was subject to periods of decline and effects of economic conditions.[29] A comparison of the rate of increase in the gross revenue of the industry in Queensland between 2005 and 2009 (2.66%) and Mr Crawford’s projection for LGM for the same period (42-43%)[30] highlights the artificiality of Mr Crawford’s analysis. His analysis also ignores or at best fails to deal adequately with his projections for LGM when compared to the statewide trends of BlockBuster on an average revenue per annum basis. These figures reveal that the average revenue per store was generally static between 2006 to 2008.[31] No probative evidence was put before me to show how a steady growth rate of 10% or thereabouts was going to be maintained over time or how the business of LGM was going to be kept immune from the forces that affected the industry as a whole.
[26] T. 2-7 L. 15-32.
[27] T. 2-10 L. 15-20.
[28] T. 3-6 L. 5-20.
[29] T. 1-33 L. 40 and T. 1-35 L. 27-42.
[30] Ex. 14 at pp 7-9.
[31] Ex. 14, Table 4. Also annexure to Ex. 2.
No explanation was given to explain why Mr Crawford’s calculation of loss post 2006 exceeded by so much LGM’s most recent claims, the amount of the claim as particularised by the company[32] and the amount of compensation as detailed in Mr McGinn’s statement.[33]
[32] Ex. 17, p. 39 para 35.
[33] Ex. 3, para 134.
For all of these reasons I reject Mr Crawford’s estimate of the post work losses. The rejection of Mr Crawford’s evidence of course creates the immediate difficulty of finding a rational basis upon which to assess compensation. On the limited evidence before me I have decided that the best guide to the likely post roadworks losses suffered by LGM is the evidence of the losses suffered during construction.
It appears reasonably clear that if LGM had, at or about the time of the completion of the roadworks, carried out an extensive advertising and promotional campaign it would have recovered most, if not all, of its lost custom within a reasonable period of time. As already referred to, according to Mr Williams, the appropriate amount to spend on such a campaign could have been up to $40,000 and the time taken to recover lost custom in the order of 6 months. However, this estimate might tend to be overstated as it seems quite clear that when giving his opinion about these matters, based on the information provided by Mr McGinn, he had an exaggerated impression of the extent and duration of the inconvenience caused to the customers of LGM by the roadworks. That is, it might not have been as expensive or difficult to lure back the lost customers as Mr Williams thought. However, regardless of whether the cost of the campaign would have been $40,000 or less it is now to an extent, academic. That is so because at or about the date of completion of the roadworks LGM was not financially able to fund any such advertising/promotion campaign. In this regard there has been no suggestion that any fault lies at the feet of the company for failing to conduct such a campaign at the appropriate time.
The inability of the company to finance such a campaign is significant. On the evidence before me it would seem that the longer a former customer spends with his/her new supplier the more difficult it may be to lure that customer back. That task would be made all the more difficult in circumstances where the supplier was not able to offer an appropriate product mix. In this regard there is evidence that because of the disruption to its business during and after the roadworks LGM may not have been able at all relevant times to maintain and offer an appropriate level of product or product mix. After the roadworks, LGM did not have the funds to finance a marketing campaign and, at the time of the legal proceedings against APH (October 2008), Mr McGinn believed the company faced bankruptcy.[34]
[34] Ex. 3 paras 32 and 143.
With the availability of the settlement monies and the benefit of the rent waiver, resulting from the settlement of the proceedings between LGM and APH, now available for promotional work and/or product improvement, custom should begin to return to LGM at an increasing rate. This result is not only consistent with the evidence of Messrs Smith and Williams but also with the return of new membership numbers,[35] the increase in average active membership numbers[36] and the increase in gross revenue[37] by 2009. On balance however, I accept that it will take longer to recover lost custom than it would have taken if appropriate advertising was carried out at or about April 2006. The financial benefits of the settlement with APH would not have begun to flow on to LGM until after 8 October 2008. The respondent’s advance of $35,656 was not paid until 11 July 2009. While there is no direct evidence about this, the delay in the payment of the advance is likely explained by the respondent’s views about LGM’s entitlement to claim compensation.
[35] Ex. 13 Table 5.
[36] Ex. 3,paras 135-139.
[37] Ex. 13, Table 3.
The evidence leads me to conclude that, while the company’s customers and potential customers would have been most inconvenienced during the actual construction phase, for a material time thereafter losses remained at levels in the vicinity of those incurred during that time.
Active membership numbers fell dramatically from the date construction commenced in mid June 2005 and continued to fall and remain at low levels until about May/June 2008.[38]
[38] Ex. 3, Annexure 51.
The fall in active member numbers coincides with the dramatic turnaround from revenue growth to negative growth from 2006 to 2008.[39] As was the case in determining compensation during the construction phase, I do not consider that external factors of the type identified by Mr Calabro and other witnesses could be wholly responsible for such a dramatic shift in membership numbers and revenue. At least to some extent this is confirmed by the significant difference between the fall in revenue of the business of LGM when compared to the fall in the average revenue of BlockBuster stores.[40] The evidence of Mr McGinn in particular also leads me to conclude that the deteriorating financial affairs of LGM were likely to have had some negative impact on the performance of the company overall. For example in being able to fund an appropriate level of promotion and product.
[39] Ex. 13, table 3.
[40] Ex. 13, table 3.
On balance I have concluded that the economic losses caused to LGM as a consequence of the activities of the respondent through the 2006/07 and 2007/08 financial years would have been in the order of those for the 2005/2006 financial year. In the absence of any better evidence I will continue to apply the base rate of $44,000 per annum for each of those years. An additional amount of about $9,200 also has to be brought into account for the 2.5 months (approximately) from the date of completion of the works to the end of the 2005/06 financial year.[41]
[41]Works commenced at or about 14 June 2005 and the date of practical completion was 10 April 2006; Ex. 12, para 12.
For the reasons I have already given I have decided that losses thereafter will decrease at an accelerating rate through to mid 2010. In the circumstances, I do not consider that I can do much better than to adopt a roughly linear rate of loss for the 2008/09 and 2009/10 financial years of $30,000 and $15,000 respectively.
Bringing all of these amounts into account results in a total of $142,200.
The base rate of $3,680 per month ($44,000 p.a) has already built into it a discount component of 30% to bring into account the risks and vagaries of the video industry including the state of the industry at the relevant time and its competitive nature. However, the evidence leads me to conclude that, at the beginning of the 2006/07 financial year, the indications for the future state of the industry, at least in the short term, were more conservative if not pessimistic than would have been the case at the beginning of the 2005/06 financial year. As at the end of 2005 BlockBuster statewide experienced a revenue increase of 9% and the introduction of 4 new stores. By the end of 2006 revenue growth had fallen into the negative at minus 5% and only 1 new store had opened.[42] To take into account the apparent increasing uncertainty facing the industry as at the beginning of the 2006/07 financial year, I intend to discount this component of compensation by a further 10% resulting in a figure of $127,980, adopt $128,000. Given the relatively small component of future economic loss and the broadbrush approach adopted, I do not intend to make any further allowance to bring that component of compensation back to a present value. However, consistent with the approach adopted by me in assessing compensation for the period of the roadworks I consider the residual benefits of the agreement between APH and LGM concerning outstanding rent must be brought into account. The balance of that benefit was $12,550.[43] This results in a final figure under this heading of compensation of $115,450.
[42] Annexure to statement of Mr Cook, Ex. 2.
[43] Ex. 13, p. 14, para 8.
The Claim for Costs pursuant to s.20(g) of the Acquisition of Land Act 1967
As at the date of resumption s.20(5)(g) of the Act did not exist. The Acquisition of Land Act as it then was did not expressly formulate a right to compensation under the heading of disturbance. However, notwithstanding the absence of express statutory recognition of a right to claim for disturbance this Court has long recognised that otherwise legitimate claims under this heading are recoverable. To be recoverable however the economic losses or costs claimed must be reasonably incurred and able to be described as being not too remote from or being the natural and reasonable consequence of the taking of the land.[44] Those common law tests are now largely enshrined in s.20(5)(g) of the ALA.
[44]Harvey v Crawley Development Corp (1957) 1 All ER 504 at 507; Director of Buildings and Lands v Shun Fung Ironworks Ltd (1995) 1 All ER 846 at 852-853.
Until the decision of the Land Appeal Court in Heavey Lex No. 64 Pty Ltd v Department of Transport[45] there was a well established line of authority in Queensland that claims for owner’s time spent in conferring with the resuming authority and professional advisors about the resumption were not compensable. However, in Heavey Lex the Land Appeal Court was concerned with, among many other things, claims made by the company for the time spent by a director and another person concerned with the preparation of the company’s claim for compensation.[46] In reviewing these claims the Land Appeal Court said:[47]
“The claims were rejected by the member in reliance on a substantial line of authority in Queensland to the effect that costs attributable to the time spent by a claimant in preparing a compensation claim are not recoverable. The basis for denying recovery is that the activities of a claimant are ‘akin to a vendor in the market place seeking to recoup from the purchaser his expenses for the time he spent to negotiate a purchase price’. We doubt the validity of a comparison between a person’s activities in voluntarily marketing his land and the work done by an owner, whose land has been compulsorily acquired, in endeavouring to secure proper compensation.”
After reviewing a number of authorities the Land Appeal Court then went on to say:[48]
“In our view, the above authorities and the principles they express strongly suggest that the approach previously taken in this State to claims of the nature of those under consideration may be unduly restrictive.”
[45] (2001) 22 QLCR 177.
[46] See para [31].
[47] At para [39].
[48] At para [54].
However, in Heavey Lex it was determined that the claims failed at the threshold as there was no evidence that the appellant company had remunerated the company director for his services or incurred a legal obligation to do so. In respect of the other person, it was found that while he had been paid at relevant times for services he had performed, the evidence did not suggest that any relevant charge for his services was made to the company or that the company was under any legal obligation in relation to the provision of the services by the employee.[49] The Land Appeal Court had previously said in respect of these claims[50]
“… The concept under consideration is one which relates to compensation for losses sustained by a dispossessed owner. Losses, to be recoverable, must be actually incurred and quantifiable. Are the claims in respect of Mr Smith’s and Mr Paino’s time losses actually incurred and quantifiable?”
[49] At para [55].
[50] At para [38].
In Nevis Pty Ltd v Department of Main Roads[51] the then President of the Land Court was concerned with a claim for compensation for time spent by the directors and staff of the claimant company or associated company. After referring to the previous well established line of authority where it had been held that, generally speaking, owner’s time was not compensable, the learned President went on to say after acknowledging the more recent decision of the Land Appeal Court in Heavey Lex:
“It would seem then that despite the approach previously taken, where claimants are able to demonstrate, by means of properly quantified claims, that they have suffered economic loss in such circumstances, such amounts may be recoverable. However, here there is no such evidence. The claim was based on a suggestion of what a quantity surveyor thought was reasonable.
In the absence of detailed quantified claims, I make no award in respect of these items of head of claim D.”[52]
[51] (2001) 22 QLCR 231.
[52] At p. 266.
The claim for $46,000 is itemised in Exhibit 19 under the heading “Work of LGM”. The claim is essentially one for the time spent by Mr McGinn on the company’s proceedings against the respondent from 14 May 2004 through to 23 October 2009. The amount claimed is calculated at a rate of $23 per a ten minute unit of time. According to Mr McGinn this was the apparent charge out rate for a first year solicitor. The claim encompasses some 295 hours. In my opinion this claim must fail either totally or substantially for a number of reasons.
The claim fails because there is no evidence that LGM has paid any of these monies to Mr McGinn or is under any legal obligation to do so. As was submitted on behalf of the respondent, there is no evidence that LGM has suffered or will in the future suffer any pecuniary loss arising out of this time spent by Mr McGinn.
If I am wrong in my conclusion about the totality of the claim it is my view that it would have to be substantially discounted. As acknowledged by Mr McGinn it would not be appropriate to allow the claim based on the remuneration paid to a first year solicitor and at the same time allow the number of hours it takes an unqualified lay person to complete what, in many instances, are legal or at least quasi-legal tasks. An example of this is that some 26 hours was claimed for “Monitoring of Sorrento”. This is a reference to the decision of the Court of Appeal in Sorrento Medical Service Pty Ltd v Department of Main Roads.[53] That case was concerned with determining whether the claimant in that case held an estate or interest in land under s.12(5) of the ALA. The decision in Sorrento quite fairly could be described as being the foundation of LGM’s claim to this Court. However, notwithstanding the importance of this case to LGM, I cannot accept that it would be reasonable to allow 26 hours for the monitoring of the case. This is but one example. In my opinion it would be necessary to significantly reduce the dollar amount claimed or the time spent by Mr McGinn in carrying out the various tasks for which he seeks to be compensated. There is no evidence to suggest what an appropriate charge out rate should be or how much time would be reasonable. In the absence of such evidence I would, if I had to, reduce the claim by at least 50%. However, it is also clear that much of the time claimed by Mr McGinn has nothing to do with the preparation of the claim for compensation but could be more properly described as being costs incurred in preparing for trial.
[53] (2007) 151 LGERA 328 (QCA).
The first claim for compensation was filed in this Court on 11 September 2007. Those costs which could not be more properly categorised as being costs of the action would therefore tend to be limited to those costs which occurred between 14 May 2004 and September 2007. By reference to Exhibit 9 I calculate those costs to be $6,762. According to the respondent the total should be $6,992. Discounting that figure by the 50% referred to above results in the amount of $3,496 which I would round off to $3,500.
In conclusion on this part of the claim I determine that none of it is recoverable for the reasons expressed. However, if I am wrong about that I would allow $3,500.
Legal Costs of $1,736
This claim involves what Mr McGinn describes as “work with McInnes Wilson”. The period claimed for is from 3 July 2006 to 3 August 2006. It is not at all clear what this account or these accounts relate to and there is no evidence to suggest that these costs or losses were a natural and direct consequence of the taking of the land. As was submitted on behalf of the respondent this claim must fail for want of proof.
The Retail Shop Leases Tribunal Legal Costs
A general if not broad description of these proceedings is given above.[54] Neither these proceedings nor the costs incurred by LGM associated with the proceedings[55] could reasonably be said to be a direct and natural consequence of the taking of the land. Accordingly this claim for compensation must also fail.
[54] Para [23].
[55] See Ex. 19 pp 2.9 – 3.8. (Work with Flower and Hart/J Peden).
Professional Costs in the Amount of $5,170
This claim seems to relate to what Mr McGinn describes as being “work with Sims Crawford Elliot & Co”.[56] Mr Crawford from that firm was the accountant retained by LGM in these proceedings. This claim must also fail as it has not been shown how they could reasonably be said to be recoverable as an item of disturbance or injurious affection. Having regard to the dates involved (between July 2008 and October 2009) I suspect that they may well have been costs incurred by LGM in preparing for the hearing of this matter. In any event this claim also fails for want of proof.
[56] See Ex. 19 p. 4.
Miscellaneous Disturbance Claims
Exhibit 19 also refers to additional costs and/or claims which, as far as I can see, have not been specifically identified in the claim for compensation. These include certain costs associated with work with “SPG Lawyers/C Carrigan” between 14 December 2007 and 17 March 2008. No meaningful attempt was made to show how these claims are compensable. Accordingly they also must fail for want of proof.
Conclusions
For the reasons expressed above I determine compensation in the amount of $152,250 made up as follows:
· Business losses during construction $36,800
· Business losses after construction $115,450
· The disturbance claims Nil
· Total $152,250
It is not necessary to make an allowance for the risk of any GST liability.[57]
[57] Goods and Services Tax Ruling 2006/9. (25 October 2006).
Orders
Compensation is determined in the amount of one hundred and fifty two thousand two hundred and fifty dollars ($152,250).
I order that the respondent pay interest at the rate of 5.25 per cent per annum on the amount of $152,250 from the date of resumption, 7 January 2005, to the date of the payment of the advance, 11 July 2009, and thereafter on the amount of $116,594 up to the day immediately proceeding the day upon which the balance of the compensation is paid.
RS JONES
MEMBER OF THE LAND COURT
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