Roads and Traffic Authority v Perry - [2001] NSWCA 251

NEW SOUTH WALES COURT OF APPEAL

CITATION: RTA v Perry & Anor [2001] NSWCA 251

FILE NUMBER(S):
40408/99

HEARING DATE(S): 23 May 2001, 24 May 2001

JUDGMENT DATE: 23/08/2001

PARTIES:
ROADS & TRAFFIC AUTHORITY OF NEW SOUTH WALES
v
RAYMOND THOMAS PERRY & ANOR

JUDGMENT OF: Handley JA Powell JA Hodgson JA

LOWER COURT JURISDICTION: Land & Environment Court

LOWER COURT FILE NUMBER(S): LEC 30009/96

LOWER COURT JUDICIAL OFFICER: Bignold J

COUNSEL:
Appellant - G K Downes QC/J A Ayling
Respondents - D F Jackson QC/J J Webster

SOLICITORS:
Appellant - I V Knight, Crown Solicitor
Respondents - Levy Peatman, Ryde

CATCHWORDS:
LAND VALUATION - compulsory acquisition - method of calculating compensation - special potential of land - need to establish scheme underlying resumption before calculating compensation

LEGISLATION CITED:
Land Acquisition (Just Terms Compensation) Act 1991
Roads Act 1993
Environmental Planning and Assessment Act 1979
Public Works Act 1912

DECISION:
Appeal allowed with costs - orders made

JUDGMENT:

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40408/99
LEC 30009/96
HANDLEY JA
POWELL JA
HODGSON JA

23 August 2001
ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES v RAYMOND THOMAS PERRY & ANOR

LAND VALUATION - compulsory acquisition - method of calculating compensation - special potential of land - need to establish scheme underlying resumption before calculating compensation

The Roads and Traffic Authority (the RTA) appealed from the judgment of Bignold J in the Land and Environment Court in which the Judge determined the compensation payable to Perry in accordance with ss 55 and 56(1) of the Land Acquisition (Just Terms Compensation) Act 1991 for the compulsory acquisition of his land for the purposes of the Roads Act 1993. The decision turned on the relationship between the decisions in Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 (the Raja’s case) and Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 (Pointe Gourde). The trial Judge applied the Raja’s case and awarded compensation accordingly. The RTA contended at first instance and on appeal that Pointe Gourde applied and that the compensation should have been calculated on that basis.
The market value of the land as grazing land was agreed. The dispute arose as to whether the land’s potentiality as a source of fill suitable for use in the construction of an embankment for a new section of the Pacific Highway increased the compensation.
HELD, allowing the appeal: (1) Collins v Livingstone Shire Council (1972) 127 CLR 477 establishes that the Raja’s case and Pointe Gourde can both be applied in assessing a claim for compensation. Bignold J’s findings attracted the relevant principles in the Raja’s case and those findings were not vitiated by legal error. However, as Collins established, it was also necessary to consider the Pointe Gourde principle; (2) The distinction between the Raja’s case and Pointe Gourde is that in the former there were two schemes and in the latter only one. Bignold J failed to identify the scheme underlying the acquisition of the property as required by the Pointe Gourde principle. The claimant would be entitled to compensation for any increase in value entirely due to an independent scheme which did not underlie this acquisition. However any increase in value entirely due to the scheme which underlay the acquisition would have to be excluded; (3) The proceedings must be remitted to the Land and Environment Court to identify the scheme which underlay this resumption and to redetermine the compensation on that basis; (4) For the purpose of calculating the compensation payable, the appropriate market royalty rate for the landfill which could be taken from the quarry is the price at which a willing but not anxious land owner would sell the right to obtain quarry products from his land to a willing but not anxious quarry master.
ORDERS
(1) Appeal allowed with costs;
(2)Set aside the determination of compensation for the market value of the land taken in the sum of $1,000,000, and the order that the appellant pay the respondents’ costs of the claim for compensation, other than the costs referred to in Order 3 made in the Land and Environment Court;

(3)Direct the parties to bring in short minutes to give effect to these reasons before Hodgson JA on Thursday 6 September at 9.30 am unless agreed short minutes have earlier been filed.

THE SUPREME COURT
OF NEW SOUTH WALES
COURT OF APPEAL
CA 40408/99
LEC 30009/96
HANDLEY JA
POWELL JA
HODGSON JA

23 August 2001
ROADS AND TRAFFIC AUTHORITY OF NEW SOUTH WALES v RAYMOND THOMAS PERRY & ANOR
JUDGMENT

HANDLEY JA: The Roads and Traffic Authority (the RTA) has appealed from the judgment of Bignold J (7 May 1999) in Class 3 of the jurisdiction of the Land and Environment Court. The Judge determined the compensation payable to Mr Perry (the claimant) for the compulsory acquisition of 9.44 hectares of land on both sides of the Pacific Highway at Perry’s Hill (the land taken), near Repton, south of Coffs Harbour, at $1,164,794. The acquisition, stated to be “for the purposes of the Roads Act1993” was effected on 3 November 1995. The appeal is limited to questions of law (Land and Environment Court Act s 57(1)).
The decision of the trial Judge, and most of the argument in this Court, turned on the relationship between the decisions in Raja Vyricherla Narayana Gajapatiraju v Revenue Divisional Officer Vizagapatam [1939] AC 302 (the Raja’s case) and Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565 (Pointe Gourde) and the decisions of the High Court in which they have been considered. The trial Judge held that the Raja’s case applied and awarded compensation of $1m on this basis. The RTA contended below and in this Court that Pointe Gourde and Emerald Quarry Industries Pty Ltd v Commissioner of Highways (1979) 142 CLR 351 (Emerald Quarry) applied and that compensation should be determined on that basis.
In fact the compensation had to be determined in accordance with the Land Acquisition (Just Terms Compensation) Act 1991 (the Act) and in particular ss 55 and 56(1). Section 55 provides that in determining compensation regard must only be had to the matters specified. These relevantly were market value and losses due to disturbance. Section 56(1)(a) provides that:
“‘Market Value’ of land … means the amount that would have been paid for the land if it had been sold … by a willing but not anxious seller to a willing but not anxious buyer, disregarding …:
(a) any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired”.
The first part of this definition embodies the basic principle stated in Spencer v The Commonwealth (1907) 5 CLR 418 and in the Raja’s case. Para (a) of the definition embodies the Pointe Gourde principle.
Prior to the resumption the land taken was being used for grazing purposes, but it included the site of a disused quarry. During the trial the parties agreed that its market value as grazing land was $158,000. They remain in dispute as to whether the land’s potentiality as a source of fill suitable for use in the construction of an embankment for a new section of the Pacific Highway (the special potential) increased the compensation. The claimant claimed for the value of this special potential under s 56(1) in accordance with the Raja’s case.
It was common ground that the land taken provided 478,000 m³ of fill for the project, principally for the embankment from the north bank of the Bellinger River across the flood plain. It came from excavation for a 3-lane carriageway through Perry’s Hill which allowed for a future dual carriageway. The RTA’s principal submission on appeal was that compensation had been awarded contrary to s 56(1)(a).
The embankment formed part of what became known as the Raleigh Deviation project. On 27 March 1991 the RTA asked consultants to prepare the Environmental Impact Statement for a project which involved the construction of approximately 6.5 kms of new highway between Urunga and Repton on opposite banks of the Bellinger River. A single carriageway was envisaged, including an embankment across the flood plain north of the river below the once in a hundred years flood level (1% flood level). At this stage the project did not involve the resumption of any part of the claimant’s land.
The EIS was submitted in September 1991. The RTA, as the determining authority, followed the procedures required by Pt 5 of the Environmental Planning and Assessment Act. The EIS was made available for public inspection, and an opportunity was provided for representations to be made by affected parties for consideration by the RTA and its consultants.
Over the next few years the planning process stopped and started and the project evolved and was extended. As finally implemented it involved a different route on the flood plain with new bridges over the creeks, an enlarged embankment for a dual carriageway above the 1% flood level, and the highway was carried further north through the land taken. On 2 September 1994 the claimant learned for the first time of the RTA’s intention of resuming some of his land.
At first glance one would think it was almost clear beyond argument that the market value found by the trial Judge because of the special potential was due in substantial measure to the carrying out, or the proposal to carry out, the public purpose for which the land was acquired. The RTA or its contractor were the only possible purchasers interested in the special potential. If there had never been such a proposal, or if it had been abandoned or deferred, there would have been no requirement for the fill and the land taken would not have been worth the sum awarded. However the case is not that simple.
The Judge rejected the claimant’s argument that the true purpose of the acquisition was to secure a source of fill, and held that there were at least two purposes; to obtain the fill and to continue the highway deviation north of Man Arm Creek through the claimant’s land. Each was a principal purpose of the acquisition, and both qualified as purposes of the Roads Act 1993.
The Judge’s findings establish that the land taken had the special potential for which the RTA would have been prepared, “in friendly negotiations”, to pay more than its grazing value. He held that these findings brought this case squarely within the Raja’s case and entitled the claimant to compensation accordingly.
On the other hand in Pointe Gourde Lord MacDermott said ([1947] AC at 572-3):
“… compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition. As it was put by Eve J in South Eastern Ry. Co. v London County Council [1915] 2 Ch 252, 258 ‘ Increase in value consequent on the execution of the undertaking for or in connection with which the purchase is made must be disregarded’. This rule was recognised by the Full Court … for … Blackall CJ [said] ‘ In the present case, although a value as a quarry had admittedly been created prior to the acquisition, that value was increased by the fact that a base was being established in the vicinity for which a large quantity of stone in a readily accessible situation was required. In other words, the value was enhanced by the scheme of the party acquiring the land, and that is not a factor for which additional compensation may properly be awarded’. On behalf of the appellants it was said that the relevant scheme … was the acquisition of the quarry land and not the construction of the naval base in its vicinity. Their Lordships are unable to accede to this argument. The case stated finds that the lands acquired were ‘required by the United States for the establishment of a naval base in Trinidad’. That being so the nature of the scheme of this acquisition is clear and the award of $15,000 can only be related to the additional value which it gave to the quarry land”. (emphasis supplied)
Pointe Gourde was applied in Rugby Joint Water Board v Shore-Fox [1973] AC 202, and again in Fletcher Estates Ltd v Environment Secretary [2000] 2 AC 307, 315 where Lord Hope said:
“The whole question must be approached upon a consideration of the state of affairs which would have existed if there had been no scheme”.
The apparent difficulty of reconciling the Raja’s case and Pointe Gourde in their application to this case requires a close examination of both. The Raja’s case is authority for many propositions which could not be disputed and there is no need to refer to these aspects of that decision. It is however significant that Lord Romer, who delivered the advice of the Board, recognised what has become known as the Pointe Gourde principle. He said ([1939] AC at 318-320):
“Any enhanced value attaching to the land by reason of the fact that it has been compulsorily acquired for the purpose of the acquiring authority must always be disregarded … It must, of course, be conceded that the existence of this scheme must not be allowed to enhance the price, if by ‘scheme’ is meant the fact that compulsory powers of acquisition have been obtained for the purpose of carrying into effect a particular scheme for the profitable use of the potentiality. The valuation must always be made as though no such powers have been acquired, and the only use that can be made of the scheme is as evidence that the acquiring authority can properly be regarded as possible purchasers. But their Lordships have some difficulty in seeing why the taking into consideration of the fact that the special value exists for those purchasers only should be said to be allowing the existence of the scheme to enhance the value of the lands. The only difference that the scheme has made is that the acquiring authority, who before the scheme were possible purchasers only, have become purchasers who are under a pressing need to acquire the land; and that is a circumstance that is never allowed to enhance the value”.
At 321 Lord Romer cited Fraser v City of Fraserville [1917] AC 187, 194 with approval where Lord Buckmaster said:
“… the value to be ascertained is the value to the seller of the property in its actual condition at the time of expropriation with all its existing advantages and with all its possibilities, excluding any advantage due to the carrying out of the scheme for which the property is compulsorily acquired, the question of what is the scheme being a question of fact for the arbitrator in each case”. (emphasis supplied)
The ratio of the Raja’s case which is relevant in the present appeal is at 323 where Lord Romer said:
“… even where the only possible purchaser of the land’s potentiality is the authority that has obtained the compulsory powers, the arbitrator in awarding compensation must ascertain to the best of his ability the price that would be paid by a willing purchaser to a willing vendor of the land with its potentiality in the same way that he would ascertain it in a case where there are several possible purchasers …”.
The real difficulty lies, not in this statement of principle, but in its application to the facts of that case. The land was acquired in connection with the development of a new harbour at Vizagapatam, on which construction work began in 1920. The Raja’s land was located on the south side of the harbour and included a spring which yielded 50,000 gallons a day of excellent drinking water. In 1926, when the work was well advanced, the harbour authority took expert advice about the malaria problem on the south side of the harbour where land had been earmarked for industrial use.
The expert advised that it would be necessary to close the wells in the nearby villages which were breeding grounds for mosquitos but this would only be possible if gravity water supply could be provided. An available source was identified in the spring not far away. The authority also realised that water from this source could be made available to the industries that might be established in the area. This scheme, which was carried out, involved the acquisition of the spring and its catchment area, and a strip leading to the harbour. The acquisition was effected on February 13, 1928 (308-10).
Lord Romer held (310, 326) that the scheme underlying the acquisition was for the provision of running water to the land on the south side of the harbour. It had commenced in 1926. It was not the original scheme for the construction of the harbour and the development of adjacent land which had commenced prior to 1920. As he said at 326:
“The scheme for utilisation of the water and the carrying out of anti-malarial operations … was linked up with a bigger scheme for getting rid of breeding places of mosquitos all around the southern side of the harbour so as to make the whole of that area fit for development … the special adaptability of the land for the supply of drinking water had no value apart from the scheme for which the acquisition was made”.
At the date of acquisition the harbour works were far advanced (327) and Lord Romer said (330):
“… the land must be valued not at the sum it would be worth after it had been acquired by the Harbour Authority and used for anti-malarial purposes, but at the sum that the Authority ‘in a friendly negotiation’ … would be willing to pay on February 13, 1928 in order to acquire it for those purposes”.
He had earlier referred (313-4) to the need to allow, by way of deduction, for “the degree of possibility that the land might never be so required or might not be so required for a considerable time”. However in that case, where the land was acquired when the opening of the harbour at the end of 1929 was in contemplation, there was little scope for any such discount.
The Board, at the request of both parties, and “giving the matter the best consideration they can” (330), fixed the additional compensation for this potentiality at Rs 40,000 which, as Bignold J pointed out, was more than 2½ times the value of the land if this potentiality was ignored. However it was only 7.92% of the award of Rs 1,05,000 (505,000 rupees) made by the Subordinate Judge based on a capitalisation at 20 years’ purchase of the market value of the water after allowing for the costs of its reticulation (325) which represented its value to the Harbour Authority.
The Raja’s case has been considered by the High Court on a number of occasions. In Geita Sebea v The Territory of Papua (1941) 67 CLR 544 (Geita Sebea), which concerned the resumption of the reversion of land leased by the Crown and used by it as an aerodrome, the Raja’s case was cited by Starke J (551) for the proposition that “any enhanced value attaching to the land by reason of the fact that it is being compulsorily acquired for the purpose of the acquiring authority must be disregarded”. Williams J cited it (557) for the proposition that a potentiality, which is of interest to only one purchaser, is not to be disregarded.
The decision was referred to again in Turner v Minister of Public Instruction (1956) 95 CLR 245, which concerned the valuation of land ripe for sub-division. Williams J, who dissented, cited the case at 281, 282 and 283, but the only relevant citation (282) was to the need to discount for the possibility that the land might never be required for its special potentiality, or not for a long time. The decision was also referred to by Kitto J at 286, 288 and 292, but the only relevant citation (288) was to the principle that “it is the possibilities of the land and not its realised possibilities that must be taken into consideration”.
Collins v Livingstone Shire Council (1972) 127 CLR 477 (Collins) is the only case where the High Court has considered both Raja and Pointe Gourde. The Council had constructed a circular concrete water reservoir partly on land it owned but principally on the land of the appellants. The Council then resumed the land and the appellants claimed for the value of their part of the reservoir.

The Court applied the Raja’s case and Geita Sebea (above) in holding that the potentiality created by the construction of part of the reservoir on the resumed land had to be reflected in the compensation even though the Council was the only interested purchaser. See per Walsh J at 491, and per Gibbs J at 498-9.
The Court also applied Pointe Gourde in holding that the appellants’ land had to be valued on the supposition that the rest of the reservoir had not been constructed on the Council’s land. This improvement added value to the appellants’ land but this was entirely due to the scheme underlying the acquisition which Gibbs J said (497) “provided for the construction of a complete reservoir”. He referred to Pointe Gourde (497) and the other Judges applied the principle without referring to the decision. See for example per Barwick CJ at 488.
Collins establishes that the Raja’s case and Pointe Gourde can both be applied in assessing a claim for compensation. Although the potentiality created by the improvement on the appellants’ land had been created pursuant to the scheme, this improvement could not be ignored because it was physically part of the resumed land. To that extent only the Pointe Gourde principle was displaced.
In Emerald Quarry (1979) 142 CLR 351, Pointe Gourde was applied in considering compensation for the acquisition of a leasehold quarry for the purposes of the South Eastern Freeway out of Adelaide. The appeal was from the decision of Wells J reported (1976) 18 SASR 438. Questions of law had earlier been referred to the Full Court and its decision is reported (1976) 14 SASR 486.
The High Court in dismissing the appeal held that Pointe Gourde required the Court to ignore the effects, direct and indirect, of the construction of the freeway. The Court had to leave out of account the increased demand for the products of the quarry for the construction of the freeway and for the additional development. These conclusions depended on the characterisation of the scheme underlying the acquisition. At 357 Gibbs J quoted the statement of Lord Russell in Melwood Units Ltd v Commissioner of Main Roads [1979] AC 426, 434 that a landowner could not “claim compensation to the extent to which the value of his land is enhanced by the very scheme of which the resumption forms an integral part” and continued:
“The scheme underlying the acquisition in the present case was the building of a freeway. It is clear that any enhancement to the value of the land caused by the building of the freeway should be disregarded”. (emphasis supplied)
See also per Mason J at 363. The Raja’s case was not referred to in the judgments of Wells J or the High Court, although it was referred to in the judgment of Bray CJ in the earlier proceedings. Mr Downes QC for the RTA contended that this decision was directly in point, and required the compensation awarded by Bignold J in reliance on the Raja’s case to be disallowed.
While the High Court was free in 1979 to depart from the Raja’s case, or to hold that it had been partially overruled by Pointe Gourde, it would be surprising if it did this in the absence of argument which directly raised these points. The Court could not possibly have overlooked the Raja’s case and is not likely to have refused to follow it on any point without saying so. Wells J of course was bound by the decision.
There must be some explanation for the absence of any reference to the Raja’s case in the judgments of Wells J and the High Court and it seems to me there are two. In the Full Court, Bray CJ said (above at 497):
“I do not doubt that the principle laid down in [the Raja’s case] [1939] AC 302 and Fraser’s case (1963) 40 DLR (2d) 707 would apply here if there were any facts to call that principle into operation. So far as I can see there are none”.
This must mean that the quarry had no special potential as a source of material for the freeway. There was no flood plain nearby on which an embankment was to be constructed requiring almost 478,000m³ of fill, and excavation at Mount Barker may have provided the normal requirements of fill whichever route was followed. This is supported by the statement of Wells J at 455:
“There is no doubt … that the Commissioner of Highways has already used, and will probably continue to use, material taken from the quarry for constructing the freeway. I am, however, satisfied - and I find - that it was not with such a use in mind that the Commissioner acquired the subject land; he was prompted by engineering considerations alone.
The claimant submitted that, in some way, not altogether clear to me, … the past and potential use of the quarry materials should swell the compensation payable. I cannot accept this submission. It is, of course, true that where the acquiring authority sees in the land to be acquired some special advantage for its own purposes that advantage may have a bearing on the amount of compensation payable. But general principles would ordinarily treat the incidental - almost fortuitous - use made of the acquired land by the Commissioner as irrelevant: see Vile v Manawatu County [1959] NZLR 337. I reject this item of claim”.
I therefore reject the arguments for the RTA that Pointe Gourde has relevantly overruled the Raja’s case, and that Emerald Quarry requires the award of additional compensation on the Raja principle to be rejected.
The Pointe Gourde principle was again considered in Housing Commission of NSW v San Sebastian Pty Ltd (1978) 140 CLR 196 (San Sebastian) in the context of s 124 of the Public Works Act which Jacobs J, who wrote the principal judgment, said restated that principle in statutory form (205). The case is important because it was necessary for the Courts to determine with some care the true scope of the scheme underlying the acquisition.
Waddell J had found (para 23 of the stated case, 202-3) that a proposed rezoning of the land for residential purposes was a step in the resumption process so that its depressing effect on value had to be ignored. Jacobs J said at 205-6:
“A difficulty which arises in the application of this principle [Pointe Gourde] is that valuation is in the ordinary case based on market value and, if the proposed public purpose and the possibility or likelihood of resumption therefor has become known prior to the date of resumption, the market value at the time of resumption will probably reflect by way of increase or decrease the possibility or likelihood of resumption for that public purpose. Therefore that value cannot be accepted. Yet it is inevitably in most cases the starting point of the process of valuation. With the actual market value at the time of resumption as the starting point, it is then necessary to determine whether that value has been depressed or elevated by the market’s foreknowledge of the possible or likely public purpose and consequent resumption. It is therefore inevitable in such circumstances that the public purpose has to be taken into account in the process of valuation but it can be taken into account only for that purpose”.
Jacobs J emphasised the distinction between the market’s awareness of the possibility of a zoning or resumption for public purposes before action to initiate the resumption, and official action taken for that purpose. See at 207, 208, 211, 212, 213. He took a broad view of what constituted “a step in the process of resumption”, a paraphrase of the expressions “the establishment of public works” in s 124 and “the scheme underlying the acquisition” in Pointe Gourde.
The case was concerned with possible changes to zoning restrictions in the context of negotiations between the Commonwealth and State Governments and the Sydney City Council, between December 1972 and June 1975 (200-201), which culminated in the resumption in July 1975. Jacobs J said (213) that the qualification in s 124 was:
“… wide enough to cover the whole subject matter of the establishment of the particular public work”.
He quoted extensively from the judgment of Hope JA in this Court (212-4) but not the following passage ((1977) 37 LGRA 191, 202-3), most of which was quoted by Bignold J (par 90):
“I do not think that … uncertainty affects the application of the qualification [in s 124] although it may of course affect the amount of any resulting alteration in value. Thus in the railway cases, … it was not necessary for the exact identity of the proposed site of the works to be known … If the government announced that an existing railway to A was to be extended to B any resulting increase of the value of land in B would be disregarded, even though the exact route of the railway or the exact site of the new railway station was not known, or, before resumption, was changed to other land. …
The next question concerns the scope of the matters preceding the date of resumption which fall within the ambit of the qualification. That it can apply to matters other than the actual construction of the works, … has long been accepted … The decision to go ahead with the proposal or scheme which has resulted in the resumption of the land is clearly within the ambit of the qualification … such a decision is almost inevitably preceded by actions of many kinds which, if known, show that the works will possibly or probably be carried out. If they are actions by the authority who finally decides to carry out the works … and if they are part of a series of actions leading up to, and done in contemplation of, the making of the decision to construct the works, any alteration to the value of the land resulting from them should … fall within the ambit of the qualification. In Rugby Joint Water Board v Shore-Fox [1973] AC 202, 215 Lord Pearson used the expression ‘genesis … of the scheme’ to describe actions of the kind I am seeking to define. In describing the effect of the qualification Innes J said in Black v Commissioner for Railways (1890) 11 NSWR [L] 160, 165: ‘… the land is to be assessed at the value it would have had if the railway for which it is resumed had never been contemplated’ … In my opinion Innes J correctly construed the qualification”. (emphasis supplied)
Wilson v Liverpool Corporation [1971] 1 WLR 302, a decision of the Court of Appeal, contains a useful analysis of what constitutes a scheme for present purposes. At 309 Lord Denning MR said:
“A scheme is a progressive thing. It starts vague and known to few. It becomes more precise and better known as time goes on. Eventually it becomes precise and definite, and known to all. Correspondingly its impact has a progressive effect on values. At first it has little effect because it is so vague and uncertain. As it becomes more precise and better known, so its impact increases until it has an important effect. It is this increase, whether big or small, which is to be disregarded at the time when the value is to be assessed”.
Widgery LJ said at 310:
“Whenever land is to be compulsorily acquired this must be in consequence of some scheme or undertaking or project. Unless there is some scheme or undertaking or project, compulsory powers of acquisition will not arise at all, and it would, I think, be a great mistake if we tended to focus our attention on the word ‘scheme’ as though it had some magic of its own. It is merely synonymous with the other words to which I have referred, and the purpose of the so-called Pointe Gourde rule is to prevent the acquisition of the land being at a price which is inflated by the very project or scheme which give rise to the acquisition … It is for the tribunal of fact to consider just what activities - past, present or future - are properly to be regarded as the scheme within the meaning of this proposition”. (emphasis supplied)
Bignold J’s findings referred to in para 12 of these reasons attract the relevant principles in the Raja’s case and in my judgment those findings were not vitiated by legal error. However, as Collins established, it was also necessary to consider the Pointe Gourde principle. Lord Romer applied this principle in the Raja’s case (paras 15-17 of these reasons), and took care to identify the scheme which underlay that acquisition (para 20 of these reasons).
Bignold J followed the decision of the Supreme Court of Canada in Fraser v The Queen (1963) 40 DLR (2d) 707 where the majority applied the Raja’s case and not Pointe Gourde. This decision has never been considered by the High Court, and I have considerable difficulties with the judgments. The scheme which underlay the acquisition dated from the decision of the Dominion Cabinet recorded in an order in Council of 17 October 1951 (713). The Dominion let the contract for the construction of the causeway on 8 June 1952 and this gave the contractor the right to obtain 9 million tons of rock from the claimant’s land (720). The resumption itself was effected later on 9 July 1952 (713).
Some such project had been under consideration since 1943 (713) but there was no prospect of the rock being exploited commercially without such a project. Judson J said (712): “Whatever value this property has, other than its value as waste land, it gets from the scheme”. However with respect this was not entirely correct because the possibility of some such scheme had been openly canvassed from 1943 onwards. This would have increased the value of the land and, in accordance with the Raja’s case, this added value should have been reflected in an award of additional compensation, such as the $40,000 over the waste land value awarded by the trial Judge.
I also have difficulty with the judgments of the majority, particularly that of Ritchie J. Their decision to award compensation of $360,000 may possibly be supported on the facts because the construction contract, with the right to take 9 million tons of rock from the claimant’s land, had been entered into before the resumption was effected. However in my respectful opinion the majority decision is contrary to Pointe Gourde and the High Court decisions in which that principle has been applied, and I decline to follow it.
Bignold J considered Pointe Gourde in paras 79-132 of his reasons and concluded (para 133):
“… the … principle has been held by the High Court … not to exclude the value of the special potentiality … of compulsorily acquired land even where … [it] is only realisable in the hands of the acquiring authority, and even where [it] … is relevant to the public purpose for which the land is compulsorily acquired. In so concluding the High Court has applied the Raja principle … [which] has not been abrogated or displaced by the Pointe Gourde principle”.
He considered s 56(1)(a) and said (para 138):
“I would interpret s 56(1)(a) … conformably to the meaning ascribed … [to] the final phrase in s 124 of the Public Works Act … so as not to abrogate the Raja principle concerning the value of [the] special potentiality … of the compulsorily acquired land”.
At para 143 he said:
“… both principles (i.e. the Raja’s case and Pointe Gourde) may apply in a given case … but where they do the Pointe Gourde principle does not require the special potentiality … to be disregarded even where the acquiring authority is the only possible purchaser and the special potentiality … is related to the public purpose for which the land is acquired”.
After finding that the land taken had been acquired for two public purposes (para 11 of these reasons), he concluded:
“… none of the Respondents’ objections to the validity of the Raja valuation or to the applicability of Raja to the facts of the present case has prevailed and … I hold that Raja applies … and provides both the necessary legal and valuation support for [the claimant’s] Raja valuation”.
The Pointe Gourde principle requires the Court to identify “the scheme for which the property is compulsorily acquired”; Fraser v City of Fraserville cited in para 16 of these reasons. Until this has been done it is not possible to determine how the Raja and Pointe Gourde principles interact. This was done in Raja (par 20)¸ Pointe Gourde (par 13), Collins (par 28), Emerald Quarry (par 31) and San Sebastian (pars 38-41).
Unfortunately Bignold J did not identify the scheme which underlay this acquisition, perhaps because he was never asked to do so. In par 158 he said:
“… a vast body of documentary and oral evidence was given concerning the evolution of the Raleigh Deviation of the Pacific Highway … Based upon this evidence, the applicant submitted that the Court would find that the true and dominant public purpose for which the applicants’ land was compulsorily acquired was for the purpose of obtaining some 500,000m³ of fill for deployment in constructing embankments across the flood plain to accommodate the Raleigh Deviation”.
He then referred to Pointe Gourde, noted that in that case the appellant’s submission as to the scope of the scheme failed because of findings in the stated case, and continued:
“So here, it was submitted that if the true and dominant purpose for the acquisition of the applicants’ land was for the obtaining of fill, what s 56(1)(a), or the Pointe Gourde principle, required to be disregarded in assessing market value was any enhanced value in the land caused by the carrying out of the public purpose or the proposal to carry it out (and not the construction of the highway deviation). Ultimately in view of my primary holding on the applicability of Raja I do not think that I need explore the applicants’ submission in this behalf ”.
He concluded (par 161) that his finding that the land was taken for at least two purposes did not exclude the Raja principle.
This was an extremely difficult case but in my judgment Bignold J erred in law in holding that because the principle in the Raja’s case applied, there was no scope for the operation of the Pointe Gourde principle in s 56(1)(a). The claim and the RTA’s submissions required him to identify the scheme which underlay this acquisition. A tribunal of fact which asks itself the wrong question of fact, or fails to ask itself the correct question, commits an error of law. See Azzopardi v Tasman UEB Industries Ltd (1985) 4 NSWLR 139, 156 per Glass JA.
In the Raja’s case the identification of a separate water supply scheme dating from 1926, which was not simply part of an evolving harbour scheme dating from before 1920, was fundamental to the decision. The development of the harbour, the malaria problem and the projected industrial development had increased the value of the Raja’s land prior to the inception of the water supply scheme in 1926. Fully informed parties would have been aware of the land’s potential and the increase in value.
Lord Romer referred (313-4) to the degree of possibility that land might never be required for some potentiality, or might not be required for some considerable time, and these considerations would have weighed with any hypothetical purchaser negotiating with the Raja for the acquisition of the land before the water supply scheme came into existence. Lord Romer also considered the possibilities of the Raja turning this potentiality to account (328) or the Harbour Board obtaining its water supply from other sources (329). These considerations would also have been known to fully informed parties.
Lord Romer referred to what has since became known as the Pointe Gourde principle (318-20) and must have considered that his decision was consistent with it. He treated the Harbour Authority, whose existence was due to the earlier scheme, as a potential purchaser (320, 327, 329) but this was only possible if the scheme underlying the acquisition was the later water supply scheme. The distinction between the Raja’s case and Pointe Gourde therefore is that in the former there were two schemes and in the latter only one.
The Pacific Highway, as it existed in the Bellinger Valley prior to 1991, was the result of an earlier scheme. Any value which it gave to the land taken was not caused by the carrying out, or the proposal to carry out, either the Raleigh Deviation or its extension northwards to Perry’s Hill.

At its inception the Raleigh Deviation extended north of Man Arm Creek but did not directly affect the claimant’s land (Judge’s reasons par 30). This scheme, in its final form, may not have included the extension of the highway through the claimant’s land north of Man Arm Creek to Perry’s Hill. If so this would then be the subject of a separate scheme (the Perry’s Hill scheme). The claimant would be entitled to compensation for any increase in value “entirely due” to the Raleigh Deviation because that would not be the scheme which underlay this acquisition. However any increase in value “entirely due” to the Perry’s Hill scheme would have to be excluded.
It may also be necessary to determine when, and in what circumstances, the decision was taken to enlarge the embankment to carry a dual carriageway above the 1% flood level because this greatly increased the quantity of fill required. If there were two schemes the effect of the decision to enlarge the embankment will depend on identifying the scheme that included this decision and its implementation.
Mr Jackson QC, who appeared for the claimant, took the Court to the evidence to show how the RTA’s proposals evolved to establish that there were two schemes. The primary facts derived from the records of the RTA, and the evidence of Mr Stevens, which the Judge accepted, were undisputed. However our jurisdiction is limited to deciding questions of law, and we cannot make findings of fact. See Vetter v Lake Macquarie City Council (2001) 75 ALJR 578, 591 per Kirby J and Maurici v Chief Commissioner of State Revenue [2001] NSW CA 78, paras 55-6.
The identification of the scheme which underlay this acquisition requires the evaluation of complex events which occurred over 4½ years and questions of degree are involved. It would be relevant to consider whether a separate contract was let, and construction work started at the southern end of the Raleigh Deviation before the planning for the Perry’s Hill extension had either commenced or been completed and before the decision was made to acquire the land taken. It would also be relevant to consider whether or not the planning and construction work for the Raleigh Deviation and the Perry’s Hill extension were interrelated and not severable in time, location, contractual arrangements or otherwise. This Court cannot make findings on these questions.
Bignold J found that the land taken was acquired for the principal purposes of building the highway deviation through the claimant’s land and obtaining a supply of fill (Judge’s reasons par 160). However this finding did not determine whether the scheme which underlay the acquisition was a single scheme for the enlarged Raleigh Deviation or a separate Perry’s Hill scheme. The particular purposes, in the sense of the uses to which particular land will be put, do not exclude the wider public purpose to be served by the acquisition. If so it is this wider public purpose, scheme or project which underlay the acquisition, which governs the operation of s 56(1)(a).
The resumption of land in the middle of a substantial extension to an existing railway or highway will be for the public purpose of that scheme or project as a whole, and not just for whatever part of it is to be constructed on that land. Section 56(1)(a) would fail to achieve its evident purpose if the Court could award compensation for an increase in value due to the construction of the new railway or highway up to the boundaries of the land resumed and only had to ignore the proposal as it directly related to that land.
The Act defines the right of a former land owner to compensation in both positive and negative terms. This definition, including its negative as well as its positive aspects, is “a statement of the complete factual situation which must be found to exist” before a landowner has a right to compensation and he therefore bears the onus of proof. Compare Vines v Djordjevitch (1955) 91 CLR 512, 519. This is supported by the fact that the Pointe Gourde principle was from the outset seen to be inherent in the concept of compensation for compulsory acquisition.
In my judgment the proceedings must be remitted to the Land and Environment Court so that it may identify the scheme which underlay this resumption.
The Judge’s award of $1m for market value reflected his understanding of the Raja’s case. It was based on the report of the claimant’s valuer, Mr Robertson, who obtained a price of $4.50 per m³ for this fill from the report of Mr Green of Resource Design Management (blue 2/312 and foll). That price reflected the cost to the RTA of obtaining the fill from a new quarry which might possibly have been established on either of two sites 6 km from Raleigh (2/326). It was based on royalty payments to the land owner of $1.50 per m³, the costs of obtaining development consent and developing the quarry and the cost of transport to Raleigh, (2/326, Judges reasons par 194). Mr Green’s report identified these costs as follows (2/325):
“The cost of works to gain approval and develop a proposed quarry site would include items such as negotiations with land holders, Council and government authorities, Environmental Impact Statement costs (including flora and fauna assessments), survey, intersection and public road upgrading, access road costs, erosion and sediment control work, site and extraction management plans and rehabilitation of the site”.
Mr Robertson sought to determine the value to the claimant of exploiting the potential of the land taken as a source of fill. His starting figure of $4.50 represented “an appropriate commercial value for the fill which provides a reasonable return to the dispossessed owner, as well as an economically viable cost to the road construction company” (blue 1/63 s-t). His discount to $2.75 per m³ was intended “to take account of the approval process required by Council, the costs involved”, the quantity of the excavation, and the required assumption of an advanced payment rather than a staged payment over the life of the excavation (1/63 x-z, Judge’s reasons par 180(iv)).
Mr Robertson’s discount for the approval process and the costs involved may have duplicated deductions already allowed by Mr Green, or may have been intended to allow for additional costs because of the time required to obtain the approval and establish the quarry. However any error would have been in favour of the RTA and was one of fact. He said that if the land taken had not been resumed, the claimant could have negotiated with the various road construction companies, or anyone else involved with the various sections of road works, in and around Coffs Harbour (1/63 p-r).
The RTA contended that Mr Green should not have factored into his value the advantage to the RTA of not having to obtain development consent for its quarry operation on Perry’s Hill. The Judge rejected this submission because the parties to the hypothetical negotiations are presumed to be fully informed. They would therefore be aware that continuing the highway deviation north of Man Arm Creek through the land taken would secure for the RTA the land needed for that deviation, and the fill it required, without the need for development consent (Judge’s reasons par 208).
The Judge obtained his value of $1m by discounting Mr Robertson’s valuation by a further 25% to provide, in his own words, “the necessary element of inducement for the respondent to acquire the applicant’s land for its source of fill material, in preference to obtaining the required fill material from alternate sources at … much greater cost” (Judge’s reasons par 223).
The parties agreed that the grazing value of the land taken was $158,000 and the Judge found that part of it also had potential as the site of a quarry to supply the local market, and this increased its market value, apart from the Raja principle, to $258,000. This figure was not challenged.
There are other difficulties with Mr Robertson’s valuation. He adopted, from the report of Mr Green, what was in effect a market price for the fill. Mr Green obtained his figure by calculating the cost which the RTA would incur if it obtained the required quantity of fill from two other possible sources within a 6 km radius of Raleigh. Mr Robertson deducted the estimated costs of winning and delivering that fill to obtain what would have been the claimant’s gross profit per m³ on a sale of the fill to the RTA at a competitive price compared with possible supply from the other sources identified by Mr Green.
The compensation of $1m awarded was therefore based, with adjustments, on the market value of the fill to the RTA, and included an amount, in addition to the owner’s royalty of $1.50 per m³, for the profit that would have been earned by a quarry master from the production and sale of the fill from Perry’s Hill. This method of calculating the compensation is substantially the same as that adopted by the Subordinate Judge in the Raja’s case which was rejected by the Privy Council. It is contrary to the principles stated by Lord Romer that “the value of the land is not to be estimated at its value to the purchaser” (312) and “it is the possibilities of the land and not its realised possibilities that must be taken into consideration” (313, 330).
It is also contrary to Turner v Minister of Public Instruction (1956) 95 CLR 245, where the High Court held that land ripe for sub-division should not be valued on the basis of the nett proceeds of a hypothetical sub-division. Such a figure may be used as a starting point, but if so proper allowances must be made for the risks of realisation and the sub-divider’s profit. There is no distinction in principle between a realisation by sub-division and a partial realisation by quarrying. Mr Robertson made no allowance for the risk of realisation or for the quarry master’s profit.
If these figures are stripped out of Mr Robertson’s valuation, one is left with the landowner’s royalty, and in my judgment this should have been the starting point for any valuation. In other words, the appropriate market royalty rate reflected the price at which a willing but not anxious land owner would sell the right to obtain quarry products from his land to a willing but not anxious quarry master. The market rate might be higher in this case to reflect the special potential.
Moreover no allowance was made either by Mr Robertson or the Judge for the possibility that the relevant scheme would not proceed. The acquiring authority interested in the special potential must be regarded as no more than a possible purchaser (Raja 320) and allowance must be made for “the degree of possibility that the land might never be so required or might not be so required for a considerable time” (Raja 313-4). Much will depend for this purpose on the scheme underlying the acquisition. If the RTA was committed to a separate Raleigh Deviation scheme, including the enlarged embankment, before the inception of a separate Perry’s Hill scheme, the allowance for the possibility that the Perry’s Hill scheme would not proceed may be modest. On the other hand if there was a single overall scheme the required allowance might be substantial.
The claimant was also awarded compensation of $100,400 for disturbance which affected the conduct of his abattoir and cattle grazing business on land he retained. This comprised the following:
(i)          supplementary cattle feed costs  $79,815
(ii)          repairs to the abattoir building and to the   17,000
  adjoining caretaker’s cottage
(iii)         additional lighting in the abattoir   4,586
The claim for supplementary cattle feed costs arose because during the construction phase the claimant could not transfer cattle from his fattening paddocks and holding areas on the eastern side of the highway to his abattoir on the western side. The cattle had to be maintained in holding yards adjacent to the abattoir and supplementary feeding was necessary. The Judge found that all these costs were reasonably incurred within the meaning of s 59(f) and did not involve any element of double compensation.
The RTA’s only challenge to the award for disturbance was that propounded in ground 7 of its notice of appeal as follows:
“His Honour erred in awarding compensation for disturbance losses which would have been sustained if the hypothetical use of the land as a quarry, upon which his valuation depended, had occurred in fact contrary to the principle in Horn v Sunderland Corporation [1941] 2 KB 26, 35 and s 61 of the Land Acquisition (Just Terms Compensation) Act 1991”.
Losses attributable to disturbance are defined by s 59 and the relevant paragraph is para (f) which permits claims for:
“(f) any other financial costs reasonably incurred (or that might reasonably be incurred) relating to the actual use of the land, as a direct and natural consequence of the acquisition”.
This amount was awarded for costs incurred after acquisition during the construction of the highway. There may be a question whether all these costs were “a direct and natural consequence of the acquisition”, but Mr Downes declined to take this point and I say no more about it.
The RTA contended that the award for disturbance was contrary to s 61. This provides:
“If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:
(a) any financial advantage that would necessarily have been foregone in realising that potential; and
(b) any financial loss that would necessarily have been incurred in realising that potential”.
There was some debate as to whether this point was open to the RTA but in my judgment it was because at the trial it relied on the rule against inconsistent claims (Judge’s reasons paras 229, 293, 301).
Claims for compensation on the basis of a potential use may be inconsistent with claims for disturbance to the existing use. This principle was applied in Horn v Sunderland Corporation [1941] 2 KB 26, where the resuming authority had acquired farming land suitable for residential development. Greene MR said at 35:
“[The owner] says that the sum properly payable to him for the loss of his land is (a) its value as building land plus (b) a sum for disturbance of his farming business. It appears to me that, subject to a qualification which I will mention later, these claims are inconsistent with one another. He can only realise the building value in the market if he is willing to abandon his farming business to obtain the higher price”.
In The Commonwealth v Milledge (1953) 90 CLR 157, 165, Dixon CJ and Kitto J referred to Horn’s case and continued:
“The conclusion reached was that when land being used for agricultural purposes is ripe for building, and compensation for its compulsory acquisition is fixed on the basis of its value as building land, compensation for disturbance of the agricultural business should only be awarded to the extent (if any) that the value of the land for agricultural purposes together with the compensation for disturbance, exceeds the compensation payable on the basis of the land being building land”.
In both Horn and Milledge the whole of the claimant’s land was acquired and the disturbance claims were for the cost of relocating the relevant business on other land. Here the land taken was only a small part of the claimant’s land and the claims are for disturbance to the claimant’s business on the land retained.
Horn and Milledge were considered in Crisp & Gunn Co-operative Ltd v Hobart Corporation (1963) 110 CLR 538. The appellant had carried on its timber business on 3 physically separate parcels of land but only one was resumed. It claimed compensation for market value and for disturbance, and attempted to distinguish the earlier cases where the whole of the land used by the owner’s business had been resumed. However the High Court in a joint judgment said at 547-8:
“The principles … apply with equal force, we think, whether the land resumed represents the whole of the land or only one of several parcels upon which business activities are conducted. Further we are of the opinion that the requirement of the statute that regard should be had in assessing compensation to a number of factors including disturbance … does not justify the award of any amount for disturbance in addition to the market value of the land where, as here, that value exceeds the present use value by an amount in excess of any loss resulting from disturbance”.
However that disturbance claim was for the cost of relocating the business activities to another site. The disturbance claims allowed in this case would only be inconsistent with a claim for the special potential if construction work would inevitably have caused the claimant to incur these costs. The RTA did not secure findings to that effect and there is nothing in the material to which we were taken that would support such findings. The award for disturbance has not been shown to be vitiated by any error of law and I would reject this part of the RTA’s appeal.
After the Court reserved its decision, I received a letter dated 9 August from junior counsel for the RTA which stated that if the appeal were to succeed on the issues involving s 56(1)(a) and the Raja’s case, the parties had agreed that judgment could be entered for the respondent for $660,353.43 in lieu of the compensation awarded in the Land and Environment Court. It is not clear that this agreement applies, or was intended to apply, to the decision reached by the Court and in these circumstances the prudent course is to direct that the parties bring in short minutes to give effect to the Court’s reasons.
The following orders should be made:
(1) Appeal allowed with costs;
(2)Set aside the determination of compensation for the market value of the land taken in the sum of $1,000,000, and the order that the appellant pay the respondents’ costs of the claim for compensation, other than the costs referred to in Order 3 made in the Land and Environment Court;
(3)Direct the parties to bring in short minutes to give effect to these reasons before Hodgson JA on Thursday 6 September at 9.30 am unless agreed short minutes have earlier been filed.
POWELL JA: I agree with Handley JA.
HODGSON JA: The circumstances of this case are set out in the judgment of Handley JA, with which I generally agree.
Application of the Pointe Gourde principle, as expressed in s.56(1)(a) of the Land Acquisition (Just Terms Compensation) Act, requires identification of “the public purpose for which the land was acquired”; and as indicated by Handley JA, this generally requires identification of the scheme for the purposes of which the acquisition was made. Then, the principle requires any variation in value caused by the carrying out or proposal to carry out this scheme to be disregarded. The Rajah’s Case [1939] AC 302 can then be reconciled with the Pointe Gourde principle on the basis that the scheme for the purposes of which the acquisition was made in the The Rajah’s Case was a scheme for the provision of water to land to the south of the harbour which was being developed, and not the original scheme for the development of the harbour and adjacent land. Accordingly, compensation could be assessed on the basis of potentialities arising from the original scheme.
In Collins v. Livingstone Shire Council (1972) 127 CLR 477, the scheme for the purposes of which the land was resumed was the construction of a reservoir; but the part of the reservoir already constructed on the claimant’s land had value apart from this purpose, because of the potentiality that a purchaser, including the acquiring authority, might have a use for this structure.
In Emerald Quarry Industries Pty. Ltd. v. Commissioner of Highways (1979) 142 CLR 351, the High Court proceeded on the basis that the scheme in question was “the building of a freeway”; and there was no submission that the scheme should be given any narrower characterisation, or that the quarry had any potentiality of value to the acquiring authority apart from this scheme.

In a case such as the present, it is necessary to determine what is the public purpose for which the claimant’s land was acquired, including the appropriate level of generality at which the purpose should be identified. In this case, at the most general level, the purpose could be identified as the upgrading of the Pacific Highway between Sydney and the Queensland boarder; and there are other possible identifications, including the Raleigh Deviation generally, or particular versions of the Raleigh Deviation, or the extension of the Raleigh Deviation to Perry’s Hill.
I do not think there are any clear rules determining how the relevant purpose or the appropriate level of generality is to be determined. Factors to be taken into account would, in my opinion, include the degree of continuity and consistency of various elements of what is proposed and done, and fairness to both the claimant and the acquiring authority. In the present case, I think it unlikely that the relevant public purpose could be as wide as the upgrading of the Pacific Highway between Sydney and the Queensland boarder; while on the other hand, assuming there have been a number of versions of the Perry’s Hill extension, I think it unlikely that the public purpose could be as narrow as just the last of those versions. The public purpose could be as wide as the Raleigh Deviation generally, encompassing all the variations of that project including all versions of the Perry’s Hill extension, or it could be somewhat narrower.
However the public purpose is identified, it seems clear that the value of the claimant’s property as a source of stone for the respondent’s road building activities, leaving aside that public purpose, can at best be in terms of a chance that the respondent would undertake some such scheme in the area as would require the stone. The trial judge’s failure to approach the matter on that basis is sufficient on its own to justify the upholding of the appeal.
I agree with the orders proposed by Handley JA.

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LAST UPDATED: 23/08/2001