Robertsons Furniture and Design (Qld) Pty Ltd v Chief
[2005] QLC 1
•10 January 2005
LAND COURT OF QUEENSLAND
CITATION: Robertsons Furniture and Design (Qld) Pty Ltd v Chief
Executive, Department of Main Roads [2005] QLC 0001PARTIES: Robertsons Furniture and Design (Qld) Pty Ltd
(claimant)v. Chief Executive, Department of Main Roads
(respondent)FILE NO: A2003/0717 DIVISION: Land Court of Queensland PROCEEDING:
Claim for compensation payable consequent upon the resumption of land for road purposes under the Acquisition of Land Act 1967, the Transport Infrastructure Act 1994 and the Transport Planning and Coordination Act 1994
DELIVERED ON: 10 January 2005 DELIVERED AT: Brisbane HEARD AT: Brisbane MEMBER: Mr JJ Trickett, President ORDERS:
1.
Compensation is determined at Two Hundred and Thirty-nine Thousand Six Hundred and Five Dollars ($239,605) and the respondent is ordered to pay the claimant that amount.
2.
The respondent will pay interest at the rate of 5.75% -
•
on the amount of Two Hundred and Twenty Thousand Five Hundred and Fifteen Dollars ($220,515) from 13 October 2000 (the date of resumption) to 26 February 2004 (the date the advance against compensation of $146,247.20 was paid);
•
on the amount of Seventy-four Thousand Two Hundred and Sixty-seven Dollars Eighty Cents ($74,267.80) from 27 February 2004 up to the day immediately preceding the date upon which compensation is made;
•
on the amounts of professional fees incurred in the preparation and lodgement of the claim for compensation up to the agreed amount of Nineteen Thousand and Eighty-nine Dollars Ninety-four Cents ($19,089.94), from the dates they were actually paid, up until the day immediately preceding the date upon which compensation is made.
CATCHWORDS:
Resumption - Tenant's interest - Furniture business - Claim for loss of profits during road construction - Method of valuation - Accounting evidence - Claimant's internal classification of furniture sales
Resumption - Whether claim for loss of profits valid - Head of compensation - Disturbance - Injurious affection - Tests to be applied - Statutory interpretation s.20 Acquisition of Land Act 1967
APPEARANCES: Mr RM Needham for the claimant
Mr JE Gallagher QC with him Mr RS Jones for the
respondentSOLICITORS: Phillips Fox Lawyers for the claimant
Crown Solicitor, Crown Law, for the respondent[1] This is a claim for compensation by Robertsons Furniture and Design (Qld) Pty Ltd (the claimant) as lessee of land situated in Bundall Road on the Gold Coast, consequent upon the resumption of part of that land for road widening purposes by the Chief Executive, Department of Main Roads (the respondent).
The Resumption
[2] A Notice of Intention to Resume dated 18 April 2000 was served on the claimant giving notice that the respondent intended to take an area of 62 m² from land described as Lot 8 on RP 112134, Parish of Nerang, County of Ward, for the purpose of transport, in particular, road purposes (Southport-Burleigh Road). Then on 13 October 2000, the land was formally taken for that purpose by a proclamation published in the Government Gazette of that date.
The Claim for Compensation
[3] A claim for compensation for $849,462 under s.19 of the Acquisition of Land Act 1967(the Act) dated 13 August 2003 was served by the claimant on the respondent. That claim was referred by the claimant's solicitors to the Land Court on 29 September 2003. The claim was for disturbance for loss of business profits during road construction associated with the widening of Bundall Road. Then on the last day of hearing, the claimant sought and was granted leave to amend the claim to $790,443, without objection.
[4] Compensation is assessed under s.20 of the Act, which provides:
"Assessment of compensation
(1) In assessing the compensation to be paid, regard shall in every case be had not only
to the value of land taken but also to the damage (if any) caused by either or both of thefollowing, namely -
(a) the serving of the land taken from other land of the claimant; (b) the exercise of any statutory powers by the constructing authority otherwise injuriously affecting such other land.
(2) Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.
(3) In assessing the compensation to be paid, there shall be taken into consideration, by way of set-off or abatement, any enhancement of the value of the interest of the claimant in any land adjoining the land taken or severed therefrom by the carrying out of the works or purpose for which the land is taken.
(4) But in no case shall subsection (3) operate so as to require any payment to be made
by the claimant in consideration of such enhancement of value."
[5] The respondent contended that there was no compensation payable on two bases. First, that the claim for loss of profits was not a valid claim and second, even if that type of claim is compensable, no loss was suffered by the claimant.
[6] However, it seems that the respondent did not always adopt that position, as an advance against compensation of $146,247.20 was paid by the respondent to the claimant on 26 February 2004. The parties had agreed that compensation for professional fees incurred in the preparation and lodgement of the claim in the sum of $19,089.94 should be paid. However, I was not advised if or when such payments were made.
The Claimant Company
[7] The history of the claimant company and the background to the present claim were provided by of Mr KA Robertson, who together with his wife, conducts a business through a group of companies, one of them being the claimant company. Mr Robertson has been associated with what he referred to as "the high end furnishings business" all his adult life. In 1980 he opened "Robertsons" in Melbourne which grew throughout the 1980's into "Robertsons Residential" which focused on high end furnishings from around the world, providing furnishings packages for clients, including prestige projects such as Mirage Resorts, Gold Coast and Port Douglas. "Robertsons Design", a separate company also located in Melbourne, was involved in quality design work for hotels, restaurants and office fit-outs, including overseas work.
[8] In 1990 the Robertsons opened a design office in Queensland and in 1990-91, they opened a showroom at 58 Bundall Road. As it was difficult to run operations in both Melbourne and Queensland, the Robertsons moved to Queensland and closed the majority of their Melbourne operations. Throughout the 1990's they experienced strong growth. When the premises at 58 Bundall Road proved to be too small, they moved to a two- storeyed building at 86 Bundall Road, a much larger site with good parking facilities. Extensive refurbishment works were undertaken to create a large retail showroom on the ground floor and a design and project division on the first floor. That premises was opened in 1997, allowing the company to showcase a greater range of retail product.
[9] On the advice of its accountants, the Robertsons established a company (Ellireef Pty Ltd) to hold the land at 86 Bundall Road on l July 1997 and the claimant company entered into a lease of the premises for five years, with two options each of five years. A claim for compensation by Ellireef Pty Ltd in respect of the resumption of its land was also referred to the Land Court at the same time as the present claim but has since been settled.
[10] Mr Robertson explained that the claimant company trades in three basic areas:
• Retail business - offering furniture, lighting, window coverings, rugs, art and accessories, collections of which are brought from around the world. The retail business is focused on quality service for the clientele that walks through its door and the company prides itself on being an "over service" company. • Project work - sourced in two ways, through recommendation for work the company has carried out and also by canvassing. The project work is carried out by a dedicated team of designers, architectural drafting staff and project managers who are located on the first floor of the premises at 86 Bundall Road. This work includes renovation and refurbishment. • Design - as a professional interior design company, the claimant undertakes design work, including that commissioned by property developers for large apartment and/or residential projects, including "Rivage Royale" on the Gold Coast, Juniper's "Deepwater" and "Bluewater" projects at Mooloolaba and the refurbishment of the Sheraton Gold Coast Hotel.
[11] According to Mr Robertson, it was intended to grow the retail business. He regards it as the core activity and fundamental growth area of the company, being the least complicated side of the business and generating its strongest cash flow in terms of immediacy in result. For that reason the company had spent considerable funds on the interior fit-out of its showroom. It is different to other retailers, offering high end quality product from around the world. Staff are trained to nurture their clients whose decisions involve considerable thought, with repeated calls to the showroom to discuss fabric choices and coordination of accessories.
[12] Mr Robertson explained that the company's client base consists of affluent and successful people who traditionally enjoy the experience of visiting and shopping at Robertsons, with its friendly staff and ease of access and parking. The company's advertising emphasises that the retail business is about the "Robertsons Experience". In order to provide this level of service to its clients, the company maintains a core of professional sales consultants who build up a strong rapport with their clients. A significant amount of time is spent on training sales consultants who become too valuable to the company to be put off when the volume of sales fluctuates.
[13] When they moved to 86 Bundall Road, the Robertsons planned for an annual retail sales increase of 30% which, according to Mr Robertson, was achieved in the first year and out performed in every year, except for the period when it was affected by the roadworks. Mr Robertson attributes this growth to the large showroom which allows it to display a broader spectrum of contemporary and classic furniture than previously. Mr Robertson considers the company to be unique, being only one of two retailers offering high end product, the other being Le Merciers, which targets a different clientele.
[14] According to Mr Robertson, the business suffered from the roadworks on Bundall Road as early as November 2000. It had been well known on the Gold Coast that construction work on Bundall Road was expected to result in traffic disruption and the general public were aware that Bundall Road should be avoided during the construction period.
[15] He claimed that the business was adversely affected during the whole period, not only when the roadworks were immediately in front of the premises. Regardless of where the work was in the road, with the traffic congestion, dust and construction noise and general inconvenience, clients either avoided the business or did not find the urgency to return. The type of clientele that are attracted to a top end furniture retail showroom are likely to be deterred by construction work anywhere in the vicinity. To compensate, the company resorted to different forms of advertising which was partially successful in attracting a new clientele, but this was, in Mr Robertson's terms, "a lower calibre retail client who was interested in spending less".
[16] As part of the aggressive marketing, the company conducted a second major sale in July in addition to its annual sale in January. However, despite all this, Mr Robertson believed that over the period of roadworks there was considerable damage done to the company's existing high profile clientele and to its market. He believed that the image of the business suffered during that period, with the removal of signs, digging up the road and laying new mains and telephone lines, with constant dust and trucks and long delays along Bundall Road.
[17] According to Mr Robertson, as the roadwork intensified the more the business suffered; February was a very poor month and in March 2001 the advertising budget was doubled, with some success. From April to June 2001 the company tried various advertising promotions and mail outs, but the retail business was not doing well, with sales and traffic numbers both down.
[18] Mr Robertson readily conceded that the Department of Main Roads and its contractors, had done all that they could to cooperate with him and to minimise disruption, but claims that the roadworks had a dire effect on the business and set its growth plan back 12 months. Far from enhancing the business, Mr Robertson believes that the upgraded road has proved to be a disadvantage.
[19] Mr Robertson believes that the roadworks over a 12 month period had slowed the growth prospects for the business at a time that should have been the most buoyant in its history. He considers that the company has lost considerable ground in terms of market presence despite working hard to catch up.
The Upgrading of Bundall Road
[20] The following details are drawn from the statements of engineers Ms JK Peters, Mr CL Beard, Mr WD Mooney and Mr CB Arthy, all of which were tendered by the respondent by consent.
[21] Public consultation informing the community of the proposal to upgrade Bundall Road was undertaken by the Department of Main Roads from July to September 1999, with further consultation from March to May 2000. The road construction works were undertaken so as to minimise the impact on local businesses during normal business hours. Phase A, pre-construction service relocation and accommodation work, commenced in September 2000 and was completed in July 2001. Following the location of services, work commenced on 30 October 2000, cutting concrete for water mains, removing trees, signs, etc. Phase B consisted of road widening, road construction and median construction and pavement works. The majority of road construction works was carried out from June 2001 to early November 2001.
[22] The Phase A work commenced at the southern end and progressed northerly, sometimes out of sequence and out of hours to suit property owners. The Department and its contractors kept local businesses fully informed and made adjustments to the work program to minimise traffic disruption. Mr Robertson had been particularly concerned about disruption to his business by work on his driveway, but inconvenience and disruption were minimised by finishing work by 9 a.m., plating the driveway with steel access plates, working on Sunday, etc. The driveway was resealed prior to Christmas 2000. It seems that the relationship between the Department and Mr Robertson was quite amicable.
[23] According to Mr Mooney, works were undertaken directly outside the claimant's premises on 10, 12, 16 and 18 December 2000. In addition, two incidents disrupted the four-lane traffic flow during Phase A. By May 2001, service relocations were complete and widening of the east side of the road commenced. In July 2001, traffic control barriers were erected as a centre median.
[24] By June 2001, Phase A service relocation works and construction of the pavement on the western side of Bundall Road had been completed and traffic relocated to that side. In mid-June a double white line was painted down the centre of the temporary road alignment, preventing right turn access to the claimant's premises for southbound traffic. Between June and October 2001, the Phase B part of the project was constructed, involving widening the eastern side of the road opposite Robertsons. In mid-September 2001, centre median works commenced and right turn access by southbound traffic into Robertsons was permanently prevented. During Phase B, road widening works and median construction were carried out during normal working hours, but four lanes of traffic were kept open for the vast majority of that phase. The project was completed on 31 October 2001, apart from some minor works completed by the first week of November 2001.
The Upgraded Road
[25] According to Mr Beard, the road upgrading had a number of impacts, some potentially positive and some potentially negative, on the claimant's premises. However, in his opinion, the claimant's land and the business has been substantially enhanced, as it is more accessible to more customers more safely and the environment is more attractive. He contended that the marginal increase in travel distances for some potential customers is offset by safety improvements. He doubted that there had been any significant reduction in accessibility to retail customers during construction, except for short periods only and this, he thought, was outweighed by the long-term benefits.
[26] Mr Robertson strongly denied that the upgrading of Bundall Road has resulted in any enhancement to the business. He sees the prohibition on direct access by southbound traffic to be a negative consequence. Because of the new median, southbound traffic can no longer turn directly into the premises but has to proceed to the next intersection, wait for a light change to make a U turn and then travel north to access the premises. He does not regard the increased traffic flow as positive, as motorists are too busy watching the traffic to pay attention to showrooms containing furniture. Furthermore, with the introduction of the ancillary breakdown and turning lane, there is no longer on-street parking and with the extra traffic, Bundall Road is no longer a shopping destination, but a main thoroughfare. He believes that the area will continue to deteriorate, as traffic growth and congestion will take the company's high level clientele elsewhere. In his opinion, the roadworks have done nothing to enhance the retail ability of the business.
The Basis for the Claim
[27] The claim for $849,462 and the amended claim for $790,443 were prepared by accountant, Mr PN Lovell, who joined the claimant company as financial controller in November 2001, just after the redevelopment work on Bundall Road had been completed.
[28] In February 2002, the claimant's external accountants, Watter McDermid & Staff (Watters), had provided a report and a preliminary claim for $553,374 for loss of profits and added costs of working during the period of redevelopment. Having satisfied himself as to the correctness of the methodology adopted for that preliminary claim, Mr Lovell reviewed all the records, which included statistical showroom floor traffic, order confirmations, sales invoices, sales reports and other records, as well as financial accounts and management reports. Although he adopted a similar methodology, Mr Lovell came to a different conclusion.
[29] The company's sales records show that in the two years prior to the roadworks and in the two years following those works, the claimant company achieved substantial growth in retail sales. In fact, the retail sales for the years November to October for the six years to October 2003, showed substantial growth each year, except for the roadworks year, when retail sales fell by 41% from the sales in the previous year. That rate of growth (except for the affected year), continued to outstrip furniture industry standards. The total of retail traffic into the claimant's showroom for the affected year shows a 12.4% reduction overall, but the "walk-in off the street" category fell by 75.2%.
[30] In the amended claim, Mr Lovell estimated that there had been a shortfall in retail revenue of $1,306,742 during the period November 2000 to October 2001, by deducting from the value of retail sales from the sales reports by month, for the periods November 1999 to October 2000 (before the roadworks) of $3,451,042, the value of retail sales for the period of the roadworks of $2,144,300. However, in order to arrive at loss of net profit, that shortfall in revenue had to be adjusted for the variable costs saved and for the company's gross margin.
[31] In calculating the gross margin on the shortfall in retail revenue, Mr Lovell considered it necessary to identify the rate applicable to retail sales, rather than the overall gross margin percentage for all activities of the business. However, as the accounting software at that time did not provide for differentiation between the various sales activities of the company, he had to extract various debtors' sales profitability reports, which indicated that the gross margin percentage achieved for clients selected randomly was between 40% and 50%.
[32] To support those figures, he examined the management reports for the financial years 2002 and 2003, which showed gross margin percentage achieved on retail sales only, was 39% and 42% respectively. He adopted 39%.
[33] To arrive at the net profit, Mr Lovell calculated the relevant cost of sales, including commission, delivery and administration expenses, which he reasoned are variable expenses directly related to the level of sales volume, as opposed to fixed expenses, such as rent or lease charges, which remain constant.
[34] Mr Lovell adopted 2.5% for commission, 1.25% for delivery, and for administration expenses, such as costs of telephone and facsimile, photocopying, postage, stationery, presentation costs, insurance etc, he adopted 1.5%.
[35] Mr Lovell reasoned that if the redevelopment of the road had not occurred, the business would have expected a continuation of the growth of retail sales in line with the rates achieved historically. Having regard to the trend for retail sales prior to and subsequent to the redevelopment period, he adopted a natural growth factor for retail sales of 30%, which he considered to represent a reasonable and conservative percentage.
[36] Mr Lovell's calculation of the adjusted claim for compensation was as follows:
COMPENSATION CLAIM RE-DEVELOPMENT OF BUNDALL ROAD
| SHORTFALL IN RETAIN REVENUE | ($1,306,742) |
(Based on Reduction of 12.4% in Retail Traffic
| GROSS MARGIN ON SHORTFALL IN RETAIL REVENUE (Based on Historical Levels of Margin of 39%) | ($509.629) |
| LESS - RELEVANT VARIABLE COST OF SALES:- |
COMMISSION (Based on 2.5% of Retail Sales)
DELIVERY (Based on 1.25% of Retail Sales) $32,669 ADMINISTRATION (Based on 1.5% of Retail Sales) $16,334
$19,601 $68,604
NET PROFIT DUE TO SHORTFALL IN RETAIL SALES
($441,025)
PLUS - FACTOR OF 30% APPLIED TO RETAIL SALES
OF $3,451,042 FOR THE PERIOD NOV 99 TO OCT 00
TO REFLECT THE IMPACT OR NATURAL GROWTH EXPECTED, BASED ON HISTORICAL
LEVELS$1,035,313
GROSS PROFIT @ 39% OF $1,035,313
($403,772)
LESS - RELEVANT VARIABLE COST OF SALES @ 5.25%
FOR COMMISSION, DELIVERY & ADMINISTRATION
$54,354 ($349,418)
| TOTAL OF COMPENSATION CLAIM (Excluding GST) | ($790,443) |
The Respondent's Assessment of Compensation
[37] In addition to the legal submission regarding the validity of the claim, the respondent contended that no compensation was payable because the claimant's business did not suffer any loss which could be attributed to the redevelopment of Bundall Road. Evidence to this effect was led through two witnesses, financial consultants, Mr NC Calabro and Mr JM Norling.
Mr Calabro's Evidence
[38] Mr Calabro's report was based largely on historical financial information provided by the claimant. Although Mr Calabro's principal contention was that there was no economic loss to the claimant's business which was attributable to the roadworks, he did undertake an exercise determining economic loss based on retail sales only. However, Mr Calabro's approach was somewhat different to the approach adopted by Mr Lovell -
• first, he determined the loss of retail sales during the period of roadworks; • then he applied an appropriate gross margin to the lost sales to determine the loss of gross profits; • then he reduced that figure for any costs savings achieved; • finally he made allowance for any enhancement to the business as a result of improved access etc from the roadworks.
[39] Unlike Mr Lovell, Mr Calabro's approach made no allowance for loss of natural growth in sales, which Mr Lovell had asserted consistently outstripped the general furniture statistics. Furthermore, both Mr Robertson and Mr Lovell denied that the upgrading of Bundall Road had enhanced the business by improving the access. Based on the claimant's internal sales records, Mr Calabro estimated that between November 2000 and October 2001, the claimant had suffered a reduction in turnover with a consequential loss of profit, which he summarised as follows:
Reduction in turnover $1,067,118 Gross profit on lost turnover $373,491 Less savings in costs $215,024 $158,467 Less enhancement benefits $28,360 Loss $130,101
[40] However, while Mr Calabro conceded that the sales reports indicated that the claimant had suffered a loss during that period, he thought it was debatable whether the loss could be attributed to the roadworks, as there were many other causes which could have affected the trade. For example, in 2000 there had been a large increase in expenditure on furniture by consumers to beat the GST, which had a marked downward effect on expenditure in 2001. Furthermore, an increase in housing interest rates had dampened household expenditure and there had also been a cyclical decline in residential construction.
[41] Mr Lovell rejected any of these factors as contributing to the downturn in the claimant's retail sales in the affected period. The GST made no difference, as furniture had previously been subject to wholesale sales tax at 12.5%. In any case, the claimant's retail sales activity was low for the six months prior to introduction of the GST and retail sales figures were higher immediately after.
[42] In Mr Lovell's view, changes in housing interest rates or in dwelling approvals, would have little impact upon the upper end of the furniture market, as wealthy customers were prepared to pay more for quality furniture. In any case, National Australia Bank statistics showed that interest rates actually fell from 8.06% to 6.31% in the affected period.
[43] I accept Mr Lovell's evidence. In my view, none of the matters raised by Mr Calabro would have affected the claimant's business.
[44] Mr Calabro's estimate of loss was based on the retail sales figures only. However, he expressed concerns about the reliability of the claimant's internal records, particularly the allocation of sales between "Retail" and "Projects". He was of the opinion that any loss should be calculated on the company's total sales, rather than on those transactions classified as retail sales. On the total sales basis, he concluded that the claimant had suffered no loss attributable to the roadworks.
[45] Both Mr Robertson and Mr Lovell rejected that approach. Mr Robertson defended the accuracy of the classification of sales into "Retail", "Projects", etc. He pointed out that project work is not governed by customers walking into the showroom. Sales are classified at the time when the sale is written, depending on which department of the company brought it about. He added that if the project work had not been so strong for the affected year, the company's overall profits would have been considerably less.
[46] Mr Lovell thought that Mr Calabro completely misunderstood the business of the claimant; only retail sales required entry to the showroom, the other categories do not. Therefore, only retail sales were adversely affected by the roadworks and any conclusion based on the total sales was irrelevant.
[47] Mr Calabro referred to the furniture industry profile prepared by the economics research company, Ibisworld Pty Ltd, dealing with furniture retailing in Australia, which indicated that while turnover and growth for the general furniture retail industry had increased annually in the year prior to 2000-2001 (the affected year), in that year there was a downturn of 6.5%, followed by growth in the following year of 5.4%.
[48] However, Mr Lovell explained that the Ibisworld data reflected performance of the industry Australia wide, while the claimant's growth consistently outstripped industry statistics. The Ibisworld's statistics were based largely on sales of kitchen furniture, which the claimant did not sell. Therefore, in Mr Lovell's view, this comparison was irrelevant. I accept Mr Lovell's opinion.
[49] While the key determinants of demand for furniture, listed by Mr Calabro as including income, interest rates, consumer confidence, price and fashion trends, may apply to the mid to lower end of the furniture market, I accept that they are unlikely to apply to the top end of the market, where people look for quality furniture, whatever the price. Therefore, any analysis of the entire furniture industry is not representative of the business of the claimant.
[50] Mr Calabro questioned the value of the claimant's showroom activity reports which provided a summary of the number of visitors and the genesis of each visit, because they failed to link traffic to sales. However, as Mr Robertson had pointed out, those reports were not intended to monitor sales, they were simply a measure of the traffic through the door. Clients may visit the showroom several times prior to finalising an order, but only one visit will be recorded as a retail sale. It is significant that the reports show that total traffic fell by 12.4% in the affected year, but "walk-in" traffic fell by 75%.
[51] Mr Calabro examined the Profit and Loss Accounts for the claimant's business for six financial years from 1996-97 to 2001-02, which are summarised in the following table:
SUMMARY OF PROFIT AND LOSS ACCOUNTS
1996/97 1997/98 1998/99 1999/00 2000/01 2001/02
$000 $000 $000 $000 $000 $000
| Sales | 4,874 | 3,655 | 6,256 | 4,720 | 6,134 | 8,139 |
| Increase (Decrease) | (25%) | 69% | (25%) | 31% | 33% | |
| Cost of sales | (3,320) | (2,255) | (4,504) | (3,808) | (3,583) | (5,446) |
| Gross profit | 1,554 | 1,400 | 1,752 | 912 | 2,551 | 2,693 |
| Gross margin | 32% | 38% | 28% | 20% | 42% | 33% |
| Expenses | (1,614) | (1,619) | (1,699) | (1,794) | (2,330) | (2,446) |
| Other income | 239 | 234 | 106 | 196 | 7 | 71 |
| Net Profit | 179 | 15 | 159 | (686) | 228 | 318 |
[52] Clearly those trading operations have been volatile, experiencing significant variation in turnover and profitability over that period. In information provided to Mr Calabro, the claimant had attributed the significant fall in turnover in the financial year to 30 June 1998 to the share market crash in October 1997 and the growth in sales in the following year as the result of the pent-up demand. The reduction in sales in the financial year to 30 June 2000 was attributed to the closure of the architectural activities of the business at the end of the previous financial year, with a significant drop in major project work and with substantial write-offs for non-recoverable work-in-progress items. If those abnormal items were excluded, Mr Lovell contended that the gross margin for that year would have been 31%.
[53] Mr Robertson conceded that sales fluctuate, but although monthly sales varied, there had been a steady increase over the last five years. Mr Lovell explained that many of the transactions in the profit and loss accounts were of a "paper only" nature, resulting from restructuring of the Robertson's group of companies, internal transfers and altered accounting methods. However, he admitted that even with the assistance of Watters, he could not explain some of the adjustments.
[54] Mr Calabro was sceptical of those explanations. He also expressed other concerns about various items of the accounts, particularly some of the expense items which he considered to be irregular.
[55] From his analysis of the profit and loss accounts, Mr Calabro concluded that up to 30 June 2000, the business "has not shown any propensity for earning anything like $849,462" (the amount of the original claim). The disruption had occurred in the financial years 2000-2001 and 2001-2002, yet in the profit and loss accounts, those two years had the best profit results for the last six years.
[56] Mr Lovell did not regard the profit and loss accounts for the whole of the company as relevant. In his opinion, the roadworks disruption impacted only upon retail sales and if retail sales alone were considered, the figures supported the claim. He explained that the good profit results for the overall business were obtained only because the other sectors of the business were doing particularly well, while the retail sector was struggling. If it had not been for the roadworks disruption, he added, the overall results could have been much better.
[57] I accept that based on the profit and loss accounts, there is no indication of a downturn in trading results which can be attributed to the roadworks. However, the volatility shown by the accounts appears to be largely the result of extraordinary circumstances, some of which were not adequately explained, but in my view the accounts are an unreliable basis for the assessment of whether or not there was any downturn in retail sales.
The Analysis of Retail Sales
[58] The claim for compensation is based not on the profit and loss accounts, nor on the overall sales performance of the company. It is based solely upon the downturn in retail sales shown in the company's sales reports between November 2000 and October 2001. The evidence indicates that the details of all sales are recorded and categorised in those reports at the time of sale from confirmed sales orders, rather than sales invoices, because of the potentially lengthy delay, as goods are invoiced only when they arrive at the store and are ready for delivery to customers.
[59] In his oral evidence, Mr Robertson explained that the categorisation of the business in the sales reports was an internal management mechanism to monitor the performance of the various parts of the business, particularly the project design team on the first floor, to monitor their productivity. He likened the first floor activity to an interior design business.
[60] Mr Calabro was concerned about the accuracy of the sales reports for several reasons. Principally he was concerned about the categorisation of each sale into one of five categories which were explained by the claimant in the following manner:
"1. The categories referred to in the Sales Reports, represent the allocation of sales into the types of activities, in which Robertsons Furniture & Design (Qld) Pty Ltd is involved.
Our business is primarily divided into two parts, 'Retail', with a retail store/showroom and
'Design', which works out of the same building but does not have a retail front.
A. Retail furnishings off the showroom floor, to our retail customers. The majority of the products involved have been imported from overseas and supplemented with a selection of locally sourced products. This represents our day-to-day business, reflecting daily store traffic.
B. Hardworks ranging from small alterations, such as a bathroom renovation, to major structural changes to the internal and external design of the existing building. Robertsons Furniture & Design manages the work that is normally performed by subcontractors and charges a Management Fee of this service. The source of this business is recommendation.
C. Projects normally more akin to a developer, with whom Robertsons Furniture & Design has an ongoing working relationship, which may extend over several projects. It also includes Turn Key Hardworks/Furnishings Projects. Once again, the majority of this work is gained through recommendation.
D. Fees of architectural drawings, and/or interior design plans for new or existing residential or commercial premises.
E. Designers company as a source of product, either through use of our retail showroom or through catalogue and sales information we supply them." (Exhibit 30)
[61] Mr Calabro was of the opinion that because of the uncertainty of the correctness of the categorisation, it would be more appropriate to calculate any loss having regard to the total sales orders of the business. He reasoned that if the figure of $5,842,734 for total sales for the year ended October 2000 was adjusted by the Australian Bureau of Statistcs (ABS) trend of 0.11% for the following year, notional total sales for the year ended 30 October 2001 would be $5,849,393. However, the claimant's actual total sales for that year as shown in the sales reports were $7,456,574, exceeding the notional sales. Therefore, when the assessment was made on the basis of total sales, there were no losses for the year in which the business was supposedly affected by the roadworks.
[62] However, notwithstanding this conclusion, Mr Calabro did undertake an exercise to determine any losses during the affected year based on retail sales only. However, first he adjusted the categorisation of some of the items in the claimant's monthly sales reports and made his own assessment of economic loss between November 2000 and October 2001, based on retail sales only.
[63] Mr Calabro's calculations and reasoning were as follows:
Retail sales for year ended 31 October 2000 (from adjusted
monthly sales reports) $3,202,393 Adjusted for ABS trend for year ended 31 October 2001
(plus 0.11%) $3,206,042 Less - Actual retail sales achieved for year ended 31 October 2001 (from adjusted monthly sales reports) $2,138,924 Total loss of sales $1,067,118 Gross profit percentage 35% of $2,138,924 $373,491 Adjust for cost savings: Commission 1.3% $13,873 Administration 1.5% $16,007 Delivery 1.6% $17,074
Staff costs 15.75% $168,071 $215,024
Net Loss $158,467
[64] Mr Calabro concluded that such loss should be offset by the enhancement in access to the claimant's premises by the roadworks. He calculated the value of enhancement by reference to the first year of trading following completion of the works, where adjusted retail sales had increased to $3,747,712. From that figure he deducted notional retail sales for the previous 12-month period to 31 October 2001 of $3,206,042, adjusted by the ABS movement in industry turnover of 11.5% for that year, to arrive at a figure of $3,579,867 for notional retail sales for the year to October 2002. The increase of $167,845 he considered to be enhancement attributable to the road upgrade. He applied a gross profit margin of 35% and adjusted for additional costs of the same items at the same percentages that he used previously:
Enhanced sales $167,845 Enhanced gross profit (using gross profit percentage of 35%) $58,746 Adjust for additional costs Commission 1.3% $2,182 Administration 1.5% $2,518 Delivery 1.6% $2,686
Staff costs 13.7% $22,995 $30,380
Net $28,366
[65] Offset against the net loss of $158,467, that brings Mr Calabro's assessment of compensation on this basis to $130,101.
[66] The witnesses for the claimant strongly rejected any suggestion that the widening and upgrading of Bundall Road has resulted in any enhancement to the business for reasons discussed earlier. Mr Lovell disputed the adjustments made by Mr Calabro and was critical that no allowance was made for natural growth.
The Evidence of Mr Norling
[67] While Mr Calabro had been retained by the respondent to examine the loss of the business profits, Mr Norling had been asked to examine whether there were any other factors that may have influenced the turnover of the claimant during the relevant period. Mr Norling concluded that the turnover was influenced by other factors. He also assumed that because the traffic capacity of Bundall Road had been substantially increased, the exposure of the claimant's premises had been enhanced.
[68] Mr Norling acknowledged that from November 2000 to October 2001, there were potentially disruptive roadworks on Bundall Road. However, he seemed to think that the business was affected only when roadworks were directly in front of the premises. While Mr Norling acknowledged that the claimant is a destination retailer aimed at the premium end of the market, he thought that its customers would be less likely to be put off by roadworks.
[69] However, Mr Robertson made the point that such customers are affluent and have a discretionary ability to shop where and when they like. Image, convenience, style, presence and perception were all things that the claimant traded off. Trucks, road barriers, noise, dust and workers up and down Bundall Road were deterrents to the claimant's potential clients, which was reflected in the reduction in retail sales. I accept that the type of shopper attracted to the claimant's store would not want to run the gauntlet of construction machinery and other roadwork activity.
[70] Mr Norling referred to the widely varying annual turnover figures of the business, identifying that total turnover increased by 19% during the period of roadworks. While he conceded that only the retail area was likely to have been affected by the roadworks, as the other departments do not rely upon the flow of retail customers to the premises, he shared Mr Calabro's reservations about the reliability of the records categorising sales into different departments. Mr Norling contended that there were a number of anomalies in the data, providing several examples. While he was not confident that such data was reliable, he could see no alternative other than to examine the data which had been presented to him.
[71] Mr Lovell checked every one of the items mentioned and found retail transactions had been correctly recorded, except for one small sale in October 2000 coded to "Projects" which was probably in error. He was of the view that the concerns expressed by Mr Norling regarding the integrity of the classification of sales resulted from his lack of understanding or confusion about the process, rather than the data itself.
[72] Mr Norling's examination of the retail turnover data revealed significant changes in monthly figures, which varied significantly from time to time. Because of the apparent discrepancy between the drop in retail turnover in October 2000 and the commencement of roadworks at the end of November 2000, Mr Norling analysed the weekly retail turnover data for that period and made the following observation from the analysis of total sales, rather than net sales:
" (a)
total sales and the number of transactions for the first three weeks in October 2000 were significantly below average, following a strong trading month in September 2000. No roadworks were undertaken during this period; and
(b) the week in which roadwork was undertaken on the applicant's driveway (week ended 16 December 2000) was a very strong trading week with ... total sales being double the monthly average." (Exhibit 14 pp.9-10)
[73] Mr Norling concluded that the claimant suffered a downturn in turnover commencing at the beginning of October 2000, before the roadworks commenced. Furthermore, he contended that the week in which works were undertaken on the driveway and some impact might have been expected, turnover was double the average for the preceding 13 weeks. He added that the downturn in turnover during December 2000 is not reflected by the weekly sales.
[74] Mr Robertson denied that Mr Norling's analysis was correct. He claimed that the downturn in retail sales in October 2000 was due to the activity on the road, even though the works themselves had not commenced. From October onwards, the number of retail sales transactions had nearly halved. While Mr Norling claimed that the week in which work was being undertaken on the claimant's driveway was a very strong trading week (16 December 2000), Mr Robertson claimed that was inconsistent with the retail sales reports, as retail sales for December were considerably down.
[75] Having rejected the roadworks as the cause of the downturn in retail sales, Mr Norling considered other factors which were likely to affect the turnover of furniture stores. From the ABS figures for seasonally adjusted monthly turnovers for Australian Furniture and Floor Coverings Stores, Mr Norling concluded that the data series indicates the relationship between furniture sales and interest rate movements, residential building activity and the introduction of the GST. However, he conceded that while influencing the performance of furniture stores generally, the introduction of GST does not appear to have made any difference to the trading pattern of the claimant's business.
[76] There is no ABS statistical category which covers the high end of furniture retailers. Furthermore, the ABS statistics relate to furniture and floor coverings and apart from Hali Rugs, the claimant does not have floor coverings in its retail products. I accept the evidence of the witnesses for the respondent that the ABS data is too generalised and not relevant. While downturns in dwelling approvals may have some effect on the middle to lower end of the market, they would be unlikely to affect the clientele that the claimant targets.
[77] Mr Norling identified a number of factors which suggested that the claimant suffered financial distress by June 2000 continuing through to at least June 2001, which was likely to have strained relations with suppliers and financiers and could have impacted negatively on the business in the financial year 2000-2001. However, under cross- examination, Mr Norling conceded that his evidence was weakened when he heard about the reorganisation within the Robertson's group of companies.
[78] Mr Robertson conceded that the company had cash flow pressures due to loss of trade in the affected year. However, that did not place the company under any specific stress, other than it was carrying more stock. The rest of the business was strong and a determined effort was made to keep the retail business growing.
[79] In my view, the evidence indicates that there was no undue financial stress during that period and certainly no strained relations with suppliers and financiers.
[80] In summary, Mr Norling was not satisfied that the retail turnover data supplied by the claimant was reliable. In his view, the downturn commenced prior to the roadworks and he had identified other factors that explained the decline in turnover. Therefore, he concluded that it was not possible to form a quantitative view of the turnover loss arising from the roadworks based on the available data.
[81] However, for the reasons discussed, in my view Mr Norling's evidence adds little to that of Mr Calabro.
| The Issues | |
| [82] | Apart from the question of whether or not as a matter of law the claimant is entitled to compensation for loss of profits in the circumstances, the principal issue is whether or not the claimant suffered any loss which is attributable to the roadworks. The respondent contends that there is no loss and that after the completion of the works the claimant's business is enhanced. |
| [83] | The claimant's case depends entirely upon Mr Lovell's assessment, which is challenged on two bases by Mr Calabro. His principal contention is that any assessment of loss must be made by considering the total turnover of the business, rather than what he regards as the artificial classification of sales into five categories, particularly the distinction between retail sales and project sales. Mr Calabro's second contention relates to the accuracy of that classification. |
The Turnover of the Business
[84] A summary of the profit and loss accounts of the claimant from 1997 to 2002, appears earlier in these reasons. The fluctuations in total sales from year to year have been explained, but in my view, not entirely satisfactorily. Considered in isolation, the overall turnover of the claimant company in the two financial years in which the roadworks were undertaken, 2000-2001 and 2001-2002, show no sign of a downturn in sales.
[85] The total sales shown in the monthly sales reports for the 12 months during which the roadworks were undertaken, November 2000 to October 2001, show total sales of $7,456,000, an increase of 27.6% from the previous 12 months of $5,842,000.
[86] However, the claimant contends that because of the nature of the business, it is only the retail category that was adversely affected by the roadworks. The other categories do not depend on direct access to the premises. It is only because of the strong trading performance of the other categories, particularly "Projects", that the total sales show an increase over the previous year.
[87] However, if the various components of the business are separately considered, the monthly sales reports as adjusted by Mr Calabro show that for the year to October 2001, retail sales at $2,139,000 were down by 33.2% on the previous year to October 2000, when retail sales were $3,202,000. On the other hand, project sales were considerably higher by 81.5% at $3,988,000, than the previous 12 months, when project sales were $2,034,000.
[88] It was suggested by the respondent that project sales had been artificially boosted at the expense of retail sales. However, despite extensive cross-examination and certain concessions being made, this was not substantiated.
[89] Mr Calabro had examined individual transactions and had adjusted the classifications where they appeared incorrect (as well as correcting some minor transposition errors) in the sales reports for November 1999 to October 2002 (Appendix 1 to his report Exhibit 13).
[90] During the hearing, Mr Lovell examined each transaction challenged by Mr Calabro and made what adjustments he considered necessary. He prepared a document (Exhibit 54) showing the 204 individual items challenged, commenting on each of them. He made 62 adjustments, reducing the retail sales figure for November 1999 to October 2000 by $94,426, to $3,451,042 and increasing the retail sales figures for November 2000 to October 2001 by $52,115, to $2,144,300. This formed the basis for his calculation of the amended claim of $790,443.
[91] It was submitted by the respondent that such a substantial number of errors emphasises the arbitrary nature of the classification system and casts doubts on their reliability, particularly as other errors may exist which have not been identified.
[92] Indeed, the classification system does seem unusual. For example, Item 93 on 31 January 2001, client Griffin was described as "Hardworks" but classified as "Projects" for the substantial figure of $761,517. Similarly, on the same date, Item 86, client Boyer was described as "Hardworks", but classified as "Projects" for $68,729. There is no evidence that those two items are wrongly classified, but if those amounts should have been included in the "Hardworks" category, the total of project sales for that year would have been considerably less.
[93] The respondent submits that the evidence for the claimants has failed to explain how some customers can be classified as "Retail" in 2000 and differently in 2001, or how customer Gorchetchovekov purchased furniture for a total of $318,510 between June 2000 and January 2001 and be classified as "Retail". The respondent suggested that it was unlikely that such a large retail sale could be expected in any other year. This, it was submitted, distorts both the indicative level of retail sales that could be expected and the annual growth in retail sales.
[94] Such examples, the respondent submits, identify the lack of reliability and unrealistic character of the claimant's evidence based on the arbitrary classification system, which can lead to a sudden doubling of project sales in the relevant period.
[95] There is no clear distinction in the written information provided to the respondent as to how a sale is classified between "Retail" and "Projects". Explanations have included that a "project client" is more akin to a developer with which the company has an ongoing working relationship. However, the evidence does not support that criterion, as many clients identified as "Projects" do not comply. The better view seems to be, according to the oral evidence of Mr Robertson, that any sale which involved an input from the "upstairs" design staff, is sufficient to classify it as a project sale.
[96] The respondent refers to the artificiality of that distinction, when a first time customer entering the showroom to make a purchase can be classified as a project customer, simply because of some involvement of the "upstairs" design staff, which then diminishes the pool of the "Retail" classification. Mr Robertson's only explanation was that the classification depends upon who is doing the work. If the retail staff secure the sale, it is classified as "Retail", if the design staff "upstairs" secure the sale, it is "Projects". He likened it to having two stores, one of which is an interior design business.
[97] In my view, it is difficult to see how the roadworks could have impacted upon that situation. Certainly, one-off walk-in retail shoppers may have been deterred by the roadworks. But if a potential shopper had gained entry and had expressed interest in perhaps coordinating accessories and been referred "upstairs", that would have been a project sale, rather than a retail sale. On the other hand, if a family member of a long- established project client, such as a member of the Juniper family, had intended calling into the showroom to make a personal purchase of furniture, but had been deterred by the roadworks, then later rang to request that a staff member bring a catalogue to his/her home, any resulting purchase, as I understand the evidence, would be classified as a project sale and not a retail sale. However, in reality, no sale had been lost as a result of the roadworks.
[98] Mr Robertson provided another example in his oral evidence when he described how a customer may walk into the showroom to buy a sofa (which would be a retail wale), but would end up having a large refurbishment undertaken (which would be a "Project"). Indeed, it seems that the claimant's biggest customer, Juniper Development Corporation, came to it in such a manner.
[99] I tend to agree with the respondent's submission that the claimant has provided no satisfactory evidence to substantiate a meaningful distinction between retail sales and project sales. Regardless of classification, both of them involve sales of furniture.
[100] Mr Robertson contended that the company's traditional retail clientele was deterred by the roadworks, but extensive advertising had brought in a different type of customer who spent less and so affected profit. However, the respondent contends that there is no evidence that roadworks affected the calibre of the clientele. The retail traffic reports show that total traffic to the showroom was down about 12%, but the claimant says they either came only to look, or bought cheaper items. However, while retail sales may have been down from the previous year (according to the sales reports), project sales were well up. However, if the two clients listed as purchasing "Hardworks" in January 2001 categorised as "Projects", were reclassified to "Hardworks", a total of $830,246 would be removed from "Projects" for that 12 months, which would then be $3,157,619.
[101] Whatever the vagaries of the classification of sales into the five categories, total sales were significantly stronger than in the previous 12 months, at $7,456,000, up from $5,842,000. However, Mr Robertson was adamant that the retail sales have been adversely affected by the roadworks, relying on the general upward trend identified in Mr Lovell's evidence. However, no matter how convinced Mr Robertson may be, there is a lack of cogent proof. The claimant relies on the company's sales reports, but they depend on the accuracy of the classifications, if retail sales and project sales are considered together, there is no evidence of any downturn in sales in the relevant 12 months, quite the reverse. However, despite this, I am prepared to accept that the business was adversely affected by the roadworks and that this effect would logically fall mainly on the retail sales. The difficulty is assessing to what extent.
[102] Both Mr Calabro and Mr Norling were prepared to concede that there would have been some disruption to the claimant's business during the roadworks. Mr Norling thought that it would have affected retail sales. The difficulty for both was accepting the reliability of the classification of sales in the sales reports. However, even Mr Calabro conceded that the staff member recording the order would be best placed to classify a sale as either "Retail" or "Projects".
[103] I am prepared to accept that the best evidence of retail sales is contained in the sales report adjusted by Mr Lovell following the challenges by Mr Calabro. Whatever their shortcomings, they are more likely to closest represent the retail sales for the relevant years.
[104] Based on those amended figures, Mr Lovell assessed the shortfall in retail revenue at $1,306,742, being the difference between retail sales for the year November 1999 to October 2000 of $3,451,042 and the retail sales for the year November 2000 to October 2001 of $2,144,300. The difference of $1,306,742 represents the additional amount of retail sales which the claimant would have achieved if it had been as successful as it had been in the previous year. In order to arrive at the loss of net profit, that figure was adjusted for the gross profit margin which the company would have received on those sales.
[105] Mr Lovell based his gross profit margin of 39% on the actual gross margins received for the two years following completion of the roadworks. On the other hand, Mr Calabro based his gross margin of 35% on the profit and loss statements for the whole of the business, not just the retail sales. Although there is not a lot of difference, I prefer the 39% adopted by Mr Lovell, which amounts to a gross margin on the shortfall of $1,306,742 of $509,630.
[106] To arrive at the net profit, the cost of variable items that would have been saved by a shortfall of gross sales, such as commission, administration and delivery, which are directly related to sales turnover, must be deducted.
"It follows from what we have already said that we cannot accept the submission. The appellants' submission was that to construe s.20(1)(b) as giving a right to compensation for injurious affection simplicita as opposed to damage arising out of the injurious affection is to misconstrue the section. We agree. We also agree with their submission that by providing an entitlement to compensation for damage arising out of injurious affection, the legislation provides a remedy which is broader than compensating for the mere effect on the value of the retained land."
[165] Senior Counsel for the respondent in that case submitted that the loss would be allowed as an item of injurious affection or diminution in value, not both. The Land Appeal Court pointed out at p.84, that this highlights the problem; many cases cannot be comfortably accommodated if recovery is dependent solely upon a link to market value.
[166] Finally, the Land Appeal Court concluded at pp.87-88:
"In our view it does not matter how the claim of the appellants is categorised - stock losses or business or commercial losses - it is a claim which falls within the provisions of s.20(1)(b). We are satisfied that the evidence establishes that the loss claimed is not too remote and is the natural and reasonable consequence of the work carried out by the respondent. In any given case it is a question of fact whether any particular item of loss or damage or expenditure comes within that test."
[167] In Barns, Fryberg J in a separate judgment agreed that the stock losses were compensable under s.20(1)(b). After considering the respondent's submission that injurious affection is confined to the diminution in value of the retained land, his Honour said at 33:
"In my view, it is not to the point to say, as the respondent submitted, that if the respondent commits a tort, the landowner will have his remedy elsewhere. No doubt that is true; but s.20 is designed to provide compensation where the constructing authority acts lawfully. It is of course necessary that there be a nexus between the claimant's land and the action of the constructing authority. That nexus is provided by the fact that the land is injuriously affected. The introduction of a further requirement that the damage take the form of diminution in value of the retained land selects a criterion which is random in its operation. It is difficult to see any reason in principle why the particular economic manifestation of the damage should make any difference."
[168] After further consideration, his Honour said at p.34:
"Weighing up these matters, there is in my judgment no reason why s.20 should be given other than its plain meaning. It contains no express restriction of the sort contended for by the respondent, and in my judgment, no sufficient reason has been advanced for us to imply any."
[169] A similar approach to the interpretation of s.20 was adopted by the High Court in Marshall v Department of Transport (2001) 205 CLR 603. At paragraph 20, Gleeson CJ, Gummow, Kirby and Callinan JJ, said:
"In our opinion, however, the language of s 20(l)(b) of the Act could hardly be plainer. In assessing compensation, regard is to be had not only to the value of the land taken but also to the damage caused by the exercise of any statutory powers by the constructing authority otherwise injurious affecting such other [the remaining, severed] land. The section does not say 'the exercise of any statutory powers by the constructing authority on and only on the land taken ...'. The section clearly distinguishes between the land taken and the severed land. It does not seek to distinguish between the various activities carried out by a constructing authority in the exercise of its statutory powers: for example, the conduct of a survey, the construction of a road, the building of a bridge, the installation of drainage or footpaths beside the road, and the subsequent use of everything that has been done or brought into existence as, and for the purposes of, a road. In truth, all of these can relevantly and properly be characterised as part and parcel of the construction, and subsequently the use of the road. Once the constructing authority acquires land for a statutory purpose and carries out the statutory purpose, it must, pursuant to s 20(1)(b) of the Act, compensate the dispossessed owner for the injurious effect upon the residual land resulting from the undertaking and the implementation of that purpose, actual and prospective."
[170] At paragraph 38, Gaudron J emphasised the importance of the rule in the interpretation of provisions such as those in s.20 of the Act:
"Although the rule that legislative provisions are to be construed according to their natural and ordinary meaning is a rule of general application, it is particularly important that it be given its full effect when, to do otherwise, would limit or impair individual rights, particularly property rights. The right to compensation for injurious affection following upon the resumption of land is an important right of that kind and statutory provisions conferring such a right should be construed with all the generality that their words permit. Certainly, such provisions should not be construed on the basis that the right to compensation is subject to limitations or qualifications which are not found in the terms of the statute."
[171] Furthermore, at paragraph 44, McHugh J added:
"The natural and ordinary meaning of s 20(1)(b) of the Act directs the relevant tribunal, when determining the amount of compensation to be awarded to the claimant, to have regard to any damage caused by the exercise of any statutory powers by the constructing authority injuriously affecting the land of the claimant that he or she retains after the severance. That is a separate head of compensation from compensatio for the value of the land taken and compensation for damage resulting from the severing of the land of the claimant. Nothing in the section gives any ground for supposing that compensation or injurious affection is conditioned on the statutory powers of the constructing authority being exercised on the resumed land. All that the claimant is required to prove is that the exercise of a statutory power by the constructing authority injuriously affected the 'other land' of the claimant."
[172] Therefore, if s.20(1)(b) is given its ordinary meaning, loss of profits in the present case, as with loss of stock in the Barns' case, complies with the Harvey v Crawley test. Since the claimant has demonstrated that on the balance of probabilities it did suffer loss of profit during the period of road construction, in accordance with the reasoning of the Land Appeal Court in Barns, it is entitled to an award of compensation under s.20 of the Act.
[173] There can be no doubt that the claimant as lessee has an estate or interest in land and the definition of "land" in s.2 of the Act extends to an estate or interest in land. Although that interest may be limited, it is sufficient to qualify the claimant for compensation if that estate or interest in the retained land is injuriously affected.
[174] Although the claimant's right to compensation in this case depends upon the interpretation of s.20 of the Queensland Act, rather than characterisation as disturbance, it seems to me that the dominant principle is that the claimant is to be compensated fairly, regardless of precise characterisation. In the High Court in Boland v Yates Property Corporation Pty Ltd (2000) 74 ALJR 209, at para. 292, Callinan J dealt with the topics of disturbance and special value to the owner, saying that he grouped these two topics together because, although they are separate, they are related concepts. After dealing with special value, at para. 294 his Honour stated that disturbance was discussed not entirely unambiguously by Dixon CJ and Kitto J in The Commonwealth v Milledge, pointing out that their Honours had adopted the language used by the Privy Council in the Pastoral Finance Association case referring to special value, in the passage already quoted in these reasons. His Honour then went on to state:
"By contrast the Australian Law Reform Commission report defines, correctly in my opinion, disturbance as 'cover[ing] economic losses which result naturally, reasonably and directly from acquisition. It may include such items as removal expenses, costs of necessary replacement of furniture and fittings, legal and other costs of purchasing [an alternative site] and loss of local goodwill.' Some of these items may however also fall under the head of valuation previously referred to as reinstatement.
295. I would merely add that compensation for disturbance may not be available if the
claims for it are too remote as I think the settlement sum may well have been here.
296. In most Australian jurisdictions each of disturbance and special value is a separate
statutory head of compensation.297. Whilst it must be accepted that there will be cases in which the distinction between special value and disturbance and perhaps 'reinstatement' may not be clearly drawn, no difficulty in that regard arises in this case because, for the reason which I have discussed, a claim for special value in the sense in which it is properly used as a term or art was not available in this case."
Determination of Compensation
[175] In accordance with my findings in this case, the claimant is entitled to compensation of $220,515 for the effect on its business during the period of redevelopment of Bundall Road. To that must be added the agreed amount for disturbance items relating to the preparation and lodgement of the claim for compensation of $19,089.94. Total compensation amounts to $239,605.
| Interest | ||||
| [176] | Section 28 of the Act provides that the Land Court may order that interest be paid upon the amount of compensation determined by it, excluding any compensation advanced by the constructing authority. In this case, there has been no submission that the Court should depart from its usual practice of awarding interest. | |||
| [177] | However, interest on professional fees incurred in the preparation and lodgement of the claim for compensation is payable only from the date of payment of those fees: Varitimos v Queensland Electricity Commission (1991) 13 QLCR 1. Professional fees totalling $19,089.94 have been allowed by agreement, but I was not informed if and when such fees were actually paid. | |||
| Orders | ||||
|
•
on the amount of Two Hundred and Twenty Thousand Five Hundred and Fifteen Dollars ($220,515) from 13 October 2000 (the date of resumption) to 26 February 2004 (the date the advance against compensation of $146,247.20 was paid);
•
on the amount of Seventy-four Thousand Two Hundred and Sixty-seven Dollars Eighty Cents ($74,267.80) from 27 February 2004 up to the day immediately preceding the date upon which compensation is made;
•
on the amounts of professional fees incurred in the preparation and lodgement of the claim for compensation up to the agreed amount of Nineteen Thousand and Eighty-nine Dollars Ninety-four Cents ($19,089.94), from the dates they were actually paid, up until the day immediately preceding the date upon which compensation is made.
JJ TRICKETT
PRESIDENT OF THE LAND COURT
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