Savage v Griffith City Council

[1988] NSWLEC 135

Land and Environment Court

of New South Wales

CITATION:	Savage & Ors v. Griffith City Council [1988] NSWLEC 135
PARTIES:	APPLICANTS Savage and Ors RESPONDENT Griffith City Council
FILE NUMBER(S):	30362 of 1987
CORAM:	Holland J
KEY ISSUES:	:-
LEGISLATION CITED:	Local Government Act, 1919.
CASES CITED:	Spencer v. The Commonwealth (1907); elungaloo v. The Commonwealth (1948); Turner v. The Minister (1956) ; Company v. Lacoste (1914) ; Pastoral Finance Association Ltd. v. The Minister (1914) ; Bronzel v. State Planning Authority (1979); Pastoral Finance Association Ltd. v. The Minister (1914); Minister for Public Works v. Thistlethwayte (1954); Turner v. Minister of Public In; struction (1956); The Moreton Club v. The Commonwealth (1948); Minister for Public Works v. Thistlethwayte (1954); Arkaba Holdings Ltd. v. Commissioner of Highways (1969) ; The Housing Commission v. Falconer (198l)
DATES OF HEARING:
DATE OF JUDGMENT:	09/01/1988
LEGAL REPRESENTATIVES:

JUDGMENT:

HIS HONOUR: In this claim for compensation for land of the applicants at l63 Yambil Street, Griffith, resumed by the Council by notice published in the Government Gazette on 28 November 1986, it is agreed that the market value of the land at that date was $105,000; but there is an issue as to whether the land had special value to the applicants and, if so, by what amount the market value ought to be increased to allow for it. There are some incidental issues that I will come to later.

The Court is obliged to assess the compensation in the manner required by s.124 of the Public Works Act as deemed to be amended by s.536C(2)(3) of the Local Government Act, 1919. The interpretation of s.124 and the principles to be applied have been considered in innumerable cases and the basic principles have become well established. They are not in dispute here.

The object is to compensate the dispossessed owner by assessing an amount that will place him, so far as money can, in a position as nearly similar as possible to that he was in before his land was taken: Spencer v. The Commonwealth (1907) 5 C.L.R. 418 at p.435; giving him the full money equivalent: Nelungaloo v. The Commonwealth (1948) 65 C.L.R. 495 at p.571; Turner v. The Minister (1956) 95 C.L.R. 245 at p.264; recognising that it is the value to the dispossessed owner that is to be assessed: Cedar Rapids Manufacturing and Power Company v. Lacoste (1914) A.C.569 at p.576; and that that may be a special value that exceeds the general market value of the land: Pastoral Finance Association Ltd. v. The Minister (1914) A.C.1083 at pp.1087, 1088; see also Spencer v. Commonwealth (supra) at p.435; The Moreton Club v. The Commonwealth (1948) 77 C.L.R. 253 at p.257; Minister for Public Works v. Thistlethwayte (1954) A.C.475 at p.49l; Arkaba Holdings Ltd. v. Commissioner of Highways (1969) 19 L.G.R.A. 398 at p.404; T

he Housing Commission v. Falconer (198l) l N.S.W.L.R. 547 per Mahoney J.A., at pp.572.573. There are refinements to these basic principles to be dealt with in due course.

It was for the claimants to show that the subject land had, at the relevant time, special value to them that exceeded its market value to an outsider and evidence was directed to that end. The Council contends that the evidence did not establish either that the land was of any special value to the claimants or that what they claimed as special value could add any measurable amount to the ordinary market value of the land.

At the date of resumption (28 November 1986), the resumed land (163) adjoined other land to the east in Yambil Street owned by the claimants (161) on which they had erected a two storey brick building in which a sporting goods retail store was conducted on the ground floor and the manufacture of sports clothing was carried out on the upper floor.

The six claimants are father and mother, two sons and their wives. There is no dispute that at all relevant times they owned both parcels of land. Also, it may be assumed for the purposes of this litigation, if it be material, that they beneficially owned or had interests in and controlled the business carried on in 161. Financial records tendered in evidence indicated the intervention of family trusts in relation to the operation of the business but counsel appearing for the respondent expressly declined to make anything of that circumstance or to suggest that it should affect consideration of the question whether 163 had special value to the claimants.

Some of the history of the acquisition of the two blocks, the erection of the building and the establishment of the business on 161 needs to be recited.

Between 1975 and 1980 the family lived on a farm at Tharbogang, 11 kilometers from Griffith, where they carried on a business of assembling and selling billiard tables and manufacturing sports clothing. It was a non-conforming use of the property to which the Council had objected but taken no action. The business was developing and expanding at such a rate that the family decided to move it to the town and to purchase land and build premises in town for that purpose.

In contemplation of purchasing both Nos. 161 and 163 Yambil Street, rough pencil sketch plans were drawn in 1980 by the two sons, the third and fifth claimants, of a building to be erected on 161 in the first instance with provision for future extension by the erection of a twin building on 163 to share the western wall of the first building as a common central wall. Provision was made in the sketches for the frontages of both to match and for intercommunicating access between the two structures by means of an outside common walkway at the rear of the upper floors of the twin structure leading to an outside stairway to ground level on the easterly side of the first building, walkthrough archways in the central wall on both levels and vehicle drive through delivery access from a common car parking area at the rear of the buildings on the ground floor through an opening on the westerly side of the rear wall of the building on 161, turning westerly through the central wall into the building on 163 and exiting th

rough an opening on the easterly side of the rear wall of that building.

To facilitate the two stage plan of building indicated by the above, certain internal structures and fixtures were located in the sketches at the eastern wall of the first proposed building. They included an internal staircase from the ground floor to the upper floor placed in the south eastern corner of the building and an office and a staff room and facilities, both placed against the eastern wall. As mentioned above, the outside stairway at the rear was also located on the eastern side. A roller door for vehicle ingress was shown on the western side of the rear wall adjacent to which was a hatched area marked "Keep Clear Area", and adjacent to that were areas provided for storage. The hatching of the clear area was shown as carrying through and past a section of the western wall which was marked and labelled "Drive through later".

These sketches were produced in evidence by the fifth applicant, Mr. Robert Michael Savage, who said they had been kept by his brother Paul, the third applicant, and discussed frequently by the whole family in April, May and June of 1980 before the first of the two parcels of land was purchased. Although 161 was bought first and 163 nine months later, he claimed that the family's plan to purchase both blocks with a view to building first on 161 and later on 163 in the manner indicated in the sketches was conceived, discussed and agreed before the first block was bought.

No 161 was purchased on 11 July 1980 for $35,000.

On 17 July 1980 an application was made for interim development consent to use the land for the assembly and sale of billiard tables and sale of sports gear and screen printing.

In December 1980 and February 1981 plans were drawn up for the proposed building and on 3 April 1981 lodged with the Council with an application for building approval. These plans conformed to the ideas expressed in the sketch plans with respect to the arrangements of structures and fixtures at the eastern side so as to leave the western wall free to facilitate expansion by building later on No. 163. I need not repeat what they were.

However, the plans did not themselves indicate an intention for later expansion by the erection of a twin building on 163. The only feature relied on by counsel for the applicants for this was provision for special vertical expansion joints (control joints) in the side walls and photographs of the completed building showing one section of each side wall at the rear that was narrower than the others and located in the western wall in the vicinity of the place shown in the pencil sketch marked "Drive through later". The narrower sections may have been designed to anticipate building on l63; but in the absence of expert evidence, of which none was called, I am not prepared to infer that either the control joints in the plan or the narrower section of wall on the western side signify of themselves an intention to build a twin on 163; but this is not to say that the absence from the plans of an indication of such future intention would conclude the matter against the applicants. The structural and other dispositio

ns on the eastern side of the building already mentioned are provided for in the plans and fully support their claim that the building was deliberately designed to facilitate future connection with a building to be constructed on 163.

On 29 April 1981, 163 was purchased for $36,000, plus $39l legal costs. It contained a cottage in a poor state of repair and a shed at the rear.

On 30 April 1981 the Council approved the building plans for 161. On 8 May 1981 Local Environmental Plan No. 5 was gazetted and this made the applicants' proposed development lawful with the Council's consent. (It was unlawful at the date of approval of the building plans but nothing turns on that in this case). On 10 May 1981 development consent was given.

Thereafter the building on 161 was erected at a cost of $265,000. It was completed in 1982 and the applicants commenced to trade on 20 April 1982.

Although the part of Yambil Street where the subject land is located is in a section of the City that has a mixture of residential and commercial development and little passing trade and the main retail shopping centre and passing trade is in Banna Avenue, a parallel street some thousand metres away, the business at 161 grew steadily from the time it opened. By 1985/1986 it was thriving and still expanding towards the point of needing extra space.

According to Mr. Savage, the family had from the beginning entertained the idea of eventually establishing as the business expanded a comprehensive "Sportsman's Warehouse", stocking, displaying and selling all manner of outdoor and sportsmen's gear including large items that needed a lot of space for display and stocking and could not be accommodated in the existing building with the current retail lines due only to lack of space. This bulkier category of goods was to include such items as bicycles, camping equipment, fishing tackle, archery equipment, lawn bowls, boats, canoes, water skis, wind surfers and others. Mr. Savage claimed that up to the time the Council gave notice of its intention to resume 163, the family had never deviated from its plan for future expansion on to 163 when the time was right. He agreed that at the time of the notice no concrete steps had yet been taken in that direction but said that the plan had continued to be discussed and the land at 163 held by them against the day it was d

ecided to proceed with it.

He said that that time was approaching when the Council gave its notice. The business had developed a clientele over a wide radius from Griffith of "250 miles", customers came to the store at 161 knowing what they wanted to buy, thereby compensating for lack of a large passing trade, the potential for the billiards table side of the business was decreasing but turnover otherwise was ever increasing and putting pressure on available retail space in the building and the retention of the land with a view to implementing the "Sportsman's Warehouse" plan by building on it at the opportune time remained in the contemplation of the owners. At the time the Council gave notice of intent to resume, they were then actually in need of extra room and had begun talking more constantly about expanding on to 163.

On 7 August 1985 the Council gave notice of its proposal to resume No. 163 for the purpose of providing car parking and the provision of pedestrian access from Yambil Street through to Banna Lane (which runs parallel at the rear of the subject land). The notice fixed 60 days for the lodging of objections in writing.

It appears that Mr. Savage ascertained that the Council's intention to resume was firm and the family looked to the position that the imminent prospect of losing No. 163 placed them in. Mr. Savage said that as soon as they received the letter from the Council they started to look for other areas to build on but there was very little available on the market so they decided to secure premises at 192 Banna Avenue that were available. This was a very small narrow fronted shop suitable only for carrying the same lines as they were then selling at 161 Yambil Street but not for the plans they had for the combined buildings contemplated for Nos. 161-163. Mr. Savage said that they were forced to look at other avenues and even though it was not what they had wanted to do they thought the next best thing available was No. 192 Banna Avenue.

Soon after receiving the notice, apparently within a week, they negotiated for the purchase of the shop at No. 192 Banna Avenue in the main shopping centre. They contracted to buy it on 2 September 1985 for $170,000. Stamp duty on the purchase was $5,500 and legal costs were $l,200. They took possession on 22 November 1985 and carried out alterations and installed fittings suited to the goods to be sold in this shop at a cost of $80,000.

It is clear from the evidence that the acquisition and establishment of the shop at 192 Banna Avenue, whilst initiated by the prospect of losing 163, could not be considered to be a substitute for the original idea for the use of 163 Yambil Street. Mr. Savage said that although some similar lines to Yambil Street were sold in this shop, Banna Avenue was a more "up-market" adjunct to the Yambil Street line of business and that it was too small and different in character to accommodate the "Sportsman's Warehouse" concept or be considered as an extension of it. It had the advantage of giving the business access to the pedestrian traffic in Banna Avenue that it lacked in Yambil Street; but it did not compensate for the inability to expand to No. 163 and was not as satisfactory as that form of expansion would have been.

Disadvantages of the Banna Avenue store, apart from being unable to house the warehouse idea, included lack of storage, which resulted in stock having to be received and held at 161 and retransported to Banna Avenue, and servicing Banna Avenue with staff from 161 when staff were absent from Banna Avenue for meals, sickness or accident or other reasons. Storage and movement of stock and flexibility with staff would have been easier and more efficient with adjoining buildings in Yambil Street. The diversion from the original plan that was involved in buying Banna Avenue after learning of the intention of the Council to resume 163 was not regarded generally by the applicants as satisfactory compared with the anticipated expansion to 163 for the purpose of which 163 had been purchased.

Between October 1985 and June 1986 correspondence passed between Mr. Savage, on behalf of the owners, and the Council. On 3 October 1985, which was after the contract to buy 192 Banna Avenue was executed, Mr. Savage wrote in answer to the invitation to lodge objections, that they would not object if a reasonable offer had been made but as no offer at all had been made they objected in the strongest possible terms and offered to provide a list of objections if required. On 21 October 1985 the Council wrote offering $85,400 for 163 and invited objections. On 1 November 1985 Mr. Savage, without legal advice, according to the evidence, wrote a reply on which counsel for the applicants placed strong reliance on the issue of special value and the intentions of the owners with respect to the resumed land. I quote the contents:-

"I find your offer of $85,400 as compensation an insult to our intelligence, as Lot 3 Section 6 in Yambil Street, sold for $100,000 only recently your offer does not even cover the market value let alone offer us any compensation.

When we built our shop at 161 Yambil Street (Lot 9) back in 1981-2 we built it knowing that the block in question (Lot 8 Section 6) was right next door and that we could develop it and utilise existing staff, office facilities etc. Being next door makes it quite considerably more valuable than if it is one, two etc. blocks away, (as Council know this, that is why they want our block and Mr. Miller's because they are together) so you can see why our reaction to your offer is not acceptable.

We were prepared to be reasonable and go along with progress if we were fairly treated, as was shown in our two visits to your office and in our letter dated 3rd October.

If Council intend on taking our block and not compensating us or even paying the market value maybe Council have to look at resuming our shop at Lot 9 and Lot 8, Section 6 in a group take over and let us relocate where we can have two blocks together as we first intended.

We have just purchased 192 Banna Avenue and will be opening our second store in approximately 2 weeks. We also own a farm and with all our business involvement in Griffith we employ 15 full time and 5 casual staff and have plans within the next 4 weeks to employ an additional 3 full time and 3 casual employees giving us a total of 26 employees, so we are very positive and go ahead people, so PLEASE do not come on with this negative attitude and offer us a fair price and compensation for our block or forget about it so we can go ahead helping to develop and employ people in our great town.

Please advise us within 14 days if you intend on offering us a fair deal so we can get on with our business or take this further."

After this, negotiations took place between the parties and discussions occurred with and between their respective valuers but no agreement was arrived at.

On 20 June 1986 Mr. Savage signed a notice of consent to the resumption to expedite the matter and on 8 July l986 the Council resolved to proceed with it.

On 4 November 1986 the applicants' valuer, Mr. R.J. Connolly, wrote that the Savage family was prepared to accept $130,000 as full compensation plus fees and costs and he asked for an opportunity to put to the Council their contentions in relation to special value.

As mentioned, on 28 November 1986 notice of resumption was gazetted.

In support of the contention that special value had not been established, the respondent's counsel pointed to the lack of any steps taken to implement the alleged plan of expansion: no application for development consent or building approval, no plans drawn for the building proposed for 163, no feasibility, viability or costing studies done, no architect or builder retained, no minutes or records of the alleged family discussions and, as cross-examination disclosed, no final ideas formulated for use of the upper floor when the new building was built; also, no application to amalgamate the two lots of land.

It was suggested that even if it was accepted that when the land was bought in 1980 the possibility of expansion by building on 163 at a future date was contemplated, the idea should be regarded as too general, vague and indefinite to show the land had special value and that this is supported by the failure of the owners between then and the date of notice of intention to resume to take any steps in that direction.

In Bronzel v. State Planning Authority (1979) 44 L.G.R.A. 34 at p.46, Wells J. said:-

"There is no exhaustive definition of what special value is. If it exists, its value must be assessed at what it is worth to the owner at the date of valuation, and not at what it may be worth to him in the future or after due development. It must be something objectively ascertainable derived from the land or some attribute or property of it and cannot be recognized if it rests in mere subjective affection or emotional involvement. For the rest, whether it is present and capable of being evaluated depends on all the circumstances of the case."

In Commissioner of Highways v. Tynan (1982) 53 L.G.R.A. 1 at pp.6-7, Wells J. said:-

"The special value referred to may be derived from an immensevariety of circumstances exemplifying many different forms of relationship and interdependence between the expropriated and retained land; but, as a general practical proposition, the special value may be found in a positive advantage, or in an exemption from disadvantage which the retention of the subject land would have directly conferred."

Counsel for the respondent relied on these passages to suggest that special value ought not to be attributed to the subject land because the applicants' future intentions, both when the land was acquired and when they received notice of the respondent's intention to resume it, were so vague and futuristic as to lack the positiveness and immediacy that, it was suggested, had to be present to have commercial value and thus constitute the special value contemplated by the authorities.

Before considering the application of these propositions to the facts here, there is another quotation from the Judgment of Wells J. in Tynan's case (supra) that is, I think, material. At p.5 his Honour said:-

"The general principle underlying the assessment of compensation made by this Court in pursuance of its duty under subs. (3) of s.23 and par. (a) of s.25 is that the claimant is to be "adequately" "compensate[d]" "for any loss he has suffered by reason of the acquisition of the land". It is necessary, when discharging that duty, always to bear in mind that the claimant has been deprived, not just of a parcel of land, as it were, in a vacuum, but of a parcel of land in circumstances of occupation and use, both contemporaneous and prospective. It is, speaking generally, those attendant circumstances that may be of special importance to the claimant. He has lost something that has an objective market value, and he has lost, too, something that once formed an integral part of his life - his personal life or his business life or, it may be, both.

The compulsory removal of the land from that structure is therefore likely to affect the claimant's interests adversely; and where it appears that those interests are represented by some special feature of the use and occupation of the land and the interdependence, in a recognizable business sense, between that land and the balance of land still held by the claimant, it has long been settled that he may claim the special value to him represented by the place and function of the acquired land within, and as part of, the structure as a whole."

First I should record that Mr. Savage's credit as a witness was barely questioned by counsel for the respondent and I found no reason in his demeanour or otherwise to doubt his truthfulness. Moreover, the evidence he gave of the applicants' intentions at the relevant times with respect to the future use to be made of 163 Yambil Street, whilst questioned on grounds of commercial wisdom and viability, was not materially challenged as to its honesty. For these reasons I find Mr. Savage's evidence generally acceptable.

Some findings of fact may conveniently be made at this point: firstly, I find that the applicants purchased and at all material times thereafter held No. 163 Yambil Street with the intention of using that property to enable them at a future date to develop and expand the business which they originally planned and later established on No. 161.

Secondly, that the means by which they contemplated and intended to develop and expand the business and use the land, was by constructing on No. 163 a building similar to and structurally connected with the building which they originally contemplated and later constructed on No. 161, so as to integrate the two buildings in the manner described by Mr. Savage and indicated on the sketch plans which he produced in evidence.

Thirdly, that the building which they constructed on No. 161 was specially designed, as to the location of the features earlier mentioned, in anticipation of the future construction of a connecting building on No. 163, and to avoid the costs of relocating such features if they had been placed elsewhere in the building constructed on No. 161.

Fourthly, that the applicants contemplated and intended to utilise the extra space to be provided by the additional building to set up and establish the kind of wide ranging outdoor and sporting goods business described by Mr. Savage as a "Sportsman's Warehouse", and intended so to do as soon as they judged the time to be ripe to launch into that venture.

Fifthly, the foregoing plans and intentions with respect to the use of No. 163 had not been departed from and were subsisting at the time the applicants received the Council's notice of intention to resume their property, remained in contemplation up to and after they had purchased No. 192 Banna Avenue and until they became resigned to the inevitability of the resumption going ahead which led them to sign a consent to it on 20 June 1986 which was then followed by the Council's resolution to resume the property made on 8 July 1986.

Sixthly, at the time of the notice of intention to resume, the need and desirability for expansion by way of building on No. 163 was beginning to become pressing as the expansion of the applicants' business began to use up the available space in the building on No. 161, with the result that the prospects of a decision to launch into the "Sportsman's Warehouse" venture by building on No. 163 were not remote but imminent.

I also find that the purchase and establishment in No. 192 Banna Avenue of an outlet for the business was initiated and brought about by the Council's notice of intention to resume No. 163, but was not regarded by the applicants nor could it reasonably be regarded as done by way of substitution for the expansion of the business on to No. 163 which would be frustrated by the intended resumption. That frustration led the applicants unsuccessfully to seek land comparable to what they had in Nos. 161 and 163 and, failing that, to acquire the Banna Avenue shop by way of a minor amelioration of their loss on a "something is better than nothing" basis.

Counsel for the respondent endeavoured but failed to obtain an admission from Mr. Savage that the applicants purchased Banna Avenue in order to shut out either a particular competitor who was after it, or any competitor who might be minded to acquire it. Mr. Savage rejected this suggestion pointing out with some significance that the best way for the applicants to have shut out any competition would have been by expansion into a duplicate building erected on No. 163 as they had always planned. I accept Mr. Savage's rejection of the suggestion that Banna Avenue was purchased to defeat a competitor or competition and not because of the resumption of No. 163.

Counsel for the respondent also submitted that the purchase of Banna Avenue should not be found to be a consequence of the resumption but to be an independent enterprise to obtain a different kind of outlet as an adjunct to the existing business in Yambil Street. I find as a fact that the acquisition of Banna Avenue by the applicants was a direct consequence of the Council's proposal to resume No. 163 Yambil Street and is to be regarded as an attempt by the applicants to mitigate the loss and disadvantage occasioned to them by the deprivation of their land, a venture forced on them and undertaken unwillingly in consequence of that deprivation. But, as already indicated, it could not be regarded as a complete substitute or satisfaction for what they had lost and the disadvantage they had suffered.

Although the Council sought to make out that Banna Avenue was a better place for their business to be because of the passing trade that was not to be had at Yambil Street, that did not prove to be the case. I have mentioned above the disadvantages of operating in premises at both Yambil Street and Banna Avenue but, as well, there was evidence, which I accept, that on a space/profit basis the business at Yambil Street is far superior to that brought in at Banna Avenue. On a square footage basis Yambil Street showed a 90% better return than Banna Avenue.

In view of the findings I have made I must reject the submissions for the Council that the applicants' proposals for the use of No. 163 were too general, vague and indefinite to establish that the land had special value to them. I also reject the argument that the applicants' proposals, being indefinitely futuristic, lacked the positiveness and immediacy that would enable a commercial value to be attributed to them so as to make out a case of special value.

In Pastoral Finance Association Ltd. v. The Minister (supra) the owner whose land was resumed had purchased the land because of its special suitability for a business which the owner carried on elsewhere but intended to transfer to the land resumed. The owner's intentions were frustrated when it ascertained, before having commenced to use the land, that the government intended to resume it and when this was confirmed by the government, the owner desisted from putting its plans into effect in anticipation of the notice to resume which it subsequently received. The substantial ground on which the majority of the Court below had decided the case was that the owners were not entitled to anything beyond the market value of the land by reason of the fact that they had not as yet commenced operations on the land. The Privy Council rejected this view saying, at p.1087:-

"Their Lordships have no hesitation in deciding that the principle underlying this decision is erroneous. In fact counsel for the respondent did not attempt to support it. The appellants were clearly entitled to receive compensation based on the value of the land to them. This proposition could not be contested. The land was their property and, on being dispossessed of it, the appellants were entitled to receive as compensation the value of the land to them whatever that might be. The question whether that value had as yet been developed by the actual erection of the buildings necessary to enable the appellants to realize the special value they thus possessed was no doubt one of the circumstances which was material for guiding the jury to assess its value in the appellants' hands, but it by no means prevented the land having this special value, nor did it interfere with the appellants' right to have that special value duly assessed by the jury, as the amount of the compensation due."

In my opinion, the applicants here clearly established that the resumed land had a special value to them at all relevant times. As Wells J. pointed out in Tynan's case (supra) at pp.6-7, the special value may be derived from an immense variety of circumstances exemplifying many forms of relationship and interdependence between expropriated and retained land:-

"but as a general practical proposition, the special value may be found in a positive advantage, or in an exemption from disadvantage, which the retention of the subject land would have directly conferred."

The special value to the applicants was in the positive advantage to them of having this land available and under their control for the extension of their building and the expansion of their business generally, and, in particular, to accommodate the proposals they had for establishing as a special feature, a Sportsman's Warehouse for the storage, display and sale of outdoor and sporting goods and equipment.

On the evidence before the Court, I find no difficulty in coming to the conclusion that the requisite kind of special value which the law recognises has been established in the present case; but the question as to how that special value may properly be arrived at on the evidence before the Court is, I think, one of considerable difficulty.

In point of principle, the basic approach to the question is put succinctly in the oft quoted words of the Privy Council in Pastoral Finance Association Ltd. v. The Minister (supra) at p.1088:-

"Probably the most practical form in which the matter can be put is that they (the owners of the land) were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it."

Whilst the direction is clear, the path is often thorny, as I find it to be in the present case.

The parties tendered the evidence of expert valuers, Mr. Connolly for the applicants and Mr. Maundrell for the respondent, who had endeavoured to approach the quantification of the special value here by selecting and analysing sales of land put forward as comparable, that is, sales of property to a buyer who was the owner of land adjoining the property sold.

By this "comparable sale" method, Mr. Connolly arrived at a factor of 0.82 to be applied to the market value of the subject land which, taking the agreed figure of $l05,000 as the market value, produces an additional sum of $86,100 for its special value to the applicants. Mr. Maundrell arrived at 'nil' for special value.

Mr. Connolly could find no comparable examples in Griffith sales so he went to Wagga Wagga and used some from there that he considered suitable.

Mr. Maundrell found two sales in Griffith, one being the applicants' own purchase of No. 163 whilst being owners of No. 161 Yambil Street. He concluded that no premium was paid by the buyer in each case. He scoffed at the idea that special value of Griffith land could be assessed by reference to sales of land at Wagga Wagga on the basis of comparability as the two centres were in material respects so markedly different.

Mr. Connolly analysed the Wagga Wagga sales to compare the price paid for the whole property with the market value of the bare land content, eliminating the value of any improvements sold with the land on the basis that the adjoining owner/buyer only bought the property to acquire its land, not its improvements. Mr. Maundrell repudiated the validity of this approach, claiming that the market value and price actually paid had to both relate to the property in the condition in which it was sold in order to see whether the buyer had paid a premium above its market value in order to obtain it. Each taking his own different approach, Mr. Connolly found that in each of the Wagga Wagga sales the adjoining owner had paid a premium to obtain the property but Mr. Maundrell found that either no premium had been paid or that any apparent premium was explicable by circumstances special to the buyer which made the case not comparable to the position of the applicants.

Counsel were unable to refer me to any authority to the effect that the comparable sale method is a proper method for assessing the special value to an adjoining owner of land taken from him by resumption. Counsel for both sides, I thought, had some difficulty in supporting the use of such sales as a method of valuation in the present kind of case but neither side abandoned reliance upon the evidence and counsel for the respondent submitted that, as both valuers had had resort to it, the Court should accept that it was a proper method.

After much thought, I have come to the conclusion that the comparable sale method, as attempted here by both valuers, is not a legitimate approach to finding the special value to an adjoining owner of expropriated land. Moreover, as will be seen later, it is my opinion that, even if I am wrong in this, the evidence of comparable sales relied upon by the valuers in the present case, is of such slight and questionable value as to be of no assistance in assessing the special value to the present applicants that I have found to exist with respect to the land resumed.

First, as to the validity of using the comparable sale method at all, the fact that the land has some advantage peculiar to the claimant is what makes the special value for the loss of which the claimant is entitled to be compensated. That virtually excludes from consideration what premium some other person might be prepared to pay because of the existence of some advantage in having the land which is peculiar to that other person. The cases emphasise the importance of concentrating upon the question whether there exists some attribute of the land affording an advantage which is peculiar to the owner and not shared by an outsider in arriving at the conclusion that the land had special value to that owner.

In Arkaba Holdings Ltd. v. Commissioner of Highways (supa) at p.404 Chief Justice Bray said:- "It is, of course, well established that it is the value to the owner which must be paid, even if that value exceeds the market value (Pastoral Finance Association Ltd. v. The Minister (1914) A.C. 1083; Minister for Public Works v. Thistlethwayte (1954) A.C. 475). The additional element is commonly called "special value to the owner", e.g. Thistlethwayte's case. But this special value must, in my view, arise from some attribute of the land, some use made or to be made of it or advantage derived or to be derived from it, which is peculiar to the claimant and would not exist in the case of the abstract hypothetical purchaser. Would a prudent man in the position of the claimant have been willing to give more for this land than the market value rather than fail to obtain it or regain it if he had been momentarily deprived of it? (Pastoral Finance case (1914) A.C. at p.1087; per Kitto J. in Turner v. Minister of Public In

struction (1956) 95 C.L.R. 245, at p.292)."

And again in The Housing Commission v. Falconer (supra), Mahoney J.A. at p.572-573 said:-

"Property is, of course, to be valued by reference to whatever potential it may have to whoever may be the owner of it; Turner v. Minister of Public Instruction (1956) 95 CLR 245. But it has long been accepted that, in compensation cases, the value of property may go beyond this. Its value is its value to the particular owner and, in assessing that value, there is to be taken into account also a potentiality which is available only to the individual who is the owner at the relevant date or is peculiar to him: Pastoral Finance Association Ltd. v. The Minister (1914) AC 1083, at pp 1087, 1088; see also Spencer v. Commonwealth (1907) 5 CLR 418, at p 435; Minister for Public Works v Thistlethwayte (1954) AC 475, at p 491. On this basis, if the land is, physically, by reason of its zoning or otherwise, particularly suited for the use to which the then owner wishes to put it or is putting it, and that makes it specially valuable to him, that which is to be assessed in money terms is not merely the value of the land

generally on the market but its value having regard to that special value: Dangerfield v. Town of St Peters (1972) 129 CLR 586."

It would seem to me that if, as postulated in the classic statement of the Privy Council quoted above, the claimant for special value is entitled to what a prudent man in the claimant's position would have been willing to give for the land sooner than fail to obtain it, it is irrelevant and inadmissible to assess it according to what some other person not in the claimant's position, even though also considered to be a prudent man, would have been willing to pay for that other person's land sooner than fail to obtain it. Whilst equating the claimant to a prudent man on the question of the amount he would have been willing to pay, the circumstances peculiar to him that give the land special value to him involve subjective considerations that only by rare coincidence would be likely to be duplicated in some other individual and, in my opinion, those subjective considerations cannot be excluded in attempting to assess what the claimant, albeit as a prudent man, would be willing to pay rather than lose the land.

It was said that a qualified valuer is trained to analyse the circumstances involved in a comparable sale and the individuals who are parties to it and, by making allowances and adjustments, reduce the factors and circumstances of the comparable sale to the equivalent of those of the subject claimant being considered. It would seem to me that to reduce the comparable by adjustments and allowances to the position of the instant owner is, theoretically, to make the comparable identical with the latter and so make no advance on the problem. If done perfectly, the valuer should be back to square one, with no solution.

In each of the comparable sales selected from Wagga Wagga by Mr. Connolly, the buyer had special reasons, peculiar to his own position, that were all subjective and not remotely comparable with the present claimants' position except in the respect that they owned the land adjoining the land which they bought in the sales that were analysed. The subjective considerations affecting one of the buyers were so special and peculiar that that buyer was led to pay nearly twice the market value of the site to secure the land. The buyer happened to be a large supermarket organisation operating a multi million dollar business with branches throughout the country and the financial resources to make certain of the acquisition of a piece of land which it required to consolidate the establishment of a branch of its business in Wagga Wagga. To my mind it borders on the absurd to attempt to prune such an example back to a state of comparability with the position of the claimants and the special value to them of No. 163 Yambil

Street, Griffith

In my opinion, the comparable sale method is not a valid means of assessing special value of land resumed from an adjoining owner and I should reject the evidence of that kind that was tendered in the present case as evidence of such value.

It may be said that evidence of that kind is at least relevant to show that where the land next door offers some special advantage to an adjoining owner he is likely to be prepared to pay a premium above market value in order to obtain it. In my opinion, that would be so evidently an attribute of the human condition that judicial notice may be taken of such a tendency without proof. One does not need proof that human beings tend, in the majority and at most times, to act like human beings.

If I were to be wrong on the question of relevance, the question whether the comparable sale evidence is of assistance in ascertaining the special value in this case remains.

The value of the comparable sales relied upon by Mr. Connolly is diminished at the outset by the fact that they were obtained from an area not comparable. According to the evidence, looking to the business prospects and the state of the economy in each place, Wagga Wagga is a Regional Centre of the Riverina District, has twice the population of Griffith, a far greater range and scale of industrial, commercial, cultural and social activities and is a more rapidly expanding business and residential district than Griffith, which is not only smaller but at somewhat of a standstill in these respects. The demand and prices paid for properties in Wagga Wagga is substantially greater than what obtains in Griffith. Therefore the willingness of buyers to pay for the land they seek for commercial purposes in Wagga Wagga can be assumed to be substantially greater than in Griffith. If adjustments and allowances are attempted so as to cut back the Wagga Wagga conditions to make them comparable to those of Griffith, the res

ult is to return from Wagga Wagga empty handed in the search for a basis on which to assess the special value to the claimants of their land in Griffith.

As I have said, Mr. Connolly compared the price paid for the property with the market value if the property had been vacant land on the basis that the buyer, whilst purchasing improved land, did so to demolish the improvements and utilise the vacant land only. In my opinion, to do this is to destroy the value of the exercise itself because its purpose is to see whether in competition with an outside prospective purchaser the owner of the adjoining land was prepared to pay more than the outsider and, if so, how much; but, if they are each bidding for two different commodities they are not in competition, so any difference in their bids does not bear comparison. In order to see whether, relative to the open market, the adjoining owner would pay more than the outsider, the price each bids must be for the same property before their comparative willingness to pay can be ascertained.

Mr. Maundrell added back in each case the market value of the improvements that were sold with the property and purchased by the price paid by the adjoining owner. Except in the supermarket case which, on any view, was a freak, there was either no recognisable margin above market price paid or only one so little above the assessed market price as to be within normal market variations.

I would have to agree with Mr. Maundrell's criticisms of Mr. Connolly's processes of assessing that the buyers in the Wagga Wagga sales had paid premiums to acquire the adjoining properties which they purchased. A premium price was paid in the supermarket purchase; but, apart from the considerations that made that purchase not comparable, the price was probably what counsel described as a "hold up" or "squeeze" price exacted by a vendor who was able to take advantage of the buyer's determination to obtain the property.

Finally, on the question of the value of comparable sale evidence to assess special value to an adjoining owner of resumed land, it would seem to me that there may be danger in treating him as being in the market to purchase the property next door, when in fact, he already owns the land that is being expropriated so he would never have been a competitor with an outsider in the market place for that land. I would think it would be sounder to attempt to assess what the expropriated land would have been worth to him, considered as a prudent man, to keep rather than to lose and be forced to start again elsewhere.

Whilst it may be of assistance to contemplate the position supposed by Chief Justice Bray in Arkaba Holdings Ltd, namely, whether a prudent man in the position of the claimant would have been willing to give more for the land than the market value rather than fail to obtain it or regain it if he had been momentarily deprived of it, the factual position that, immediately prior to the expropriation, the adjoining owner already owns the land, is not a competitor in the market for it but has sound reasons for wanting to keep it, should not be lost sight of.

Before leaving the question of comparable sales evidence, what I have said about its admissibility obviously applies as much to the comparable sales in Griffith put forward by Mr. Maundrell as to those in Wagga Wagga put forward by Mr. Connolly. As mentioned earlier, Mr. Maundrell arrived at a 'nil' value for the special value claimed by the claimants. If the comparable sales in Griffith relied upon by Mr. Maundrell were relevant, I would come to the same conclusion as I did with respect to those relied on by Mr. Connolly, namely, that they were of no assistance in assessing the special value in this case. Mr. Maundrell compared the purchase of No. 161 for $35,000 in July 1980 with the purchase of 163 for $36,000 plus $391 legal costs in April 1981. He argued that the difference was accountable within market value ranges and did not show that the claimants paid any relevant margin for No. 163 because they were the owners of No. 161. A point to be made about this argument is that it is hardly right to make the

comparison and assess the value to the complainants as at April 1981 when No. 163 was purchased. At the time notice of resumption was given in August 1985 and up to the gazettal of the resumption notice in November 1986 the building on No. 161 had been constructed with the special features to which I have referred, the business conducted in that building had been well established, had thrived and expanded to the point where the value to the claimants of owning No. 163 had become greatly enhanced and the advantage of owing that land firmly established. It is the value to the claimants at that stage of development of their fortunes and prospects for the future that has to be evaluated in relation to No. 163.

The other comparable sale in Griffith on which Mr. Maundrell relied was in such very special circumstances and required such particular analyses to assess whether any margin above market value had been paid for it that, in my opinion, it was of no weight in the assessment of special value required for the present case even if, contrary to my view, it had been relevant.

The applicants' valuer, Mr. Connolly, in his valuation (Exhibit "K") gave consideration to assessing the special value of the resumed land on a reinstatement basis. After observing that the reinstatement principle generally applied to more unusual circumstances, he pointed out that the owners of the resumed land had specifically designed their building on No. 161 to exploit the location of the resumed land on their western boundary and observed that it was not possible for them to replace the land and put themselves in the position they were in prior to the resumption merely by purchasing either the property adjoining on the east or a property further along to the west.

However, Mr. Connolly did the hypothetical exercise of assessing the cost of placing the applicants in the approximate position they were in prior to the resumption by purchasing No. 159 Yambil Street on the eastern side of No. 161. This land did in fact become available for sale but only after the applicants had purchased 192 Banna Avenue and the Council had resolved to resume No. 163. The relevant cost items are:-

Cost of the land No. 159 Yambil Street $125,000

Legal fees and stamp duty (Mr. Maundrell's figure) $4,600

Costs of altering the existing building by relocating the stairs and other items placed on the eastern side of the building on No. 161 and needed to be moved elsewhere to achieve the expansion proposal but by going east to 159 instead of west to 163 (Mr. Connolly's figure) $70,000

Cost of plans __$l,000

Total - $200,600

Exhibit "M" is a detailed cost analysis of the work involved in altering the existing building for the above purposes. The costs total $57,887 to which Mr. Connolly added 20% for builder's margin and Mr. Maundrell added only 10%. To that extent the experts disagreed, Mr. Connolly taking the round figure of $70,000 and Mr. Maundrell allowing $64,000. A precise figure is not necessary for the exercise in hand and I think it fairer to err on the side of the applicants if there is room for doubt as to who is right on the speculative question of what margin a builder would have demanded to do such work at the relevant time. On this approach, the market value recoverable on the resumption of No. 163, $105,000 would be brought to account and deducted from $200,600 leaving $95,600 as the additional costs to the applicants if they had reinstated themselves by the acquisition of No. 159 Yambil Street. It should be pointed out that this result would not allow anything for disruption to the business in No. 161 whilst it

was being remodelled.

Counsel for the respondent, in cross-examining Mr. Savage, endeavoured to obtain his admission that it would not have been necessary to do any remodelling if reinstatement had taken place by way of building on No. 159. It is unnecessary to go into the detail of the arguments offered to Mr. Savage by counsel in cross-examination. In my opinion, Mr. Savage responded with perfectly sound objections to all of the relevant propositions put to him. In substance, his rejection of those propositions was based upon the applicants' perceptions of what was desirable from the point of view of retail marketing of the type of goods they were proposing to offer and what was the more efficient arrangements for handling the delivery and storage of stock within the proposed buildings. I accept the evidence by which he sought to justify the applicants' claims that it would have been necessary to remodel the building on No. 161 in the respects mentioned.

Mr. Connolly also assessed the costs of purchasing, altering and fitting out the Banna Avenue property if that were to be considered as reinstatement. For the reasons I have earlier given, I am of the view that the purchase of that property, whilst caused by the resumption, could not reasonably be regarded as reinstatement.

Mr. Connolly sought to use both of these "reinstatement" exercises as support, not a substitute, for the results arrived at by his exercise in "comparable sales". I will come back later to the figures quoted above for a "reinstatement" by use of l59 Yambil Street.

The question is then how much more than the market value of No. 163 would a prudent man in the position of the claimants have been willing to give in order to retain that land or, if Chief Justice Bray's test is correct, "rather than fail to obtain it or regain it if he had been momentarily deprived of it". That kind of assessment will seldom be easy to make and is difficult in this case because so much of the evidence was diverted to questions which, on my view, were irrelevant or unhelpful; but the Court must do the best it can with the material available taking some consolation from the statement of Dickson, C.J., in Turner's case (supra), at p.268, "Valuation cannot be made to depend entirely on a logical process or formula and.... in any case questions of logical reasoning about considerations of fact are not to be confused with questions of law".

Counsel for the respondent put forward a number of factors which he suggested would lead a prudent man in the applicant's position to pay nothing more than the market value. I summarise these as follows:-

The idea of extending the premises by building another building would necessarily be based upon prospects of commercial success if the venture were undertaken but, at the time in question, a number of factors militated against such success; first, commercial activity in Griffith, current and prospective, at the relevant time was stagnant or declining; the population of Griffith in 1986 was 21,350 people, a very slight increase over the period from 1980; indeed, between 1980 and 1986 the population of the Murrumbidgee district in which Griffith lies had declined, showing the only negative population growth in New South Wales; for the same period, 1980-1986, the statistics for retail sales and employment in the Murrumbidgee district showed an extremely slow rate of increase compared to the rest of New South Wales; that district for that period showed an increase in retail turnover of only 5%, the lowest in the State, and an increase in employment also of only 5%, the second lowest in the State; secondly, buildi

ng finance for the erection of the premises by loan borrowings would, at the relevant time, have attracted high interest rates, in the order of 19-20%. The claimants' plan for the extended building was to use only ground floor space for display and retail sales at the front with storage and handling of stock at the rear of the ground floor of the extended premises, maintaining the manufacture of sports clothing on the upper floor of 161 and not having made any final decision about the use to be made of the upper floor of the new adjoining building except rejecting the idea that it was suitable for the Sportsman's Warehouse merchandising idea.

Counsel for the respondent then pointed out that the floor space provided by the building on No. 161 was 740m2 which when duplicated would grow to 1,480m2, as to which there was evidence, not disputed by the claimants, that no other sports store in New South Wales could be discovered operating with such a large area of floor space. It was then suggested that the project as envisaged by the claimants would result in a gross over-capitalisation of floor space, the more so if the projected business did not develop and expand in the manner anticipated by the claimants.

For the foregoing reasons, it was submitted for the respondent Council that a prudent landowner/businessman, contemplating the purchase of No. 163 to go with No. 161 in awareness of the factors mentioned and the commercial advantages and disadvantages which they posed for the present and the future, would have arrived at an extremely cautious assessment of the value of No. 163 and would probably have placed no value on the property above its market value.

I accept that a prudent man would take into account all of the matters to which the Council's submissions draw attention; but I am not prepared to accept that a prudent man in the position of the claimants would, because of such factors, place no value above market value upon No. 163 at the relevant time. A prudent man in their position would be aware of the success already achieved and the potential markets already proved by the business that they had carried on at No. 161 for over four years when they received the Council's notice of intention to resume. He would be aware that whatever the statistics might show generally, his particular business had shown a continual growth rate expanding to the point of squeezing him for space and bringing forward the time for implementation of his long term proposals. He would also be inclined to back his judgment of the need for and prospective success of the Sportsman's Warehouse idea and the efficiency of being able to promote it through the use of the combined buildin

gs. He would be aware that the Banna Avenue experiment showed a comparatively lower rate of return than the large space selling of sporting goods at Yambil Street. He would not be imprudent in looking upon the proposed expansion as a long term project providing such an amount of space as would allow considerable expansion of the business if it were to prove successful and spare space for other profitable exploitation to the extent that it was surplus for the requirements of the Sportsman's Warehouse business.

In my opinion, it is a reasonable approach to the question to suppose firstly that a prudent man in the position of the claimants, after taking into account all of the considerations to which I have referred, would remain willing to pay more than the market value of No. 163 in order to retain it to use it or have it available for use for the purposes of the project for which it was acquired; but, at the same time, it would be reasonable to expect him substantially to reduce the margin above market price which he would be prepared to pay because of the existence of the adverse factors to which the Council's submissions draw attention.

I think that the figures relating to the hypothetical reinstatement by building on No. 159 instead of No. 163 give a guide to the worth of No. 163 to the owner of No. 161 at the time of the resumption. Those figures showed that if the owner of No. 161 was faced with the choice of purchasing No. 163 or No. 159 for the purpose of enabling the contemplated expansion to go ahead, it would have cost them an additional $95,600 to obtain the same result using No. 159 as they would have been able to obtain by using No. 163. I think that it would be, therefore, a reasonable approach for the claimants, acting prudently, to argue that they could afford to pay up to, as a maximum, $95,600 more than market value for No. 163. However, acting prudently, they would be expected to substantially reduce this concept of the worth of No. 163 by their awareness of the hostile factors involved in a current assessment of the commercial future of the project.

There is, I think, another consideration that ought to play a part in this kind of exercise. It is not, I think, a simple question of how much more would the claimants pay,but how much more would they be forced to pay by an outsider bidding in competition but in ignorance of their special interest in the land. As the outsider would not share that interest and so may not have the incentive to bid to the same limit as the claimants who did, the claimants might never be forced, though willing, to go to their limit as the competitors might drop out well short of it. What I am saying is that I do not think that it may blindly be assumed that the full amount of the margin above market value that may be assessed as representing the dispossessed owners special interest in the land is the true measure of its special value.

Taking all of these factors and considerations into account I assess the special value to the claimants of No. 163 to have been, at the time of resumption, $40,000 which is to be added to the market value which was agreed at $105,000.

The claimants claimed in addition the costs which they incurred in being forced to attempt to mitigate their loss by undertaking the diversion into the shop premises in Banna Avenue. The figures in question were agreed but their recoverability as compensation was disputed by the Council on the ground that Banna Avenue was a separate adventure undertaken independently of the threat of resumption. I have found that this project was directly caused by the threat of resumption but for which, in all probability, it would never have been undertaken. In my opinion, there is a legitimate claim to have these costs included in the compensation on the basis that they flowed from the disturbance of the claimants caused by the expropriation of their land. The agreed figures are:-