Secretary to the Department Of Transport v Provan’s Timber Pty Ltd (ACN 004 654 746) and others according to the schedule
[2020] VSCA 210
•21 August 2020
SUPREME COURT OF VICTORIA
COURT OF APPEAL
S APCI 2019 0094
| SECRETARY TO THE DEPARTMENT OF TRANSPORT | Applicant |
| v | |
| PROVAN’S TIMBER PTY LTD (ACN 004 654 746) and others according to the schedule | Respondents |
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| JUDGES: | TATE, KYROU and McLEISH JJA |
| WHERE HELD: | MELBOURNE |
| DATE OF HEARING: | 22 April 2020 |
| DATE OF JUDGMENT: | 21 August 2020 |
| MEDIUM NEUTRAL CITATION: | [2020] VSCA 210 |
| JUDGMENT APPEALED FROM: | [2019] VSC 390 (Emerton J) |
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LAND ACQUISITION AND COMPENSATION – Compulsory acquisition of land for East West Link tollway – Land used for hardware business – Where land owned by company and occupied by a related entity as tenant at will – Compensation to owner based on highest and best use of land assuming vacant possession – Whether compensation for disturbance losses to tenant available – Whether cost of relocating business a ‘natural, direct and reasonable’ consequence of acquisition – Relocation costs of tenant at will not compensable – Whether Authority bound by initial offer to pay relocation costs – Whether offer based on incorrect information – Whether judge erred by permitting double recovery – Roads and Maritime Services v United Petroleum Pty Ltd (2019) 99 NSWLR 279, Peter Croke Holdings Pty Ltd v Roads and Traffic Authority (NSW) (1998) 101 LGERA 30 applied – Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752, Rosenbaum v Minister for Public Works (1965) 114 CLR 424 considered – Land Acquisition and Compensation Act 1986 ss 30, 31, 40, 41, 41(2), 41(6), Valuation of Land Act 1960 s 5A.
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| APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr S Goubran with Ms C Dermody | Russell Kennedy |
| For the Respondents | Mr J Delany QC with Ms C van Proctor | Aitken Partners |
Tate JA
KYROU JA
McLeish JA:
TABLE OF CONTENTS
Introduction and summary......................................................................................
3
Compulsory acquisition of the Land for freeway link........................................
5
Negotiations before Notice of Intention to Acquire.....................................................
6
Meetings before Notice of Acquisition.........................................................................
12
The initial offer of compensation..................................................................................
16
Provans’ response to the initial offer...........................................................................
22
The revised offer...........................................................................................................
24
Provans’ response: claimants not to be treated ‘as one’..............................................
26
Supreme Court proceedings.........................................................................................
29
The statutory scheme................................................................................................
30
The judge’s reasons...................................................................................................
34
Causation.....................................................................................................................
35
Construction of the initial offer...................................................................................
39
Dismissal of the subsidiary proceeding........................................................................
45
Agreed market value....................................................................................................
45
Prohibition on double recovery — s 41(2)...................................................................
47
Orders..........................................................................................................................
50
The grounds of appeal..............................................................................................
51
Did the judge misapply the statutory test for causation? — Ground 1...........
52
Was the initial offer binding? — Ground 2...........................................................
70
No partial acceptance...................................................................................................
Incorrect information...................................................................................................
Should the subsidiary proceeding have been dismissed against Joinery? — Ground 3.....................................................................................................................
71
78
79
Was the market value agreed if Hardware received relocation costs? — Ground 4.....................................................................................................................
80
Did the judge order double recovery? — Ground 5..............................................
81
Conclusion.................................................................................................................
85
Introduction and summary
On 16 October 2014, the Linking Melbourne Authority (‘the Authority’) compulsorily acquired land in Clifton Hill (‘the Land’) occupied by a hardware store for the construction of a proposed 18 kilometre tollway road linking the Eastern Freeway to the Western Ring Road (‘the East West Link’). The retail hardware and timber business was run by Provan’s Timber and Hardware Pty Ltd (‘Hardware’). Provan’s Timber Pty Ltd (‘Timber’) was the registered proprietor of the Land and held the estate in fee simple. There was no formal lease between Hardware and Timber but Hardware paid rent to Timber. Provan’s Timber (Joinery) Pty Ltd (‘Joinery’) employed the staff of the retail hardware and timber business.
There were extensive negotiations between the parties before the compulsory acquisition and offers of compensation were made. The acquisition of the Land led to a dispute about the amount of compensation to be paid, the manner in which it should be assessed, and the precise parties to whom compensation was owed. In particular, there was a dispute about whether an initial offer had been directed to all three relevant companies of the Provans Group, Timber, Hardware, and Joinery, or to those companies individually. The question arose whether the initial offer was capable of disaggregation and acceptance by Hardware but not by Timber.
Proceedings were brought in the Supreme Court by Timber against the Authority and by the Authority against Hardware and Joinery. The two proceedings were heard together and the judge ordered that Timber was entitled to an award of compensation for market value assessed on the basis of highest and best use, assuming vacant possession, in the sum of $12.2 million.[1] The judge also held that Hardware was entitled to compensation for its relocation costs, by way of ‘disturbance loss’, in the amount of $2.871 million. This was despite a finding that Hardware’s interest in the Land was as a tenant at will and an undisputed assessment of the valuation of Hardware’s occupancy interest as having ‘nil’ value.[2] The judge dismissed the proceeding brought by the Authority for a declaration that neither Hardware nor Joinery was entitled to compensation.
[1]Provans Timber Pty Ltd v Secretary, Dept of Economic Development, Jobs, Transport and Resources [2019] VSC 390 (‘Reasons’). The award was for a total of $12.49 million including solatium, submission expenses and professional expenses.
[2]Reasons [151], [225] respectively.
The Secretary to the Department of Transport[3] applies for leave to appeal against the orders made on the basis that, as Hardware’s interest was as a tenant at will, any pecuniary loss it suffered as the natural, direct and reasonable consequence of the divestment of its interest could only have been of a limited nature and not warranting compensation of $2.871 million for relocation costs. The Authority also submits that the judge erred in finding that it had made a binding offer that was capable of acceptance by Hardware alone.
[3]It is convenient to refer to ‘the Authority’ as subsuming a reference to the applicant. In May 2015 the Secretary to the Department of Economic Development, Jobs, Transport and Resources was appointed as the successor to the Authority: Victoria, Government Gazette, No S 112, 19 May 2015. That Department has since been divided into two separate departments, one of which is the Department of Transport. The Secretary to the Department of Transport is now the officer authorised from 1 January 2019 to complete transactions including legal proceedings in connection with a transaction that happened in relation to the Secretary to the Department of Economic Development, Jobs, Transport and Resources under the Major Transport Projects Facilitation Act 2009 prior to 1 January 2019: Victoria, Government Gazette, No S 579, 21 December 2018, clause 6 and Table 2, Item 42.
For the reasons below, we would grant leave to appeal[4] and allow the appeal.
[4]In what follows, for convenience, we refer simply to ‘the appeal’.
In our view, the compensation awarded to Hardware does not faithfully reflect the divestment or diminution of its insubstantial leasehold interest as a tenant at will. Compensation afforded for disturbance loss cannot be divorced from the interest in land that is divested or diminished. We do not consider that the relocation costs incurred by Hardware can be viewed as the natural, direct and reasonable consequence of the divestment of its interest in the Land.
Furthermore, we consider that the initial offer is properly to be construed as comprising three offers, one to each relevant Provans company. It was an offer in writing to each claimant of whom the Authority was aware, and it thus satisfied the requirements of the Act. It was not a global or ‘joint’ offer addressed to all three claimants ‘as one’. However, because the claimants had multiple interests in the Land and due to the manner in which the initial offer was formulated, the offers to the claimants were intertwined; that is, an acceptance of the offer to one claimant was dependent upon the acceptance of the offer made to the other claimants. The rejection of the offer by Timber precluded separate acceptance by Hardware and the Authority was not bound by Hardware’s purported acceptance.
Compulsory acquisition of the Land for freeway link
The Land compulsorily acquired by the Authority is at 62–64 and 88–92 Alexandra Parade, Clifton Hill.
The Authority acquired the Land under the Land Acquisition and Compensation Act 1986 (‘the Act’), which provides for compensation to be paid to persons whose interest in acquired land is divested or diminished by reason of compulsory acquisition. The Authority compulsorily acquired all interests in the Land by notice of acquisition published in the Government Gazette on 16 October 2014 (‘the Notice of Acquisition’) for the purpose of the East West Link, which was a road project (‘the project’) that has since been abandoned.[5]
[5]In March 2015 the Authority made an offer to re-convey the Land to Timber and to give Hardware and Joinery the opportunity to remain in occupation. The claimants did not accept that offer: see Reasons [119].
Timber, Hardware and Joinery form part of the Provans Group of companies.[6] The Provans Group operates the businesses of the Rosenberg family. The Rosenberg family had operated the hardware business on the Land for several decades. The sole shareholder of Timber was Barry Rosenberg (‘Rosenberg’), and he was a director alongside his wife Sara Rosenberg. The shareholders of Hardware and Joinery were Rosenberg and Mrs Rosenberg, and in each case the sole director was Rosenberg.
[6]There are discrepancies in the spelling of the companies’ names. For convenience, the primary judge chose to use the spelling ‘Provans’. The same approach is adopted here. We use the expression ‘Provans’, or ‘the Provans Group’, to refer to Timber, Hardware and Joinery, unless the context shows otherwise. We also refer to those companies as ‘the claimants’.
Negotiations before Notice of Intention to Acquire
On 15 July 2013, the Authority notified the Provans Group by letter that the Land would be likely to be required for the construction of the project. The letter included a map of the project corridor to illustrate the likely need for the Land. It also advised that the design had not yet been finalised and that it might be amended following consultations that were to occur over the coming months. The Authority stated that while its letter was not a formal notice of acquisition, it would be in a position to advise if a formal acquisition was to occur by mid-2014.
Between mid-2013 and August 2014, Rosenberg, Gregory Heverin (‘Heverin’), the General Manager of the Provans Group, and Robert Proctor, the financial controller of the Provans Group, met and communicated regularly with representatives of and consultants retained by the Authority, including Nicole Glynn (‘Glynn’), the Authority’s land acquisition consultant, Piera Murone of Pitcher Partners (‘Murone’), the Authority’s accounting advisor and business valuation specialist, and Gab Aghion (‘Aghion’) of Business Relocation Management, the Authority’s relocation consultant. The discussions centred around the relocation of the business to new premises further down Alexandra Parade, specifically to buildings owned by another company controlled by Rosenberg and Mrs Rosenberg, of which Mrs Rosenberg was the sole shareholder, Lysteron Pty Ltd (‘the replacement premises’). Hardware’s business relocated to the replacement premises in September 2015.
On 16 July 2013, Glynn had two telephone conversations with Heverin. This was the day that the reference design for the project was released. The reference design showed the properties likely to be required for compulsory acquisition, and included the Land. Heverin informed Glynn that the business conducted upon the Land had operated for 110 years. He also indicated that ‘Provans’ owned the replacement premises.
Glynn deposed that, based on her discussions with Heverin, at that time she believed Timber was the owner/occupier of the Land. Her file note of the first telephone conversation records that Heverin advised that it would be impossible to find land of a sufficient size for relocation in the inner city, but that the replacement premises might provide a solution. In the second conversation, Glynn advised Heverin that the reference design for the project did not require the acquisition of any land east of a shot tower on Alexandra Parade, and therefore that the replacement premises were not on the likely acquisition list.
On 15 August 2013, the solicitors for the Provans Group, Aitken Partners (‘AP’), responded to the Authority’s 15 July 2013 letter to advise that Timber was the registered proprietor of the Land and that Hardware conducted a retail hardware and timber business from the Land. The letter stated that Timber and Hardware were considering their position in light of the likely acquisition of the Land ‘and business’, including the possible relocation of the business. AP advised that relocating the business would involve months of detailed planning and implementation, and requested urgent advice as to whether any of the three properties comprising the replacement premises was likely to be acquired or otherwise affected by the project.
On 23 August 2013, Glynn, along with her colleague Ian Clarke (‘Clarke’) and Marianne Stoettrup of Matters More, a business impact consultant retained by the Authority, met with Rosenberg and Paul Calleya, the systems manager for the Provans Group, to discuss the Authority’s 15 July 2013 letter. Glynn and Clarke advised that, following completion of the planning process, the Authority would commence the formal acquisition process and serve a ‘notice of intention to acquire’ under the Act. It was expected that the notice would be served around mid-2014. The Authority would obtain a business valuation and relocation assessment and, on the basis that the cost of relocation to ‘reasonably suitable’ premises did not exceed the value of the business, it would make an offer of compensation to relocate. The Authority’s valuer would assess the unaffected market value of the Land, not taking into account the impact of the project. The valuation would be assessed either on the basis of the business as a going concern (an ‘in use’ assessment, where additional compensation would be paid for relocation costs and loss of profits) or, alternatively, on the basis of the highest and best use of the Land, in which case compensation for relocation costs would not be payable. It was the Authority’s ‘core proposition’ that these assessments of compensation were alternative methods. The Authority’s core proposition was never accepted by Provans.
Before the 23 August 2013 meeting concluded, Rosenberg explained that there was a lease between Timber and Hardware, with Hardware paying rent to Timber, although he was sure it was below market rate. Glynn asked for a copy of the lease.
On 20 September 2013, there was a further meeting between Glynn, Clarke and Greg Holland, Director of Property Services, on behalf of the Authority, and Rosenberg and Heverin of the Provans Group. Rosenberg and Heverin raised concerns over the impact of the project design and construction works on the replacement premises, and Rosenberg indicated that he would like to commence the acquisition process immediately. Glynn said that the ‘government’ would consider ‘requests to purchase’ on grounds of financial and personal hardship, and that the Authority was willing to seek approval to commence early negotiations to purchase the Land.
On 21 October 2013, Heverin emailed Glynn and advised that the Provans Group had been provided with access to the buildings located at the replacement premises. He indicated that there were issues to be worked through regarding the viability of the site of the replacement premises for running a hardware and timber business. Glynn subsequently met with Rosenberg, Heverin and Marc Dixon, the architect for the Provans Group, on 25 October 2013. The meeting was held at the corner of Hoddle Street and Alexandra Parade, at the site of the replacement premises, and issues concerning access to those premises were discussed.
On 28 October 2013, Heverin wrote to Ken Mathers, the Chief Executive Officer of the Authority, advising that the Provans Group was investigating whether it was feasible to relocate the business to the replacement premises corner, and setting out a number of concerns. Heverin sought an opportunity to discuss the issues in more detail.
On 6 November 2013, Glynn and Clarke met with Rosenberg and Heverin. Glynn advised that the Authority would commence its investigations and make an offer, but explained that this process would take a reasonable period of time. She indicated she did not expect to settle the matter before the commencement of the formal acquisition process in July/August 2014. However, she hoped that an offer would be made before then so that ‘Provans’ would have a ‘ballpark figure’ of what the Authority was prepared to offer, which would provide some degree of comfort or indicate a minimum level of compensation. Glynn referred to company searches that she had undertaken, and requested precise information about the business structure of the Provans Group, including which company occupied the Land and on what terms. Rosenberg indicated that there was a lease in place that had been prepared by his solicitors. Glynn again requested a copy of the lease.
On 11 November 2013, the Authority replied to Heverin’s 28 October letter seeking agreement to conduct early investigations into the possible relocation of the business. The Authority’s letter stated:
Acknowledging the size of Provans Timber and Hardware and the challenges that Provans will face in securing a suitable replacement property and relocating its business successfully, [the Authority] is able to engage in business relocation investigations with Provans now, rather than waiting until July/August 2014 which would be normal practice.
However, the Provans Group indicated that it wanted to wait until the question of the suitability of the replacement premises had been resolved.
On 13 December 2013, the Provans Group lodged an application with the Yarra City Council for a planning permit in relation to the replacement premises.
On 11 April 2014, Heverin telephoned Glynn and advised that the Provans Group was now agreeable to the Authority commencing early investigations as he was confident the planning permit for the replacement premises would be approved.
On 29 April 2014, Glynn and her colleague, David Willmott (‘Willmott’), met with Rosenberg, Heverin and the lawyers for the Provans Group, Andrew Blogg (‘Blogg’) and Sebastian Greenway of AP. They discussed when the Land would be required, which Glynn advised would most likely be July–August 2015. The Authority indicated that it wanted to commence early investigations with affected businesses in order to be in a position to make offers as soon as possible after the service of notices of intention to acquire. This would involve the Authority engaging a valuer to assess the market value of the Land, an accountant to assess the value of the business and estimate loss of profits, and a relocation consultant to assess the cost of relocating to another property. This information would then be used to consider the basis on which the Authority would assess compensation and formulate an offer.
At this meeting, Glynn reiterated the Authority’s core proposition. She said that if the highest and best use of the Land was found to be an alternative use to its current use as a retail hardware and timber business, an assessment of market value on the basis of the highest and best use would be compared to an assessment of market value on an ‘in use’ basis, plus an allowance for relocation expenses or business value. If the highest and best use valuation was a higher valuation, an offer would be made on that basis. However, a highest and best use valuation would exclude any allowance for relocation costs or business value. If a combination of ‘in use’ market value plus an allowance for relocation expenses (or business value) was the higher sum, the offer would be made on that basis. It was agreed that the Authority would conduct early investigations regarding the possible relocation of the business. Glynn again asked for details of all parties with an interest in the Land and an explanation of the relationship between the parties, along with copies of any leases that might exist for the Land.
On 5 May 2014, the Authority wrote to AP confirming that the Provans Group had agreed to commence early investigations and setting out the steps that the Authority would undertake with respect to assessing compensation and requesting documentation. The Authority’s letter stated:
Having received your client’s approval to commence early investigations in our meeting on 29 April 2014, [the Authority] will now:
1. Instruct the Valuer-General Victoria to obtain a certified and check valuation of the unaffected market value of your client’s property. If there is a lease pertaining to the property, then a leasehold valuation will also be requested. It would be appreciated if you would provide copies of any leases for the property;
2. Engage an accountant to assess the value of the business operating from the property, and loss of profits (if any) which may be incurred during the relocation and re-establishment of the business. To assist this assessment can you please provide:
a. Documents that establish any other interests in the subject property that [the Authority] may be required to acquire;
b. An outline as to the relationship between the entities, particularly freehold and leasehold interests, should they differ; and
c. Financial documents (tax returns and profit and loss statements) for the past three financial years, for the occupant(s) of the property.
3. Engage a relocation consultant to assess the cost to relocate to your client’s potential replacement property. To assist in this assessment, any additional design/site layout work which has been completed by your client would be appreciated together with any quotations already received for proposed works, such as racking.
On 29 May 2014, Aghion emailed Heverin requesting that he arrange a number of site visits with professional designers, removalists and quantity surveyors, as well as identify some of the interior requirements for the replacement premises. On the same day, Heverin emailed Glynn to inform her that the Provans Group had received an approved planning permit in relation to the replacement premises.
On 3 June 2014, Glynn again requested a copy of any lease documentation for the Land. AP responded on behalf of the Provans Group on 11 June 2014, advising that there was no formal lease documentation but that Hardware paid rent of $32,400 per annum to Timber. Hardware was also responsible for the payment of all outgoings associated with the Land, including council rates and land tax, which had totalled $87,018.03 in the most recent financial year.
On 30 June 2014, the project was approved by the Minister for Planning, pursuant to s 77 of the Major Transport Projects Facilitation Act 2009.[7] The Minister designated what land was required for the project on 30 July 2014.[8]
[7]Victoria, Government Gazette, No S 222, 30 June 2014.
[8]Victoria, Government Gazette, No S 257, 30 July 2014.
Heverin and Glynn met on 17 July 2014 to discuss the progress of the relocation and the likely timing of an offer of compensation from the Authority. According to Heverin, in a telephone call on 24 July 2014, Glynn advised him that she had to have a ‘lump sum offer’ on the table by the end of August of that year.
On 6 August 2014, the Authority served a Notice of Intention to Acquire (‘the Notice of Intention to Acquire’) addressed to Timber, Hardware, Joinery, Westpac Banking Corporation (as mortgagee) and ‘all other parties holding an interest in [the Land]’. The Notice of Intention to Acquire was sent under separate covering letters to the directors of Timber (Rosenberg and Mrs Rosenberg), the director of Hardware (Rosenberg), and the director of Joinery (Rosenberg).
Meetings before Notice of Acquisition
On 11 August 2014, Heverin spoke to Glynn about the replacement premises. He advised that a longstanding family dispute about those premises had been resolved, but there remained issues to be dealt with regarding administrator’s fees. Heverin emphasised the importance of the timing of the compensation payment, as it would assist in meeting some of the relocation costs.
In August and October 2014, the Authority went through its internal processes to formulate an offer of compensation based on two options — option 1, the highest and best use assessment, with no additional compensation for the business including no compensation for any disturbance loss, and option 2, the existing use valuation, which would include relocation expenses. In practical terms, the Authority sought to have the Provans Group elect which of these two options would form the basis of the claim.
On 15 August 2014, AP provided the information requested in the Notice of Intention to Acquire, stating that it was not aware of any person having an interest in the Land apart from the directors of Timber, Hardware and Joinery.[9]
[9]Reasons [80].
By email dated 26 August 2014, Glynn sought a meeting with the Provans Group to discuss ‘the way forward’ in relation to anticipated offers and claims for compensation. She explained that she understood there were several interests in the Land, namely Timber as proprietor, and Hardware and Joinery each as occupiers. The email stated:
As discussed, I wish to arrange a meeting with legal advisers and representatives of both [the Authority] and your clients in order to discuss issues associated with the manner in which compensation should be assessed in relation to the interests of each of those named above.
[The Authority] recognises that [Hardware] (and no doubt [Joinery]) is currently [taking] steps to relocate its business to new premises.
[The Authority’s] representatives wish to discuss the manner in which valuations should be undertaken both in relation to the freehold interest and also the interests of the occupiers, particularly in circumstances where the occupiers pay rent of approximately $30,000 per annum for the present premises.
On 17 September 2014, a meeting was held between Glynn and David McQuilton (‘McQuilton’) on behalf of the Authority, the Victorian Government Land Monitor, David Brahe (‘Brahe’) and Celene Ramanathan (‘Ramanathan’) of the Authority’s lawyers, Russell Kennedy (‘RK’), and Blogg, Rosenberg and Heverin. A contemporaneous file note taken at that meeting by Ramanathan confirmed the structure and relationships between the companies in the Provans Group and noted that Timber owned the land and Hardware leased the land and paid rent of $32,000 per annum, although there was no formal lease.[10]
[10]Reasons [83].
The file note of the meeting also recorded that Brahe identified for those present three alternative ways to value the Land, to the following effect:
(1)based on its highest and best use, which would involve the Authority denying any claim for compensation for clearing the Land or relocating the business, as the highest and best use was different from the (then) current use;
(2)based on its existing use, with the Authority to pay relocation costs; and
(3)on the basis that all three claimants were treated as one and the property was treated as owner-occupied, in which case compensation would ‘presumably’ result in an assessment based on the existing use and relocation costs.[11]
[11]Reasons [84].
Brahe told those at the meeting that the Authority had received confirmation that the highest and best use of the Land was for residential development, specifically for a medium-rise building of three to four levels. (Amendments to the Yarra Planning Scheme had been prepared placing the Land in a Residential Growth Zone providing for apartment scale development of up to four storeys.) Brahe said that putting the Land to its highest and best use would require the existing building to be demolished and would thus remove any requirement for the Authority to pay relocation costs.
The file note records that Blogg (AP) ‘disagreed and formed the view that a claim could be made for the highest and best use with a deduction for the costs to demolish the improvements but also a claim for relocation costs. ... Brahe (RK) indicated that this will result in an overpayment of compensation’. It might be observed that this tension, as expressed in the views of Blogg and Brahe, has continued throughout the dispute between the parties, both at trial and on appeal, namely, a reluctance on behalf of Provans to accept that compensation based on highest and best use of the land (that is, based on potential use and not existing use) excluded compensation for relocation. As mentioned, Provans never acceded to the Authority’s core proposition.[12]
[12]See [16] above.
On 24 September 2014, RK wrote to AP setting out the Authority’s understanding of what had occurred at the 17 September 2014 meeting, and confirming that the Authority did not expect to receive both a claim from Timber for the value of the Land based on its highest and best use as well as a claim from Hardware for relocation costs or in relation to the benefit of profit rent. The letter stated:
As was discussed at the meeting, it is our view that if the market value of the property were to be assessed at its highest and best use (that is for residential development) it would be necessary for the land to be cleared to enable the property to be developed for its highest and best use thus removing (for the purposes of assessing compensation payable by [the Authority]) the concept of the costs of relocation of the business enterprises conducted upon the property.
…
At the present time, it seems to us that an appropriate approach to this matter would be as follows—
·[Timber] be paid for the market value of the land acquired, that value to be assessed on the basis of a continuing use of the property for its current use.
·It be agreed that [Hardware] makes no claim for the value of its interest in the property.
·[Hardware] be paid compensation based upon the reasonable cost of relocation of that business to reasonably comparable premises. The relocation costs to be assessed having regard to that required to place the company in a similar operation condition to that which it now enjoys. This proposal is however, subject to the costs of relocation not being far greater than the value of the business conducted by [Hardware] as a going concern.
·An allowance for costs (of advisers) in relation to relocation.
·An allowance for expenses associated with the acquisition.
On 10 October 2014, AP responded to RK’s 24 September 2014 letter seeking to reserve Timber and Hardware’s rights in relation to the manner in which compensation would be assessed, and warning that if the ‘in use’ value of the Land was arrived at on the basis of the current rather than the market rent, Hardware would reserve its right to make a claim in relation to profit rent. In other words, it was made clear that compensation was not to be based on the peppercorn rent Hardware was paying Timber but rent at market value. The letter confirmed that Hardware was seeking to relocate the business to the replacement premises and emphasised that ‘our clients are understandably concerned about the time constraints relating to the relocating and establishing of its business at [the replacement premises]’. The letter noted that Joinery was unlikely to have a claim by reason of the acquisition and proposed relocation of the business. AP requested that an offer be made as close to, if not in conjunction with, the Notice of Acquisition.
AP acknowledged that the manner in which the Authority assessed compensation was entirely a matter for it but added: ‘Nonetheless in this instance there may be some utility in providing a breakdown as to how any compensation offered to our clients is calculated by [the Authority]’.
On 16 October 2014, the Notice of Acquisition was published in the Government Gazette identifying the interests acquired to include Timber’s estate in fee simple and the interests of Hardware and Joinery respectively as occupiers.[13] The Notice of Acquisition was served on the companies in the Provans Group under a single covering letter, dated 22 October 2014, addressed to the directors of each of them.
The initial offer of compensation
[13]Victoria, Government Gazette, No S 371, 16 October 2014.
RK gave the Authority legal advice about the form of offer that should be made. On 15 October 2014 Brahe advised:
I am of the view that at the present time, having regard to the various options that [Glynn] has drafted, that option 2 is the one to address. This option contemplates assessing compensation on the basis that Provan’s will in fact relocate. If it transpires that Provan’s decide at some time in the near future that it is not economically in its interests to relocate its business, the issue of the amount of compensation to be offered can be reconsidered.
It is my view, therefore, that, having regard to the advice that [the Authority] has received from its advisors, the offer of compensation should, at this stage, be in the sum of $8,706,279 …
…
In making its first offer of compensation, I confirm our discussion to the effect that the offer should make it clear as to its components and the appropriate member of the Provan’s group to which a particular item of compensation applies.
The letter included a table with items for market value based on existing use, solatium, relocation expenses, and professional expenses, with a dollar value next to each item.
Between 16 and 22 October 2014, the Authority went through its internal processes to obtain approval to make an offer of compensation based on ‘option 2’,[14] being the market value of the Land based on its existing use and relocation costs. During this process the Valuer-General Victoria (‘VGV’) queried the request for a valuation based on existing use. RK wrote to the VGV explaining why the request was made, saying that Provans had indicated an intention to relocate the business to the replacement premises in which case it would be inappropriate to pay Provans compensation based on the highest and best use of the Land. Summaries of the offer to be made were prepared. RK advised the Authority, on 22 October 2014, that it would be sensible to make a statutory offer in accordance with s 31 of the Act[15] based upon option 2, which, it thought, would be unlikely to be accepted. It advised that, in addition, the Authority should make a ‘without prejudice’ offer based on highest and best use for all of Provans’ interests in the Land and subject to the execution of a deed of release and indemnity by all of the Provans companies. RK attached a draft ‘without prejudice’ offer letter but it was never used.
[14]See [35] above.
[15]See [78] below.
Glynn proposed that, due to the related nature of the companies in the Provans Group and the advice from RK, one offer should be made to Timber, Hardware and Joinery for their combined interests in the Land, clearly outlining the components of the offer and to which company each component related.
On 24 October 2014, the Authority served the Initial Offer of Compensation pursuant to s 31 of the Act (‘the initial offer’). The initial offer was expressed as an offer addressed to the directors of each of Hardware, Timber and Joinery. The components of the offer were expressed in a table. The interpretation of the initial offer, including its table, is one of the issues at the heart of this appeal. The initial offer reads:
Offer of Compensation
[The Authority] has obtained independent advice as to the value of all three companies’ interests in the property and, based upon this advice, [the Authority] offers a total sum of $8,706,000 (less monies paid) as compensation for the compulsory acquisition of the companies’ interests in the property.
This offer is made pursuant to section 31 of [the Act] and is the amount of compensation [the Authority] has assessed as being the amount payable to the companies, based on information currently available to [the Authority].
The offer is comprised of several components and attributed to a specific interest as follows:
The initial offer was expressed to be made subject to a number of conditions including, relevantly, the following:
1.The sum offered is for the compulsory acquisition of the companies’ interests in the whole of the property and for all loss or damage which may be sustained as a natural and direct consequence of the acquisition, including any impact to businesses, and is made in full and final settlement of all claims that the companies may have.
2.The sum offered includes an allowance to relocate [Hardware] and [Joinery] from the property to the replacement property at 168–174 and 176–182 Alexandra Parade and 477 Hoddle Street, Clifton Hill.
…
8.If the offer is accepted, the companies will be required to release and indemnify [the Authority] from any further claims arising from the acquisition. In the event that [the Authority] is required to pay compensation for any further interest in the property, [the Authority] may require reimbursement of the compensation paid. The companies will be required to sign a Release and Indemnity agreement at settlement to this effect.[16]
[16]Item 10 also has some relevance. It provides: ‘[The Authority] will reimburse the stamp duty, transfer fees and reasonable conveyancing costs should [Timber] purchase a replacement property’.
The initial offer was accompanied by three certificates of valuation issued by the VGV. Each recorded Timber as the sole proprietor of the Land. The first certificate recorded that the valuation of Timber’s interest was based upon the ‘in use’ value of the Land as a timberyard and like business and assessed compensation at $5.675 million. The second certificate referred to the lessee/occupier as Hardware and assessed the amount of compensation for ‘[a]ll interests in the land’ as ‘nil’. Likewise, the third certificate, which referred to the lessee/occupier as Joinery, assessed the amount of compensation for ‘[a]ll interests in the land’ as ‘nil’. There was no dispute by Hardware or Joinery in respect of the ‘nil’ value assessment made with respect to their respective interests in the Land.
The initial offer attached a ‘Form 10’ as prescribed under the Land Acquisition and Compensation Regulations 2010 (‘the Regulations’). Form 10 is a pro forma statement to the effect that the recipient could accept the offer in full, accept the offer in part, or reject the offer. This was required by s 31(4)(c) of the Act to accompany an initial offer of compensation.[17] The attached Form 10 provided:
[17]See [78] below.
STATEMENT TO ACCOMPANY INITIAL OFFER OF COMPENSATION
1 What this statement is about
This statement comes to you with an offer of compensation by the ... Authority because you had an interest in land which was compulsorily acquired.
You should refer also to the statement which came with the notice of acquisition which was given to you on 22 October 2014.
2 What to do with the offer
You may—
(a) accept the offer in full (complete Part A of Form 11); or
(b) accept the offer in part (complete Part B of Form 11); or
(c) reject the offer (complete Part C of Form 11).
Within 3 months after service of the offer (unless the time is extended by agreement or by the Minister) you must give the ... Authority a notice of acceptance or claim.
If you do not reply within time, the ... Authority may assume that you reject the offer and dispute it. A dispute is determined by the Victorian Civil and Administrative Tribunal or by the Supreme Court.
If you need more time to decide what to do, ask the ... Authority, or if the ... Authority will not let you have more time, you can ask the Minister for more time.
3 Do you get interest?
...
4 Advance of compensation may be payable
You may have the full amount of the offer paid to you within 30 days of making a written request to the ... Authority even if you are claiming more than the offer.
An advance is not payable unless the offer is for $5000 or more. If the advance paid is greater than the compensation finally determined, you will have to repay the difference.
5 If you do not agree with the valuation
If you think the information which you have been given with the offer is incorrect, you should consider consulting a solicitor, valuer or other professional adviser.[18]
[18]Emphasis added.
Also attached to the initial offer was a partially completed ‘Response to Offer’ (Form 11 under the Regulations) that referred to the ‘Person(s) accepting offer or making claim’ as Timber, Hardware and Joinery ‘(collectively “the Claimants”)’. It recorded that the offer was for ‘$8.706 million comprised of several components and attributed in the letter from the Authority to the Claimants of 24 October 2014 to specific interests as follows’. The partially completed Form 11 reproduced the table from the initial offer, numbered item by item, and included, as item 7, the reimbursement of stamp duty, transfer fees and conveyancing costs incurred by Timber:
1. Market Value
$5,675,000
Provan’s Timber Pty Ltd
2. Solatium
$100,000
Provan’s Timber Pty Ltd
3. Relocation Expenses
$2,871,000
Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd
4. Legal Expenses
$25,000
Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd
5. Submissions Expenses
$20,000
Provan’s Timber Pty Ltd and Provan’s Timber & Hardware Pty Ltd
6. Valuation Fees
$15,000
Provan’s Timber Pty Ltd and Provan’s Timber & Hardware Pty Ltd
7. Reimburse stamp duty, transfer fees and conveyancing costs incurred by Provan’s Timber Pty Ltd payable on a property up to $5,675,000
Provan’s Timber Pty Ltd, Item 10 in the letter
The partially completed Form 11 named the persons who were to respond to the initial offer in the following way:
The interest in the land of the
persons responding to offer: Provan’s Timber Pty Ltd (sole proprietor),
Provans Timber & Hardware Pty Ltd (lessee/occupier) and Provan’s Timber (Joinery) Pty Ltd (lessee/occupier)
Provans’ response to the initial offer
On 17 December 2015, Provans Group served a Response to Offer. By then Hardware had relocated, in September 2015, to the replacement premises. At the time of the relocation, the owner, Lysteron Pty Ltd, did not have the funds to undertake any refurbishment of the premises to make it suitable for the operation of the hardware business. Because of the urgency of the need to relocate the business, it was decided that the Provans Group would fund the relocation and cover the refurbishment costs. In return, Hardware entered into a lease with Lysteron Pty Ltd commencing on 1 August 2015, for an initial 10-year period, with two five-year options. Hardware was to pay rent at the market rate.[19]
[19]Reasons [120].
In the Response to Offer, Timber claimed compensation for market value in the sum of $12.7 million and Hardware and Joinery claimed relocation costs (in effect rejecting the Authority’s core proposition):
Provan’s Timber Pty Ltd claims the sum of $12,700,000 for market value in response to Item 1 of the offer of compensation plus costs associated with a replacement property in response to item 7 of the offer of compensation.
Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd accept item 3 of the offer of compensation for the Relocation Expenses in the sum of $2,871,000 offered by the Authority.
Each of Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd accept the offer made for submission expenses of $20,000 and claim legal, valuation and other professional expenses and interest pursuant to [the Act].[20]
[20]Emphasis added.
The Response to Offer also addressed each of the components of the initial offer, item by item, by the particular Provans company with the relevant interest, as follows:
The responses to the several components in the 24 October 2014 offer by the persons to whom each such offer was made are as follows;
1) Market value: Provan’s Timber Pty Ltd:
62-64 Alexandra Parade, Clifton Hill
88-92 Alexandra Parade, Clifton Hill$10,000,000
$2,700,000
$12,700,000
2)
Solatium: Provan’s Timber Pty Ltd
$350,000
3) Relocation expenses: Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd: Agreed at $2,871,000
4) (a) Legal expenses (ongoing): Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd $TBA
(b) Other professional expenses pursuant to section 41(1)(f) of the Act (to date and continuing): Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd:
- accounting fees
- architectural fees
- heritage architects
- planning$35,277
$20,930.25
$880
$7,001.50
5) Submission expenses: Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd: Agreed at $20,000
6) Valuation fees to date and ongoing: Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd $TBA
7) (a) Stamp Duty assessed on purchase price of replacement property (up to value of $12,700,000): Provan’s Timber Pty Ltd $TBA
(b) Registration fee payable on replacement property (up to a value of $12,700,000): Provan’s Timber Pty Ltd $TBA
(c) Legal and conveyancing expenses in relation to the acquisition of a replacement property: Provan’s Timber Pty Ltd $TBA
(d) Agent’s fees in locating a replacement property: Provan’s Timber Pty Ltd $TBA
(e) In the event that a replacement property is not acquired by Provan’s Timber Pty Ltd within the prescribed time limit an indemnity in relation to the Capital Gains Tax incurred by reasons of the acquisition
$TBA
8)
Interest pursuant to the Act: Provan’s Timber Pty Ltd, Provans Timber & Hardware Pty Ltd and Provan’s Timber (Joinery) Pty Ltd
$TBA
At the end of the Response to Offer, Provans disputed the Authority’s valuation of the Land stating:
The Claimants dispute the value of the land by the Authority and attached is a copy of the certificate of valuation which has been provided by a Valuer in respect of his valuation of the land together with a statement advising how that valuation is calculated.
Provans provided its own certificate of valuation that adopted a valuation approach described as a ‘Direct Comparison with consideration given to the value of the enterprise as a going concern’. The ‘compensation assessment’ was valued at $12.7 million excluding GST.
The revised offer
On 6 April 2016, the Authority provided its statutory Reply to the Response to Offer, pursuant to s 36 of the Act,[21] in the form of a revised offer. By 17 February 2016 there had been an agreement on the valuation of the Land at the date of the acquisition assessed on the basis of its highest and best use, namely, $12.2 million. The agreed valuation had been reached by the four valuers engaged by the parties at that time.[22]
[21]See [81] below.
[22]Reasons [11].
The Authority addressed its Reply to Timber, Hardware and Joinery, and defined and referred to them jointly as ‘the Claimants’. The Reply referred to what it described as ‘an agreement’ between the parties that all claimants were to be treated ‘as one’. Provans later responded that there was no such agreement. The Reply stated:
This Reply is made to the Claimants’ claim for compensation pursuant to the provisions of s 36 of [the Act]. The Claimants have agreed that the time for the delivery of this Reply is extended to 22 April 2016.
By this Reply, the Authority offers to vary the amount of compensation previously proposed by it in its Offer of Compensation dated 24 October 2014.
In this Reply, the Authority makes two Offers of Compensation placed in the alternative for the Claimants’ consideration (only one of the offers may be accepted by the Claimants). Any acceptance is on the basis of settlement of the Claimants’ claim for expenses in full and final settlement.
In making its Reply, the Authority acknowledges agreement between the parties that all Claimants be treated as one (despite the fact that they are separate corporate entities but noting that each Claimant operates in conjunction one with the other).[23]
[23]Emphasis added.
The Authority then made two offers in the alternative. The first, described as the ‘primary offer’, included an allowance of compensation for market value of the Land at its highest and best use (for residential development), as agreed by the valuers representing the claimants and the Authority, in the amount of $12.2 million. The primary offer also included an allowance for $100,000 solatium,[24] $20,000 for submission expenses and $170,000 for costs and expenses as contemplated by s 41(1)(f) of the Act.[25] The total value of the primary offer was $12.49 million.
[24]The Authority reserved the right to argue that the allowance for solatium should be less than that offered.
[25]See [82] below.
The second, described as the ‘alternative offer’, assessed the market value of Timber’s interest in the Land based on an ‘existing use’ or ‘in use’ assessment, but made allowance for compensation for relocation expenses. The alternative offer reiterated the Authority’s core proposition and made plain that compensation would not be provided for both relocation costs and a valuation based on highest and best use of the Land. The Authority addressed Timber, Hardware, and Joinery collectively as ‘the Claimants’, and said, in relation to the alternative offer:
This alternative offer is based upon the fact that the Claimants have sought (as part of the compensation payable) relocation expenses in the sum of $2,871,000. The Authority agrees that relocation expenses incurred by the Claimants may amount to the sum of $2,871,000 but say that the Claimants cannot recover compensation based upon the highest and best use of [the Land] … and at the same time make a claim for relocation expenses.[26]
[26]Emphasis added.
The Authority further said that, if the claimants sought to ‘persist’ with a claim for relocation expenses, it offered $5.675 million for the market value of the Land on the basis of its existing use, in accordance with the certificate of valuation previously provided. The compensation for relocation expenses ($2.871 million), solatium ($100,000), submission expenses ($20,000) and costs and expenses as contemplated by s 41(1)(f) of the Act ($170,000) were the same as those in the primary offer. The total value of the alternative offer was $8.836 million.
Provans’ response: claimants not to be treated ‘as one’
On 29 April 2016, AP responded to the Authority’s Reply noting that the agreement that had been reached relating to market valuation ‘relates to the interest in land of Provan’s Timber Pty Ltd as registered proprietor of the land’. In the context of asserting its entitlement to an advance of the compensation payable, the letter went on to emphasise the distinct interests of Timber, Hardware and Joinery, saying:
As you know, the initial letter from the Authority offering compensation on 24 October 2014 was careful to distinguish between the amounts assessed as compensation in favour of and payable to [Timber] and amounts assessed as compensation in favour of and payable to either [Hardware] and/or [Joinery].
The Response to Offer served by our client on 17 December 2015 similarly responded discretely in relation to each offer made to each company. In particular, the Response to Offer included a separate response on behalf of [Timber] in respect to its claim for market value.
AP’s letter observed that the Authority had recognised that neither Hardware nor Joinery had any compensable interest with respect to the market value of the Land and that Hardware and Joinery had accepted this:
As set out in the Certificates of Valuation dated 20 October 2014 the initial offer made for market value offered ‘$nil’ compensation for the interest in land of [Hardware] as lessee/occupier and ‘$nil’ compensation for the interest in land of [Joinery]. Neither of these companies disputed the ‘nil’ offer made to them for market value in the Response to Offer.[27]
[27]Emphasis added.
The letter unequivocally rejected the existence of an agreement that Timber, Hardware, and Joinery were all to be treated ‘as one’ for the purposes of compensation under the Act:
So that the position is clear, contrary to the assertion made in the Reply dated 6 April 2016, at no time has there been any agreement that ‘all claimants be treated as one’. The course of communications and in particular the formal offer and Response to Offer process has been very much to the contrary.
We invited you to advise as to the basis of the assertion in the Reply dated 6 April 2016 that all claimants were agreed to be treated as one. No response has yet been received. There is no basis for the assertion.
On 31 May 2016, RK sent a letter to AP accepting that the Authority might have been mistaken in assuming that ‘all claimants be treated as one’. It stated that the initial offer was made on the basis that the Provans Group would be relocating and the compensation offered by the Authority reflected the market value of the existing use of the Land and all claims that could be made by the Provans Group as a whole. It reiterated that it was on that basis, and that basis alone, that an allowance was made for disturbance to the business interests of the Provans Group.
RK’s letter went on to say that Hardware’s interest in the Land was no greater than that of a tenant at will. Timber, considered as a separate entity, could at any time have exercised its right to terminate the tenancy leaving Hardware in exactly the same position as under the compulsory acquisition. There was therefore no causal connection between the compulsory acquisition of the Land and any loss suffered by Hardware. Had its interest been considered separately from that of Timber there would have been no offer made for its relocation costs. If the table in the initial offer[28] indicated that Hardware, Timber, and Joinery were being offered compensation as separate entities, this was to be regretted. RK’s letter stated:
If the Authority had proceeded on the basis that each entity was to be treated separately then no offer for relocation costs would have been made at all to [Hardware] because that entity has not demonstrated a basis upon which to make a claim of that type or in that amount given the nature of its interest in the land. The original offer was made on what may have been a mistaken assumption that the companies would be treated as one entity and that the entity would move its existing business to a new location.
It is regrettable that the table might be read as treating the entity separately. That said, rather than the table being conclusive evidence of the Authority treating the entities separately, the form and content of the original offer is no more than a manifestation of and a compounding of a possible error made by the Authority in formalising its position.[29]
[28]See [50] above.
[29]Emphasis added.
The letter went on to say that the Authority considered the initial offer not to be a binding offer as some of the information contained in it may have been incorrect. Rather, it recognised Timber’s entitlement to market value assessed on the highest and best use of the Land. It therefore offered Timber $12.49 million and, on the basis of Hardware’s ‘nil’ interest in the land, it offered Hardware nothing.
On 21 June 2016, AP provided its clients’ response to the revised offer. It asserted that at no time had there been any agreement that ‘all Claimants be treated as one’ and both the initial offer and the Form 11 response to the initial offer dealt individually with claims made by each of Timber, Hardware and Joinery. As a result of that response, the only ‘disputed claims’ between the Authority and an individual claimant were the claims by Timber for the market value of the land ($12.7 million) and solatium ($350,000) (with the legal expenses and professional expenses claimed jointly by Timber, Hardware and Joinery to be advised).[30] The response to the revised offer agreed that the market value of the land was $12.2 million and claimed stamp duty, registration fees, legal and conveyancing expenses and agent’s fees in locating a replacement property, as well as compensation for any capital gains tax payable by reason of the loss of the capital gains tax-free status of the land.
[30]Pursuant to s 41(1)(f) of the Act.
The alternative offer, being premised on a single claimant, was to be treated as irrelevant. The response to the revised offer said:
The premise of the alternative offer by way of reply is false. It assumes an agreement that the Claimants be treated as one. There is not and never was any such agreement.
The alternative offer is irrelevant.
Supreme Court proceedings
Timber referred the ‘disputed claims’ to the Supreme Court for determination, pursuant to s 80 of the Act. The ‘disputed claims’[31] include the amount that Timber said remained outstanding on the agreed compensation for the market value of the Land, after the payment of several advances. On 19 December 2014, the Authority made an advance of $8,693,310 and on 10 May 2016 it made a further advance of $3.784 million,[32] a total of $12,477,310. The Authority claimed that the payments were made to Timber as the registered proprietor of the Land in accordance with s 51 of the Act.[33] It claimed that Timber had been compensated for the market value of the Land, based on its highest and best use, and that no further amounts were payable to Timber. This was disputed as the claimants said that $2.871 million was owed to Hardware for its relocation costs and that $2.871 million of the advance of $8,693,310 made on 19 December 2014 was paid to Hardware to discharge that obligation.[34] On this understanding, the advances paid to the claimants left $2.871 million outstanding to Timber.
[31]The judge described this as an ‘amount [that] corresponds with the amount that Hardware and Timber say was offered to them and accepted by them for relocation expenses’: Reasons [144].
[32]Reasons [12].
[33]Section 51 provides for a claimant, upon service of an offer, to require the Authority to advance an amount equal to the amount of compensation offered.
[34]Reasons [132].
The Authority commenced proceedings against Hardware and Joinery for a declaration that Hardware and Joinery were not entitled to any compensation arising from the acquisition of the Land. The Authority denied that the payment on 19 December 2014 included a payment of $2.871 million to Hardware. The judge referred to this as the ‘subsidiary proceeding’.
The statutory scheme
Section 30 of the Act confers a right to compensation on anyone whose interest in land has been divested or diminished by the compulsory acquisition of that interest:
30 Right to compensation on acquisition
Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.[35]
[35]Emphasis added.
An ‘interest in land’ is defined, under s 3, as ‘a legal or equitable estate or interest in the land’ or ‘an easement, right, charge, power or privilege in, under, over, affecting or in connexion with land’.
Section 31 regulates the making of an initial offer of compensation by the Authority:
31 Initial offer of compensation
(1)After the notice of acquisition has been published in the Government Gazette the Authority must make an offer in writing to each claimant of whose entitlement to compensation it is aware.
(2) An offer under this section must be made—
(a) within fourteen days after the date of acquisition; or
(b) within such further period as—
(i)may be agreed upon in writing between the Authority and the claimant; or
(ii) the Minister administering the special Act may certify.
(3)The offer must set out the amount that the Authority, on the information available to it, has assessed as a fair and reasonable estimate of the amount of compensation payable to the claimant under this Act on the assumption that the claimant held the interest in respect of which the offer is made.
(4) An offer under this section must be accompanied by—
(a)a copy of the certificate of valuation to which the Authority has had regard in making its offer; and
(b)a statement explaining the difference between its offer and the valuation referred to in paragraph (a) if these differ; and
(c)a statement in the prescribed form setting out the principal rights and obligations of persons whose interests in land have been acquired under this Act.
(5)In making its offer the Authority must have regard to a valuation of the land carried out by the Valuer-General or a person who holds the qualifications or experience specified under section 13DA(2) of the Valuation of Land Act 1960.
(6)A valuation under subsection (5) may be made in respect of the specific interest acquired or in respect of the freehold interest in the land whichever appears to the Authority to be appropriate in the circumstances.
(7)If an offer of compensation is made under this section in respect of an acquired interest and immediately prior to the date of acquisition—
(a) the interest was affected by another interest in the land; or
(b)rates, taxes or other charges were charged upon the land in which the interest subsists—
the Authority may reduce the amount of its offer by an amount equal to the amount that it considers is necessary to provide for that other interest or to pay those rates, taxes or other charges.
(8)To the extent that an amount of compensation offered under this section, or any part thereof, is not disputed, the amount offered is binding upon the Authority unless the Authority can demonstrate that the information contained in the offer and relied upon by the Authority in making the offer was incorrect.[36]
[36]Emphasis added.
Section 33(1) provides that before the expiration of three months after the date of service on a claimant under s 31 the claimant must ‘(a) serve a notice of acceptance on the Authority stating that the claimant accepts the amount of compensation offered in respect of the acquisition; or (b) serve a notice of claim upon the Authority’. Section 34 provides that the notice of acceptance must be in the prescribed form and identify the interest and the claimant’s entitlement to that interest. Section 34(3) provides: ‘The claimant may accept the offer in part and leave specified matters as being subject to negotiation or claim.’
The claimant may also accept the amount of compensation offered but can ‘claim ... to be entitled to a further amount of compensation’ and those amounts must be separately identified in the notice of claim served under s 33(1)(b), pursuant to s 35(1)(c). The ‘notice of claim may [also] specify any further matter which the claimant regards as being subject to negotiation’, pursuant to s 35(2).
The Authority, pursuant to s 36, must serve upon the claimant a statement in writing replying to the notice of claim and may, in that statement, pursuant to s 36(2), ‘(a) admit the claim as to whole or to part’ or ‘(b) offer to vary the amount of the compensation previously proposed...’ or ‘(c) reject the claim and repeat its offer under section 31’.
Section 41 relevantly governs the assessment of compensation:
41 General principles on which compensation is to be based
(1)Except as otherwise provided in this Part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors—
(a) the market value of the interest on the date of acquisition;
(b) any special value to the claimant on the date of acquisition;
(c) any loss attributable to severance;
(d) any loss attributable to disturbance;
(e)the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;
(f)any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.
(2)If the market value of an interest in land is assessed on the basis that the land had potential to be used for a purpose other than the purpose for which it was used on the date of acquisition, compensation must not be allowed for—
(a)any special value in respect of any pecuniary advantage that would necessarily have been forgone in realizing that potential; and
(b)any loss attributable to disturbance that would necessarily have been incurred in realizing that potential.
(3)If less than the whole of the land in which a claimant’s interest subsists is acquired or less than the whole of that interest is acquired, the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.
(4)The expenses referred to in subsection (1)(f) do not include any costs incurred by a claimant in the course of prosecuting any proceedings [in] the Tribunal or the Court under Part 10.
(5)If compensation has previously been paid in respect of the land pursuant to Part 5 of the Planning and Environment Act 1987, the amount of compensation payable under this Part in respect of an acquired interest in land or in respect of land in which an acquired interest subsists must be reduced by the prescribed amount.
(6)If the claimant’s interest in the acquired land was liable to expire or to be determined, the assessment of compensation payable under this Part in respect of that interest must take account of any reasonable prospect of renewal or continuation of the interest.[37]
[37]Emphasis added.
What amounts to ‘disturbance loss’ is defined by s 40 as follows:
loss attributable to disturbance means any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of—
(a)the service upon the claimant of a notice of intention to acquire, where the Authority has refused or failed to give consent to the carrying out of improvements to the land in respect of which that notice has been served or the effecting or obtaining of any sales, transactions, licences or approvals in respect of that land; and
(b)the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part;[38]
[38]Emphasis added.
Section 5A(3) of the Valuation of Land Act1960 (‘the VL Act’) requires that the interest in land of an individual claimant is to be valued in accordance with the highest and best use of that interest:
5A Determining value of land
(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.
(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.
(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account—
(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;
(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;
(c) the shape size topography soil quality situation and aspect of the land;
(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;
(e) the extent condition and suitability of any improvements on the land; and
(f) the actual and potential capacity of the land to yield a monetary return.
The judge’s reasons
The judge noted that a number of issues had been resolved. Joinery did not continue to assert that it was entitled to compensation.[39] The parties had, in substance, agreed the amounts of compensation in issue for both relocation costs and the market value of the Land. At the direction of the Court, a conference of valuers was held on 19 June 2018, following an exchange of valuation reports. The valuers prepared a joint statement setting out areas of agreement and disagreement. The judge referred (at [149] of the Reasons)[40] to the principal area of agreement between the valuers as being the market value of the Land based on its highest and best use, namely, the underlying residential development value that was agreed at $12.2 million. An issue on the appeal is the extent to which this agreed valuation applied if Hardware also recovered compensation for its relocation costs.[41]
[39]Reasons [146].
[40]We have set out the paragraph numbers of the Reasons that are specifically referred to in the grounds of appeal.
[41]Ground 4. See [122] below.
Provans did not dispute the amount of recoverable relocation costs as at least $2.871 million.[42]
[42]Reasons [150].
It was not in dispute that there was no lease or other written agreement between Timber and Hardware. On this basis, the judge found (at [151]) that Hardware’s interest in the Land was as a tenant at will. She said:
It is not disputed that there was no formal lease between Timber and Hardware, and it was not asserted that there was any other form of agreement governing Hardware’s occupancy of the Land relating to anything other than the payment of annual rent and outgoings by Hardware. It is tolerably clear, therefore, that Hardware occupied the Land as a tenant at will and I so find.
This is a critical finding by the judge and there is no challenge to it.
Causation
A primary issue in dispute was whether Hardware’s relocation costs were a natural, direct and reasonable consequence of the divestment of its interest in the Land as a tenant at will and amounted to ‘disturbance loss’ within the meaning of s 40(b).[43] The judge accepted, on the basis of Secretary, Department of Economic Development, Jobs, Transport & Resources v ManorLakes (Werribee) Pty Ltd,[44] that the phrase ‘natural, direct and reasonable consequence’ requires a very close and limited causal connection within the context of the Act and that it would not be sufficient for the compulsory acquisition to have been no more than the genesis, or a necessary condition, for the incurring of the relocation costs. She observed that there was no dispute that Hardware’s interest in the Land had a value of ‘nil’. She said (at [225]):
Hardware’s interest in the Land was a tenancy terminable at will. This interest was so attenuated as to not have any market value: the value of Hardware’s leasehold interest was given by the Authority’s valuer as ‘nil’ and Hardware did not dispute this valuation. Hardware had no ongoing legal entitlement to occupy the Land — it did so only with the consent of Timber, which was and would be freely given for so long as their interests were aligned. On one view, the real detriment to Hardware was caused by the Authority taking away Timber’s interest in the Land, resulting in the constructive withdrawal of consent to Hardware’s occupation of the Land.[45]
[43]See [83] above. The issues are considered here in the order in which they are raised in the grounds of appeal.
[44][2017] VSCA 114, [76] (Warren CJ, Osborn and Ferguson JJA) (‘Manor Lakes’). See also Melbourne City Link Authority v Teford Pty Ltd [2001] VSCA 54, [24], [28] (Batt JA, Tadgell JA agreeing at [1], Chernov JA agreeing at [31]); Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280, 302–3(Batt J).
[45]Emphasis added.
The judge noted that the need for Hardware to relocate occurred immediately upon the divestment of Hardware’s interest in the Land. She considered Roads and Maritime Services v United Petroleum Pty Ltd[46] where the New South Wales Court of Appeal held that loss of future income from a business carried on under a lease terminable on one month’s notice was not a loss attributable to disturbance because it was not reasonably incurred as a direct and natural consequence of the acquisition; rather, it was incurred by reason of the attenuated tenure held by the lessee. The judge distinguished UnitedPetroleum on the basis that loss of profits is a different form of loss from relocation costs; by contrast with the unsuccessful claimant in United Petroleum, Hardware’s claim ‘was not a claim for losses arising after its leasehold interest would have expired’.[47] The judge said:
the need to relocate arose immediately upon the divestment of Hardware’s interest in the Land, that is, upon the service of the Notice of Acquisition. Although Hardware was given some time to vacate the Land, it was required to take steps to do so straight away. As a result, Hardware’s claim for relocation costs was not a claim for losses arising after its leasehold interest would have expired. Hardware had an interest in the Land when it was required to relocate. Unlike in United Petroleum, compensation paid to Hardware for relocation costs is for disturbance of Hardware’s interest in the Land, not for disturbance of the continued operation of the business unsupported by an interest in the Land. Nor could it be fairly said that the relocation costs were a function of Hardware’s decision ‘to conduct a business intended to operate in the long term under a lease which could be terminated at any time on very short notice’. It was not the limited term of the Lease that generated the need to incur relocation costs but the acquisition of the Land.[48]
[46](2019) 99 NSWLR 279; [2019] NSWCA 41 (‘United Petroleum’). United Petroleum is discussed further below at [138]–[153].
[47]Reasons [235] (emphasis added).
[48]Reasons [235] (emphasis added) (citations omitted)
The judge observed that s 41(6) of the Act[49] required that, relevantly, the assessment of compensation of interests that are ‘liable to expire’ or ‘be determined’, quintessentially leasehold interests, must take account of ‘any reasonable prospect of renewal or continuation of that interest’. She noted[50] that s 41(6) was introduced into the Act in response to the High Court’s decision in Minister v New South Wales Aerated Water & Confectionary Co Ltd[51] that held that where there was a current leasehold interest on compulsorily acquired land it was not permissible to consider the probability of renewal of the lease based on the personal relations of the lessor and lessee to one another.
[49]See [82] above.
[50]Reasons [236].
[51](1916) 22 CLR 56; [1916] HCA 48 (‘Aerated Water’).
Although the judge was doubtful of how long Hardware would have been permitted by Timber to operate its business on the Land, because of the uplift in value of the Land due to its rezoning, she found that Hardware would have continued its operation there after the date of acquisition. She said (at [242]):
I accept the claimants’ submission that s 41(6) requires the interest of the claimant to be considered in its context, that is, the context in which it actually exists as an interest in land. Whether there is a ‘reasonable prospect’ of the continuation of the interest depends both on the nature of the interest and on the surrounding circumstances. In this case, Hardware’s occupancy depended on a number of factors: Timber’s good will; Timber retaining its interest in the Land as landlord; and, in the future, Timber foregoing the opportunity to realise the potential of the Land. That does not, however, require Hardware’s tenancy to be viewed through the eyes of the hypothetical purchaser of the Land. That is the paradigm for the assessment of the market value of the Land; it is not the paradigm within which losses attributable to disturbance must be assessed. The evidence was that, absent the compulsory acquisition of the Land, Timber would have permitted Hardware to continue to operate the business on the Land beyond the date of acquisition. While I have some doubts about how long this would have persisted given the significant uplift in land value resulting from its rezoning, I am satisfied that it would have continued beyond the acquisition date. That is enough for the compulsory acquisition of Hardware’s leasehold interest in the Land to be the ‘natural, direct and reasonable’ cause of Hardware’s need to relocate the business and thereby incur relocation costs. The imperative to relocate occurred during the term of Hardware’s leasehold interest in the Land or during its very likely continuation absent the compulsory acquisition, namely, upon or very shortly after the service of the Notice of Acquisition.[52]
No partial acceptance
In support of Ground 2(a), the Authority submits that the initial offer consisted of ‘intertwined’ or inter-dependent offers in that, relevantly, the offer for relocation costs was conditional on the acceptance of the offer in respect of market value. It put its argument on two bases — primarily, that there was a single offer to the claimants jointly or, in the alternative, that there were three separate offers but that they were inter-related or intertwined offers. It also submits that the ambiguity, or, more precisely, the lack of unambiguity, that the judge recognised[187] ought to have been resolved against a finding of binding consequences. The ambiguity also permits reference to the surrounding circumstances which, it submits, objectively construed, reveal the intertwined nature of the offer and demonstrate that there was no meeting of minds.
[187]See [101] above.
The Authority submits that the mere reference in the table in the initial offer[188] to the different claimants in respect of different forms of compensation cannot be sufficient in itself to indicate that the offer was capable of acceptance by Hardware alone. It emphasised that it is only the table that differentiates between the claimants. It submits that there were numerous indicia that the initial offer was made to all three claimants or, at least, that in that respect it was ambiguous. It points to the reference to all three claimants as addressees and the reference in the first paragraph to the Notice of Acquisition having been made ‘for all three companies’ interests’. It records that the Authority had obtained independent advice ‘as to the value of all three companies’ interests in the property’. The offer is for a single amount of compensation, a ‘total sum of $8,706,000’, that is expressed as directed to the claimants in the plural as ‘compensation for the compulsory acquisition of the companies’ interests in the property’.[189] The presence of a single figure of compensation, indicates, the Authority argues, that the initial offer was not capable of disaggregation, or acceptance by one claimant and not the others.
[188]See [50] above.
[189]Emphasis added.
The Authority also points to the conditions of the initial offer,[190] in particular, the description of the sum of compensation being offered ‘for the compulsory acquisition of the companies’ interests in the whole of the property and for all loss and damage’.[191] It submits that this reveals that the initial offer was to be accepted, if at all, in its entirety. It recognises that the Act allows for partial acceptance but submits that this can only be so where partial acceptance is consistent with the offer made; neither s 31(4)(c) nor Form 10[192] can override the terms of an offer that is inconsistent with partial acceptance. It points also to item 8 of the conditions that requires, upon acceptance of the initial offer, a release and indemnity from ‘the companies’ in the plural.
[190]See [51] above.
[191]Emphasis added.
[192]See [53] above.
The response to the initial offer from the claimants (Form 11)[193] also reveals the inseparability of the offers made, submits the Authority, particularly the description of all three claimants as having signed the response.
[193]See [54] above.
The Authority submits that the judge recognised that the construction of the initial offer could be informed by matters beyond its four corners.[194] She was also aware that the Authority’s approach reflected the core proposition and that had been communicated to the claimants. However, the judge discounted those communications by observing that Provans never accepted that approach.[195] The Authority submits that the judge asked the wrong question; she ought to have regarded the dispute between the Authority and the claimants with respect to the core proposition as evidence that there was never a meeting of minds — that the parties never reached an agreement that could have binding consequences.
[194]Reasons [178]. See [101] above.
[195]Reasons [182]. See [103] above.
Hardware and Joinery submit that the initial offer, properly construed, comprised a number of separate and distinct offers capable individually of being accepted or rejected. They accept that there were aspects of the initial offer that are inconsistent with the statutory scheme; for example, the statement in condition 1 that the offer is made ‘in full and final settlement of all claims that the companies may have’, if read literally, is inconsistent with s 35(1)(c)[196] that allows for a claimant to accept the amount of compensation offered under s 31 but nevertheless claim to be entitled to a further amount of compensation. So too, Hardware and Timber submit that the release and indemnity proposed in item 8 of the conditions is inconsistent with the statutory scheme. They urge that the initial offer ought be read down, or those conditions severed. They further submit that, despite the deficiencies of the initial offer, every effort should be made to construe the initial offer as a valid offer made under s 31 of the Act, as it is expressed to be,[197] because of the importance of giving effect to the statutory scheme when an owner is dispossessed of its interest in land. This Court ought reject any submission that the initial offer was not an offer made under the Act or was so vague or ambiguous as not to be binding in any event.
[196]See [80] above.
[197]See [50] above.
Hardware and Timber emphasise the manner in which the Act allows for partial acceptance of an offer. The statutory requirement under s 31 mandates that an offer set out a fair and reasonable estimate of the compensation payable to each claimant in respect of that claimant’s interest by reference to which the offer is made. Each offer must be accompanied by various documents, including a copy of the certificate of valuation of the respective interest. Here, the initial offer was accompanied by three separate certificates of valuation, one in respect of each of the three claimants. An offer must also be accompanied by a statement in the prescribed form under the regulations (Form 10) setting out a claimant’s principal rights and obligations. As noted, Form 10 expressly provides that a claimant can accept an offer in full or in part.[198] The Act also acknowledges, under s 31(8), that where ‘an’ amount of compensation that is part of an offer is not disputed, the amount offered becomes binding on the Authority. Here, for example, the initial offer included as a component part an allowance for solatium of $100,000. If that amount had been undisputed, that component part of the offer would have been binding. This would allow for other component parts of the offer to become a disputed claim under s 33(2). Only disputed claims are referable, under s 80 of the Act, to the Victorian Civil and Administrative Tribunal or the Supreme Court for determination. The capacity of a claimant to accept an offer in part only is reinforced by s 34(3),[199] s 35(2)[200] and s 36(2).[201]
[198]See [53] above.
[199]See [79] above.
[200]See [80] above.
[201]See [81] above.
In support of the construction of the initial offer as containing individual offers to each of the three claimants, and not treating the claimants ‘as one’, Hardware and Timber also point to the fact that the table is comprised of items and the appropriate claimant is identified in respect of each item that relates to it, for example, market value is only relevant to Timber (given that the certificates of valuation for each of Hardware and Joinery’s interests were ‘nil’) and so only Timber’s name appears opposite the offer for market value in the table. Similarly, with respect to the conditions imposed, item 10 of the conditions, relating to costs incurred in purchasing a replacement property, is only relevant to Timber and so only Timber is referred to in that item.[202]
[202]See n 16 above.
In our view, the judge was correct to observe that the initial offer was not free of ambiguity and contained a variety of ‘signposts’ supporting alternative and inconsistent constructions of what it meant.[203] We also agree that the judge was correct to construe the initial offer as comprising offers in writing to each of the three claimants. Although the initial offer referred to a ‘total sum’ of $8,706,000, the table served to differentiate the particular offers made to each claimant. The initial offer was thus not a singular ‘global’ offer that treated the three claimants ‘as one’. It was not an offer of a total sum addressed to all three claimants without distinguishing between them. That type of offer is available under s 32 but that did not occur here.[204] The initial offer distinguished between the three claimants and precisely addressed the particular type of loss that each claimant would suffer, respectively. It thereby satisfied the requirements of s 31(1) because it was an offer in writing to each claimant of whose entitlement to compensation the Authority was aware.
[203]Reasons [179]. See [101] above.
[204]See [201] below.
Nevertheless, again with great respect, we do not agree with the judge that the offers made to the claimants were separate and independent of each other. In our view, the initial offer made it sufficiently clear that the Authority was offering a ‘package’ of proposals with multiple components. The components were inter-dependent — each component was tied to the other components. The initial offer was thus an intertwined offer — the acceptance by one claimant was dependent upon acceptance by the other claimants. More particularly, the acceptance of the offer made to Hardware for relocation costs was contingent upon the acceptance of the offer made to Timber for market value based on an ‘in use’ assessment (as reflected in Timber’s certification of valuation).
The inter-dependent nature of the offers made to the claimants is apparent first from the reference to all three claimants as the addressees and, secondly, to the existence of joint expenses, for example, legal expenses (where all three claimants are identified as the recipients), submission expenses (where Timber and Hardware are both identified) and valuation fees (where Timber and Hardware are both identified). In respect of those joint expenses, it was not possible for one of the three claimants to accept and the others to refuse. There was no indication of how the compensation for those expenses might be apportioned. Those expenses were not further differentiated as having been incurred by one claimant and not another. The claimants could jointly ask for more compensation but there would be no basis for one claimant to suggest that its ‘share’ did not adequately cover the costs it had incurred.
Thirdly, the presence of a total sum, although, as mentioned, not creating a ‘global’ offer, does serve to link the offers and indicates that the Authority has assessed the aggregate compensation payable to the three claimants, for their respective interests considered individually, as not rising above that sum.
Fourthly, condition 1 emphasises that the sum being offered is for ‘the whole of the property and for all loss or damage which may be sustained as a natural and direct consequence of the acquisition’ which suggests that the initial offer is being made to acquire all of the separate interests in the Land.
Fifthly, the certificate of valuation for Timber’s interest, as registered proprietor, is expressly based on its ‘in use’ value ‘as a timber yard and like business’ thereby linking the value of Timber’s interest, in respect of which compensation for market value is offered, with the business conducted by Hardware, in respect of which compensation for disturbance loss is offered.
While there are various indicia in the Act and in the prescribed forms supporting the availability of partial acceptance of an offer as an aspect of the statutory scheme, the application of those provisions must be informed by the nature of the particular offer and the terms in which it is drawn. The Act is directed at ensuring that, when an offer is made, there can be scope for further negotiation. The iterative nature of the process of an initial offer, the service of a notice of claim, and the Authority’s reply to a claim all support the gradual narrowing of issues in dispute with the result that, over time, amounts offered will become ‘not disputed’ and ultimately binding. Where, as here, the initial offer is drafted as an inter-dependent or intertwined offer, the capacity for partial acceptance must be limited; it cannot mean that one component of the ‘package’ can be singled out for acceptance without reference to the other components upon which its acceptance was premised. That would mean that partial acceptance had the effect of fundamentally changing the substance of what remained of the offer. Instead, consistently with the iterative process, a partial acceptance which maintained the inter-dependence of the offers would leave scope for negotiation on, say, the market value based on an ‘in use’ assessment. Such a response would have been consistent with the underlying premise of the initial offer and been part of a coherent exchange. If the Authority rejected the claim for further compensation all the offers would fall.
In any event, although in our view the initial offer was a statutory offer under s 31, there was no acceptance of that offer by the claimants. To respond in the manner the claimants did, by rejecting the inter-dependence and purporting to accept a component of the initial offer, for relocation expenses, as though it bore no relationship to the other components of the offer, particularly market value, was, in our view, not consistent with the manner in which the initial offer was framed. It underscored the fact that there was no meeting of minds between the Authority and the claimants and no agreement between them.
This conclusion is reinforced by matters beyond the text of the initial offer. Insofar as the ambiguity inherent in the initial offer permits reference to the surrounding circumstances,[205] we consider that its construction must be informed by the Authority’s core proposition as reflecting the approach it adopted. The core proposition underscores the inter-dependence of the offer to Hardware in respect of relocation expenses and the basis for the assessment of compensation for the market value of Timber’s interest.[206] It is sufficient that the core proposition was communicated by the Authority to the claimants repeatedly. The claimants were well aware at the time of the initial offer of the position adopted by the Authority. The initial offer represented a statement of the Authority’s position. It was to be expected that it would reflect the core proposition. In our view, the fact that the claimants never agreed with the core proposition is irrelevant. They were at liberty to express their disagreement with the Authority’s approach (and did so). However, their refusal to accept the core proposition cannot affect what the initial offer was objectively understood to convey.
[205]See, eg, Adaz Nominees Pty Ltd v Castleway Pty ltd [2020] VSCA 201 [70], [254]; Apple & Pear Australia Ltd v Pink Lady America LLC [2016] VSCA 280; Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd (2015) 256 CLR 104; [2015] HCA 37.
[206]See [16] above.
For these reasons, we would uphold Ground 2(a).
Incorrect information
In support of Ground 2(b), the Authority submits that the judge should have accepted that what she described, at [202],[207] as a ‘flawed conceptual basis’ for the Authority’s understanding of Timber’s entitlement to compensation, namely, that it could make an offer based on the ‘in use’ value of the Land rather than its highest and best use, should have been understood as incorrect information. It relies on observations made in Longo v Roads Corporation[208] to the effect that ‘information’ in s 31(8) should not be read restrictively; that a ‘mistaken understanding of planning evidence’ and an ‘error in a valuation report’ are sufficient to establish ‘incorrect information’; that it is sufficient that incorrect information is ‘embedded’ in the offer rather than expressly recited; and that whether incorrect information has been relied upon by the Authority is a question of fact.
[207]See [108] above.
[208][2013] VSC 636 (Emerton J).
The Authority points to the evidence of McQuilton that the Authority misunderstood the nature of Hardware’s interest in the Land and would not have offered compensation for Hardware’s relocation costs had it appreciated that Hardware only had the limited interest of a monthly tenancy at will.[209] It submits that, despite knowing that there was no formal lease between Timber and Hardware,[210] the Authority incorrectly considered that s 41(6) would have the effect that Hardware enjoyed a substantial leasehold interest which might qualify the registered proprietor’s interest and facilitate compensation being paid to Timber for market value assessed on an ‘in use’ basis. In this it was mistaken.
[209]See [104] above.
[210]Reasons [198]. See [106] above.
Hardware and Timber emphasise that for s 31(8) to apply it must be the ‘information contained in the offer’ that is incorrect. It is not sufficient that there is an assumption upon which an offer is based that is mistaken. Here, what was contained in the offer reflected the legal advice the Authority had received[211] and it was deliberate in the manner in which it treated each of the claimants.
[211]See [46] above.
We agree. There is nothing identifiable within the initial offer that amounts to incorrect information. While the initial offer may have other flaws, as described above, containing incorrect information is not one of them. The Authority was unable to demonstrate, as it was obliged to do in order to succeed in relying on s 31(8), that the initial offer contained information that was not correct.
We reject Ground 2(b).
Should the subsidiary proceeding have been dismissed against Joinery? — Ground 3
Ground 3 is a stand-alone ground that does not depend on Grounds 1 or 2. It rests on the concession made by Joinery during the proceeding before the primary judge that it did not have an entitlement to compensation.[212] In those circumstances, the Authority submits the judge ought not have dismissed the subsidiary proceeding in respect to Joinery. The Authority had sought a declaration that Joinery was not entitled to any compensation. Given Joinery’s concession, the Authority submits that it ought to have succeeded in obtaining such a declaration and this would have had implications for costs. The question was live in the proceeding because the judge treated the initial offer as binding and it was directed at Joinery as well as the other claimants. This was reflected in the table in the initial offer to which the judge afforded significant weight on the question of construction.
[212]Reasons [146].
However, in our view, if the declaration sought had been granted, it is unlikely this would have had any, or any significant, implications for the costs orders (including the order for indemnity costs) the judge made in the subsidiary proceeding. The Authority was not ordered to pay Joinery’s costs.[213] The judge might have ordered Joinery to pay the Authority’s costs of the subsidiary proceeding insofar as they related to Joinery. These may have been slight and/or difficult to distinguish from the costs incurred by the Authority in respect of Hardware. Moreover, the basis of the order for indemnity costs in favour of Hardware was that the issues in the subsidiary proceeding were inextricably intertwined with those in the proceeding brought by Timber against the Authority and, had the Authority not unreasonably refused a Calderbank offer[214] made by Timber, the subsidiary proceeding would have been unnecessary.[215] This reasoning would have applied even if the judge had made a declaration that Joinery had no entitlement to compensation.
[213]Provans Timber Pty Ltd v Secretary, Dept of Transport (Costs Judgment) [2019] VSC 537, [27]–[28] (‘Costs reasons’).
[214]Calderbank v Calderbank [1975] 3 All ER 333.
[215]Costs reasons [29].
Nevertheless, we consider that, in the circumstances, the judge ought to have granted a declaration that Joinery was not entitled to any compensation. However, as explained below, we also consider that the judge ought to have made a declaration that Hardware was not entitled to compensation under the Act. The orders made by the judge in the subsidiary proceeding ought be set aside.[216]
[216]See [209] below.
To this extent, we would uphold Ground 3.
Was the market value agreed if Hardware received relocation costs? — Ground 4
Ground 4 impugns any reliance on s 41(6) to confer on Hardware an occupancy right of greater duration than a monthly tenancy terminable at will. It calls into question whether the market value of Timber’s interest was agreed at $12.2 million if Hardware was treated as having a substantial interest by the operation of s 41(6).
As described above, ultimately the Authority submits, and we agree, that a close analysis of the reasoning of the judge reveals that she did not rely on s 41(6) to expand Hardware’s interest. That conclusion removes the premise of Ground 4 and renders it unnecessary to determine this ground. However, we draw attention to the observations we made about s 41(6) above.[217]
[217]See [160] above.
Did the judge order double recovery? — Ground 5
Ground 5 alleges that the judge misapplied s 41(2)[218] of the Act and permitted the claimants to recover in respect of claims that were inconsistent with each other. The claimants therefore recovered twice. It was accepted by the parties that the error identified in Ground 5 is not a vitiating error unless the Authority also succeeded on Ground 2 and showed that the initial offer did not give rise to a binding agreement. The Authority has been successful on Ground 2(a). Ground 5 is in effect an alternative to Ground 1. It is therefore unnecessary for Ground 5 to be decided given that the Authority has succeeded on Ground 1. Nevertheless, it may be useful to make some brief observations.
[218]See [82] above.
The critical question depends on whether the judge was correct to consider that the prohibition in s 41(2)(b) applies only in respect of a single claimant who is entitled to compensation for market value and seeks also to obtain disturbance loss. In Peter Croke Holdings Pty Ltd v Roads and Traffic Authority (NSW)[219] Bignold J held that the analogous provision to s 41(2) in the Just Terms Act (s 61) operates to bar inconsistent claims whether they are made by a single interest holder or by different interest holders. Section 61 provides:
If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:
(a)any financial advantage that would necessarily have been foregone in realising that potential, and
(b) any financial loss that would necessarily have been incurred in realising that potential.
[219](1998) 101 LGERA 30 (‘Peter Croke’). See more generally Horn v Sunderland Corporation [1941] 2 KB 26, 35 (Sir Wilfrid Greene MR); Commonwealth v Milledge (1953) 90 CLR 157, 164; [1953] HCA 6.
In Peter Croke, the first applicant was the registered proprietor of the compulsorily acquired land that was used by the second applicant, as the lessee and occupier of the land, for a mobile home display and sale business. The first applicant held the majority of shares in the second applicant. Bignold J held that the claimants could not make inconsistent claims based on market value of the land acquired as well as disturbance loss by way of relocation costs and loss of profits. He said:
The question now arises as to how s 61 is to be applied in the present case, where the court is required to determine two separate claims for compensation — one by the first applicant as the owner of the acquired land at the date of acquisition and the other by the second applicant, as the lessee or tenant of the acquired land at that date.
In my judgment, if the first applicant’s claim to compensation … founded on the entitlement to the ‘market value’ of the land … were to lead to an assessment of compensation on the basis of a higher and more valuable use of the acquired land than on the basis of its existing use (being the use made by the second applicant, as lessee or tenant, in the conduct of its business), and that assessment on the basis of the higher use was predicated upon the termination of the second applicant’s tenancy of the land and the cessation of conducting its business thereon, the second applicant would not be entitled to compensation in respect of ‘loss attributable to disturbance’ because (i) the financial advantage of continuing in occupation and in the conduct of the business would necessarily have been foregone in realising that (higher) potential and (ii) the financial loss to the second applicant of ceasing to conduct the business, or of having to relocate the business, would necessarily have been incurred in realising that (higher) potential.
...
This conclusion does not deny that each claimant, having an interest in the acquired land, is entitled to have his or her claim for compensation separately determined. Rather, it gives proper recognition to the apparent effect of s 61 of the Just Terms Act namely to deny recovery of compensation for disturbance loss where a claim to such compensation is inconsistent with another claim to compensation based upon the market value of the land, where that value is assessed on the basis of a potential higher use of the land than the existing use and where the realisation of that potential necessarily terminates (or postulates the termination of) that existing use. In my opinion, s 61 so operates, whether the inconsistent claims are made by a single ‘interest’ holder ... or, as in the present case, by different interest holders, one being the owner and the other being the lessee.[220]
[220]Peter Croke (1998) 101 LGERA 30, 43–4.
The Authority commends the reasoning of Bignold J to this Court while recognising that s 61 is different from s 41(2). Moreover, it submits that even if here the judge was correct to construe the prohibition in s 41(2) strictly so as to apply only in respect of a single interest-holder, nevertheless, the objective of s 41(2) to prohibit inconsistent claims, should be kept in mind in the construction of the other provisions, including ss 31(8), 41(1)(d) and 40.
Timber and Hardware emphasise again that the Just Terms Act is a different piece of legislation from the Act, drafted in different terms, and that statutory construction begins and ends with the text.[221] They submit that s 41(2)(b) should be construed in the manner adopted by the judge so as to treat individual claims separately. A claimant ought not be financially penalised in its assessment of compensation because of the need to take account of other claimants’ interests.
[221]Alcan (2009) 239 CLR 27, 46–7 [47]; [2009] HCA 41.
They submit that this approach reflects the position before the enactment of the Act; for example, as Barwick CJ said in Rosenbaum v Minister for Public Works, ‘each person having any estate or interest in the land, including a ... tenant, has a separate and independent claim to compensation for the value of the interest which is taken from him by the acquisition of the land’.[222]
[222](1965) 114 CLR 424, 425; [1965] HCA 65 (‘Rosenbaum’). See also SJR Investments Co Pty Ltd v Housing Commission of Victoria [1971] VR 211, 214 (Lush J).
Hardware and Joinery further submit that the construction of s 41(2)(b) must align with the construction of s 41(2)(a). Section 41(2)(a) precludes the recovery of compensation for the ‘special value’ of land, in respect of pecuniary advantage, where market value is assessed on the basis of potential use. Hardware and Joinery submit that ‘special value’ will be specific to a particular claimant who must be the same claimant as the recipient of compensation for the market value of the land based on potential use. To construe s 41(2)(b) as applicable where there are multiple claimants would be at odds with the manner in which s 41(2)(a) is construed. They also submit that to adopt the Authority’s construction would be contrary to the policy of the Act which, as expressed in s 30, is concerned with the consequence of divestment of every person’s interest in land. Finally, they contend that the approach in Peter Croke ought not be adopted and note that it was considered by Biscoe J to be wrongly decided in the subsequent case of Attard v Transport for New South Wales[223] on the ground that no inconsistency arises where ‘a tenant claims relocation costs without the market value of its interest in the land being assessed on the higher potential use’.[224]
[223][2014] NSWLEC 44 (‘Attard’).
[224]Attard [2014] NSWLEC 44, [158]. See also [159]–[160].
For our part we find it difficult to see why the legislature’s concern to prohibit inconsistent claims should not extend to circumstances where those claims are made by distinct interest holders. There appears to us to be a fundamental contradiction between the assessment of compensation of market value based on potential use where the realisation of that potential necessarily terminates the existing use and yet compensation also being provided for the termination of that existing use.
It is also not apparent why the fact that s 41(2)(a) may be confined to cases where there is a single claimant should warrant reading down the plain words of s 41(2)(b) which are expressed in general terms, in the passive voice, and without any express or necessarily implied reference to any claimant or claimants.
The view expressed in Peter Croke is reinforced by the potential application of s 41(2) to offers made under s 32 of the Act, which provides for a global or aggregate offer to be made by way of a ‘total amount of compensation that the Authority proposes to pay in respect of the value of all interests in the acquired land’.[225] If s 41(2) applies to offers made under s 32 then it must have been intended to apply in circumstances where there are multiple different interest-holders. An offer can only be made under s 32 when the relevant Minister certifies that it is not appropriate to set out in an offer under s 31 the information referred to in s 31(3). It was not relied upon here but the possibility of its application may inform the construction of s 41(2).
[225]Emphasis added.
In any event, as mentioned, it is unnecessary to decide Ground 5.
Conclusion
The Authority denied that any advances it made were paid to Hardware. It claimed that it had paid all of the advances to Timber and so paid the agreed market value of $12.2 million in full.[226]
[226]See [74] above.
We have concluded that Hardware was not entitled to its relocation costs. We accept that all of the advances made by the Authority were advances to Timber in respect of the market value of the Land, assessed on the basis of its highest and best use, together with legal expenses, solatium, and so on. In other words, the advances that have been made by the Authority discharged its obligation to Timber under the Act. There is no payment to Timber that is outstanding. There is no obligation on the Authority to pay Hardware any compensation.
Orders will be made to give effect to this conclusion.
Leave to appeal will be granted and the appeal allowed. We would uphold Grounds 1(a), 2(a), and 3. We reject Ground 2(b). It is unnecessary to decide Grounds 1(b), 4, and 5.
On 14 August 2019 the judge ordered that there be an award of compensation for Timber in the sum of $12.49 million (paragraph 1).[227] This order remains undisturbed.
[227]See [121] above.
Paragraphs 2 to 4 of the orders of 14 August 2019 should be set aside. Paragraph 2 indicated that there was $2.871 million payable on the balance of the compensation payable pursuant to paragraph 1. Paragraph 3 directed that the Authority pay Timber the sum of $1,517,136.41 within 14 days, being interest payable on the balance of $2.871 million outstanding. Paragraph 4 directed the Authority to pay Timber’s costs (including indemnity costs from 8 April 2017). In their place there will be a declaration that the award of compensation referred to in paragraph 1 has been paid and no amount remains outstanding.
With respect to the subsidiary proceeding, paragraphs 1 and 2 of the orders made on 14 August 2019 ought be set aside. These orders were to the effect that the subsidiary proceeding be dismissed (paragraph 1) and that the Authority pay Hardware’s costs, calculated on an indemnity basis (paragraph 2). In their place there will be declarations that neither Hardware nor Joinery is entitled to an award of compensation under the Act.
The parties will be given an opportunity to be heard on the costs of the appeal and the costs of the two proceedings below.
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SCHEDULE OF PARTIES
| SECRETARY TO THE DEPARTMENT OF TRANSPORT | Applicant |
| and | |
| PROVAN’S TIMBER PTY LTD (ACN 004 654 746) | First respondent |
| PROVANS TIMBER AND HARDWARE PTY LTD (ACN 005 257 705) | Second respondent |
| PROVAN’S TIMBER (JOINERY) PTY LTD (ACN 004 419 667) | Third respondent |
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