Roads Corporation v K-Line Mobile Mechanics Pty Ltd
[2011] VSC 475
•23 September 2011
| IN THE SUPREME COURT OF VICTORIA | Not Restricted | |
AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION & PLANNING LIST
No. 1303 of 2011
| ROADS CORPORATION | Plaintiff |
| v | |
| K-LINE MOBILE MECHANICS PTY LTD (ACN 096 617 480) | Defendant |
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JUDGE: | CROFT J | |
WHERE HELD: | Melbourne | |
DATE OF HEARING: | 18 August 2011 | |
DATE OF JUDGMENT: | 23 September 2011 | |
CASE MAY BE CITED AS: | Roads Corporation v K-Line Mobile Mechanics Pty Ltd | |
MEDIUM NEUTRAL CITATION: | [2011] VSC 475 | |
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VALUATION AND COMPENSATION – Application for leave to appeal from orders made by Victorian Civil and Administrative Tribunal – Appeal on questions of law – Claims for compensation on acquisition of land – Loss attributable to disturbance – Whether there was evidence to support finding of fact or the refusal to be satisfied that a finding was justified – Wednesbury unreasonableness – Commissioner of State Revenue v Frost [2011] VSC 232; Roads Corporation v Dacakis [1995] 2 VR 508 – Land Acquisition and Compensation Act 1986, ss 30, and 41; Victorian Civil and Administrative Tribunal Act 1998, s 148.
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APPEARANCES: | Counsel | Solicitors |
| For the Plaintiff | Mr J. Delany SC with Mr E. Nekvapil | Garland Hawthorn Brahe Lawyers Pty Ltd |
| For the Defendant | Dr R. Sadler | MLC Lawyers |
HIS HONOUR:
Introduction
This is an application for leave under s 148(1) of the Victorian Civil and Administrative Tribunal Act 1998 (“the VCAT Act”) to appeal against the Order of Deputy President Macnamara dated 24 February 2011 in a proceeding in the Victorian Civil and Administrative Tribunal (“VCAT”) Land Valuation List – VCAT reference number L114/2009 (“the VCAT proceeding”).
The applicant in the VCAT proceeding and the original plaintiff in these proceedings was Linking Melbourne Authority (formerly Southern and Eastern Integrated Transport Authority). The rights and responsibilities of this Authority were, however, taken over by Roads Corporation. Prior to the commencement of the hearing of this matter, an order was made, by consent, substituting Roads Corporation as the plaintiff in the proceeding. For convenience, references to the plaintiff are references to the original plaintiff and to Roads Corporation, according to whom rights and responsibilities passed.
The reasons for the orders made in the VCAT proceeding are contained in very detailed and extensive reasons of Mr M.F. Macnamara, Deputy President, and Mr L. Jones, Member, which were published on 8 February 2011 (“the VCAT reasons for decision”).
The plaintiff’s application for leave to appeal
The orders of VCAT which the plaintiff sought leave to appeal are set out in its amended Proposed Notice of Appeal, dated 4 August 2011, as follows:
“1.The plaintiff appeals from the following order of the Tribunal made on 24 February 2011:
1The amount of compensation by the applicant to the respondent by way of interim award arising from the compulsory acquisition of the land at 3/266 Princess Highway, Dandenong is assessed at $580,209, made up as follows:
(a)loss of goodwill of the respondent’s business conducted on the land:
Unaffected (‘before’) value: $190,122
Less Affected (‘after’) value: $Nil
Less salvage/auction realisation value
for the equipment $25,900 $164,222
(b)actual trading losses incurred: $135,955
(c)direct relocation expenses $117,150
TOTAL$417,327
2For the purposes of sub-section 148(2)(a) of the Victorian Civil and Administrative Tribunal Act 1998, the day of the order of the Tribunal is the date of this order.
3Interest is payable on any unpaid amounts in Order 1 in accordance with Sections 53(1) and 56 of the Land Acquisition and Compensation Act 1986, such interest to be agreed between the parties or, failing agreement, to be determined by the Tribunal.
4Costs reserved.
5Any application for costs to be paid on any particular scale or basis or determination of interest is to be made in writing (including supporting submission) and filed with the Tribunal and served on the other party within 21 days of the date of this order.
6Adjourned to further hearing 29 April 2011 at 10.00am at 55 King Street Melbourne before Deputy President Macnamara.
7The unpaid compensation of $417,327 is to be paid within 14 days by the applicant to the respondent’s solicitors, Melbourne Legal partners.”
The questions of law which the plaintiff sought to rely upon are set out in its amended Proposed Notice of Appeal and are as follows:
“2. The first question. In circumstances where:
a)a claimant under the Land Acquisition and Compensation Act 1986 (the Act) had operated a business on land then compulsorily acquired by an authorised Authority; and
b)the claimant had continued to operate the business until 1 July 2009; but
c)from 1 July 2009, the claimant had ceased to operate the business and a different entity had started to operate the business;
is the claimant entitled to compensation for ‘loss attributable to disturbance’, as defined in s 40 of the Act, for losses and expenses incurred by the business after 1 July 2009?
3.The second question. In the same circumstances, is it manifestly unreasonable or illogical for the Tribunal to:
a)conclude that the claimant should be compensated on the basis that the claimant had ceased to operate its business by about 1 July 2009; but
b)also award compensation for losses and expenses, incurred after 1 July 2009, in relation to the business?
4.The third question. Could the Tribunal draw from the facts as found by it an inference that the defendant suffered losses incurred between 1 July 2009 and 30 June 2010 in relation to the business previously operated by the defendant?”
The critical question which underlies the plaintiff’s application concerns whether the defendant did continue to carry on the business which it claimed was disrupted by the plaintiff in circumstances where this gave it a right to compensation under the Lands Acquisition and Compensation Act 1998 (“the Act”).
Principles of leave to appeal
Section 148(1) of the VCAT Act provides:
“(1)A party to a proceeding may appeal, on a question of law, from an order of the Tribunal in the proceeding-
(a)to the Court of Appeal, if the Tribunal was constituted for the purpose of making the order by the President or a Vice President, whether with or without others; or
(b)to the Trial Division of the Supreme Court in any other case-
if the Court of Appeal or the Trial Division, as the case requires, gives leave to appeal.
It follows from these provisions that any appeal is dependent upon two important qualifications. First, that the appeal be “on a question of law” and the second qualification is that the court “gives leave to appeal”.
The legislative policy underlying these provisions is that “VCAT decisions should not generally be disturbed when cases have been decided in that forum other than on questions of law and where there is something about the decision bearing upon the question of law which warrants a grant of leave to appeal”.[1] It follows that “[t]his Court is not entitled to enter into the fact finding exercise which the legislature has deliberately entrusted to a specialist tribunal”.[2]
[1]Commissioner of State Revenue v Frost [2011] VSC 232 at [5] (Pagone J), referring to Secretary to the Department of Premier and Cabinet v Hulls [1991] 3 VR 331, 335-6 (Phillips JA); Myers v Medical Practitioners Board (Vic) [2007] VSCA 163, 55 [28] (Warren CJ).
[2]Boucher v Dandenong Ranges Steiner School Inc [2005] VSC 400 at [15] (Osborn J), referring to Spurling v Development Underwriting (Vic) Pty Ltd [1973] VR 1 and Whitehorse City Council v Golden Ridge Investments Pty Ltd [2005] VSCA 198.
The leave requirement under s 148 is designed to maintain this position. As Pagone J said in Commissioner of State Revenue v Frost:[3]
“3The requirement for leave under s 148(1) of the VCAT Act ‘is a safeguard that the appeal is on a pure question of law and that the grounds supporting the question of law articulated for determination by the Court do found the subject matter of the appeal’.[4] It also confers a discretion about whether to grant leave[5] which an applicant must persuade the Court to exercise in its favour. What must be shown will depend upon the particular case bearing in mind the statutory criteria being a grant of leave and not special leave.[6] It will ordinarily be necessary (in addition to a clearly articulated question of law)[7] for an applicant to make out a prima facie case[8] and in an appropriate case it may be necessary for the applicant to show that the question upon which leave is sought has public or general importance.[9]”
[3][2011] VSC 232 at [3].
[4]Commissioner of State Revenue v STIC Australia Pty Ltd [2010] VSC 608, [10] (Davies J).
[5]Secretary to the Department of Premier and Cabinet v Hulls [1991] 3 VR 331; Al-Hakim v Monash University (Unreported, Victorian Supreme Court of Appeal, 28 March 2003); Myers v Medical Practitioners Board (Vic) [2007] VSCA 163.
[6]See Morris v R (1987) 163 CLR 454 at 475 (Dawson J).
[7]Osland v Secretary to the Department of Justice (2010) 241 CLR 320 at [21] (French CJ, Gummow and Bell JJ).
[8]Morris v R (1987) 163 CLR 454 at 475 (Dawson J); Secretary to the Department of Premier and Cabinet v Hulls (1991) 3 VR 331 at 335 (Phillips JA).
[9]Secretary to the Department of Premier and Cabinet v Hulls [1991] 3 VR 331, 335-6 (Phillips JA); Commissioner of State Revenue v Challenger Property Nominees Pty Ltd [2006] VSC 203, [20], [65] (Hollingworth J).
In considering an application of this nature, courts have been concerned to respect the role entrusted by the legislature to the particular tribunal and not, in effect, subvert this position by seeking out error. Thus, Kirby J in Roncevich v Repatriation Commission, said:[10]
[10](2005) 222 CLR at 136, [64].
“Courts conducting this form of review have been repeatedly enjoined by this Court to avoid overly pernickety examination of the reasons.[11] The focus of attention is on the substance of the decision in whether it has addressed the ‘real issue’ presented by the contest between the parties.”
Similarly, in Vegas Nominees Pty Ltd v Werribee Sports & Community Club Inc, Ashley J said:[12]
“This Court has said more than once that it should not examine briefly stated reasons by an expert Tribunal in an over-legalistic manner or by the over-zealous drawing of inferences in order to disclose some supposed error; although where unambiguous language is used, the user should be taken to mean what the words say. I should add that the Court is not entitled to interfere with the Tribunal’s decision unless it is satisfied that there was in fact a vitiating error of law. It is not enough for the appellant to show that the Tribunal’s reasons for its decision are so expressed as to suggest the possibility that it proceeded upon a wrong view of the law. In support of the several propositions that I have just stated I refer to Portland Properties Pty Ltd v Melbourne and Metropolitan Board of Works (1971) 38 LGRA 6 at 18, Michaelis Bayley (Vic) Pty Ltd v Melbourne and Metropolitan Board of Works and others (1980) 44 LGRA 65 at 67-68 and Teston Investments Pty Ltd and Anor v Melbourne and Metropolitan Board of Works (1985) 62 LGRA 346 at 349-350.”
Additionally, “[o]n appeal this Court must recognise the forensic realities of the way in which the case was put to the Tribunal. It is these realities to which a Tribunal must respond in its reasons”.[13]
[11]Minister for Immigration and Ethnic Affairs v Guo (1997) 191 CLR 559 at 575, 597; cf Minister for Immigration and Multicultural Affairs for Yusuf (2001) 206 CLR 323 at 348, [74].
[12](1994) 14 AAT Tr 73; BC 9401309 at 13.
[13]The Gombac Group Pty Ltd v Vero Insurance Ltd [2005] VSC 442, [59] (Osborn J).
Mere want of logic in the reasons given by a tribunal does not, of itself, establish an error of law. Thus, Mason CJ said in Australian Broadcasting Tribunal v Bond:[14]
[14](1990) 170 CLR 321 at 356; referred to with approval by Osborn J in Lucas v Transport Accident Commission [2003] VSC 97 at [10].
“But it is said that ‘[t]here is no error of law simply in making a wrong finding of fact’: Waterford v The Commonwealth [(1987) 163 CLR 54 at 77], per Brennan J. Similarly, Menzies J observed in Reg. v District Court; Ex parte White [(1966) 116 CLR 644 at 654]:
‘Even if the reasoning whereby the Court reached its conclusion of fact were demonstrably unsound, this would not amount to an error of law on the face of the record. To establish some faulty (e.g. illogical) inference of fact would not disclose an error of law.’
Thus, at common law, according to the Australian authorities, want of logic is not synonymous with error of law. So long as there is some basis for an inference – in other words, the particular inference is reasonably open – even if that inference appears to have been drawn as a result of illogical reasoning, there is no place for judicial review because no error of law has taken place.”
In the same vein, Batt J, in Roads Corporation v Dacakis, said:[15]
[15][1995] 2 VR 508 at 520.
“… A finding of fact will only be open to challenge as erroneous in law if there is no probative evidence in support of it (and not also if it is not reasonably open on the evidence), whilst an inference will be open to challenge as being erroneous in law if it was not reasonably open on the facts.”
Batt J continued:[16]
“But, as the statement of Mason CJ at 360 shows, there is virtually no difference between the tests.”[17]
Batt J continued, quoting the passage from the judgment of Mason CJ in Bond at 356, which is set out above, and concluded:[18]
“For the reasons I have given, I consider that I should take that passage as stating the law which I must apply. The ascription of value to a parcel of land or a chattel is, or at least will frequently involve, an inference of a fact. Accordingly, a want of logic in drawing that inference will not by itself constitute error of law. But it may, I consider, sound a warning note and put one on enquiry whether there was indeed any basis for the inference.”
[16][1995] 2 VR 508 at 520.
[17]The page reference is to (1990) 170 CLR 360, part of the Chief Justice’s judgment in Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321.
[18][1995] 2 VR 508 at 520; and see Tisdall v Webber [2011] FCAFC 76 at [31]-[32] (Greenwood J) and [126] (Buchanan J).
This conclusionary statement was made by Batt J after a comprehensive review of the authorities in relation to the nature of a question of law or an error of law.[19]
[19]See Roads Corporation v Dacakis [1995] 2 VR 508 at 517-520.
Wednesbury unreasonableness
The issue of “reasonableness” or, indeed, “unreasonableness” was explored further by the Court of Appeal in East Melbourne Group Inc v Minister for Planning,[20] with particular reference to Associated Provincial Picture Houses Ltd v Wednesbury Corporation.[21] The relevant principles to be applied with respect to unreasonableness were stated by Ashley and Redlich JJA as follows:[22]
“[183] A decision may be unreasonable in the Wednesbury sense because it is manifestly unreasonable, that is, it simply defies comprehension,[23] or because it is obvious that the decision-maker consciously or unconsciously acted perversely.[24] Wednesbury unreasonableness will also be made out where there was manifest illogicality in arriving at the decision — there being illogical findings, or inferences of fact unsupported by probative material or logical grounds.[25] ‘Irrationality’ thus encompasses disregard of relevant considerations, giving regard to irrelevant considerations and manifest unreasonableness.[26]
[184] Where the requisite opinion has been formed, the courts will interfere where there is an ‘absence of any foundation in fact for the fulfilment of the conditions upon which in point of law the existence of the power depends.’[27] Where all of the evidence points one way, and the opinion rests upon a contrary view, there will be jurisdictional error because the decision will not be supported on logical grounds by the material adduced.[28]In Chan Yee Kin v Minister for Immigration and Ethnic Affairs[29] McHugh J, with whom Mason CJ agreed, held that important parts of the reasons of the delegate were, upon consideration of the evidence, in error and could not be supported on any reasonable basis. If the facts disclose no basis for the decision, it will be invalidated[30] without, as McHugh and Gummow JJ state in S 20,[31] any distinction being drawn between errors of law and fact. Likewise, in S 20 Kirby J emphatically rejected the notion that a decision that is ‘perverse’ ‘illogical’ or ‘marred by patent error’ can be immune from correction because it is a decision about the facts.[32] Further, where by the decision-maker’s own criteria it can be seen that the factual result is perverse, the decision may be struck down on the grounds of unreasonableness.[33]”
[20](2008) 23 VR 605 at pp 647-8.
[21][1948] 1 KB 223 (CA).
[22](2008) 23 VR 605 at 647-8, [183] and [184]; and note also the statement of Warren CJ in that case (2008) 23 VR 625, [73]:
“73. In certain review processes a superior court may take account of any material before it (Craig v South Australia (1995) 184 CLR 163 at 176). Generally, a court reviewing a decision on the grounds of unreasonableness may consider material before the decision-maker at the time of the making of the decision (Attorney-General (NT) v Minister for Aboriginal Affairs (1989) 23 FCR 536 at 539-40). It will be an issue, as here, whether the materials were before the decision-maker”.
[23]R v North and East Devon Health Authority; ex parte Coughlan [2001] QB 213 at 244 (Lord Woolf MR).
[24]Puhlhoffer v Hillingdon London Borough Council [1986] AC 484 at 518 (Lord Brightman).
[25]Australian Broadcasting Tribunal v Bond (1990) 170 CLR 321 at 356 (Mason CJ); Minister for Immigration and Multicultural Affairs v EpeaBaka(1999) 84 FCR 411, [20]-[26]; Minister for Immigration and Multicultural Affairs v Eshetu (1999) 197 CLR 611 at 145 (Gummow J); Gamaethige v Minister for Immigration and Multicultural Affairs(2001) 109 FCR 424, [28] (Finkelstein J); Minister for Immigration and Multicultural Affairs; ex parte Applicant S 20/2002 (2003) 198 ALR 59 [34], [37] (McHugh and Gummow JJ); [127] (Kirby J); Australian Retailers Assn v Reserve Bank of Australia (2005) 148 FCR 446, [559]–[561] (Weinberg J). A decision resting upon a finding of fact totally unsupported by evidence which is critical to the decision, whether expressed as the taking into account of an irrelevant consideration, error of law, or unreasonableness, cannot stand: Luu v Renevier(1989) 91 ALR 39.
[26]Associated Provincial Picture Houses Ltd v Wednesbury Corporation [1948] 1 KB 223 at 233–4; Council of Civil Service Unions v Minister for Civil Service [1985] AC 374 at 410 (Lord Diplock).
[27]R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 119; (Dixon CJ, Williams, Webb and Fullagan JJ).
[28]Minister for Immigration and Multicultural Affairs; Ex parte Applicant S 20/2002 (2003) 198 ALR 59, [138] (Kirby J).
[29](1989) 169 CLR 379 at 433–4.
[30]R v Australian Stevedoring Industry Board; Ex parte Melbourne Stevedoring Co Pty Ltd (1953) 88 CLR 100 at 109.
[31](2003) 198 ALR 59, [54]. See also [59],[73].
[32]Ibid [78], [81].
[33]Parramatta City Council v Pestell (1972) 128 CLR 305; Prasad v Minister for Immigration and Ethic Affairs (1985) 6 FCR 155.
The extent to which the Court may make use of material before the Tribunal or other body whose decision is in question was also considered by the Full Federal Court of Australia in Tisdall v Webber.[34] This case was an appeal from findings of a Professional Services Review Committee. The Committee had found that Dr Tisdall had engaged in inappropriate practice in relation to his rendering of professional attendances as a medical practitioner over a specific period of time. An issue arose in relation to the examination, by the Court, of statistics in relation to the availability or otherwise of alternative medical services during the referral period. Greenwood J, with whom Tracey J agreed, said in relation to this issue:[35]
“The point of examining the statistics is not to substitute the Court’s view on the ultimate question on the merits or the facts for that of the Committee, but simply to examine the content of the statistics to consider what might be revealed by them so as to understand how they were used by the Committee and whether they represent any evidence of a relevant matter when reliance was placed upon this data by the Committee”.
[34][2011] FCAFC 76.
[35][2001] FCAFC 76 at [73].
It is on this basis that the plaintiff sought to make extensive reference to the transcript of the proceedings before VCAT and to other material before the Tribunal.
Nature of the compensation claim
The jurisdiction of VCAT arose under s 81 of the Act as a result of a dispute between the parties in relation to the defendant’s claim for compensation.
The initial offer of compensation was made by VicRoads, as agent for Linking Melbourne in September 2008. The defendant rejected the offer, thus giving rise to a “disputed claim” which was referred to VCAT under s 80 of the Act.[36] As a result of these events, the VCAT jurisdiction under the Act was invoked and the tribunal was required to “… determine the amount of compensation in accordance with this Act to be paid in respect of the claim and make any orders necessary to give effect to that determination”[37] and to “determine the compensation payable in the particular circumstances of the case having regard to the provisions of … [the] Act”.[38] Consequently, among other provisions, the provisions of Part 3 of the Act, which provide for compensation for acquisition, and Part 4 of the Act, which provide for the measure of compensation, were attracted. The critical provisions of these Parts, at least for present purposes, are ss 30 and 41.
[36]VCAT reasons at [89]-[90].
[37]Section 89(1) of the Act.
[38]Section 90(2) of the Act.
Section 30 of the Act provides for the right to compensation on acquisition, in the following terms:
“30 Right to compensation on acquisition
Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.”
The general principles on which compensation is to be based are the subject of s 41 of the Act. In the present circumstances, issues are raised as to the entitlement of the defendant to compensation for loss attributable to disturbance of its business. Consequently, the following provisions of s 41 are relevant:
“41. General principles on which compensation is to be based
(1) Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors-
(a) the market value of the interest on the date of acquisition;
…
(d) any loss attributable to disturbance;
…”
The expressions “market value” and “loss attributable to disturbance” are defined in s 40 of the Act, as follows:
“loss attributable to disturbance means any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of-
(a) the service upon the claimant of a notice of intention to acquire, where the Authority has refused or failed to give consent to the carrying out of improvements to the land in respect of which that notice has been served or the effecting or obtaining of any sales, transactions, licences or approvals in respect of that land; and
(b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part;
market value, in relation to any interest in land on a particular date, means the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser”.
In these proceedings, it is uncontroversial that there can be no compensable “loss attributable to disturbance” under the Act unless two conditions are met. The first is that the claimant must have suffered an actual loss.[39] The second is that the loss suffered must have been caused by the acquisition.[40] Thus, in Studley Developments Pty Ltd v Department for Planning and Urban Growth,[41] Southwell and Teague JJ said:[42]
“… It is necessary, and in our view, that the claimant first establish that he has suffered such loss, and then show that the loss was suffered as the ‘natural, direct and reasonable consequence’ of the refusal to grant a permit which, in the present instance, might be read as ‘the acquisition’. It follows that if the first condition is not met, the issues of causation raised by the second condition do not arise.”
[39]Roads Corporation v Love [2010] VSC 537 at [189]-[190] (Vickery J) and the authorities referred to therein.
[40]See, for example, Halwood Corporation Ltd (Scheme Administrator Appointed) v Roads Corporation (1995) 89 LGERA 280 at 297 (Batt J); Melbourne City Link Authority v Teford Pty Ltd (2001) 113 LGERA 102 at [24] (Batt JA); Roads Corporation v Schembri [2009] VSC 369 at [12]-[28] (Osborn J); and Roads Corporation v Love [2010] VSC 337 at [185]-[188] (Vickery J).
[41][1994] 1 VR 643.
[42][1994] 1 VR 643 at 647 (with whom Brooking J agreed).
In the present circumstances, the plaintiff’s case is that the first condition is not satisfied because the defendant did not suffer loss within the 2009-10 financial year as the defendant’s business had ceased from at least 1 July 2009. Consequently the plaintiff submitted that as the first condition is not satisfied, the second does not arise. VCAT found otherwise, and the plaintiff submits that it erred in ordering that the defendant be compensated for the claimed 2009-10 losses. It is to these issues that I now turn.
VCAT proceedings
The defendant was incorporated by Mr Kon Nedanovski in 2001 for the purpose of operating a motor mechanic business (“the business”). He was the defendant company’s sole shareholder and director, as well as its principal employee. In 2001, the defendant began operating the business from a leased factory at 3/266 Princes Highway, Dandenong. In 2006, Mr Nedanovski and a business partner purchased the freehold of this factory at 3/266 Princes Highway, Dandenong. Following the purchase of the freehold, the defendant entered into an agreement with the freehold owners to lease the factory from them. It continued to operate the business from those premises. So much appears from VCAT’s reasons for decision, findings which are not challenged.
In 2007, the freehold owners of the factory at 3/266 Princes Highway, Dandenong received a notice of intention to acquire the premises, which was served under s 6 of the Act, and subsequently, a notice of acquisition under s 19 of the Act.
Following the service of these notices, steps were taken by the acquiring authority to obtain possession of the subject premises. The narrative of the subsequent events is set out in VCAT’s reasons for decision, a narrative which is uncontroversial.
Briefly, in March 2008, Mr Nedanovski was informed that possession of the subject premises was required. In April 2008, the defendant’s equipment was moved into storage as at that stage it had been unable to find alternative premises and it had been informed that possession of the subject premises was required. In May 2008, the business was relocated to 18 Princes Highway, Doveton, and was operated by the defendant for the following year. The Doveton premises was leased by the defendant, Mr Nedanovski having signed a one year lease with a two year option, as the director and secretary of the defendant. In June 2009, the business was relocated to 251 Princes Highway, Dandenong, where the business continued to be carried on at all relevant times. It was common ground in the proceedings before me that the business which the defendant commenced to carry on in 2001 continued as the same business at all relevant times, apart from the brief period in April 2008 when equipment used for the purposes of the business needed to be moved into storage. It was also common ground that the business was carried on at all relevant times by Mr Kon Nedanovski and that, apart from changes in employees from time to time, in the normal course of events, the natural persons involved remained the same.
On 28 May 2009, VicRoads, then as agent for Linking Melbourne, referred the disputed claim – an offer of compensation having been rejected – to VCAT under s 80 of the Act. On 8 February 2011, VCAT awarded compensation to the defendant of $417,327 made up as follows:
(1)Destroyed goodwill of the motor mechanic business $164,222;
(2)Actual trading losses incurred $135,955; and
(3)Direct relocation expenses $117,150.
During the course of Mr Nedanovski’s cross-examination before VCAT, it emerged that on 23 June 2008, a second company was incorporated in which Mr Nedanovski, was and is the sole director and shareholder. The name of that company is K-Line Mobile Mechanics (Aust) Pty Ltd (which, for convenience, I will refer to as “Aust”). As to this, the plaintiff commented in its submissions that, despite the filing of detailed witness statements in the VCAT proceedings,[43] neither Mr Nedanovski nor his accountant, Mr Peter Delis, disclosed the existence of Aust prior to its being mentioned during Mr Nedanovski’s cross-examination.
[43]Referring to exhibit AJG-17 and AJG-18 to the Affidavit of Andrew James Gunter sworn 4 August 2011.
The plaintiff made reference to the oral evidence in this respect that was before VCAT on the basis that it was merely seeking to provide material to enable a proper understanding of VCAT’s decision, in accordance with the principles established by the authorities, as set out above, as to the principles to be applied with respect to an appeal under s 148(1) of the VCAT Act. I have considered the material on this basis only, and not as part of a process of revisiting factual evidence for the purpose of “second-guessing” the proper role of VCAT in assessing the factual evidence. On this basis, I turn now to parts of the transcript of the proceedings before VCAT.
In cross-examination, Mr Nedanovski was asked about the incorporation of Aust. Referring to the company search of Aust, the cross-examination proceeded:[44]
[44]VCAT Transcript, pp 196-8.
“MR DELANY: I understand that. Just keep that volume available, the lease and if you turn to the first volume of your exhibits and the very first exhibit is the company search of your company?
DEPUTY PRESIDENT: Which number is this?
MR DELANY: Exhibit KN1. Do you have that?---Yes I do.
Company we learn was incorporated on 26 April 2001, correct?---Correct.
The registered office is at Mr Delis’s firm and that’s at 1 Ricketts Road, Mount Waverley. Is that right?---That’s correct.
The principal place of business is currently recorded as your residential address at Koonalda Avenue, Glen Waverley. Is that right?---Yes. That’s correct.
You are the sole director of the company?---That’s correct.
The sole shareholder?---Correct.
Just keeping that search with you, can you turn back to Exhibit 91 and turn to the schedule. Your company name is K-Line Mobile Mechanics Pty Ltd. That’s the claimant in this case. That’s not the name that appears in a schedule to the lease is it?---That’s correct.
Someone has inserted the word, ‘Australia’ in handwriting. Is that your handwriting?---That’s correct.
You did that did you?---That’s right.
The company numbers aren’t the same are they?---There’s two companies sir.
There are two companies?---Yes.
Where in your witness statement which runs to some 62 pages do you tell anyone that there are two companies?---I don’t.
You don’t. It’s not a mistake that the lessee is K-Line Mobile Mechanics Australia Pty Ltd. Is that right?---No.
That company - - -
DEPUTY PRESIDENT: That’s confirmed by the execution clause.
MR DELANY: Indeed. The position is that K-Line Mobile Mechanics Pty Ltd ACN 096617480 is not the lessee of the premises at 251 Princes Highway is it?---No.
…
What I put to you just to be clear about it is that the person who leases these premises is a company called K-Line Mobile Mechanics Australia Pty Ltd. Do you agree with that?---Yes I do.
And what I suggest to you is that if anyone is going to spend 170,000 on repairing or renovating or altering the premises it’s going to be K-Line Mobile Mechanics Australia Pty Ltd the tenant isn’t it?---Which is me, yes.
Well it’s a company which is not the same company as the claimant in the case isn’t it?---Well no. I’m not a taxation person, I don’t know to answer that question sir.”
The cross-examination continued in relation to the involvement of Aust in the lease of premises at 251 Princes Highway, Dandenong:[45]
“MR DELANY: Mr Nedanovski, you told the Tribunal before lunch that the lease of the 251 Princes Highway premises is in the name of the company Aust and that someone had handwritten the word Aust in. Was that you who handwrote the word Aust?---Yes I did.
Yes and why did you do that?---Um, the accountant told me to do that.
Was the accountant there when you did it was he?---Ah, the accountant wasn’t there, no.
No, well which accountant told you to do so?---No, Peter Delis, sorry.
I see. So you understood that you were signing a lease with a different company other than the claimant company, K-Line didn’t you?---Under my thoughts, I thought it was all combined.
I see. Now we had some documents that we looked at this morning that related to Aust. Have you given information about the income that Aust makes to Mr Delis?---We have to speak to the bookkeeper about that sir.”
[45]VCAT transcript p 229.
The questioning of Mr Nedanovski, both by Deputy President Macnamara and in cross-examination continued with respect to the business. First, he was questioned apparently for the purpose of clarifying whether or not there was more than one business involved and then, subsequently, in relation to the operation of that business:[46]
[46]VCAT transcript pp 232-292.
“DEPUTY PRESIDENT: Just one point of clarification before we move on from that. If we consider the situation of you as an individual and K-Line and Aust, my impression is, and tell me if I’ve got this impression wrong, whoever we regard as running it, there’s only one business and that’s a mechanics business. There aren’t any other businesses. It’s not that there are three businesses, one of them carried on by you, one by K-Line and another by Aust. There’s only one business?---That’s correct, sir.
…
MR DELANY: What I put to you is that there have been BAS returns put in by Aust of which you’re the sole director, showing it received the income? That’s true isn’t it?---No, it’s not. I don’t believe it’s true.
You don’t think it’s true?---No.
You see what I’ve put to you is Aust was secretly established on your instructions wasn’t it?---That’s incorrect.
Why is it in your 62 page affidavit and in your second affidavit you make no mention to that - - -?---Because I’m a mechanic and I just run my business as – you know, I leave the – the professionals to deal – that with me.
You’re such a good mechanic that as soon as I asked you about that lease yesterday you knew didn’t you, Mr Nedanovski, that the lease was in the name of the second company?---I did know, yes.
You knew that was relevant didn’t you?---Relevant to what, sir?
Relevant to you seeking to advance on behalf of K-Line, for example, a claim for $176,000 to renovate premises of which Aust is the lessee?---That’s incorrect.
See what I put to you is that claim - - -
DEPUTY PRESIDENT: Just a minute. What’s incorrect about the statement?---I didn’t – I didn’t fabricate that company for anything, sir. I – I didn’t - - -
It was put to you that you’re the directing mind of K-Line that’s making a claim for $176,000 compensation for expenditure on premises that K-Line has no interest in. That they’re owned by a third party and leased by Aust. That’s what was put to you, and as far as I can make out that’s the plain truth isn’t it? If it’s not tell me why it is?---I just – I – I must’ve heard it incorrectly. I thought that he – I made the company to specifically put the system off. That’s what I thought the - - -
I suppose that was - - -
MR DELANY: I put that to you as well, and that’s true isn’t it?
MR O’BRIEN: Hang on, that was the implication in the question. I’m not wanting to interfere but the two questions should be asked. The practical non-sinister one and the sinister one if they wish but - - -
DEPUTY PRESIDENT: I think, Mr O’Brien, that it’s perfectly proper in cross-examination to ask questions which have implications to them, and I think whether there’s an implication or not there should be a straight answer given to the question.
MR O’BRIEN: But as I took his answer it’s in clarification to you, and I’m not wanting to interfere. The witness did disagree with the sinister aspect of it but not the - - -
DEPUTY PRESIDENT: But he wasn’t disagreeing with the literal factual premises - - -
MR O’BRIEN: That’s where it got – yes.
DEPUTY PRESIDENT: Thank you, Mr O’Brien. Please continued, Mr Delany.
MR DELANY: Let me just put this to you that the claim that K-Line seeks to advance of which you are a director, for $176,000 in relation to work not carried out to premises in respect of which it is not lessee, is quite frankly a fraudulent claim and you know it?---That’s incorrect because I’m working as K-Line. I’m K-Line and if it’s K-Line Australia it’s just me. I just believe that I’m the director of it. I – I don’t know the – the tax parts of – of these things. I mean everyone’s got their own tax people that they deal with but I’m just leaving up to the professionals. I – I know that I’m K-Line and that’s what I do. I’m just trying to find a location where I can rebuild my business because of what’s happened.
DEPUTY PRESIDENT: Just let me understand what you mean by that. Does that mean that as you see things, and I can understand that in many respects it’s a completely realistic view, that you’re running the show? It’s your business whether it’s K-Line or K-Line Aust or K-Line Victoria or K-Line something else? It’s really all the same and there’s no distinction to be drawn, and you just leave that to the accountant?---That – that’s correct, sir.
So if that’s right how then can you confidently deny what was put to you by Mr Delany, namely that all of the incomes since 1 July 2008 has been derived by Australia - - -?---I don’t think - - -
- - - if these sorts of distinctions are pretty much irrelevant to way you look at things? How can you be sure?---Sir, I – I don’t think that K-Line Australia has any income. I don’t believe – I write cheques out from K-Line Mobile Mechanics; that’s it. I don’t write any cheques out from K-Line Australia.
…
Which bank is it that Aust has its cheque account with?---The same, with Westpac.
Which branch?---In Dandenong.
I see. See, what I’m putting to you is that income in the 07/08 year and in particular in the last quarter of 07 and 08 from the business was paid into the Aust new account at the bank, wasn’t it?---I can’t answer that question, sir.
You know, don’t you.
DEPUTY PRESIDENT: So does that mean it might have been?---I don’t think so, sir. I honestly don’t believe that anything’s been functioning from K-Line Aust. I believe that sincerely.
…
[After the tendering of an exhibit – documents relating to the account of K-Line Mobile Mechanics Australia Pty Ltd with Westpac Banking Corporation]
So in relation to that, it was put to you that you may have been attempting to funnel money into that account or that company, K-Line Australia as an attempt to manipulate the books to increase your claim for compensation?
---Yes it was put to me like that.Do you recall that being put to you?---Yes I do.
What do you say in relation to that suggestion?---That was untrue.
And why do you say that?---Because I know that I’ve never written a cheque out from K-Line Australia. And I know the account was never operable.”
Mr Delis, the defendant’s accountant, was also questioned in relation to the incorporation and purpose of Aust. Mr O’Brien, counsel for the Respondent in the VCAT proceedings (the defendant in these proceedings), referring to Aust, asked Mr Delis the following question – and received the answer set out:[47]
“And how was it established, to the best of your knowledge?---It was established in approximately mid 2008, the tail end of that financial year, and for the purposes of having ability for K-Line in future endeavours, in their business post any compensation assessment, to be able to borrow money and have a more, I suppose, clean credit rating, and to also act as a new vehicle with a new proposal to restructure the affairs of K-Line.”
[47]VCAT transcript p 404.
In cross-examination, there were further questions in relation to the purpose of the incorporation and activities of Aust:[48]
[48]VCAT transcript pp 433-652.
“MR DELANY: Thank you. Well, I was wrong. Now, you mentioned to the Tribunal that the company which I will refer to as Aust was incorporated in, and we have the company search here, 23 June 2008. And the purpose of incorporation of that company was what?---The purpose was to give potentially another option to K-Line moving forward into the future, having regard to the assessment concluding in a short period at that point in time, with a view to maybe restructure the affairs of K-Line to work in a, I suppose a more secure manner dealing with the unknown and the contingencies that were confronted at the time.
DEPUTY PRESIDENT: So does that mean that it was a contingency against K-Line collapsing into insolvent liquidation?---That was a concern that we had initially. Once we had an understanding of the resources that K-Line was able to access, that is through his officeholder, Mr Nedanovski, a loan facility as far as we were aware, was available that Mr Nedanovski could lean on, and introduce new capital into the business from time to time when it needed it over, yes.
…
DEPUTY PRESIDENT: So what, to your understanding, is the connection between K-Line and the premises of which the business, and I’ll use that neutral term, the business is now carried on?---Yes, Your Honour. K-Line Aust, it appears, holds the lease.
Yes?---And there would be a sublease arrangement to the business, come operator, but known as K-Line.
And so am I right in saying that normally if such a thing were to be done, it would be documented in some way, a letter perhaps, board resolutions, we haven’t heard anything of that type, are you aware of any documentation, resolutions, exchange of letters in that respect?---I know there was discussions with the landlord, ah, to ah, confirm that arrangement.
I see. And so it’s a subtenancy, is there any rent payable by the subtenant?
---Well, obviously they’d have to meet the rent expense.So the – you say there’s a deal between Aust and K-Line that K-Line is to indemnify Aust?---Yes.
And so does that entail Aust deriving any assessable income?---It would derive assessable income to the value of the rent that it’s liable for.
And would that be consistent with it having the status that you’ve accorded of – in your evidence today as being a dormant and non operating company that’s deriving assessable income?---Well, no, pre knowing the lease was in Aust’s name, it was dormant was far as I was aware. With a lease in its name it’s active – it’s physically trading.”
On the basis of the evidence before it, VCAT found that as and from 1 July 2009, the premises at 251 Princes Highway, Dandenong was leased to Aust and not to the defendant and, further, that there was no sublease from Aust to the defendant.[49] It also found that the WorkCover agent had been informed that Aust was the employer for the business and that the computer system used by the business “was programmed so that the accounts that recorded transactions of the business did so under the banner of Aust”.[50] On the basis of these findings, the plaintiff submitted that the Tribunal rejected the evidence of both Mr Nedanovski and Mr Delis that the confluence of events as at 1 July 2009 was “some sort of red herring or just a mistake”, finding, to the contrary, that it “occurred only because of the adoption of a deliberate strategy by those in control of K-Line and Aust, viz Mr Nedanovski that the K-Line business would hence forward be conducted by Aust and not by K-Line. Any further losses or outlays will therefore be Aust’s, not K-Line’s”.[51] In this context, the plaintiff focused on the reference by VCAT to the view that the defendant had “in effect ‘retired from business’”.[52] It was also submitted that on the basis of these findings, VCAT found that “various costs of providing a replacement above ground dynamometer, fitting out new premises at 251 Princes Highway, Dandenong and funding an accreditation course were necessarily excluded”.[53]
[49]VCAT reasons for decision at [213].
[50]VCAT reasons for decision at [213].
[51]VCAT reasons for decision at [213].
[52]VCAT reasons for decision at [213].
[53]VCAT reasons for decision at [212].
The plaintiff submitted that notwithstanding these findings and the award of $164,222 for destruction of the defendant’s business, VCAT then concluded that the defendant ought also to be compensated for losses claimed to be sustained by the business between 1 July 2009 and 30 June 2010. The 2009/10 financial year losses were trading losses of $50,879 incurred during that financial year and also costs of $60,399 for relocation of the business to 251 Princes Highway, Dandenong. It is against the ordering of compensation on this basis that the plaintiff now appeals, on the basis of the three questions of law it says arise, which have been set out previously.[54]
[54]See paragraph 5, above.
Alleged error
The plaintiff submitted that regard should be had to the submissions by Linking Melbourne Authority, the applicant before VCAT, that Aust was deliberately set up with the intention of operating the business and that this submission was supported by reference to a variety of factual evidence, including the following:[55]
[55]See VCAT reasons for decision at [159]-[162]; written Closing Submissions of the Plaintiff filed in the Tribunal proceeding (8 December 2010) at paragraphs 58-64 contained in Exhibit AJG-20 to the affidavit of Andrew James Gunter sworn on 4 August 2011; VCAT transcript pp 1167-1191.
(1)From at least 1 July 2009 –
(a)Aust was a trading entity;[56]
(b)it was liable for the payment of rent for the premises at 251 Princes Highway, Dandenong, which it leased from the owner and did not, in turn, sublease to the defendant;[57]
(c)Aust was registered as the employer of the employees of the business (and in the 2008/09 financial year, subcontractors were paid by Aust);[58]
(d)the primary accounting records were in the name of Aust;[59] and
(e)BAS statements were completed in the name of Aust.[60]
(2)Mr Nedanovski was advised to transfer his assets of value into Aust;[61] and
(3)when Aust was incorporated in June 2008, its principal place of business was given as the Doveton address, whereas the defendant’s address was Mr Nedanovski’s residential address.[62]
[56]VCAT transcript pp 652.23-29.
[57]Exhibit AJG-21 to the affidavit of Andrew James Gunter sworn on 4 August 2011.
[58]VCAT transcript pp 205.7-20, 207.23-26, 214.20-23; Exhibits AJG-24 and AJG-26 to the affidavit of Andrew James Gunter sworn on 4 August 2011.
[59]Exhibit AJG-26 to the affidavit of Andrew James Gunter sworn on 4 August 2011.
[60]Exhibit AJG-22 to the affidavit of Andrew James Gunter sworn on 4 August 2011; VCAT transcript p 315.7-13.
[61]VCAT transcript p 434.23-29.
[62]VCAT transcript p 201.20-25; Exhibit AJG-23 to the affidavit of Andrew James Gunter sworn on 4 August 2011.
The plaintiff submitted that if VCAT accepted, on the basis of the factual matters to which reference has been made, that the business was transferred from the defendant to Aust when it was relocated to 251 Princes Highway, Dandenong, then the tribunal could not attribute 2009/10 financial year losses to the motor mechanic business to the defendant. It was noted that Mr Nedanovski accepted that there was only one business, effectively operated by him through the defendant or Aust.[63] It was also noted that VCAT accepted, on the basis of the evidence relied upon by Linking Melbourne, the applicant before it, that there was a deliberate strategy to transfer the motor mechanic business from the defendant to Aust[64] and thereby rejecting the evidence of both Mr Nedanovski[65] and Mr Delis[66] that the “confluence of events” at 1 July 2009, was a red herring, mistake or clerical error. Further, it was submitted that for these reasons, VCAT found that “the K-Line business would henceforward be conducted by Aust and not by K-Line” and that “any further losses or outlays [would] therefore be Aust’s not K-Line’s”.[67] The plaintiff says that it is necessarily implicit in these findings that VCAT accepted that the business had been transferred from the defendant to Aust, on the basis of the evidence of the confluence of events as at 1 July 2009.
[63]VCAT transcript pp 229.17-20, 232.5-14 and 290.8-16.
[64]VCAT reasons for decision at [213].
[65]VCAT transcript p 314.15-25.
[66]VCAT transcript pp 643-646.
[67]VCAT reasons for decision at [213].
In this context, the plaintiff submitted that there was no logical or reasonable basis for the statement in the VCAT reasons for decision which followed:[68]
“With some hesitation however we refrain from making the finding that the business was transferred to Aust with affect [presumably effect] from the financial year commencing on 1 July 2009”.
The plaintiff submitted that there were two reasons for this hesitation, as indicated in VCAT’s reasons for decision.[69] The first reason stated was that “[s]uch a finding would be contrary to the evidence of both Mr Nedanovski and Mr Delis” and the second was that “despite attempts by subpoena to find evidence of a trading account in the name of Aust none was demonstrated to exist”.
[68]VCAT reasons for decision at [213].
[69]VCAT reasons for decision at [213].
In relation to the first reason, the plaintiff submitted that VCAT rejected the explanation given by both Mr Nedanovski and Mr Delis as to why there was evidence of Aust being active, rather than dormant, namely that all such evidence was the result of a mistake or clerical error. It was said that VCAT also implicitly rejected the submission by the defendant’s counsel that Aust was “an unfortunate irrelevancy”.[70]
[70]VCAT reasons for decision at [130].
As to the second reason, relating to the subpoena, it was submitted that it is not possible to reconcile this reason with the VCAT finding that the business had been transferred. It was said that this is so whether there was a transfer as at 1 July 2009 or some later date. The subpoenaed documents were, it was said, obtained during the course of the hearing, after 1 July 2010. It was submitted that if these documents supported a finding that Aust was not an operational company, then it would not have been possible for VCAT to find that the business had been transferred to Aust; but this it clearly did. It was submitted further, that this finding was contrary to, and by it VCAT must be taken to have rejected, the defendant’s submission that the lack of trading accounts shows Aust can simply be put to one side.[71]
[71]Referring to VCAT transcript, pp 1285.20-1286.4.
In conclusion, it was submitted that VCAT’s inference that the business was not transferred to Aust until some unstated date on or after 1 July 2010 cannot be reconciled with the findings of fact upon which it is based.
Focusing on paragraph [213] of its reasons for decision, the plaintiff submitted that VCAT appears to have confused notions of:
(a) the defendant transferring the business to Aust;
(b) “retiring from business”,[72] which it clearly viewed in its reasons as relating to the transfer to Aust; and
(c) being “written off” or having a “point of ultimate destruction”.
Thus, it was submitted that if the defendant suffered no loss after 1 July 2009 (as it was said must logically be the case based on the factual findings regarding Aust in paragraph [213] of the VCAT reasons for decision) the question of causation with respect to the 2009/10 financial year losses does not arise. But, it was said, VCAT appears to have conflated and confused the questions whether and at what date the transfer to Aust occurred and whether and from what date the business should be “written off”. Further, it was said that this confusion resulted in its apparent failure to make any determination of the date at which the transfer occurred.
[72]VCAT reasons for decision at [213]; VCAT transcript, p 1282.26.
The plaintiff reiterated that in order to recover compensation for loss due to business disturbance, a claimant must demonstrate actual loss suffered by the claimant and that the loss was caused by the acquisition. There is no reason, the plaintiff submitted, on the evidence before VCAT on the findings it made that the date of transfer of the business and the date of “write off” should occur simultaneously on 30 June 2010. Consequently, it was submitted that there was no basis for finding that any loss had occurred to the defendant after 30 June 2009. Hence, it was said that no basis was provided in the evidence before the tribunal for the “illogical conclusions” contained in paragraph [213] of the VCAT reasons for decision. It follows, it was said that in ordering that the defendant be compensated for the 2009/10 financial year losses, VCAT made an error of law which arises, in slightly different ways, from each of the three questions on the basis of which the plaintiff seeks leave to appeal. Concluding, it was submitted, that there can be no doubt that it is also a vitiating error in that the VCAT decision would have been different had the error not been made.
As has been indicated, the plaintiff placed considerable reliance in it submissions on the language of paragraph [213] of the VCAT reasons, in addition to relying upon parts of the VCAT transcript, exhibits and submissions that were before the Tribunal, on the basis noted previously. The defendant also sought to analyse the language of [213] of the VCAT reasons for decision closely, but also in the context of paragraphs [212], [213] and [214]. Accordingly, before turning to the defendant’s submissions, it is helpful to set out these paragraphs of the VCAT reasons for decision in full:
“212To resort again to the analogy of the damaged motor vehicle (or shop or aircraft) it may be reasonable after damage is initially inflicted to attempt to repair the vehicle. These repairs can be seen to have their analogy in the present case in the attempt to relocate K-Line’s business. Accepting as we do that these steps at least in prospect were reasonable for K-Line to take, compensation should be fixed on that basis with K-Line compensated for the relevant losses. Nevertheless, when in Mr Fitzgerald’s report which is relied upon by K-Line, Mr Fitzgerald nominates as appropriate for compensation the capital value of K-Line’s business on the basis that in the events that had occurred it now has no value, it is difficult to regard this as other than an election ultimately to ‘write off’ the business. In his initial report Mr Fitzgerald had rejected the use of a capital value for the business derived by the use of a multiplier upon its maintainable earning. His calculation applied cash flow over an assumed 27 years remaining in the working life of Mr Nedanovski, adjusted it for tax and discounted it at 11% calculating a figure of $381,408. Following the conference of experts he modified his view accepting a capital calculation based on a multiplier in accordance with the figures referred to at [222] below. In making that claim for compensation for capital value of the business and making that election (we use the term in a broad sense rather than in any technical legal sense) K-Line necessarily abandons compensation for any amounts representing the cost of resuscitating the business in the future. Once an owner of a damaged motor car receives by way of damages of the car on a ‘write off’ basis no further damages are awarded for the repair of the wreck. It follows that the various costs of providing a replacement above ground dynamometer, fitting out new premises at 251 Princes Highway, funding an accreditation course for Mr Nedanovski are necessarily excluded. The amounts claimed for fitting out the premises at 251 Princes Highway are in any event excessive or unrealistic by reference to the opinions of Mr Di Paola which the claimant was happy enough to adopt for other purposes.
213We are fortified in our view that none of these amounts should be allowed by the evidence which to our mind supports the view that K-Line has in effect ‘retired from business’. That evidence showed that the lease of the premises at 251 Princes Highway is in the name of Aust and that no sub-lease is in existence. No landlord consent for any sub-lease by Aust to K-Line has been given for instance. As from 1 July 2009 not only is the business such as it is conducted from premises owned by Aust but the WorkCover agent has been informed that Aust is the employer. The computer system was programmed so that the accounts which recorded the transactions of the business did so under the banner of Aust. We cannot accept the submissions made on behalf of K-Line that this is some sort of red herring or just a mistake. This confluence of events occurred only because of the adoption of a deliberate strategy by those in control of K-Line and Aust, viz Mr Nedanovski, that the K-Line business would hence forward be conducted by Aust and not by K-Line. Any further losses or outlays will therefore be Aust’s not K-Line’s. With some hesitation however we refrain from making the finding that the business was transferred to Aust with affect from the financial year commencing 1 July 2009. Such a finding would be contrary to the evidence both of Mr Nedanovski and Mr Delis. Moreover despite attempts by subpoena to find evidence of a trading account in the name of Aust none was demonstrated to exist. Even in the absence of such a finding however, what we have said already as to the destruction of the value of the goodwill in K-Line’s business means that a line must be drawn at a particular point at which the K-Line business must be treated as ‘written off’. This process began when K-Line left its original premises upon acquisition and went into storage. There is much to be said for the view that the process of destruction of the value of the goodwill was complete by the time K-Line vacated the premises at Doveton, nevertheless a more conservative view would have the point of ultimate destruction at 30 June 2010 when even a year’s trading in the vicinity of K-Line’s original premises (across the Princes Highway) had failed to restore the business to profitability. Choice of this date therefore means that the costs of losses incurred in the year 2009/2010 and the costs of the move to 251 Princes Highway are included amongst K-Line’s compensable losses.
214No separate allowance should be made for the effect of unsatisfactory premises or the lack of a dynamometer because insofar as compensation claims have been made with respect to the incurring of losses or the destruction of goodwill of the business, the losses relative to the unsuitability of premises and the lack of an operating dynamometer are already reflected in those figures to which we will turn in due course.”
The defendant submitted that VCAT was fully aware of the dispute as to whether the post 1 July 2009 losses and costs were those of the defendant or of the other company, Aust, having received evidence and heard submissions on that issue. VCAT, it was said, was invited to make a finding of fact that the business had been transferred to Aust.[73] Critically, it was submitted that VCAT’s reasoning at paragraph [213], extensively relied upon by the plaintiff (as has been indicated), must be read in the context of the VCAT reasons for decision as a whole, especially paragraphs [212] and [214]. It was submitted by the defendant that the facts demonstrate that there was for many years a lack of demarcation between Mr Nedanovski personally and the defendant company and, as I understand the submissions, between him and Aust.
[73]VCAT transcript, pp 1170-71; written Closing Submissions of the Plaintiff filed in the Tribunal proceeding (8 December 2010) at paragraphs 63 contained in Exhibit AJG-20 to the affidavit of Andrew James Gunter sworn on 4 August 2011.
In particular, it was submitted that, on the basis of the evidence, VCAT expressly refrained from finding that the business was transferred to Aust with effect from 1 July 2009. It was submitted that this is a conclusion that a fact was not established and that the inference reasonably arising from that conclusion is that the defendant, by not transferring the business, continued, at least, to own the business or participate in it, in conjunction with Aust.
The defendant submitted that the common element to each of the plaintiff’s grounds in support of its appeal are purported inconsistent findings of fact.
The trading losses and relocation costs sought to be excluded were incurred on or before 30 June 2010. VCAT reached the conclusion that the defendant’s business was destroyed as at that date[74] and ordered compensation based on that finding. It found that the defendant had not transferred the business to Aust and therefore the defendant was entitled to losses up until the date the business was effectively destroyed.
[74]Referring to the end of paragraph [213] of the VCAT reasons for decision.
It was submitted that in paragraph [212] of its reasons for decision, VCAT considered and rejected various claims relating to the period after 1 July 2009. VCAT reached this conclusion on the assessment of the evidence and not because the defendant had closed down. Following the paragraph [212] analysis, VCAT then, at paragraph [213], referred to matters which fortified that view. It was submitted and emphasised that paragraph [213] of the reasons for decision should be read in this context. Further, it was said that VCAT was not making findings of fact in paragraph [213] to justify the drawing of any inferences. It was simply identifying those facts which support a view that the business was divested to Aust from the financial year commencing 1 July 2009.
VCAT then stated that it was not prepared to find as a fact that the business was transferred to Aust from the financial year commencing 1 July 2009. It was submitted that VCAT made a finding in these terms because of the evidence of Mr Nedanovski and Mr Delis and because there was no trading account in the name of Aust. Business activities clearly occurred after 1 July 2009, but the question was whether these were those of the defendant or of Aust.
Given the evidence of Mr Nedanovski and Mr Delis in the absence of any substantive trading records of Aust, it was submitted that VCAT properly found as a fact that the business had not been transferred to Aust.
Until 1 July 2009, the defendant operated the business. From that date, it was submitted, there are “evidentiary signposts” that Aust operated the business, but VCAT expressly decided not to make that finding. There were various matters, matters which were raised in the plaintiff’s submissions,[75] which might be said to support the view that Aust operated the business. The Tribunal did not make a finding, but merely identified matters which supported a view that the defendant had, in effect, “retired from the business”. It did not, however, find that “the business was transferred to Aust with effect from” 1 July 2009. In this respect, the defendant emphasised that the concepts of “retiring from business” and “transferring a business” are not the same, a position which I would have thought is quite clear as a matter of language and that this is consistent with the language of VCAT in its reasons for decision, particularly in paragraphs [213] to [214].
[75]See paragraph 34, above.
Continuing in relation to this point, the defendant emphasised that in paragraph [213] of its reasons for decision, VCAT uses the phrase “in effect” and italicises the words “retired from business”. It was submitted that VCAT is, by these aids, making it clear that it is referring loosely and not literally to the notion of “retiring from business”. The Tribunal’s language, it is said, indicates that it recognises that there are some indicia that the defendant has ceased to operate the business, but it is a looser, relaxed arrangement and, in any event, is consistent with a set of circumstances where the principal and only director of both entities, Mr Nedanovski, understood that the defendant company was still the operating entity and that any change of entities was for accounting reasons only.[76] Further, it was submitted that “retiring” from business is also consistent with the defendant still owning the business. The defendant submitted that this is the conclusion that the Tribunal reached, having found that the defendant company had not transferred the business.
[76]See VCAT transcript pp 202-3 and 209-10.
By way of conclusion, the defendant submitted:[77]
[77]See Outline of the Defendant’s Submissions (11 August 2011), pp 7 and 8, paras 19 and 20.
“19.The Tribunal’s observations in paragraph 213 are consistent with either providing justification for the conclusions reached in paragraphs 212 or alternatively that Aust continued the business for and on behalf of (or in conjunction with) K-Line. They are also consistent with the forensic realities of the case as presented to VCAT that:
·the business operations of each of K-Line and Aust was the conduct of Mr Nedavoski (see transcript 198, 202, 203);
·K-Line had continued to have during 2009-2010 a trading account with Westpac, and Aust did not have an active bank account (eg transcript 1285 lines 20-25)
·Aust was not an entity separate from or at arm’s length from Mr Nedavoski or his interests – it was a related entity and Mr Nedavoski was the sole director and shareholder of both entities;
·Aust had been created and its involvement was for tax or insolvency management reasons (see transcript 404 lines 20-27; 433 lines 4-24; 716 lines 13-29);
·Mr Nedanovski did not understand these things and continued in his mind as K-Line (transcript 198, 202, 203, 209, 210);
·Aust had little or nothing to do with the actual business operations (see transcript 433 lines 4-27; 434 lines 23-29).
Therefore whilst Aust was created (in June 2008) and certain formal business matters were entered into by Aust they were not operational trading activities, for instance no cheques were ever written in Aust’s name (see transcript 384 line 25ff) nor did it have any trading records.
20.The Tribunal did not find that there was at any date a transfer from K-Line to Aust. Rather the Tribunal found as a fact that by 30 June 2010 the business was ultimately destroyed. This is not a finding that it was Aust’s business as at that date.”
Application of relevant principles
In relation to the first question, the plaintiff relied upon the following passage from the judgment of Dixon J in Secretary to the Department of Infrastructure v Williamstown Bay and River Cruises Pty Ltd[78] where his Honour said:
[78][2011] VSC 191 at [95]; referring also to Roads Corporation v Schembri [2009] VSC 369 at [44]-[45].
“The assessment of disturbance loss was a question of fact to be resolved on the whole of the evidence before the Tribunal. The proper approach to an appeal on a question of law in such circumstances is not in doubt. In S v Crimes Compensation Tribunal[79] Phillips J stated:
‘…
Essentially, the question whether the particular circumstances of the claimant are such as to bring his or her case within the statutory description is a question of fact, not law … Nevertheless, if in determining whether the particular circumstances of the claimant are such as to fall within a relevant statutory description, the fact finding tribunal arrives at a conclusion which was simply not open to it, that is an error of law.’”
[79][1998] 1 VR 83, 89; see also Collector of Customs v Pozzolanic Enterprises Pty Ltd [1993] FCA 456; (1993) 43 FCR 280; Collector of Customs v Agfa-Gevaert Ltd (1996) 186 CLR 389, 395; Myers v Medical Practitioners’ Board of Victoria [2007] VSCA 163.
The plaintiff submitted that the first question asks whether the particular circumstances of the defendant, between 1 July 2009 and 30 June 2010, on the facts found by VCAT, were such as to fall within the statutory description of “loss attributable to disturbance”. As was emphasised in the plaintiff’s submissions, “loss attributable to disturbance”, must be a “pecuniary loss suffered by the claimant”.[80] As indicated previously in its submissions, the plaintiff says that it was not open to the Tribunal to find that the 2009/10 losses fall within the definition of “loss attributable to disturbance” or were otherwise losses incurred by the defendant.
[80]See Outline of the Plaintiff’s Submission (4 August 2011), paragraph 46.
As I have indicated previously, I have been prepared to consider the oral evidence before VCAT to which I was taken by the plaintiff in the course of its submissions for the purpose only of enabling a proper understanding of VCAT’s decision in accordance with the principles established by the authorities to which reference has already been made. The defendant, in its submissions in relation to the first question raised by the plaintiff, emphasised that a party may not “refer to and rely upon the evidence before the Tribunal as distinct from the factual findings of the Tribunal”.[81] Further, the defendant submitted that the plaintiff must show that there was no evidence available to VCAT upon which it could reach the conclusion of fact it reached.[82]
[81]Referring to South Eastern Water Ltd v Trans Pacific Cleanaway Pty Ltd [2010] VSC 46 at [15]-[16] (Cavanough J) as seen in Outline of the Defendant’s Submissions (11 August 2011), paragraph 21.
[82]Outline of the Defendan’ts Submissions (11 August 2011), para 22 referring to Krsteski v Jovanoski [2011] VSC 166 at [46] (Macauley J).
Additionally, the defendant emphasised the distinction between an affirmative finding by a tribunal that was not supported by evidence and a situation where the evidence necessitated an affirmative finding but the tribunal did not make that finding. In this respect, reference was made to the judgment of Brooking JA in Ericsson Pty Ltd v Popovski:[83]
“It is a strong thing to reach such a conclusion in a case where the burden of proof lies on the appellant, who is therefore submitting not that an affirmative finding had no evidence to support it, but that the evidence was such as to necessitate an affirmative finding which was not made.”
In this context, the defendant submitted that VCAT has done no more than recognise various facts, then proceed to balance those facts and make a determination that, having balanced the facts, it was not persuaded to reach the conclusion advocated by the plaintiff that the business had been transferred to the defendant.
[83](2000) 1 VR 260 at 266, [14].
Additionally, I should observe that there is a clear logical difference between a finding that a business has been transferred from one entity to another as distinct from a finding that another entity has, at some stage, stepped into the shoes of the other entity and commenced to conduct the relevant business to the exclusion of the former entity. There may also, logically, be an “intermediate” position where the entities both carry on businesses at the same time – one the former business, the other a new business.
Having regard to this distinction and the language of the VCAT reasons for decision, particularly paragraphs [212] to [214], I am of the opinion that the defendant’s analysis of the Tribunal’s reasons is to be preferred to that of the plaintiff. Reading these paragraphs in context, I think it is clear that paragraph [212] is, in substance, a finding that the defendant had decided to “write off” the business and abandon compensation for any amounts representing the cost of resuscitating the business in the future. The defendant is correct, in my view, that the reasons contained in paragraph [213] are directed to indicating, at least initially, that VCAT was strengthened in the view previously expressed in paragraph [212], that the defendant had decided to “write off” or “retire from business” on the basis of the further evidence to which reference is there made. Further, the reasons contained in paragraph [213] then direct attention to the point at which the defendant’s business must be treated as “written off” – in other words, the point after which no compensation would be payable with respect to the business.
Picking up the analogy referred to in paragraph [212], the damaged motor vehicle was, at some point, a wreck – written off – and on that basis no further damages would be awarded for its repair. In the latter part of paragraph [213], VCAT found that the ultimate destruction, the “write off” date of the business was 30 June 2010. It is in this context that VCAT declined to make a finding that the business had been transferred by the defendant to Aust with effect from the beginning of the financial year 2009/10 – in other words, 1 July 2009. In my opinion, this process of reasoning undertaken by VCAT does do no more than recognise various facts and then seek to balance those facts and to make a determination on the basis of those facts. As indicated previously by reference to authorities considered, particularly The Gombac Group Pty Ltd v Vero Insurance Ltd,[84] the fundamental duty of the Tribunal was to address the question of a particular fact in issue in the proceedings before it by reference to the whole of the evidence relevant to that issue and not some part of that evidence alone.
[84][2005] VSC 442 at [20] (Osborn J).
The defendant emphasised that VCAT had expressly determined that:
“[213] … we refrain from making the finding that the business was transferred to Aust with affect [presumably effect] from the financial year commencing on 1 July 2009. Such a finding would be contrary to the evidence of both Mr Nedanovski and Mr Delis”.
Having reaffirmed that this was a situation where the tribunal had declined to make a finding, the defendant submitted that if, as from 1 July 2009:
(a)the defendant stopped operating the business and Aust started operating the business, but the business was not transferred; or
(b)the defendant continued to operate the business in conjunction with Aust, but the business was not transferred; or
(c)Aust started operating the business on behalf of the defendant, but the business was not transferred
this does not prevent the defendant, as owner of the business, claiming and receiving compensation for disturbance loss.
In my opinion, in the context of my consideration of VCAT’s reasons for decision, the defendant’s submissions in this respect are correct. There is no basis, for saying, that based on the VCAT reasons for decision (even as “clarified” by reference to the oral evidence before the Tribunal to which reference was made by the plaintiff) there was evidence which necessitated VCAT making an affirmative finding with respect to the transfer of the business or that there was any illogicality in its findings or inconsistency with the whole of the evidence properly balanced as indicated above.
The second and third questions in substance go to illogicality and “Wednesbury” unreasonableness.[85] As the authorities to which reference has been made indicate,[86] even if there were a defect in the logic of the VCAT reasons, that would not be, of itself, sufficient to establish an error of law. Rather, what must be established is that there is “no probative evidence to support it [a finding of fact] (and not also if it is not reasonably open on the evidence), while an inference will be open to challenge as being erroneous in law if it is not reasonably open on the facts …”.[87]
[85]See above, paragraphs 12
[86]See Lucas v Transport Accident Commission [2003] VSC 97 at [10] (Osborn J); and the authorities referred to above, paragraphs 8 to 13.
[87]Roads Corporation v Dacakis [1995] 2 VR 508 at 520 (Batt J); and see above paragraph 11.
In my opinion, on the basis of the VCAT reasons for decision, the evidence referred to by the Tribunal, and the oral evidence to which I was taken by the plaintiff, there was evidence available upon which the tribunal could make the finding (or more accurately refuse to be satisfied that a finding was justified) and otherwise reach the conclusions that it did reach in relation to the defendant’s entitlement to be compensated for disturbance for the financial year 2009/10. In my view, the oral evidence before VCAT to which I was taken by the plaintiff serves to clarify the reasons for the decision of the Tribunal; but in the sense of reinforcing as a result of clarification, rather than filling any gaps. The reasons for decision, thus clarified, indicate that on the basis of the whole of the evidence there was a proper basis for VCAT making the findings it did make and refusing to make the finding in relation to the transfer of the business.[88]
[88]In the same vein, as I understood the defendant’s submissions, reference was also made to the VCAT transcript, pp 210.3-13; 214.11-15; 215.16-24; 216.17-24; 229.17-20; 288.28 to 290.26; 292.17-20; and 317.13-17. Additionally, reliance was placed on para [130] of the VCAT reasons for decision.
Summary and conclusions
For the preceding reasons, I refuse the plaintiff’s application for leave to appeal the Order of Deputy President Macnamara dated 24 January 2011 in the matter of VCAT reference no. L114/2009. I will hear the parties in relation to the question of costs and the form of orders, both in relation to the dismissal of the plaintiff’s application and any consequential orders which may be required.
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