Luka v Lake Macquarie City Council
[2000] HCATrans 332
IN THE HIGH COURT OF AUSTRALIA
Office of the Registry
Sydney No S261 of 1999
B e t w e e n -
SHANNON LUKA
Applicant
and
LAKE MACQUARIE CITY COUNCIL
Respondent
Application for special leave to appeal
GLEESON CJ
GAUDRON J
TRANSCRIPT OF PROCEEDINGS
AT SYDNEY ON FRIDAY, 4 AUGUST 2000, AT 11.20 AM
Copyright in the High Court of Australia
MR P.J. McEWEN, SC: May it please your Honours, I appear for the applicant in this matter. (instructed by Mervyn J. Cathers & Co)
MR M.S. JACOBS, QC: For the respondent, together with MR P.C. TOMASETTI. (instructed by Peter Rees)
GLEESON CJ: Yes, Mr McEwen.
MR McEWEN: Your Honours, our summary of argument identifies three grounds we wish to argue. Might I confine myself to two, namely that relating to the use of a comparable sale and the Dabbs v Seaman point. The problem in this matter arose out of the fact that there is no market for land being sold in made roads and lanes across the State. What the applicant propounded before the trial judge, and was accepted, was to ascertain a value by going to a proximate area of land in globo and deducing from it the value the purchaser of that land was prepared to pay for an area within the in globo site for a similar, or not dissimilar, area to be used for roads and applied it to the subject site.
The Court of Appeal held that to apply that, or to take that tack, was to involve a notional reversal of the subdivision of the subject site back to 1904. That is true to the extent that one is notionally doing that to make it a comparable – to make a comparison with the sale that was propounded as a comparable sale. But the answer that we relied upon – and with respect we would submit where the Court of Appeal erred – was in that the comparable sale did show that there was a value in land to be used for roads in a not dissimilar subdivision in a proximate location. That, your Honours, we submit, was an error.
Now, in his Honour Mr Justice Handley’s decision his Honour uses that reasoning, coupled with his Honour’s findings in relation to Dabbs v Seaman, to say that the land, in effect, had for all practical purposes no realistic value and to ‑ ‑ ‑
GAUDRON J: Well, that is not exactly what was held, is it, Mr McEwen?
MR McEWEN: Your Honour, what his Honour did, he dismissed our objection to the valuation. The Council having propounded a value of some ‑ ‑ ‑
GAUDRON J: The matter was remitted to the Land and Environment Court, was it not?
MR McEWEN: Yes, it was.
GAUDRON J: On the basis that the comparable sales analysis involved an error of law?
MR McEWEN: Yes, your Honour.
GAUDRON J: And on the basis that allowance had to be made in the valuation for interests of others.
MR McEWEN: Other interests.
GAUDRON J: But he does not say – the Court of Appeal does not go on to say it has no practical value on that account.
MR McEWEN: Your Honour, with respect, is perfectly right, but when I said “practical value”, the value contended for by the Council of $16,500 as against the area of land involved, I was referring to that, your Honour. But there was only one approach to using comparable sales. That was that taken by us and that approach, we submit, your Honours, demonstrated that there was a value able to be ascertained from a comparable sale, albeit that one had to go through the notional subdivision, which is not an unusual course taken in relation to other matters.
GLEESON CJ: Is it fair to say that what has happened here is that one issue in the case has been resolved against your client by the Court of Appeal and other issues have been sent back to the Land and Environment Court?
MR McEWEN: When your Honour says “one issue”, the one issue being the approach to overall value. The issue that has been sent back to the Land and Environment Court is to ascertain the value of other interests, both in relation to the other proprietors of lots and owners of other equitable or legal interests.
GAUDRON J: And the value of the land to you.
MR McEWEN: Yes, your Honour, but only to have it reduced. Our notice of objection was dismissed and the figure contended for by the Council is only to be reduced by the excising out of that figure of amounts found to be due to those other interests, the other proprietors of lots and other equitable or legal interests. So, for all practical purposes – and if I could address just briefly the Council’s submission to this Court is that we have not exhausted our remedies. The Court of Appeal has dismissed our objection and remitting it back to the Land and Environment Court, it is only for the purpose of cutting out of the compensation now fixed as $16,500 any amounts due to the other lot proprietors or other equitable or legal interests.
GAUDRON J: It is order 3 on page 222.
MR McEWEN: Yes. It has remitted it, yes, your Honour. Your Honours, the other aspect of the matter, apart from what we submit is an erroneous finding against us as to the use of a comparable sale because of a notional reversal of a subdivision, is in relation to the Dabbs v Seaman point. If rights of the Dabbs v Seaman type are created, it does mean that those entitled to those rights can go across the land set out in lanes and subdivision – or roads and lands in subdivision – but with respect to his Honour’s findings, it does not, which by implication his Honour found, set at nought the value of the improvements, which here was approximately half the amount found at first instance of the total value awarded by the trial judge.
Now, his Honour does not deal with that. His Honour merely notes that the Dabbs v Seaman interests cut across any value, but he does not then divide out the impact of that right or interest from the land value as against the value in the improvements. Here that was a very valuable part of the applicant’s claim. It means, in effect, that here the Council has succeeded to, not just the raw land, but improvements found by his Honour to be worth something in the order of $340,000 which, because of the way in which his Honour found the working together of the comparable sale point and the Dabbs v Seaman point, he then says, those two features or factures working together effectively set at nought the value of the improvements. We submit that, on its face, just cannot be right.
GAUDRON J: Where do you say that emerges?
MR McEWEN: It emerges from the fact that his Honour talks about the Dabbs v Seaman point and the comparable sale together and then his Honour concludes that the land simply cannot have a value of that nature. That is found, your Honour, at pages 200 to 201, in particular where, at 201 line 40, his Honour said that:
The idea that a willing but not anxious purchaser who was well informed would pay $682,836 for these roads and lanes lacks all reality.
But here you had a Council succeeding to improvements which at first instance were found to be worth some $340,000 of which they were to thereafter have the benefit of by way of being the local rating authority and providing those services to local ratepayers. They, with respect, we submit,
continue to have such a value. But the way the decision works in the Court of Appeal is to remit it, without the opportunity for my client to reagitate that value point, that point of value.
Your Honours, as I said, I did not wish to address the point raised in the outline of submissions concerning Park Street, albeit because it does not raise a matter of general importance. But the comparable sale point and the Dabbs v Seaman point, even though they arise under the New South Wales Just Terms legislation, we submit are matters of general importance for valuation practice beyond New South Wales. They are the matters I wish to put, your Honours.
GLEESON CJ: Thank you. Yes, Mr Jacobs.
MR JACOBS: Your Honours, with regard to the Dabbs v Seaman point, the Court of Appeal dealt with this at page 199, lines 20 to 45, where, with reference to the judgment of his Honour Mr Justice Windeyer in the Permanent Trustee Case at page 422, his Honour Mr Justice Handley held, at line 35 on page 199, that:
The private rights-of-way must extend –
the private rights of the lot owners –
must extend to the other private roads or lanes in the sub-division owned by the transferor which gave access to public roads.
Your Honours will also find a reference to this at page 200, line 10. What his Honour Mr Justice Handley and the other members of the Court of Appeal who concurred with his Honour’s judgment held is really a matter of basic common sense. It is common ground that the roads formed a grid‑like roads and lane system – and your Honours will find that in the judgment of the Court of Appeal at page 195, lines 20 to 40 – and your Honours will find a description of the subdivision at page 197, lines 25 to 199, line 15. If I can just take your Honours to that very quickly. At 197, from about line 25 on that page, from the words “The owner’s valuers adopted as comparable a sale of in globo” et cetera, then at the foot of the page there is reference to the deposited plan, and across the page at page 198 your Honours will see that there are “a further 87 lots were zoned” et cetera and there is a large reserve as part and parcel of the subdivision.
Now, to suggest that an owner of a particular lot would not be entitled to traverse the other roads in order to get to the public reserve is just, with respect, nonsense. The owners would have that right. They would also have the right to go and visit each other and drive along the roads for that purpose. It is our submission that the abutting owners have rights of way over all of the roads in the subdivision. To the extent that their Honours held that that would be the position in the Court of Appeal, consistent with the judgment of his Honour Mr Justice Windeyer in the Permanent Trustee Case, that judgment, in our respect, is unassailable and admits of no error whatsoever.
In regard to the Raja point, which is the other point which my learned friend agitates, their Honours in the Court of Appeal held that his Honour Mr Justice Bignold committed a basic error of principle. What he did was he took a piece of land to the south of the subdivision. That piece of land was a green field site. It had been sold as a green field site. It was not subdivided. He then compared that with what was essentially a grid‑like system of roads and lanes that had been subdivided as far back as 1906 and the roads and lanes had stood for some 90 years and where there was a subdivision that had already been established.
GAUDRON J: Accepting that to be the case for the moment, Mr Jacobs, was it open to the Court of Appeal to dismiss the objection or should it simply have remitted the matter to the Land and Environment Court?
MR JACOBS: We submit it was open to the Court of Appeal to reject ‑ ‑ ‑
GAUDRON J: It may have been, but I do not understand why that is so. I do not understand why, on the theory that the Land and Environment Court was wrong in its approach, it should not have gone back for rehearing in toto.
MR JACOBS: Because the objection was taken on two basic grounds before his Honour Mr Justice Bignold. The one was in regard to – initially the objection was based upon the report of a Mr Prince who ‑ ‑ ‑
GAUDRON J: But what was the objection? What form did the objection take?
MR JACOBS: That the land was worth some $5.4 million.
GAUDRON J: Yes.
MR JACOBS: And that, on the basis ‑ ‑ ‑
GAUDRON J: I just do not see where there is a properly based finding that the land is worth $16,000.
MR JACOBS: What their Honours did was that they said the grounds of objection had to be rejected.
GAUDRON J: I am not familiar with this jurisdiction but I would have thought that still left open the question of the true value. How does an objection – it says, “I object to your valuation”. It puts the real value in issue, does it not?
MR JACOBS: Yes. What their Honours did was they took the basis of the – they took the evidence that was presented to his Honour Mr Justice Bignold and the points that were ‑ ‑ ‑
GLEESON CJ: It is paragraph 74 on page 220. Whether it be right or wrong, it states the reasoning on which they proceeded, does it not?
MR JACOBS: What they say is this, that “the argument and the owner’s objection have both failed”. If I may just explain to your Honours what happened in regard to the value of the alleged improvements. The evidence in that regard ‑ ‑ ‑
GAUDRON J: Yes, could you take me to the objection, though. What I do not understand is an objection ‑ ‑ ‑
MR JACOBS: The Land and Environment Court deal with an objection, right.
GAUDRON J: Yes. But what is the nature of an objection? Is it like a plea of not guilty in the sense that it puts you to the proof and it puts all matters in issue or is it, “I accept that that is the value unless I make good some other value”?
MR JACOBS: Yes.
GAUDRON J: Is it?
MR JACOBS: That is what we submit it is.
GAUDRON J: I know you submitted it is, but where do I find out – from what piece of legislation or from what – perhaps it is conceded, is it?
MR McEWEN: Under the Just Terms Act, your Honours, under section 66, an objection is raised and that allows the objector to stand by his figure that he has put in his formal objection or to vary it. And that is what happened here, the $5.6 million ‑ ‑ ‑
GAUDRON J: That is what I am wondering. I am just wondering whether, having lost on those two grounds, you are precluded from having the proper value determined, other than on the basis of what the Valuer General asserted.
MR JACOBS: We submit yes. We submit ‑ ‑ ‑
GAUDRON J: I know you do, but can you tell me why.
MR JACOBS: We are bound by the Valuer General’s valuation ‑ ‑ ‑
GAUDRON J: I know you are. The question is, is Mr McEwen bound by the Valuer General’s valuation in circumstances where the court has said the approach which the court took was flawed but there may be another approach open.
MR JACOBS: The procedures I note is that an objection is filed, there are points of claim filed, there are points of defence which are lodged in response thereto, and those are the matters that then go forward.
GAUDRON J: To say an approach is flawed is one thing; to conclude that there is no basis for valuing the land other than that asserted by the Valuer General is another thing.
MR JACOBS: What they did was they dismissed the objection.
GAUDRON J: I know, and that is what I am concerned about. They could only dismiss the objection, I should have thought, if the Land and Environment Court was bound to dismiss the objection at the end of the evidence.
MR JACOBS: We say yes.
GAUDRON J: You accept that they could only have done that?
MR JACOBS: Yes.
GAUDRON J: Then the question is, why was the Land and Environment Court bound to dismiss?
MR JACOBS: Because there were two points which had been agitated at different stages before his Honour Mr Justice Bignold.
GAUDRON J: But there is no finding, is there, that the land is only worth $16,500?
MR JACOBS: No, there is no such finding. But then one is bound – one should be bound by the way ‑ ‑ ‑
GAUDRON J: One may be bound by it, but what seems to me is that you could put your case at the highest level, pitch it at the highest level, and absent, so be it, that maybe at the end of the day you do not make that out, but it seems to me at the end of the day someone had to find that the land was only worth $16,500. It does not seem to me that that has been done.
MR JACOBS: With respect, that is not how it works in the Land and Environment Court.
GLEESON CJ: The Court of Appeal seems to have proceeded, rightly or wrongly, upon the basis that the only unresolved issues in the case were issues that might reduce the value of the land below $16,500.
MR JACOBS: Yes, that is correct.
GLEESON CJ: And that was the basis on which they made the order that they made.
MR JACOBS: To remit it, yes.
GLEESON CJ: So the question is, were they right to proceed upon the basis – did anybody argue to the contrary – that having resolved against Mr McEwen’s client the issues that they resolved, the result was that the only other issues open for determination in the Land and Environment Court were issues that might reduce the value below $16,500. Was that common ground before the Court of Appeal?
MR JACOBS: No. No, that was not common ground.
GLEESON CJ: Where do we find the part of their reasoning with which they deal with that matter?
MR JACOBS: They do not, excepting to the extent that they say the objection is to be dismissed ‑ ‑ ‑
GAUDRON J: Yes, but why?
MR JACOBS: Because of the two points that were held against my learned friend.
GAUDRON J: I can understand them saying that the appeal should be allowed and the order of the Land and Environment Court set aside and the matter remitted to them. I cannot understand them saying – let us assume there had been no Dabbs v Seaman point – I cannot understand how it came about that they could have said, assuming no Dabbs v Seaman point, appeal allowed, order of the Land and Environment Court set aside, order in lieu that they be paid or order that the application be dismissed, without there being a finding somewhere along the line that $16,500 was the true value.
MR JACOBS: If I could just compartmentalise this. There were two aspects. One was the value of the improvements. His Honour Mr Justice Bignold, at a passage I will take your Honours to, rejected all of the evidence that had been given in that regard. May I take your Honours to page 31 of the papers at lines 35 to 40. His Honour Mr Justice Bignold specifically rejected the evidence of Mr Pryor that some $600,000 had been spent on the road construction. Subsequent to that his Honour allowed a reopening which the Court of Appeal found should never have been allowed, a reopening to lead further evidence. If your Honours turn to page 32 his Honour finds that:
the value of the roadworks simply was not adequately addressed in the proceedings where the overwhelming focus was directed to who was responsible for the works and the costs thereof.
The kingpin of the case in regard to the value of the roads was Mr Pryor’s evidence which His Honour Mr Justice Bignold rejected as false. That issue, in our submission ‑ ‑ ‑
GAUDRON J: But Mr Justice Bignold said – we are talking about the lanes – he says:
I accept that the lanes are of little value. However, I think that the nominal value of $15,000 is too little based upon some of the few sales effected by Mr Pryor.
Now, he is not talking about the comparable sales there. He is talking about the times Mr Pryor actually persuaded somebody to buy a lane.
I think $25,000 (which is itself nominal for 2.2 hectares of land) is a better estimate of value and I adopt it.
Now, if that has not been overturned by the Court of Appeal, I do not see how they can dismiss an objection to the valuation of $16,500.
MR JACOBS: It was on the basis that the entire valuation approach was completely flawed.
GAUDRON J: But this was not – we are talking about the lanes, not the roads.
MR JACOBS: Yes, yes.
GAUDRON J: This was not the comparable sales approach that was wrong in relation to the lanes.
MR JACOBS: They do not address the lanes in their judgment at all.
GAUDRON J: No.
GLEESON CJ: Is not the Park Street land affected by a similar consideration?
MR JACOBS: No, this goes back to ‑ ‑ ‑
GLEESON CJ: In relation to the form of the order, I mean.
MR JACOBS: That goes back to the Land and Environment Court and they ‑ ‑ ‑
GAUDRON J: But the objection has been dismissed.
MR JACOBS: No, no. In regard to Park Street, that goes back.
GLEESON CJ: Where do we see that?
MR JACOBS: Their Honours said that ‑ ‑ ‑
GLEESON CJ: Where in the form of order? Excuse me, where, in the form of order, do we see that? The argument which we are debating at the moment is an argument to the effect that, assuming in your favour that the Court of Appeal was right on the major issues, there is a problem about the form of the order and we are seeking your assistance on that.
MR JACOBS: Yes.
GLEESON CJ: Where does the order deal with Park Street?
MR JACOBS: Order No 4.
Remit the proceedings to the Land and Environment Court for further hearing and determination in conformity with the reasons ‑ ‑ ‑
GLEESON CJ: Now, bearing in mind the terms of order No 3.
GAUDRON J: That would only seem to permit of the Dabbs v Seaman point.
MR JACOBS: If your Honours will turn to page 219, lines 30 to 45, where the Court of Appeal speaks about the exercise of its jurisdiction under section 25 of the Environmental Planning Act and for the joining of those person pursuant to orders under section 25(2). One of the persons ‑ ‑ ‑
GAUDRON J: Does it not seem to be the case that there is an inconsistency in that notion and in order 3. Once the respondent’s objection is dismissed, that is the equivalent, is it not, to dismissing the proceedings, save, perhaps for ‑ ‑ ‑
MR JACOBS: I do not read it as such. I would say that the objection taken ‑ ‑ ‑
GAUDRON J: You may not read it as such, but there are certain rules about the nature of court orders and their binding force and effect. Now, I would have thought, if the matter goes back to the Land and Environment Court, somebody is going to say, “The objection is dismissed. There is nothing I can hear about that.”
MR JACOBS: Even if the objection is dismissed, under section 25 Mr Pryor, who was the purchaser of the Park Street lot, would be entitled to seek his joining in the proceedings. The objection we have taken to Park Street ‑ ‑ ‑
GAUDRON J: I do not know how there can be any proceedings even, once the objection is dismissed. I mean, I would have thought – as I said, I am not familiar with these proceedings – but let us assume it is the equivalent of an application of an ordinary summons, your objection to valuation, in the sense that it initiates the proceedings and it is what brings the jurisdiction of the court into play and if an order is then made that the objection be dismissed, I would take it that the proceedings are dismissed and there is nothing there for the Land and Environment Court on which to work, that there is then a final and binding order.
MR JACOBS: Section 25 is outside that.
GAUDRON J: What does it say?
MR JACOBS: Section 25 provides for the joinder of all persons who have ‑ ‑ ‑
GAUDRON J: Yes, to what? There has to be a proceeding before they can be joined. Where is the proceeding any more, once the objection is dismissed?
MR JACOBS: I understand what your Honours are saying. I wonder if I could seek your Honours’ indulgence and ask that the matter stand down because perhaps these aspects can be attended to right here and now.
GLEESON CJ: It may be more efficient if we hear what Mr McEwen has to say in reply on what I might call the merits of the case and then perhaps we can say what we think about the merits of the case and then leave open the question of some adjustment to the actual form of order. It may be. We will see what Mr McEwen has to say.
MR JACOBS: If your Honours please.
GLEESON CJ: May I ask you a question, Mr McEwen? Assuming we were against you on the principal arguments – you know what I mean by those?
MR McEWEN: Yes.
GLEESON CJ: Do I understand it that you still have a complaint about the form of order and, in particular, you have a complaint about the presence in the order of paragraph 3?
MR McEWEN: Yes, your Honour. Might I just, in answering that question, revert to the discussion your Honours had with my learned friend a few moments ago at the beginning of his submissions as to the entitlement for the court to revisit the exercise when it has been referred. Under the Just Terms Act, section 66 entitles an owner to lodge an objection and contemplates there will only be one objection. It does not contemplate an owner lodging a series of objections. So that once it has been dealt with in this fashion and dismissed, the legislative schema would suggest that his entitlement is spent and there is no power for the court to then revisit the original application.
GLEESON CJ: What I was going to do was ask you to state in summary form the nature of the complaint you have about the form of the order and, in particular, the presence there of clause 3. Could you do that?
MR McEWEN: Yes, your Honour.
GAUDRON J: That is still assuming you are wrong on the major points.
MR McEWEN: Yes, your Honour. In dismissing the objection in that fashion it has prevented the court, when the matter is remitted, revisiting issues other than the main points we have agitated before your Honours, that is the comparable sale and the Dabbs v Seaman point. It prevents, as your Honour Justice Gaudron said, revisiting the lanes question and it prevents the revisiting of Park Street.
GAUDRON J: You seem to have won on those questions in the Land and Environment Court on quite different grounds.
MR McEWEN: Yes, they were not dealt with in the Court of Appeal judgment.
GAUDRON J: And were not dealt with in the Court of Appeal.
MR McEWEN: No.
GLEESON CJ: Where do we find that complaint mirrored in your draft notice of appeal?
MR McEWEN: Your Honours do not. We did not ventilate that. We have only ventilated the three matters: that is the comparable sale, the Park Street point and the Dabbs v Seaman point.
GLEESON CJ: It looks as though, if we were against you on the issues that you sought to raise in your special leave application, there may be something to be gained by you having a talk to Mr Jacobs about the actual form of the order. Is that right?
MR McEWEN: It could be, your Honour, yes.
GAUDRON J: See, on one view, the deletion of order 3 would satisfy your complaint in this regard.
MR McEWEN: In that regard, yes, your Honour.
GLEESON CJ: On the same view, the presence of order 4 would protect Mr Jacobs’ position.
MR McEWEN: Yes, your Honour, with respect.
GLEESON CJ: Now, is there anything you want to put to us on ‑ ‑ ‑
MR McEWEN: No, I have said what I wanted to say on the other matters.
GLEESON CJ: On the principal issues sought to be raised by the applicant, the Court is of the view that there is not sufficient reason to doubt the correctness of the decision of the Court of Appeal to warrant a grant of special leave to appeal in this matter.
However, in the course of argument, a problem has emerged concerning the precise form of the order made by the Court of Appeal and, in particular, the effect of paragraph 3 in that order. Counsel have indicated that this is a problem that could possibly be resolved by discussion between counsel. In those circumstances, we will make no order on the application for special leave at this stage, but we will stand the matter over until 2 pm for further mention.
AT 11.54 AM THE MATTER WAS ADJOURNED
UNTIL LATER THE SAME DAY
UPON RESUMING AT 2.03 PM:
MR JACOBS: May it please your Honours, we have agreed that order 3 goes. My learned friend asks and we concede that.
GAUDRON J: What you really agree is that, by consent, special leave be granted, the appeal allowed to the extent that order 3 is deleted.
MR JACOBS: We move for costs, your Honour. I understand my learned friend does not ‑ ‑ ‑
MR McEWEN: We cannot resist that.
GAUDRON J: I do not know. Why?
MR McEWEN: Because, your Honour, it is a point that we did not take in our summary argument. We did not present it, your Honour.
GAUDRON J: I see.
GLEESON CJ: All right, then.
In this matter, the order the Court will make is that the application for special leave to appeal is granted and the appeal is allowed to the extent that order 3 of the orders made by the Court of Appeal of New South Wales is deleted. Because the respondent has been substantially successful on the principal issues the subject of the application for special leave to appeal, the applicant is to pay the costs of the respondent of the application.
MR McEWEN: If the Court pleases.
MR JACOBS: If your Honour pleases.
AT 2.05 PM THE MATTER WAS CONCLUDED
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