Minister for Energy, Environment and Climate Change v Morton

IN THE SUPREME COURT OF VICTORIA

Not Restricted

AT MELBOURNE

COMMON LAW DIVISION

VALUATION, COMPENSATION & PLANNING LIST

S CI 2017 00788

MINISTER FOR ENERGY, ENVIRONMENT AND CLIMATE CHANGE	Plaintiff
v
PATRICIA SUZANNE MEGSON DAVID ALEX MORTON (as joint executors of the will of JOHN ALEX MORTON)	Defendants

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JUDGE:	GARDE J
WHERE HELD:	Melbourne
DATE OF HEARING:	2-3 October 2017
DATE OF JUDGMENT:	19 December 2017
CASE MAY BE CITED AS:	Minister for Energy, Environment and Climate Change v Morton
MEDIUM NEUTRAL CITATION:	[2017] VSC 774

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VALUATION AND COMPENSATION – Amendment to the Melton and Wyndham Planning Schemes – Public Acquisition Overlays imposed on property – Financial loss – Loss on resale – Increased compensation for a residence for intangible and non-financial disadvantages – Owner not occupying residence – Interest payable on loss on sale compensation – Claim for penalty interest – Relevant principles – Planning and Environment Act 1987 (Vic) ss 3, 4(1), 4(2), 98(1), 98AA, 100, 101, 101(2), 104–106, 108; Land Acquisition and Compensation Act 1986 (Vic) ss 44, 51–53, 55 and 56; Supreme Court Act 1986 (Vic) ss 60(1), 101(1).

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APPEARANCES:	Counsel	Solicitors
For the Plaintiff	Ms M L Quigley QC with Mr I G Munt	Victorian Government Solicitors Office
For the Defendant	Mr G H Peake	Rennick & Gaynor

HIS HONOUR:

Background

The defendants are the executors of the estate of the late John Alex Morton (‘the claimants’). They bring claims for compensation arising from the approval of Amendment VC68 to the Melton and Wyndham Planning Schemes (‘planning schemes’), which placed Public Acquisition Overlays (‘PAO’) over a number of properties owned by the late Mr Morton (‘the properties’). The properties adjoin Faulkners Road, Boundary Road and Downing Street, Mount Cottrell. The purpose of the PAO is to reserve 15,000ha of land for the establishment of Western Grassland Reserves near Melbourne. The establishment of new reserves is linked to the expansion of Melbourne’s Urban Growth Boundary, and is a requirement of federal approvals obtained under the Environment Protection and Biodiversity Conservation Act 1999 (Cth).

The plaintiff is the Minister for Energy, Environment and Climate Change (‘the Minister’).[1] The Minister is the person against whom the claim for compensation should be made.[2] There were originally three proceedings for compensation arising from the PAO between Morton family members and the Minister. Two proceedings have been resolved and only the current proceeding remains.
[1]All references to the Minister in this judgment are references to the Minister as the person liable to pay compensation under s 109 of the PE Act.
[2]PE Act s 109.

The claims are brought under pt 5 of the Planning and Environment Act 1987 (Vic) (‘PE Act’). They include a claim for financial loss following from the sale of the properties under a contract of sale dated 11 November 2015. The claim is made under ss 98 and 106 of the PE Act and is agreed between the parties in the sum of $9,056,600. A claim for legal, valuation and other expenses reasonably incurred in preparing and submitting the claim under s 101 of the PE Act is also agreed between the parties in the sum of $75,992.00. The agreed claims total $9,132,592.00 and the Court is asked to make an award by consent in favour of the claimants in the agreed amounts. An advance of compensation of $7,705,000.00 was paid by the Minister to the claimants on 27 June 2017.

There are two claims in the present proceeding that the parties have not been able to resolve and now stand for determination by the Court. The first is a claim for increased compensation under s 100 of the PE Act, not exceeding 10% of the amount of compensation payable in relation to the residence and property known as ‘Arva’ located at 1645 Boundary Road, Mount Cottrell. The Minister disputes this claim, but the parties have been able to agree that if the Court decides this issue in favour of the claimants, then the amount of compensation should be quantified at $60,000.

The second unresolved claim is a claim for interest under s 60(1) of the Supreme Court Act 1986 (Vic) (‘SC Act’) on the amounts awarded. The Minister resists this claim for reasons that I will subsequently address.

Agreed facts

The parties have set out the material facts in a joint statement of agreed facts dated 28 September 2017. The agreed facts include:

3.Mr Morton died on 2 September 2016. On 28 February 2017, David Alex Morton and Patricia Suzanne Megson were appointed as executors and representatives of [his estate] …
4.By contract of sale of land dated 11 November 2015, Mr Morton, Mary Morton, Patricia Megson and Greg Megson variously sold their interests in fee simple in the following land:
4.1properties for which Mr Morton was the registered proprietor (or claimed to be entitled to be registered as the proprietor), being land described as:
(a)Portion 6 Section 3, Parish of Pyweitjorrk, being the whole of the land in Certificate of Title Volume 11032 Folio 295, known as part of 1884 - 1908 Boundary Road, Mount Cottrell (Parcel 1);
(b)Lot 1 on Title Plan TP384637R, being the whole of the land in Certificate of Title Volume 11032 Folio 294, known as part of 709 Downing Street, Mount Cottrell (Parcel 2);
(c)Lot 2 on Plan of Subdivision LP96268, being the whole of the land in Certificate of Title Volume 8956 Folio 614, known as part of 1884 - 1908 Boundary Road, Mount Cottrell (Parcel 3);
(d)Lot 1 on Plan of Subdivision LP96268, being the whole of the land in Certificate of Title Volume 8956 Folio 613, known as part of 1884 - 1908 Boundary Road, Mount Cottrell (Parcel 4);
(e)Lot 1 on Title Plan TP412561X, being the whole of the land in Certificate of Title Volume 4829 Folio 635, known as part of 709 Downing Street, Mount Cottrell (Parcel 7);
(f)Crown Allotment A1, Section 25, Parish of Tarneit, being the whole of the land in Certificate of Title Volume 9581 Folio 975, comprising the land known as 1645 Boundary Road, Mount Cottrell (Parcel 8); and
(g)Part of Crown Allotment A, Section 25, Parish of Tarneit, Memorial No. 214 Book 121 (Adversely Occupied Land);

…
4.2a property for which Mr Morton and Mrs Morton were the registered proprietors, being land described as Lot 1 on Title Plan TP897485C, being the whole of the land in Certificate of Title Volume 8120 Folio 628, known as part of 1884 - 1908 Boundary Road, Mount Cottrell (Parcel 6); and
4.3a property for which Ms Megson and Mr Megson were the registered proprietors , being land described as Lot 1 on Title Plan TP078347J, being the whole of the land in Certificate of Title Volume 11054 Folio 489, known as part of 643 - 709 Downing Street, Mount Cottrell (Parcel 9).

5.The contract was completed on 9 February 2016 …

…
Reservation of the [properties]
7.On 6 August 2010, notice of approval of planning scheme amendment VC68 (VC68) was published in the Victoria Government Gazette. As a result of VC68, all of the [properties] (as well as Parcels 6 and 9) were affected by the introduction of public acquisition overlays (PAO), reserving the land for a public purpose.
8.More particularly:
8.1Parcels 1, 2, 3, 4 & 7 of the Subject Land were affected by PAO5 in the Melton Planning Scheme; and
8.2Parcel 8 and the Adversely Occupied Land … were affected by PAO7 in the Wyndham Planning Scheme.
…

12.On 1 September 2017, the [Minister] offered and [the claimants] agreed to accept in respect of loss on sale and for legal, valuation and other expenses under ss 98(1)(a) and 101 of the … Act, the following amounts:

Head of compensation

Agreed Sum

Financial loss suffered as the natural, direct and reasonable consequence of the reservation of the [properties] for a public purpose under the Melton Planning Scheme and the Wyndham Planning Scheme (s 98(1)(a) of the … Act)

$9,056,600.00

Legal, valuation or other expenses reasonably incurred in preparing and submitting the claim (s 101 of the … Act)

$75,992.00

Total

$9,132,592.00

Interest Claim
13.The amounts agreed to be paid by the [Minister] to [the claimants] in respect of Mr Morton's claims for loss on sale and for legal, valuation and other expenses do not include any allowance for interest.
14.The [Minister] has not consented to the payment of interest with respect to any sum payable to the [claimants] arising from the [claim].

Claim pursuant to s 100
15.Mr Morton resided with his parents in a dwelling on Parcel 8 for approximately 25 years from the date of his birth in 1931.
16.Mr Morton and Mrs Morton were married in 1956. From that year, Mr Morton resided with Mrs Morton in a dwelling on Parcel 6 which they built as their matrimonial home.
17.Mr Morton’s parents continued to reside in the dwelling until their respective deaths in 1981 and 1983.
18.In 1983, Mr Morton inherited Parcel 6, Parcel 9 and the [properties] from his mother.
19.Mr Morton ceased to reside at the matrimonial home on Parcel 6 on or about May 2015 when he moved to aged care at Balmoral Grove Aged Care.
20On 27 September 2017, the [Minister and Mr Morton] agreed that, if the Court were to find that [Mr Morton’s estate] is entitled to an increase in compensation under s 100 of the [Act], the quantum of that entitlement would be $60,000.

A Supplementary Joint Statement of Agreed Facts sets out a number of additional material facts:

1.[Mr Morton’s] claim for loss on sale included the loss on sale of the property known as “Arva”, being Crown Allotment A1, Section 25, Parish of Tarneit, being the whole of the land in Certificate of Title Volume 9581 Folio 975, comprising the land known as 1645 Boundary Road, Mount Cottrell.
2.[Mr Morton’s] parents purchased the property known as “Arva” in or about 1921.
3.Shortly after purchase, [Mr Morton’s] parents constructed a house on “Arva” and it was [their] residence until [Mr Morton’s] mother died in 1983.
4.The house on “Arva” was [Mr Morton’s] residence from his birth in 1931, until 1956 when he married and constructed a new dwelling for [him] and his wife on the property known as “Peterleigh”, which is opposite “Arva”.
5.After [Mr Morton’s] parents died in 1983, [he] was registered as the proprietor of “Arva” and was the registered proprietor on the relevant date.
6.After [Mr Morton’s] parents died in 1983 and until the relevant date, the dwelling was the residence of one of [his] daughters, her husband and their children.

Claim for increased compensation
Relevant statutory provisions
PE Act

I now turn to the relevant statutory provisions that govern the claim under s 100 of the PE Act for increased compensation in respect of ‘Arva’. Section 4(1)(a) and (g) of the PE Act provide:

Objectives
(1) The objectives of planning in Victoria are—
(a) to provide for the fair, orderly, economic and sustainable use, and development of land;
…
(g) to balance the present and future interests of all Victorians.

Section 4(2) of the PE Act sets out the objectives of the planning framework established by the PE Act, which include ‘to provide for compensation when land is set aside for public purposes and in other circumstances.’[3]
[3]PE Act s 4(2)(l).

The term ‘owner’ is defined in s 3 of the PE Act. However, s 98AA modifies this for the purposes of pt 5 of the PE Act. Relevant to the present circumstances, to be an owner a person must either be the registered proprietor, or entitled to be the registered proprietor of an estate in fee simple in the land.

Part 5 of the PE Act makes provision for compensation in certain circumstances. Section 98(1) of the PE Act provides:

The owner or occupier of any land may claim compensation from the planning authority for financial loss suffered as the natural, direct and reasonable consequence of—
(a) the land being reserved for a public purpose under a planning scheme; or
(b) the land being shown as reserved for a public purpose in a proposed amendment to a planning scheme of which notice has been published in the Government Gazette under section 19; or
…

Increased compensation may be available in relation to a residence in the circumstances described in s 100 of the PE Act, which provides:

(1) The amount of compensation payable under section 98 in respect of a residence may be increased by an amount which is reasonable to compensate the claimant for any intangible and non-financial disadvantages arising from the circumstances which gave rise to the claim under section 98.
(2) The amount paid under this section must not exceed 10% of the amount of compensation which would have been payable except for this section.
(3) All relevant circumstances must be taken into account in assessing the amount payable under this section including—
(a) the interest of the claimant in the residence;
(b) the length of time during which the claimant has occupied the residence;
(c) the age of the claimant;
(d) the number, age and circumstances of any other people living with the claimant;
(e) the amount of compensation payable arising from a sale of the residence compared with the value of the land at the date of the sale.

Claims for expenses are made under s 101 of the PE Act, which provides:

If compensation is payable under section 98, the owner or occupier of any land may also claim from the planning authority or responsible authority any legal, valuation or other expenses reasonably incurred in preparing and submitting the claim.

Section 104 of the PE Act imposes a cap on the financial loss that may be awarded under s 98:

The compensation payable for financial loss under section 98 must not exceed the difference between—
(a) the value of the land at the date on which the liability to pay compensation first arose; and
(b) the value that the land would have had at the date if the land had not been affected by any circumstance set out in section 98(1) or (2) or 107.

Section 105 of the PE Act provides that the determination of a claim made under pt 5 is to be carried out in accordance with the procedures in pts 10 and 11 and s 37 of the Land Acquisition and Compensation Act 1986 (Vic) (‘LAC Act’).

Section 106(1) of the PE Act permits an owner of land who complies with the requirements of that section to claim compensation under s 98 after the sale of the land:

The owner of land may claim compensation under section 98 after the sale of the land if—
(a) the owner of the land sold it at a lower price than the owner might reasonably have expected to get if the land or part of the land had not been reserved or proposed to be reserved; and
(b) before selling the land, the owner gave the relevant authority not less than 60 days’ notice in writing of the owner’s intention to sell the land.
…

Section 108 limits the persons who can claim compensation under pt 5 of the PE Act to owners and occupiers of the land at the time that the right to claim compensation arose.

LAC Act

The LAC Act has two purposes, which are to establish a new procedure for the acquisition of land for public purposes, and to provide for the determination of the compensation payable in respect of land so acquired.[4]
[4]LAC Act s 1.

Section 44 of the LAC Act permits the Court or the Victorian Civil and Administrative Tribunal (‘VCAT’) to award solatium not exceeding 10% of the market value of land that is compulsorily acquired under that Act. There are similarities between s 44 of the LAC Act and s 100 of the PE Act. Section 44 of the LAC Act provides:

(1) The amount of compensation may be increased by such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the claimant for intangible and non-pecuniary disadvantages resulting from the acquisition.
(2) In assessing the amount payable under subsection (1), there must be taken into account all relevant circumstances applicable to the claimant including, without limiting the generality of the foregoing—
(a) the interest of the claimant in the acquired land; and
(b) the length of time during which the claimant had occupied the land; and
(c) the inconvenience likely to be suffered by the claimant by reason of removal from the land; and
(d) the period of time after the acquisition of the land during which the claimant has been, or will be, allowed to remain in possession of the land; and
(e) the period of time during which, but for the acquisition of the land, the claimant would have been likely to continue to occupy the land; and
(f) the age of the claimant; and
(g) where the claimant at the date of acquisition is occupying the land as the claimant’s principal place of residence, the number, age and circumstances of other people (if any) living with the claimant.

(3) If no solatium is paid to a claimant, a person other than a claimant who, at the date of acquisition, had occupied the acquired land for a continuous period of not less than 12 months before that date as the person's principal place of residence may claim from the Authority such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the person for intangible and non-pecuniary disadvantages resulting from the acquisition.
(4) In determining the amount payable under subsection (3), there must be taken into account all relevant circumstances applicable to the person, including the matters referred to in subsection (2)(b), (c), (d), (e), (f) and (g).
(5) If the Authority rejects a claim for solatium made by a person under subsection (3), that person is to be taken to be a claimant and the claim to be a disputed claim for the purposes of this Act.

Minister’s submissions

The Minister contends that the claimants are not entitled to increased compensation on that payable under s 98 of the PE Act in relation to ‘Arva’ because Mr Morton did not reside at Arva at the time when the claim arose. At this time, Arva was the home of his daughter, son-in-law and grandchildren, but not Mr Morton. He had not personally lived in Arva since 1956. Increased compensation in the amount of $20,000 was allowed in relation to the dwelling ‘Peterleigh’, across Boundary Road from Arva, in which Mr Morton resided until he moved to an aged care home. The Minister submits that:

(a) only the actual owner or occupier of the relevant land at the date that it is affected by one of the events described in s 98 of the PE Act is entitled to make a claim for compensation under pt 5 of the PE Act;

(b) Part 5 of the PE Act should be construed more narrowly than the equivalent provisions in the LAC Act;

(c) the relational and temporal limitations on who is entitled to make a claim for compensation under s 98 of the PE Act carry through to the ambit of entitlement to make a claim under s 100 of the PE Act;

(d) ‘whatever uncertainties there are in the text of s 100 of the PE Act, its purpose is clear’;[5]
[5]Quoting Barilla v Body Corporation [2017] VSC 349, [72].

(e) the word ‘residence’ in s 100 should be construed as a place where the owner or occupier of the relevant land lived when the entitlement to compensation arose; [6]
[6]Citing MBF Investments Pty Ltd v Nolan [2011] VSCA 114, [29].

(f) the entitlement to receive additional compensation under s 100 of the PE Act is tied to ‘a residence’, not to a ‘dwelling’ or ‘a house’;

(g) the language of s 100(3)(b) and (d) presuppose that the claimant is in occupation of the residence;

(h) the consideration in s 100(3)(d) concerning ‘the number, age and circumstances of any other people living with the claimant’ would have no utility unless the claimant actually lived at the residence when the entitlement to compensation arose;

(i) s 100(3)(e) of the PE Act only makes sense if the claimant has lost his or her residence;

(j) s 106 of the PE Act refers to an ‘owner’ being entitled to make a claim for compensation arising from loss on sale, but not an ‘occupant’. This suggests that only owners can make claims for compensation; and

(k) Mr Morton had already received compensation for the effect of the PAO on his home. He is not entitled to any further compensation under s 100 of the PE Act.

The Minister’s submission placed reliance on the 1986 Second Reading Speech for the Planning and Environment Bill 1986 (Vic), which stated in part:

The right to claim compensation has been clarified and the possibility of payments for solatium to householders … has been recognised. [7]

It was submitted that the reference to ‘householders’ means the owner and points in favour of the Minister’s submission.

[7]Victoria, Parliamentary Debates, Legislative Council, 19 November 1986, 1154 (Jim Kennan, Minister for Planning).

The Minister’s submission also refers to passages in the 1983 Morris Report concerning special home owner provisions and solatium.[8] Relevant passages in the Morris Report as it related to the compulsory acquisition of residential properties include:
[8]Stuart Morris, Report to the Minister for Planning, Land Acquisition and Compensation – Proposals for New Land Acquisition and Compensation Legislation (1983).

The compulsory acquisition of residential properties raises special problems which need special solutions. The displacement of a person from his home is, in many ways, the most serious consequence that can flow from compulsory acquisition. Whilst the compensation formula outlined above will be fair in its general application, there will be cases involving the acquisition of homes where the compensation is not adequate. This will be especially so when a large scale acquisition takes place in an area of low value housing (e.g. the acquisition of homes to make way for the Eastern Freeway). In such a case the market value of the acquired homes will be low and often inadequate to purchase comparable alternative accommodation. When the effect of the acquisition programme is to eliminate a significant portion of the low value housing stock (either generally or in a particular locality) many former homeowners may be forced onto the rental market.
…
It is recommended that where, on the date of acquisition, the acquired land is the claimant’s principal place of residence, the amount of compensation may be increased by such amount, not greater than the maximum amount fixed by regulation, as is reasonable to compensation the claimant for intangible disadvantages resulting from the acquisition. The maximum amount should be initially fixed at $10,000 and increased in line with inflation. It is further recommended that, in assessing the amount payable, there should be taken into account all relevant circumstances, including
(a)the interest of the claimant in the acquired land;
(b)the length of residence;
(c)the extent of the inconvenience likely to be caused by removal from the acquired land;
(d)the period after acquisition during which the claimant has been, or will be, allowed to remain in possession of the acquired land;
(e)the period of time during which the claimant would have been likely to continue to reside on the acquired land;
(f)the age of the claimant;
(g)the number, age and circumstances of other persons living with the claimant;
…

The recommendation in the previous paragraph will ensure that tenants, as well as home owners, will be entitled to an award of solatium. The amount will usually be less in the case of a tenant (as a result of criterion (a)); but the fact that the tenants with short legal tenancies (e.g. week to week) often have considerable de facto security of tenure is recognised by criterion (e). The A.L.R.C. makes the novel suggestion that the right to solatium be extended beyond tenants to persons occupying premises owned by not occupied by a spouse, former spouse, relative or friend. Such persons occupy the premises under some form of licence and have no legal interest in the land which would give them a right to claim compensation. Nevertheless such persons suffer equal disruption with their home is compulsorily acquired. The A.L.R.C. recommendation ought to be adopted in Victoria. It should be made clear in the legislation that solatium is only payable once: it should not be possible for both owner and occupier to claim solatium in respect of any one dwelling. Thus it is recommended that if solatium is not payable to any other person in respect of land, a person (other than a person who had an interest in the land at the date of acquisition) who occupied the land on that date, and had occupied the land for a continuous period of not less than 12 months before that date, as his principal place of residence, may recover from the Authority such amount of solatium, to be determined in accordance with the criteria set out above, as is reasonable to compensation the person for intangible disadvantages resulting from the acquisition.[9]

[9]Ibid [655], [658]–[659].

The report recommended that the right to compensation for intangible disadvantages arising from the loss of a residence extend to claims by owners, tenants and other occupiers.

Claimants’ submissions

The claimants referred to the facts set out in the Supplementary Joint Statement of Agreed Facts.[10] They submit that they are entitled to an amount not exceeding 10% of the amount of compensation paid in respect of Arva, which is reasonable to compensate Mr Morton for any intangible and non-financial disadvantages arising from the circumstances giving rise to the claim under s 98 of the PE Act.
[10]See above [7].

As to the construction of s 100 of the PE Act, the claimants submit that:

(a) legislative provisions conferring compensation are to be construed according to their natural and ordinary meaning, and given full effect. They should not be construed on the basis that the right to compensation is subject to limitations or qualifications that are not found in the terms of the statute;[11]
[11]See below [33]–[35].

(b) the principal operative words of s 100 of the PE Act and s 44 of the LAC Act are identical;

(c) both sections provide for the amount of compensation payable (or payable on a residence) to be increased by an amount which is reasonable to compensate a claimant for intangible and non-financial (or non-pecuniary) disadvantages arising from the event that gives rise to the entitlement to compensation;

(d) the reference in s 100 of the PE Act is to ‘a residence’. The residence must be owned by the claimant, but there is nothing in the PE Act that restricts a claim to a residence occupied by the owner;

(e) both s 100 of the PE Act and s 44 of the LAC Act require all relevant circumstances to be taken into account. Whether the residence is a usual or permanent place of residence is a matter relevant to the assessment of the amount to be awarded under s 100, but is not a threshold test as to the entitlement to additional compensation;

(f) an amount can be awarded under s 44 of the LAC Act in circumstances where a claimant does not live in the residence – for example, if the residence is occupied by other family members, a partner, children, or other persons living with the claimant;

(g) if it had been Parliament’s intention to restrict the right to claim (as distinct from it being a matter relevant to quantum) so that the residence the subject of the claim was required to be the principal place of residence of the claimant, then the entitling legislation would have said so;

(h) there are many possible circumstances relating to a residence under s 100 of the PE Act, ranging from personal occupation by the owner, occupation by the owner’s children, family or extended family, to a rental property where the occupants are unrelated to the owner. These circumstances are relevant to quantum but not eligibility; and

(i) the reference in the Second Reading Speech to ‘householders’ could equally well be a reference to a person who owns a house, or to a person who occupies a house. It did not point to one interpretation or the other.[12]

[12]See above [21].

Comparison of s 44 of the LAC Act and s 100 of the PE Act

The claimants contend that the interpretation of s 100 of the PE Act is informed by the interpretation of s 44 of the LAC Act. The Minister contends that s 100 of the PE Act should be given a narrower interpretation.

Section 44 of the LAC Act is engaged where there has been a compulsory taking of land by an authority, and uses the term ‘solatium’. Section 100 of the PE Act applies where there has been no compulsory acquisition of land. It refers to increased compensation, and does not use the term ‘solatium’. Nonetheless, there are substantial similarities between the provisions:

(1) Each provides for an increase in compensation by an amount not exceeding 10%;

(2) Each relates to the award of compensation as is reasonable to compensate the claimant for intangible and non-pecuniary (or non-financial) disadvantages;

(3) In each case, in assessing the amount of compensation, all relevant circumstances must be taken into account;

(4) In each case, a list of factors set out in each provision are to be taken into account; and

(5) In each case, factors such as the claimant’s interest in the acquired land (or residence), the length of time during which the claimant has occupied the land (or residence), the age of the claimant, and the number, age and circumstances of the other people living with the claimant are to be taken into account.

There are significant differences between s 44 of the LAC Act and s 100 of the PE Act. They include:

(1) Section 44 allows solatium in relation to the amount of compensation awarded not exceeding 10% of the value of the land acquired. By contrast, s 100 allows increased compensation not exceeding 10% of the amount of compensation payable under s 98 only ‘in respect of a residence’;

(2) Section 44(2)(g) refers to the circumstance where the claimant, at the date of acquisition, is occupying the land as the claimant’s principal place of residence, although this is not a requirement for the award of compensation. Section 100 does not refer to the principal place of residence;

(3) Section 44(3) refers to persons other than a claimant who, at the date of acquisition, had occupied the acquired land for a period of not less than 12 months before that date as their principal place of residence. It provides that they may claim from the authority such amount not exceeding 10% of the market value of the land, by way of solatium, as is reasonable to compensate them for intangible and non-pecuniary disadvantages resulting from the acquisition. There is no similar provision found in s 100; and

(4) Section 100 uses the indefinite article referring to ‘a residence’, and does not refer at all to ‘a principal place of residence’.

Principles of statutory construction

The statutory construction of the relevant provisions is approached by the application of well-established principles of interpretation that apply to a statute or an instrument authorised by a statute.

In Project Blue Sky Inc v Australian Broadcasting Authority, four judges of the High Court said:
[T]he duty of a court is to give the words of a statutory provision the meaning that the legislature is taken to have intended them to have. Ordinarily, that meaning (the legal meaning) will correspond with the grammatical meaning of the provision. But not always. The context of the words, the consequences of a literal or grammatical construction, the purpose of the statute or the canons of construction may require the words of a legislative provision to be read in a way that does not correspond with the literal or grammatical meaning.[13]
[13]Project Blue Sky Inc v Australian Broadcasting Authority (1998) 194 CLR 355, 384 [78] (McHugh, Gummow, Kirby and Heydon JJ) (citations omitted).
In Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory), four judges of the High Court said:
This Court has stated on many occasions that the task of statutory interpretation must begin with a consideration of the text itself. Historical considerations and extrinsic materials cannot be relied on to displace the clear meaning of the text. The language which has actually been employed in the text of legislation is the surest guide to legislative intention. The meaning of the text may require consideration of context, which includes the general purpose and policy of a provision, in particular the mischief it is seeking to remedy.[14]
[14]Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue (Northern Territory) (2009) 239 CLR 27, 46–47 [47] (Hayne, Heydon, Crennan and Kiefel JJ) (citations omitted).

An important principle of interpretation is found in s 35(a) of the Interpretation of Legislation Act 1984 (Vic). A construction which would promote the purpose of, or object underlying, an Act is to be preferred to a construction that would not promote that purpose or object.

Principles of statutory construction relating to compensation legislation have been clearly articulated by the High Court. In Marshall v Director General, Department of Transport, Gaudron J said:

It is a basic rule of statutory construction that legislative provisions are to be construed according to their natural and ordinary meaning unless that would lead to a result that the legislature must be taken not to have intended. The rule serves the important purpose of ensuring that those who are subject to the law understand the nature and extent of their rights and obligations. And because it serves that purpose, good reason must be shown before it will be concluded that the legislature did not intend the consequences that would flow if the provision in question were given its natural and ordinary meaning.
Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit. Certainly, such provisions should not be construed on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute.[15]

[15]Marshall v Director General, Department of Transport (2001) 205 CLR 603, 623 [37]–[38] (Gaudron J); Hayne J concurring, 633 [67].

To like effect, McHugh J said that compensation 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. [16]

[16]Ibid 627 [48].

The High Court has reaffirmed these principles of construction relating to statutes conferring compensation rights on a number of occasions.[17] The principles have subsequently been followed and applied to compulsory acquisition and land compensation provisions in Victoria and other states.[18]
[17]See Kettering Pty Ltd v Noosa Shire Council (2004) 78 ALJR 1022, 1029 [31]; Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd (2011) 243 CLR 492, 503 [33]–[34]; Western Australian Planning Commission v Southregal Pty Ltd (2017) 259 CLR 106, 149 [125]–[127].
[18]Sleeman v SPI Electricity Pty Ltd [2014] VSCA 243, [100]–[105]; Halwood v Roads Corporation [2008] VSC 28, [62]; Secretary to the Department of Economic Development, Jobs, Transport and Resources v MG Pastoral Company Pty Ltd (2016) LGERA 413, 428–429 [80]–[81]; Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752, 766–767 [47]–[51]; Cameron v Noosa Shire Council (2006) 145 LGERA 316, 324 [25]; Merrick Tyler v Commissioner of Main Roads [2015] WASCA 82, [38]–[39]; Town of East Freemantle v Cornell (2005) 138 LGERA 180, 194 [67]; Roads Corporation v Love (2010) 31 VR 451, 545 [774].

The purpose and object of the compensation provisions in pt 5 of the PE Act

Section 4 lists the objectives of the planning framework established by the PE Act. Sub-sections (1)(a) and (g) include the objectives of providing for the fair, orderly and economic and sustainable use and development of land, and to balance the present and future interests of Victorians. Sub-section (2), includes the provision for compensation when land is set aside for public purposes and in other circumstances as one of its objectives.

It is reasonable to conclude that Parliament intended that the compensation provisions in pt 5 would provide a fair, just and reasonable compensation regime where landowners and occupiers whose interests were affected by the imposition of public acquisition reservations or overlay controls would be compensated. Parliament intended that the compensation regime established by the PE Act would be responsive to the adverse effects of public acquisition reservations and overlays on landowners and occupiers, suffered by compulsion of law. It cannot be taken to intend that the compensation provisions be construed in an arbitrary, illogical or unduly limited manner so as to deprive claimants of compensation that they might otherwise have been awarded, having regard to the financial and non-financial impacts sustained by reason of a public acquisition reservation or overlay.

This view is consistent with the principles of interpretation accepted by the High Court of Australia and in the numerous cases that I have noted above.[19]
[19]See above [33]–[35].

Key concepts in s 100 of the PE Act

The Court is asked to determine whether a claimant, who is the owner of a residence on land for which compensation is awarded under s 98 of the PE Act, is required to live in that residence in order to qualify for increased compensation under s 100(1). It is convenient to address, as threshold issues, the nature of the Court’s power to award compensation under s 100(1); what is meant by the expressions ‘a residence’ and ‘intangible and non-financial disadvantages’ as found in s 100(1) of the PE Act; and the nature of the 10% cap on compensation imposed by s 100(2) of the PE Act.

The nature of the power

The nature of the Court’s power found in s 44(1) of the LAC Act was considered in Roads Corporation v Dacakis, where Batt J determined that the power had the character of a discretionary power:

Under the earlier legislation the power to award solatium was construed as a discretionary power … It might be argued that the use in s 44(1) of the Act of the words "such amount ... as is reasonable" introduces a purely objective standard requiring "the application to the facts of a legal criterion, notwithstanding that it involves a value judgment" and not the exercise of a discretion … and that the word "may" confers, not a discretion, but power. But, as at present advised, I consider the better view to be that s 44, like its predecessors, confers a discretionary power ... It would be a little surprising if the nature of the power to award solatium were changed in a later Act. Further, the word "may" in an Act coming into force after 1 July 1984 is, by virtue of s 45 of the Interpretation of Legislation Act 1984, discretionary only. This would seem to be so even though the verb is in the passive voice.[20]

[20]Roads Corporation v Dacakis [1995] 2 VR 508, 536–537 (citations omitted).

Osborn J relied on this passage in Roads Corporation v Love, together with s 45(1) of the Interpretation of Legislation Act 1984 (Vic),[21] in reaching the conclusion that the award of solatium under s 44(1) of the LAC Act was discretionary in character.[22]
[21]Interpretation of Legislation Act 1984 (Vic) s 45(1) provides:
Where in this Act or any Act passed or subordinate instrument made on or after the commencement of this Act the word "may" is used in conferring a power, that word shall be construed as meaning that the power so conferred may be exercised, or not, at discretion.
[22]Roads Corporation v Love (2010) 31 VR 451, 545 [775].

In my view, the reasoning in these cases is persuasive and applicable to s 100(1) of the PE Act. The result is that the power to increase compensation in respect of a residence under that provision should be classified as a discretionary power of the Court.

The meaning of ‘a residence’

The meaning of the expression ‘residential building’ in a planning scheme was considered in Derring Lane Pty Ltd v Port Phillip City Council (No 2), where Balmford J said:

Latham CJ in Commissioner of Taxation v Miller adopted the words of Viscount Cave LC in Levene v Inland Revenue Commissioners, as to the meaning of the word "reside". His Honour said:
I should have thought that there was no doubt that a man resided where he lived, and I do not think that there is any interpretation of the word "reside" by the courts which makes it impossible to apply the ordinary meaning of the word "reside" in the present case. In Levene v Inland Revenue Commissioners, Viscount Cave LC said:
. . . the word "reside" is a familiar English word and is defined in the Oxford English Dictionary as meaning "to dwell permanently or for a considerable time, to have one's settled or usual abode, to live in or at a particular place". … it may be accepted as an accurate indication of the meaning of the word "reside". In most cases there is no difficulty in determining where a man has his settled or usual abode, and if that is ascertained he is not the less resident there because from time to time he leaves it for the purpose of business or pleasure.

On that basis, the phrase "residential building" must be taken to refer to a building constructed for the purpose of people dwelling there permanently or for a considerable period of time, or having in that building their settled or usual abode.[23]

[23]Derring Lane Pty Ltd v Port Phillip City Council (No 2) (1999) 108 LGERA 129, 134–135 [15] (citations omitted), citing Commissioner of Taxation (Cth) v Miller (1946) 73 CLR 93, 99, quoting Levene v Inland Revenue Commissioners [1928] AC 217, 222.

Accordingly, I accept the claimants’ submission that these passages should be applied in defining the expression ‘a residence’ for the purpose of s 100(1). On this basis, ‘a residence’ is defined as a building constructed for the purpose of people dwelling there permanently, or for a considerable period of time, or having that building as their settled or usual abode. In consequence, there is no doubt that Arva is a residence for the purposes of s 100(1).

Intangible and non-financial disadvantages

In Roads Corporation v Love, the phrase ‘intangible and non-pecuniary disadvantages’ was described by Osborn J as a broad one capable of flexible adaptation to changes in land use and community values over time.[24] Although s 100(1) of the PE Act uses the expression ‘non-financial’, rather than the expression ‘non-pecuniary’ found in s 44(1) of the LAC Act, neither party suggested that this made any difference to the meaning of the phrase.
[24]Roads Corporation v Love (2010) 31 VR 451, 544 [769].

After referring to the dictionary definition of ‘solatium’ as a ‘[s]um of money paid, over and above the actual damages, as a solace for injured feelings’,[25] Osborn J noted that Barber J in March v City of Frankston (No 1), described solatium as:

[an] expression apt to describe an award of some amount to cover inconvenience and in an appropriate case distress caused by compulsory taking. It was quite inapt to describe solatium as an amount awarded for provable loss to which the claimant is entitled.[26]

[25]Ibid 549 [770], citing J A Simpson and E S C Weiner, Compact Oxford English Dictionary (Oxford University Press, 2^nd ed, 1991) 951.

[26]March v City of Frankston (No 1) [1969] VR 350, 357, cited in Roads Corporation v Love (2010) 31 VR 451, 544 [771].

Later, Barber J said that he should endeavour to compensate the claimants for the nuisance and annoyance resulting from the disruption of their business and the trouble caused by the acquisition. Such an award must not include factors which had already been compensated for, but only imponderables which are not specifically provable.[27] Osborn J concluded that these passages illuminated central aspects of the class of disadvantage which are ordinarily compensable by way of solatium. However, the statutory definition is potentially broader in its compass than either of the descriptions referred to.[28]
[27]March v City of Frankston (No 1) [1969] VR 350, 357, quoted in Roads Corporation v Love (2010) 31 VR 451, 544 [772].
[28]Roads Corporation v Love (2010) 31 VR 451, 544–545 [773].

Subsequently, Vickery J said in Roads Corporation v Love (a different proceeding):

The principles relating to awards of solatium under s 44(2) of the LAC Act were summarised by Osborn J in his judgment in Roads Corporation v Love (“the Cooper Street proceeding”). I respectfully adopt his Honour’s observations from which the following principles may be gleaned:
(a)the phrase “intangible and non-pecuniary disadvantages” is a broad one and capable of flexible adaptation to changes in land use and community values over time;
(b)whilst it may be correct to conceive of solatium as, for example, a sum of money paid, over and above the actual damages, as a solace for injured feelings, and apt to describe an award of some amount to cover inconvenience and in a proper case distress caused by the compulsory taking, such conceptions are no substitute for the statutory provision in s 44(1) of the LAC Act, which may in some circumstances be wider;
(c)solatium is not an amount awarded for provable loss to which the claimant is entitled and does not include any of the factors covered by other heads of compensation under the LAC Act;
(d)an award of solatium is discretionary;
(e)section 44 (1) should be construed with all the generality that its words permit;
(f)what is contemplated is the discretionary award of a lump sum in circumstances justifying such award;
(g)section 44(1) does not require an award of a percentage of market value, but questions of proportionality to market value are not necessarily irrelevant, although this is not to suggest that there should be any necessary relationship between market value and solatium;
(h)the fundamental task is to assess an appropriate lump sum amount, although it is open to express an award of solatium by reference to a percentage of reduction in market value.[29]

[29]Roads Corporation v Love (2010) 179 LGERA 113, 167 [193] (citations omitted).

After determining the statutory cap on the compensation that could be awarded by way of solatium, Vickery J accepted a number of specific factors as counting towards an award:

(a) the attachment of the claimant and his family to the land;

(b) that the claimant had been subjected to a considerable loss of personal time and stress resulting from the acquisition; and

(c) that the claimant had suffered a marked degree of stress resulting from the acquisition that he described as a ‘nightmare’.[30]

[30]Ibid 263–264 [740].

After also taking into account the claimant’s interest, the many years that the claimant had occupied the land, the inconvenience suffered by the claimant, the claimant’s age, the fact that the claimant and his family occupied the land as their principal place of residence, and the statutory cap, Vickery J allowed the maximum amount of solatium permissible.[31]
[31]Ibid 264–265 [741]–[744].

The nature of the cap in s 100(2) of the PE Act

A final requirement in considering the award of compensation in respect of ‘a residence’ is to determine whether the cap of 10% of the amount of compensation allowable under s 100(1) relates to the value of the house alone, or to the value of the house as well as the curtilage or area surrounding the house. In Equity Trustees Executors and Agency Co Ltd v MMBW, Gobbo J took the latter view, holding that s 100 was about the provision of additional compensation for both the house and its surrounding land.[32] In that instance, the concept of a ‘residence’ included a garden and park surrounding the house. The reference to compensation in respect of a residence was a phrase of classification so as to separate compensation for residences from compensation for vacant land or industrial or commercial premises.[33]
[32]Equity Trustees Executors and Agency Co Ltd v MMBW [1994] 1 VR 534, 550.
[33]Ibid.

Examples of the award of solatium or additional compensation

In Coastal Estates Pty Ltd v Bass Shire Council, Gobbo J made an award of solatium amounting to 5% of the land value reduction in favour of a corporate claimant:

The phrase "intangible and non pecuniary disadvantages" cannot be diluted so as to permit intangible pecuniary disadvantages to be compensated as part of a solatium award. Such an award is not a placebo or consolation prize for not being able to recover for pecuniary loss claims that are, for example, not within the specific headings in the Act.
The authority relied upon decisions of this court in claims by corporations where either no or only a low award was made. But there is no rule that excludes claims by corporations even though some of the criteria in s 40 are inappropriate to them.
In the present case, an award is, in my opinion, warranted because of the length of time that the claimant has owned the land and the inconvenience in intangible non pecuniary terms that the acquisition has caused the claimant. I award 5 per cent of the land value reduction as solatium.[34]

[34]Coastal Estates Ltd v Bass Shire Council [1993] 2 VR 566, 592.

In Equity Trustees Executors and Agency Co Ltd v MMBW,[35] land suitable for subdivision was rezoned for proposed public open space. A life tenant had lived in the residence on the land for many years but had died. Gobbo J described the three claimants who continued to live in the residence as having a long family connection with the subject land and a strong and genuine attachment to a beautiful and picturesque property. They had grown up on the land and one had spent almost her entire life there. These links extended over very many years. Each claimant suffered anxiety and frustration because of the decision of the authorities to take the property at an indeterminate date in the future. Gobbo J awarded additional compensation under s 100 of the PE Act, apportioned between the three claimants.[36]
[35][1994] 1 VR 534.
[36]Ibid 550–551.

The construction of s 100 of the PE Act

It is true that only an owner of land, as defined in s 3 of the PE Act, can claim compensation for loss on the sale of land under s 106. However, there is no express requirement in s 100 that the owner of land actually reside in the residence at the time the right to compensation arises. In my view, a construction of s 100(1) which would disallow any increased compensation because Mr Morton did not live in the Arva residence when the right to compensation arose should be rejected. As the claimants contend, the correct construction of s 100(1) is to treat the extent of occupation of the owner of the residence as a matter going to quantum and not as a requirement of entitlement.

I have come to this conclusion for a number of reasons:

(1) The statutory purpose of pt 5 and s 100 of the PE Act is to provide a fair, just and reasonable compensation regime that is responsive to the adverse effects of a public acquisition overlay imposed on the land of a claimant. The construction that I adopt would permit an owner to receive increased compensation under s 100 for adverse impacts on family members, including children, who occupy the residence. It would be arbitrary and unreasonable that an owner who lives with his or her children can claim increased compensation, but an owner who lives separately for work or other reasons cannot do so.

(2) The imposition of a limitation or qualification on the power of the Court to award compensation not found in the terms of the PE Act is contrary to the principles stated by Gaudron and McHugh JJ in Marshall v Director General, Department of Transport,[37] and subsequently approved or followed in numerous other cases.[38]
[37](2001) 205 CLR 603, 623 [37]–[38] (Gaudron J), 627 [48] (McHugh J).
[38]Sleeman v SPI Electricity Pty Ltd [2014] VSCA 243, [100]–[105]; Halwood v Roads Corporation [2008] VSC 28, [62]; Secretary to the Department of Economic Development, Jobs, Transport and Resources v MG Pastoral Company Pty Ltd (2016) LGERA 413, 428–429 [80]–[81]; Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752, 766–767 [47]–[51]; Cameron v Noosa Shire Council (2006) 145 LGERA 316, 324 [25]; Merrick Tyler v Commissioner of Main Roads [2015] WASCA 82, [38]–[39]; Town of East Freemantle v Cornell (2005) 138 LGERA 180, 194 [67]; Roads Corporation v Love (2010) 31 VR 451, 545 [774].

(3) A construction of s 100 which would only allow a claim for increased compensation where the owner resides in the relevant residence would produce arbitrary and illogical results, for example, where the claim arises as a result of a loss on resale under s 106 and the owner of the land is acting in a representative capacity, such as an administrator appointed under pts 4 or 5 of the Guardianship and Administration Act 1986 (Vic) (eg State Trustees). On the construction proposed by the Minister, increased compensation following a loss on resale cannot be claimed for the represented person under s 100, because the represented person living in the residence is not the registered proprietor or entitled to become the registered proprietor of the land on which the residence is erected. Likewise, if a residence is in the name of the executors of an estate, or trustees (whether corporate or not) of a testamentary or discretionary trust, a claim under s 100 would not be possible following a loss on resale under s 106 because the owner is not the occupier. These outcomes are arbitrary and unreasonable and cannot have been contemplated by Parliament.

(4) The owner of a residence may well suffer intangible and non-financial disadvantages in the circumstances recognised by pt 5 of the PE Act if the residence is occupied by family members, farm employees who must vacate the residence, or is the original or a longstanding dwelling on the property. In any of these cases, intangible and non-financial disadvantages may result from the owner’s responsibility for the people involved or attachment to the residence. There may be a loss of personal time on the part of the owner and anxiety – for example, the need to move out elderly family members, relocate children, or rehouse staff. There is good reason why the Court should have discretion under s 100(1) to award increased compensation to an owner in these circumstances.

(5) Section 100(3) provides that all relevant circumstances must be taken into account, including under (b) ‘the length of time during which the claimant has occupied the residence.’ This does not mean that it is essential for a claimant to live in the residence at the time when the claim arose. Rather, it is a relevant circumstance to be considered by the Court in determining whether increased compensation should be awarded.

(6) Likewise, the consideration in s 100(3)(d) of ‘the number, age and circumstances of any other people living with the claimant’ is a relevant circumstance – but one that goes as to quantum, not eligibility.

(7) Unlike in s 44(3) of the LAC Act, there is no reference in pt 5 to ‘a principal place of residence’. I accept the claimants’ submission that if Parliament had intended that an owner who suffers a loss on resale could only receive additional compensation under s 100 if that residence were the owner’s principal place of residence, the PE Act would have said so. It did not. The claimants’ submission is fortified by the fact that the LAC Act and the PE Act were debated and enacted by Parliament within one year of each other.

(8) The reference in s 100 of the PE Act to ‘a residence’ uses the indefinite article. The reference is not to the owner’s or claimant’s residence. While not decisive, the use of the indefinite article points in favour of the claimants' submission.

I also accept the claimants’ submission that the reference to ‘householders’ in the Minister’s Second Reading Speech for the PE Act does not assist. A householder may be an owner or a person in residence.[39] Equally, the recommendations in the Morris report do not discuss or consider any provisions like s 100 of the PE Act. The Morris report does not assist in the construction of s 100.[40]
[39]See above [21], [25(i)].
[40]Morris, above n 8.

For these reasons I accept that the claimants are eligible to claim increased compensation under s 100 of the PE Act. In the usual case, it would then be necessary for the Court to consider all relevant circumstances, including the considerations listed in s 100(3), and assess whether increased compensation should be awarded and the amount to be awarded. As the parties have agreed on quantum of $60,000, I will award this sum by way of additional compensation.

Claim for interest
A brief history

When the PE Act was passed, s 105 of the PE Act made s 37, pts 10 and 11 of the LAC Act applicable to claims for compensation under pt 5 of the PE Act. However, these provisions do not relate to the award of interest. Nevertheless, as part of the broader consideration of the claim for interest, it is helpful to consider the scheme contained in the LAC Act for the award of interest in compensation claims.

Interest under the LAC Act

The LAC Act established, what was in 1986, a new procedure for the acquisition of land for public purposes in Victoria.[41] Where land is compulsorily acquired, the procedure to be followed is clearly specified in pt 6 of the LAC Act. Section 51 authorises the authority to make an offer of compensation including the amount offered for the claimant’s interest in the land acquired, the losses or expenses sustained by a claimant and solatium (if any). Assuming that the authority is satisfied as to the claimant’s entitlement to an interest in the land acquired, it is required to make an advance of compensation within one month of receipt of a notice requiring payment.
[41]LAC Act s 1(a).

Interest payable under the LAC Act is self-executing.[42] Interest is payable on an advance of compensation that is overdue,[43] and on the difference between the amount of compensation awarded and the amount of compensation offered by the authority immediately before the claim became disputed, calculated from the date of acquisition, or the date the authority entered into possession of the relevant land, until the date of payment.[44] Interest is also payable on any amount awarded in relation to disputed expenses paid by the claimant from the date the claimant paid the expenses.[45]
[42]See as to the previous legislation, SJR Investment Co Pty Ltd v Housing Commission of Victoria [1971] VR 211, 215; Smith v Shire of Eltham [1977] VR 133, 136–137.
[43]LAC Act s 51(4).
[44]Ibid s 53(1).
[45]Ibid s 56.

The rate of interest payable under the LAC Act is determined by the Governor in Council by Order published in the Government Gazette.[46] It must not exceed the rate for the time being fixed under s 2 of the Penalty Interest Rates Act 1983 (Vic) (‘PIR Act’).[47] In certain circumstances, the LAC Act stipulates that penalty interest is payable at an even higher rate, namely, 5% higher than the rate of interest for the time being determined under s 52.[48]
[46]Ibid s 52(1).
[47]Ibid s 52(2).
[48]Ibid s 55.

The relationship between the LAC Act and PE Act

The basic procedural provisions in pt 6 of the LAC Act were not made applicable to claims made under pt 5 of the PE Act, including those providing for the advance of compensation,[49] the determination of the rate of the interest to be paid in respect of unpaid compensation,[50] the payment of interest including penalty interest,[51] the production of title documents by claimants evidencing their relevant entitlement,[52] and the payment of compensation into a trust fund where the claimant refuses or neglects to accept payment, is absent from Victoria, or cannot be found after diligent enquiry.[53]
[49]Ibid s 51.
[50]Ibid s 52.
[51]Ibid s 52–57.
[52]Ibid s 50.
[53]Ibid ss 58–62.

One difficulty arising from the failure to make pt 6 of the LAC Act applicable to claims under pt 5 of the PE Act relates to the making of an advance on compensation. The absence of any specific statutory power to make an advance of compensation in relation to a claim made under pt 5 of the PE Act has led to the concern that advances on compensation might not be made by authorities for want of statutory power. In Roads Corporation v Melbourne Estates and Finance Co Pty Ltd, Gobbo J overcame this difficulty, finding that the making of an advance of compensation was lawful in a pt 5 claim despite the apparent absence of an empowering provision:

… the authority … claimed that it was unable to make an advance of compensation because there was no express power to do so in the [PE Act]. In my opinion, this view is misconceived. The power to make an advance is designed to operate in cases where there is no agreement and the dispute is still to be resolved. Where there is an agreement and the claim and offer machinery of the [LAC Act] is relied upon, it is clear that there is a power to make a payment as to part of the compensation before final determination or final agreement on the entire compensation. Once liability for an item of compensation is recognised, it is difficult to see how a payment in accordance with such recognition is beyond power. [54]
[54][1993] 2 VR 602, 618–619.

Interest under the PE Act

Gobbo J also considered the position of a claimant seeking interest on compensation awarded under pt 5 of the PE Act in Mario Piraino v Roads Corporation (No 2).[55] After noting the failure of the legislature to make the interest provisions of the LAC Act applicable to claims for compensation under s 98 of the PE Act, his Honour said:

Section 53 of the [LAC Act] expressly provides for interest to be recoverable. There is even provision in s 54 for interest on compensation where no land is taken but there is no such provision in relation to compensation under s 98 of the [PE Act]. In view of my rejection of the claimant’s attempted reliance on the substantive provisions of the [LAC Act], it follows that the claimant is limited, as the authority argued, to interest from the time of issue of the claim in August 1989, an entitlement founded on the [SC Act].[56]

[55][1993] 1 VR 130.

[56]Ibid 153.

Gobbo J then heard argument about the application of s 60 of the SC Act to an award of compensation under s 98 of the PE Act, and held that in that instance the claimant had an entitlement to interest under the SC Act.[57]
[57]Mario Piraino Pty Ltd v Roads Corporation (No 1) [1991] 2 VR 534, 537. This was the second decision of Gobbo J in the same proceeding, although reported earlier than Mario Piraino v Roads Corporation (No 2) [1993] 2 VR 602.

At the conclusion of his judgment, Gobbo J noted the urgent need for the legislature to review the provisions of pt 5 of the PE Act:

As to interest, there is on one view an unintended gap in the legislation that on the authority’s argument leaves claimants wholly without an entitlement to interest that existed before the new Act. On any view, any uncertainty in this regard should be resolved by early legislation, preferably on a basis that puts all compensation interest entitlements under the one statutory provision. Finally, I would join in statements made by judges of superior courts on a number of occasions in the past, both in England and in this State, to the effect that it is manifestly just that claimants should be paid interest in respect of compensation awards made to them. In this regard, I note also that it was the practice of authorities, noted in a number of cases, to pay interest on compensation even though there was no liability to do so.[58]

[58]Mario Piraino Pty Ltd v Roads Corporation (No 1) [1991] 2 VR 534, 544 (citations omitted).

The case decided that in claims for compensation under pt 5 of the PE Act the Supreme Court of Victoria could award interest under s 60 of the SC Act. However, the Land Valuation Board of Review, and later the Victorian Civil and Administrative Tribunal, were not considered to be a court for the purpose of s 33 of the SC Act and could not award interest under s 60.[59] As to this state of affairs, Gobbo J said in Roads Corporation v Melbourne Estates and Finance Co Pty Ltd:

This case has indicated some further matters in the legislation that could be added to the list of matters calling for legislative review. One particular matter that might be usefully included is a mechanism that enables interest to be awarded in accordance with the [SC Act] in determinations of the board on awards of compensation.[60]

[59]See Roads Corporation v Melbourne Estates and Finance Co Pty Ltd [1993] 2 VR 602.

[60]Ibid 619.

The legislative deficiencies identified by Gobbo J have not subsequently been rectified. The provisions of the LAC Act, SC Act and PE Act remain in a similar form to those that were in force in 1990.

Section 60 of the SC Act

Section 60 of the SC Act permits the Court to award damages in the nature of interest in proceedings for the recovery of debt or damages.[61] Section 60(1) and (2) provide:
[61]The term ‘Court’ is defined in s 3 of the SC Act to mean the Supreme Court. The County Court and the Magistrates’ Court of Victoria have power to award damages in the nature of interest under the County Court Act 1958 (Vic) s 50 and SC Act s 33. The former Land Valuation Board of Review did not. See Roads Corporation v Melbourne Estates and Finance Co Pty Ltd (No 2) [1993] 2 VR 602.

(1)The Court, on application in any proceeding for the recovery of debt or damages, must, unless good cause is shown to the contrary, give damages in the nature of interest at such rate not exceeding the rate for the time being fixed under section 2 of the Penalty Interest Rates Act 1983 as it thinks fit from the commencement of the proceeding to the date of the judgment over and above the debt or damages awarded.
(2)Nothing in this section—
…
(d)authorises the allowance of any interest otherwise than by consent on any sum for which judgment is entered or given by consent;
…
(f)limits the operation of any enactment or rule of law which, apart from this section, provides for the award of interest.

The Minister made a number of submissions as to why interest under s 60(1) of the SC Act should not be awarded to the claimants. I will address these submissions and those of the claimants later in this judgment.

Objectives for awarding interest

In Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3), Gillard J identified three main objectives for the award of interest by the Court on amounts recovered:

First, as compensation to the judgment creditor for being out of the funds from the date of commencement of the proceeding until judgment; secondly, to deter judgment debtors from delaying proceedings and thereby having the use of the money for a longer period; and finally, to encourage defendants to make realistic assessments of their liability in a case and to take bona fide steps to compromise the claim.[62]

[62]Johnson Tiles Pty Ltd v Esso Australia Pty Ltd (No 3) [2003] VSC 244, [61].

In Victorian WorkCover Authority v Esso Australia Ltd, Kirby J spoke of another important objective:

Inflation erodes the value to parties kept out of their moneys of the sum ultimately recovered in proceedings in a court. This is why Lord Wilberforce explained that statutory interest on judgments was intended to do no more than to "compensate [the party successful in litigation] for being kept out of [the] 'real' value" of money.[63]

[63]Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520, 547 [71], quoting Pickett v British Rail Engineering [1980] AC 136, 151 (Lord Wilberforce).

These objectives apply just as much to the current proceeding as they do to other proceedings in the Court.

Claimants’ submissions

The claimants submitted that an award of compensation is ‘the recovery of debt or damages’ within the meaning of s 60(1) of the SC Act. They relied on the decisions of Gobbo J in Mario Piraino Pty Ltd v Roads Corporation (No 1),[64] Mario Piraino Pty Ltd v Roads Corporation (No 2),[65] and Roads Corporation v Melbourne Estates & Finance Co Pty Ltd.[66] They submitted that any doubt about the applicability of s 60 was removed by the decisions of the High Court in Victorian WorkCover Authority v Esso Australia Ltd,[67] and Crisp and Gunn Co-operative Ltd v Hobart Corporation.[68]
[64][1991] 2 VR 534, 536–538.
[65][1993] 1 VR 130, 153.
[66][1993] 2 VR 602, 608.
[67](2001) 207 CLR 520.
[68](1963) 110 CLR 538.

Minister’s submissions

The Minister’s submission conceded that ‘[a]t first blush’, the dicta of the High Court in Victorian WorkCover Authority v Esso Australia Ltd present a powerful argument in favour of the proposition that compensation under pt 5 of the PE Act is ‘debt or damages’ for the purpose of s 60(1) of the SC Act.[69]
[69]Victorian WorkCover Authority v Esso Australia Ltd (2001) 207 CLR 520, 534–535 [31]–[32], 538 [41] (Gleeson CJ, Gummow, Hayne and Callinan JJ).

However, the Minister then sought to develop an argument that the machinery by which compensation must be claimed under pt 5 distinguishes an entitlement to that compensation from the compensation sought in Victorian WorkCover Authority v Esso Australia Ltd,[70] and in Crisp & Gunn Co-Operative Ltd v Hobart Corporation.[71]
[70](2001) 207 CLR 520.
[71](1963) 110 CLR 538.

According to this argument, s 105 of the PE Act and pts 10 and 11 of the LAC Act confer jurisdiction to hear and determine claims under pt 5 of the PE Act on both the Supreme Court of Victoria and VCAT. The procedures relating to the respective jurisdictions are essentially similar. However, s 60(1) applies only to proceedings under pt 5 of the PE Act referred to the Supreme Court. It does not apply to a proceeding referred to VCAT. It was contended that as VCAT does not have power to award interest on awards made under pt 5, the Supreme Court should not have it either. To do otherwise, it was said, would upset the ‘equal and cognate jurisdiction to determine such claims’ in both bodies. It was unlikely that Parliament would have intended to insert such a distortion into the system for determining disputed claims for compensation under pt 5 of the PE Act.

In an alternative argument, the Minister contended that the absence of power in the Tribunal to award interest on claims under pt 5 of the PE Act provided a sound reason for the Court to exercise its discretion not to make an order for interest on the basis of it being a ‘good reason to the contrary’.

For the reasons outlined below, both arguments must be rejected.

Interest can be awarded on a claim for compensation under s 60 of the SC Act

Any doubt as to the applicability of s 60 of the SC Act to an award of compensation under pt 5 of the PE Act is removed by the decision of the High Court in Victorian WorkCover Authority v Esso Australia Ltd.[72] The plurality of the High Court held that the composite expression ‘debt and damages’ in s 60 ‘embraces any proceeding in which a claim for money is made, in contrast to declaratory relief and claims for specific forms of relief such as mandatory injunctions, charging orders and orders for specific performance’.[73] To like effect, Kirby J held that the words ‘proceeding for the recovery of debt or damages’ are to be given a broad construction and viewed as expressing a composite idea.[74]
[72](2001) 207 CLR 520.
[73]Ibid 538 [41] (Gleeson CJ, Gummow, Hayne and Callinan J).
[74]Ibid 558–559 [105] (Kirby J).

In so deciding, the High Court followed its earlier decision in Crisp & Gunn Co-operative Ltd v Hobart Corporation.[75] This decision concerned the meaning of the words ‘action to recover a debt or damages’ in Order XXIV of the Rules of the Supreme Court of Tasmania. The High Court concluded that the expression included the old common money counts, and extended to claims for money sums arising under specialities or statutes. As a result it included an action to recover compensation for compulsory acquisition under the Public Authorities’ Land Acquisition Act 1949 (Tas).[76]
[75](1963) 110 CLR 538.
[76]Ibid 543.

The construction of s 60(1) of the SC Act advanced on behalf of the Minister is inconsistent with the construction accepted by the High Court and must be rejected for this reason.

It is also inconsistent with decisions of this Court.[77] In Mario Piraino Pty Ltd v Roads Corporation (No 1), concerning a claim for compensation under s 98 of the PE Act (discussed in more detail above), Gobbo J said:

In my opinion, the history of the legislation assists rather than detracts from the argument that “damages” in s 60 was always intended to have a wide meaning and there are many considerations of justice as to why an award of compensation for loss and damage should qualify for interest under that section. I accordingly confirm that the claimant has an entitlement to interest under the [SC Act].[78]

[77]See Mario Piraino Pty Ltd v Roads Corporation (No 1) (1991) 2 VR 534, 536–538; Mario Piraino Pty Ltd v Roads Corporation (No 2) [1993] 1 VR 130, 153; Roads Corporation v Melbourne Estates & Finance Co Pty Ltd [1993] 2 VR 602, 608.

[78]Mario Piraino Pty Ltd v Roads Corporation (No 1) (1991) 2 VR 534, 537.

Secondly, as the claimants submitted, s 81 of the LAC Act provides that a disputed claim must be determined by VCAT if the amount in dispute does not exceed $50,000. However, if the amount in dispute exceeds $50,000, a claimant has the option to determine whether the disputed claim will be heard by VCAT or the Court. If the claimant does not exercise that option within one month after being requested to do so by the authority, the authority may do so. In addition, the Court will determine the dispute, irrespective of the amount in dispute, if satisfied on the application of a party that the claim raises questions of unusual difficulty or of general importance.[79] Thus, the claimants submit that it is open as a matter of right for a claimant to determine in which jurisdiction a disputed claim for compensation above $50,000 would be heard or determined, subject only to the power of the Court to order that a disputed claim must be heard in the Court if satisfied on the application of a party that the claim raises questions of unusual difficulty or of general importance. For a claim where the amount in dispute exceeds $50,000, it is always open to the claimants to elect that the claim go to the Court.
[79]LAC Act s 81.

Thirdly, and fundamentally, the Supreme Court of Victoria is the superior court of Victoria with unlimited jurisdiction, subject only to the Constitution Act 1975 (Vic), and any other applicable legislation that may affect its jurisdiction. It is ‘the Supreme Court of a State’ for the purposes of Chapter III of the Australian Constitution.[80] In my view, there is no basis for reading down the jurisdiction of the Supreme Court under s 60 of the SC Act for the reasons advanced in the Minister’s submission. Rather, the jurisdiction and power afforded by s 60 should not be confined or restricted by implications derived from the more limited jurisdiction and powers given by Parliament to VCAT. It does not follow from the fact that VCAT has not been given the power to award interest on claims for compensation made under pt 5 of the PE Act that this should restrict or impinge on the power of the Supreme Court to award interest under s 60(1) of the SC Act.
[80]See Kirk v Industrial Court (NSW) (2010) 239 CLR 531; Kable v DPP (NSW) (1996) 189 CLR 51.

Finally, I reject the submission that the inability of VCAT to award interest on a claim for compensation made under pt 5 of the PE Act does, or could, constitute ‘good cause shown to the contrary’ not to award interest under s 60(1). The jurisdiction and powers of VCAT are matters for Parliament to determine. They are not relevant to the current issue of whether interest should be awarded at the discretion of the Court under s 60(1). The Court’s discretion under s 60(1) stands to be exercised in a manner which is just and fair to the parties in the circumstances of the case.

Can interest be awarded on a sum for which judgment is entered or given by consent?

The Minister’s principal submission against the award of interest is that it would be contrary to s 60(2)(d) of the SC Act. On behalf of the Minister, it was said that this provision expresses a clear legal policy preference for consent judgments not to attract interest unless the parties consent to such an order. It was said that this interpretation of s 60(2)(d) is consistent with ‘the public interest in the early settlement of disputes by agreement between the parties’ expressed in s 9(1)(b) of the Civil Procedure Act 2010 (Vic), the recognition of offers of compromise under O 26 of the Supreme Court (General Civil Procedure) Rules 2016 (Vic), and the principles in Calderbank v Calderbank.[81] It was said that it is fair for a party who has agreed to settle a proceeding by consent not to have to face an additional impost without consent. According to the Minister, s 60(2)(d) is a complete barrier to the making of an order for interest with respect to sums of compensation agreed by the parties.
[81][1975] 3 All ER 333.

The process of negotiation

In response to this submission, the claimants point to the offers and correspondence that have passed between them and the Minister. The claimants’ particulars dated 28 April 2017 claim interest at 2.5% per annum on the loss on sale until the date of referral. Following a valuers’ conference conducted over three meetings in July and August 2017, the valuers agreed on financial loss compensation in the amount of $9,056,600. The Minister then filed amended particulars of offer on 21 August 2017, including a denial of any liability for interest. Further amended particulars of claim were filed by the claimants on 11 September 2017. In their further amended particulars of claim, the claimants did not pursue their previous claim for interest, but substituted a claim for interest under the SC Act.

By a letter dated 30 August 2017, the claimants’ solicitors sought confirmation of the Minister’s agreement to the items of loss on sale in the amount of $9,056,600 and s 101 expenses (pre-referral) in the amount of $75,992, being a total of $9,132,592.00.

In an email sent on 31 August 2017, the Victorian Government Solicitor’s Office (‘VGSO’) sought confirmation that the agreement sought would entirely dispose of the claimants’ claims under ss 98 and 101 of the PE Act. If that was correct, confirmation was sought that the only remaining issues in dispute would be the claimants ‘entitlements to effect on residence under s 100 of the PE Act, and any entitlement to interest’. It is plain from this email that the claim for interest remained in dispute despite the agreement reached as to other claims.

By an email sent later on 31 August 2017, the claimants’ solicitors confirmed agreement on the quantum of loss on sale ($9,056,600) and pre-referral expenses ($75,992), and stating in substance that if these amounts were agreed, the claimants would not pursue any further claim in relation to ss 98 and 101 of the PE Act, save for the entitlement to interest.

Lastly, by an email sent on 1 September 2017 to the claimants’ solicitors, VGSO confirmed that the Minister agreed in substance to pay the sum of $9,056,000 with respect to the claim for loss pursuant to s 98(1) of the PE Act and $75,992 with respect to the claim for pre-referral expenses pursuant to s 101 of the PE Act on the basis that the agreement fully disposes of your client’s claims and entitlements under ss 98 and 101 of the PE Act, adding in parentheses ‘acknowledging your client’s reservation as to interest’.

As submitted by the claimants, it is clear beyond dispute that the claim for interest was pursued by them, and at all times disputed by VGSO for the Minister. The claim for interest was not compromised or abandoned by the claimants.

The effect of s 60(1)(d)of the SC Act

In my view, the submission made on behalf of the Minister that s 60(1)(d) of the SC Act bars the claim for interest is misconceived. Section 60(1)(d) applies only if there has been a judgment entered by the Court or given by consent. In the present case, there has been no judgment entered by the Court or given by consent. It is true that the parties have reached agreement on the major items of claim, but this is not sufficient to attract the operation of s 60(1)(d). For there to be a prohibition on the award of interest under s 60(1)(d), there must be a judgment of the Court.

Quite apart from s 60(1), s 101(1) of the SC Act provides for interest on an unpaid monetary judgment at the rate fixed under s 2 of the PIR Act from the time the judgment was given. The liability to pay penalty interest on an unpaid monetary judgment arises under s 101(1), and not under s 60(1).

As Brooking and Hayne JJ noted in GEF Packaging Services Pty Ltd v Turner, a plaintiff cannot recover both interest under s 60 and interest under s 101 in respect of the same damages and the same period.[82]
[82] GEF Packaging Services Pty Ltd v Turner [1995] VSC 191, [14].

Section 60(2)(d) ensures consistency with s 101 of the SC Act by limiting the award of interest under s 60(1) to the period of time leading up to the entry of judgment by the Court. It is only by consent that interest can be awarded under s 60(1) after a judgment has been entered or given by consent in a proceeding. Section 60(2)(d) does not operate as a bar to the claimants’ claim for interest. It has no present application as there has been no judgment of the Court.

Reduction in the rate of interest below the penalty rate

In an alternative argument, the Minister says that the Court, in its discretion, should reduce the rate of interest to a lower rate than that fixed under the PIR Act. The Minister submits that a compensatory rather than a penalty or punitive rate is more appropriate. In support, the Minister pointed to the claim made in the particulars of claim dated 28 April 2017 for interest at the rate of 2.5% per annum.

The claimants oppose any reduction of the interest rate fixed under s 2 of the PIR Act. They say that the Minister called no evidence of prevailing interest rates and failed to establish any evidentiary basis for a reduction of the penalty interest rate.

Both arguments have some merit. It is true that the original particulars of claim, prior to any amendments, claimed an interest rate at the rate of 2.5% per annum. It is also true that the Minister led no evidence to establish what a compensatory or commercial rate of interest would be if the penalty interest rate was not imposed.

Relevant authority

The Appeal Division of this Court considered the scope and operation of s 60 in Clarke v Foodland Stores Pty Ltd.[83] As to the expression ‘if good cause was shown to the contrary’ found in ss 58(1) and 60(1) of the SC Act, the Court said:

Thus, when good cause is shown, the court may refuse to award interest at all or may, if it sees fit, award interest on terms which are less, but not more, onerous than those laid down by the section. As the court always has a discretion as to the rate (subject only to the maximum imposed by s.58), this means, in effect, that once good cause is shown, the court may allow interest to the plaintiff for a lesser period than that marked out by the section … And it follows, we think that “good cause to the contrary” means no more and no less than good reason, according to the justice of the case, for not allowing interest at all or, if interest is to be allowed, then for not allowing interest for the whole of the period marked out by the section.[84]

[83][1993] 2 VR 382 (Fullagar, Marks and Phillips JJ).

[84]Ibid 394.

As to the need to call evidence of interest rates, the Court said:

… the submission that the defendant bears an onus to adduce evidence is too restrictive. Good cause may be shown in many ways and not only by evidence led on behalf of the defendant. Thus, having heard all of the evidence at trial, the court might be satisfied, for instance, that in all of the circumstances it would be unjust to allow interest to the creditor from the date of demand ... There is no reason why it should not be said in such a case that “good cause [has been] shown to the contrary”, even if the relevant facts were proven, not by the defendant, but by the plaintiff… It follows, then, that as interest is to compensate the plaintiff, it is not to be allowed simply for the purpose of penalising the defendant for not having paid earlier, although, of course, an award of interest may have that effect: … Allowing interest at proper commercial rates may well encourage defendants not to delay litigation for the sake of it, but it appears from the authorities that that is not the purpose for which the statutory power to allow interest is now recognised as having been conferred.
… To allow interest at the maximum rate permitted under s.58 might, at certain times, go beyond mere compensation of the plaintiff – and it seems that this is one of those times; for the court was told that at present the rate fixed under s.2 of the Rates Act is 13 per centrum, which is significantly more than might be obtained by a defendant who prudently invested the money until trial and likely to be beyond “commercial rates”, however defined.[85]

[85]Ibid 394, 396–397 (citations omitted).

Further insight into the jurisdiction to award interest is provided by the decision of the Court of Appeal in Hartley Poynton Ltd v Ali:

… in claims for interest under ss 58–60 of the Act, the principles so far stated with respect to interest under similar provisions has been generally recognised as requiring no more than compensation for being kept out of the moneys claimed but, so far as Victoria is concerned, the High Court has at least recognised that different considerations may well apply in this State because of the specific provisions contained in the Penalty Act … it would seem that over the years since 1983 the Victorian rate so prescribed has been higher than that applicable in other States and Territories and reflects a policy that interest otherwise payable pursuant to statutory provisions, whether under the Act or elsewhere, should, where appropriate, do more than merely place the plaintiff in a position formerly held before the relevant claim was made. Again, speaking in the broadest of terms, the prescribed rate has usually been well in advance of what might be earned by its investment on the money market on a conservative basis, whether at short term or long term rates, and, more often than not, is in excess of what might be expected to be obtained by way of return on other conventional investments ... The Penalty Act’s object, as I perceive it, has been in part to encourage the early settlement of litigation … but it may be seen to have the broader purpose of ensuring that recalcitrant defendants, owing money or otherwise subject to an award of damages, do not withhold payments properly sought by plaintiffs upon the selfish basis that in the meantime they may without risk invest moneys so owed in a manner which will give them not merely sufficient to repay successful plaintiffs with interest under the Act but with an element of profit which might fairly be perceived as wrongfully obtained. This has ordinarily given Victorian courts a degree of flexibility in relation to the payment of interest which may not exist in other jurisdictions where the relevant rates are only broadly sufficient to recompense plaintiffs for being kept out of their money while their actions are fought or delayed, as frequently used to occur.
Nevertheless the pattern in Victoria has been that, unless good cause be shown, successful plaintiffs are ordinarily awarded interest at the rate prescribed under the Penalty Act without too fine a regard for these distinctions and I would assume that the plaintiff in the present case is entitled, in the least, to interest on the moneys invested and ordered to be repaid, although that would bring in a sum in excess of what it might have been invested at …[86]

[86]Hartley Poynton v Ali (2005) 11 VR 568, 617–619 [106]–[107] (citations omitted).

These passages make it clear that the rate of interest awarded under s 60(1) of the SC Act may well exceed proper or ordinary commercial rates, and that the purposes of an award of interest under s 60(1) of the SC Act go well beyond the recompense of plaintiffs for being kept out of their money while their actions are resolved in court. This is a key consideration in the award of interest under s 60(1).

The settled practice underpinning the award of interest under s 60(1) is illustrated in decisions of single judges of this Court. In Kalenik v Apostolidis (No 2), Hargrave J made it clear that the starting point in the process of exercising discretion is the penalty rate:

The rate of interest is always a matter in the discretion of the Court, subject to the proviso that it cannot exceed the rate prescribed under s 2 of the Penalty Interest Rates Act (the ‘penalty rate’). As a general rule, the starting point is the penalty rate. In practice, unless the defendant seeks to argue for a lesser rate, the penalty rate is routinely awarded by the Court.[87]

[87]Kalenik v Apostolidis (No 2) [2009] VSC 410, [78].

Vickery J described the practice in Victoria in Hodgson v Amcor (No 9) in these terms:

… the settled practice in Victoria is that, unless good cause to the contrary is shown, the statutory maximum rate is used. In Hartley Poynton Ltd v Ali Ormiston JA reasoned: “The pattern in Victoria has been that, unless good cause be shown, successful plaintiffs are ordinarily awarded interest at the rate prescribed under the Penalty Act without too fine a regard for these distinctions”. In Johnson Tiles Gillard J likewise observed: “The practice has evolved in this State to apply as a general rule the rate fixed pursuant to the Penalty Interest Rates Act ...”. The statutory rate was described as a “benchmark” by Fullagar, Marks and J.D Phillips JJ in Clarke v Foodland Stores Pty Ltd and in Kalenik v Apostolidis (No. 2) Hargrave J said to like effect: “As a general rule, the starting point is the penalty rate ... the penalty rate is routinely awarded by the Court”.[88]
[88]Hodgson v Amcor (No 9) [2012] VSC 205, [36] (citations omitted).

Special nature of compensation claims

The determination of the rate of interest under s 60(1) of the SC Act in the case of a claim under pt 5 of the PE Act cannot be viewed in isolation without considering the unique context of compensation claims. In Murdesk Investments Pty Ltd v Roads Corporation, concerning the exercise of the Court’s general discretion as to the award of costs following an award of compensation, Osborn J said:

I accept the submission made on behalf of the claimant that the conceptual basis underlying the award of costs to a claimant in compulsory acquisition compensation proceedings, differs from that involved in ordinary civil litigation. This is because the claimant has been placed in the situation giving rise to the litigation, by the action of the State and through no choice of its own. In turn the claimant is entitled to ascertain the compensation to which it is entitled.[89]

[89]Murdesk Investments Pty Ltd v Roads Corporation (2007) 155 LGERA 13, 19 [23].

In the South Australian decision of Minister for Environment v Florence, Wells J said:

Compulsory acquisition cases differ of course from ordinary claims dealt with in the general jurisdiction in one significant respect: the claimant, unlike the ordinary plaintiff, had no choice whether to make a claim or not; the mere acquisition by compulsory process gave him, by virtue of s.18 of the Act, a claim to compensation which he could hardly be expected to renounce.
Upon an ordinary claim in the general jurisdiction it is, generally speaking, obvious who has won and who has lost, and correspondingly clear why costs usually follow the event. Upon a claim for compensation for land compulsorily acquired, it is not, generally speaking, appropriate to speak of one party as having won; compensation is awarded to one who has already been given, by statute, the right to receive it. It is therefore as just to say of the latter sort of case that the claimant ought, in the absence of special circumstances, to receive his reasonable costs of obtaining the compensation that is, ex hypothesi, his due, as it is to say of the former sort of case that prima facie costs follow the event in favour of the party who has won. But costs are, as always, discretionary, and no hard and fast rule will ever be allowed to occupy part of an area controlled by a discretion, however predictable the result of its exercise may be in certain sorts of cases...
Against the history of a wide ranging discretion given to this Court with respect to costs, I am, I apprehend, to construe s.36 flexibly and not restrictively, to the intent that the special nature of the jurisdiction to which it relates should be duly recognized, and orders made in that jurisdiction that are just and expedient.[90]

[90]Minister for Environment v Florence (1979) 21 SASR 108, 134–135, quoted in Murdesk Investments Pty Ltd v Roads Corporation (2007) 155 LGERA 13, 19–20 [24], Mario Piraino Pty Ltd v Roads Corporation [1991] 2 VR 534, 541–542, Coastal Estates v Shire of Bass [1994] 1 VR 210, 213.

In adopting this passage, Osborn J described the general statement of principle contained in it as elaborating on the underlying context in which the Court’s general discretion is to be exercised. It does not constrain the Court’s general discretion.[91]
[91]Murdesk Investments Pty Ltd v Roads Corporation (2007) 155 LGERA 13, 20 [25].

While Osborn J was concerned with the Court’s general discretion as to costs, in my view, the special nature of the compensation jurisdiction is also relevant to the exercise of the Court’s general discretion as to interest under s 60(1) of the SC Act. In this context, it is significant that claimants of compensation, following a loss on resale after the reservation of land for public acquisition, or the imposition of a public acquisition overlay, are unlike plaintiffs in an ordinary civil proceeding. They have no choice whether to make a claim or not. They are claimants because of a decision made by the responsible Minister of the Crown to take their property for public purposes – in this instance, to fulfil the requirements imposed on the State to provide grasslands on the expansion of the Urban Growth Boundary.

Interest on unpaid compensation under the LAC Act

Subsequent to the trial, the Court asked the parties to provide a copy of the order in the Government Gazette determining the rate of interest payable in respect of unpaid compensation under the LAC Act. The Court also invited the parties to provide supplementary submissions as to the appropriateness or otherwise of the adoption of the rate of interest payable under s 52 of the LAC Act in the current proceeding.

It then emerged that since 1987, the Governor in Council has fixed the rate of interest payable under s 52 of the LAC Act at the highest possible level – namely, at the rate fixed by the Attorney General under s 2 of the PIR Act.[92] That rate is currently 10% per annum.
[92]Attorney-General, ‘Land Acquisition and Compensation Act 1986 Section 52 – Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G44, 11 November 1987, 3036; corrected by Secretary to the Attorney-General’s Department, ‘Land Acquisition and Compensation Act 1986 Section 52 – Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G6, 17 February 1988, 315.

Minister’s submissions

The Minister submits that the present rate of interest under s 52(1) of the LAC Act (being the penalty interest rate fixed under s 2 of the PIR Act) is both compensatory and punitive. It compensates plaintiffs for being kept out of their money, but also imposes a penalty above the measure of a plaintiff’s actual loss to encourage the defendant to resolve the dispute as quickly as possible.

According to the Minister, it is unclear why the Governor in Council fixed the rate at the highest rate permissible under s 52(2) of the LAC Act. The Governor in Council did not publish any reasons for this decision. The rate of interest under s 52 of the LAC Act is not referred to in the second reading speech for the Land Acquisition and Compensation Bill 1986.[93]
[93]Victoria, Parliamentary Debates, Legislative Assembly, 8 May 1986, 2013–2017 (Frank Wilkes, Minister for Housing).

Further, the Minister submits, the imposition of a penalty interest rate was not recommended in either the Morris Report or in the Report to the Minister for Planning on the Morris Report prepared by the Land Acquisition Task Group. The Morris Report expressly recommended against the award of penalty interest, recommending instead that a fair market rate be imposed below the maximum rate of interest for public securities. [94]
[94]Morris, above n 8, [559].

The Minister then sought to distinguish claims arising under pt 5 of the PE Act from those under the LAC Act. If interest is to be awarded, the interest rate for disputed compensation under pt 5 of the PE Act should be at a compensatory rate. It is not appropriate to apply the interest rate fixed by the Governor in Council under s 52(1) of the LAC Act.

It was submitted that there are very stark differences between the compensation regimes under pt 5 of the PE Act and the LAC Act, and that Parliament’s evident refusal to apply s 52 of the LAC Act to a proceeding for the determination of interest under pt 5 of the PE Act indicates, at most, that Parliament intended for the Court (in the case of a disputed claim referred to it) and not the Governor in Council to exercise the discretion to determine the appropriate rate of interest for an unpaid compensation sum. There would then be a potent financial incentive to pursue a proceeding in the Court rather than in the Tribunal. If found otherwise, a claimant whose claim did not meet the minimum compensation threshold to access the Court jurisdiction was exposed to unfairness.

Finally, the Minister submitted that just as, under s 52, Parliament and the Governor in Council have provided a uniform interest rate for all disputed claims determined by the Court and the Tribunal under the LAC Act, the Court should, in exercising its discretion under s 60(1) of the SC Act, seek to provide as close as possible to a uniform interest rate for all disputed claims determined by the Court and Tribunal under the Act. This would result in the Court either not giving interest at all, or at most, giving interest so as to only compensate claimants for being kept out of their money for the course of the proceeding.

The claimants’ submissions

In their supplementary submissions, the claimants said that they were unaware of any previous case arising under pt 5 of the PE Act where the Court had fixed a rate of interest other than that fixed under s 2 of the PIR Act. For example, the Court adopted the penalty interest rate in Mario Piraino Pty Ltd v Road Corporation.[95] Both the LAC Act and pt 5 of the PE Act provide for the payment of compensation to a landowner, in the first case upon the compulsory acquisition of land and in the second, upon a step being taken towards the acquisition of the land by the reservation of the land for a public purpose. An acquiring authority is only able to commence to acquire land, whether by agreement or compulsory process, if the land has already been reserved for a public purpose.[96] Where land is reserved, but not yet acquired, there is no logical basis on which a claimant under the PE Act should receive interest at a lower rate than a claimant under the LAC Act.
[95][1993] 1 VR 130; [1991] 2 VR 532.
[96]LAC Act s 5.

Secondly, the claimants submitted that the payment of interest was, to some extent, within the control of the Minister. While the PE Act does not impose any compulsion on the Minister to pay an advance of compensation, if the Minister does so, interest will abate to the extent of the payment. As a result, it is appropriate to have regard to the interest rate fixed under s 52 of the LAC Act, as claims under the PE Act and the LAC Act both arise out an acquiring authority taking a step in the process of acquiring the land. The fact that the rate of interest fixed under s 52 of the LAC Act is the same as the maximum interest rate fixed for the purposes of s 60(1) of the SC Act supports the conclusion that there is no good reason in this case why the Court should award interest other than at the rate fixed under s 2 of the PIR Act.

The significance of the rate of interest payable under the LAC Act

Part 5 of the PE Act and the LAC Act are both concerned with the payment of compensation in respect of the acquisition of land by an authority. An essential step in the process is normally the reservation of land to be acquired by, or under, a planning instrument for a public purpose.[97] At this point, pt 5 of the Act provides for a right to compensation when a specified trigger event has arisen.[98]
[97]LAC Act s 5(1).
[98]PE Act s 99.

In many cases where land is reserved for public acquisition, or a public acquisition overlay is imposed, an authority may proceed immediately to acquisition. In those cases, the provisions of the LAC Act apply. In cases where there is a delay between reservation for public purposes, or the imposition of a public acquisition overlay, and actual acquisition of the land by the authority, the landowner may bring a claim for compensation under pt 5 of the PE Act. It is the authority that decides when land acquisition will occur. It is hard to see why there should be any difference as to the interest payable to the landowner in either circumstance and much to be said for a level of consistency between the interest to be awarded on claims under the LAC Act and claims under pt 5. While there are important differences between the LAC Act and pt 5, it is hard to see why the rates of interest awarded under the respective legislation should be different, or why, if penalty interest is awarded under the LAC Act, only compensatory interest can be awarded if the claim is made under pt 5 of the Act.

I reject the submission on behalf of the Minister that there is any discernible purpose to be found in the existing legislation that a penalty rate of interest should be payable for claims under the LAC Act while only a compensatory rate of interest should be payable under s 60(1) of the SC Act for claims under pt 5 of the PE Act. There is no logic in this distinction, given that the reservation of the land for a public purpose, or the imposition of a public acquisition overlay, is an essential step in the acquisition and resulting compensation process under both statutes.

As submitted by the claimants, it is significant that since 1987, the rate of interest payable under s 52 of the LAC Act has been the highest rate possible – namely the penalty interest rate. The adoption of the penalty interest rate by the Governor in Council for over 30 years suggests that the Court should do likewise under s 60(1) of the SC Act in proceedings under pt 5 of the PE Act.

I also accept that there is some force in the claimants’ submission that the amount of interest payable is largely in the hands of an acquiring authority. If comprehensive and well directed offers are made by authorities consistently with their obligations as model litigants, and advances of compensation are made at appropriate times, minimal interest will accrue. If offers and advances of compensation are not made, the interest that can accrue can be substantial.

The Minister’s concern that the award of interest under s 60(1) of the SC Act would be a potent financial incentive to pursue a proceeding in the Court rather than the Tribunal is unpersuasive. Claimants have the statutory right to elect whether they proceed in the Court or VCAT, unless the claim is less than $50,000, or the Court determines that the claim raises questions of unusual difficulty or of general importance, whereupon the proceeding is determined by the Court.[99]
[99]LAC Act s 81(1).

In my view, it is a relevant matter in the exercise of the Court’s discretion with respect to an award under pt 5 of the PE Act that the rate of interest fixed by the Governor in Council under s 52 of the LAC Act since 1987 for the payment of interest in land compensation cases has been the penalty interest rate.[100]
[100]Attorney-General, ‘Land Acquisition and Compensation Act 1986 Section 52 – Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G44, 11 November 1987, 3036; corrected by Secretary to the Attorney-General’s Department, ‘Land Acquisition and Compensation Act 1986 Section 52 – Determination of Rate of Interest’ in Victoria, Victoria Government Gazette, No G6, 17 February 1988, 315.

Having considered all of the circumstances of the present case, the arguments advanced by the parties, and in the exercise of my discretion, I will award the claimants the penalty interest rate.

Conclusion

The claimants are successful in their claims for increased compensation in relation to the residence ‘Arva’ under s 100(1) of the PE Act, and in their claim for interest under s 60(1) of the SC Act. The Court will award compensation in accordance with the agreement reached by the parties and the determination of the Court in relation to the claim for increased compensation and for interest. Simple interest at the rate of 10% per annum will be allowed on the amount in dispute between the parties as ultimately awarded by the Court from the commencement of the proceeding with full allowance to be given for the advance of compensation by the Minister.

Head of compensation	Agreed Sum
Financial loss suffered as the natural, direct and reasonable consequence of the reservation of the [properties] for a public purpose under the Melton Planning Scheme and the Wyndham Planning Scheme (s 98(1)(a) of the … Act)	$9,056,600.00
Legal, valuation or other expenses reasonably incurred in preparing and submitting the claim (s 101 of the … Act)	$75,992.00
Total	$9,132,592.00

[2017] VSC 774

19 December 2017