Secretary to the Dept of Economic Development Jobs, Transport and Resources v CRG Nominees Pty Ltd
[2016] VSC 301
•1 June 2016
| IN THE SUPREME COURT OF VICTORIA | Not Restricted |
AT MELBOURNE
COMMON LAW DIVISION
VALUATION, COMPENSATION & PLANNING LIST
S CI 2015 02664
IN THE MATTER of the Land Acquisition and Compensation Act 1986
and
IN THE MATTER of the Victorian Civil and Administrative Tribunal Act 1998
BETWEEN
| SECRETARY TO THE DEPARTMENT OF ECONOMIC DEVELOPMENT, JOBS, TRANSPORT AND RESOURCES | Applicant |
| v | |
| CRG NOMINEES PTY LTD | Respondent |
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JUDGE: | EMERTON J |
WHERE HELD: | Melbourne |
DATE OF HEARING: | 24 & 25 November 2015 |
DATE OF JUDGMENT: | 1 June 2016 |
CASE MAY BE CITED AS: | Secretary to the Dept of Economic Development Jobs, Transport and Resources v CRG Nominees Pty Ltd |
MEDIUM NEUTRAL CITATION: | [2016] VSC 301 |
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VALUATION AND COMPENSATION LAW — Application for leave to appeal heard with appeal from Victorian Civil and Administrative Tribunal — Appeal on questions of law — Claim for market value ‘and severance’ — Whether claim was in substance a claim for injurious affection — Whether failure to have regard to relevant considerations — ‘Before and after’ methodology — Whether Tribunal bound to take into account matters arising after the date of acquisition — Whether findings open — Solatium — Leave to appeal granted and appeal dismissed — Land Acquisition and Compensation Act 1986, ss 40, 41 and 44; Victorian Civil and Administrative Tribunal Act 1998, s 148.
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APPEARANCES: | Counsel | Solicitors |
| For the Applicant | Mr Stuart Morris QC with Mr Peter O’Farrell | Herbert Smith Freehills |
| For the Respondent | Mr Jim Delaney QC with Mr Paul Chiappi | Maddocks |
TABLE OF CONTENTS
Introduction......................................................................................................................................... 1
Background......................................................................................................................................... 2
The AECOM plan.......................................................................................................................... 5
Grounds of appeal............................................................................................................................. 7
Statutory framework.......................................................................................................................... 8
Tribunal’s Reasons.......................................................................................................................... 10
Grounds 1 to 4................................................................................................................................... 14
Authority’s submissions............................................................................................................ 15
Analysis........................................................................................................................................ 17
The new ground............................................................................................................................... 30
Ground 5............................................................................................................................................ 31
Conclusion......................................................................................................................................... 35
HER HONOUR:
Introduction
The respondent (‘CRG’) had an interest in land at Wyndham Vale which was proposed to be developed as a residential estate.
On 3 April 2012, the applicant (‘Authority’) compulsorily acquired a small part of the land in which CRG had an interest for the purposes of the Regional Rail Link 2 project (‘RRL project’). The RRL project consists of dedicated rail tracks for regional passenger trains between Southern Cross and West Werribee via Deer Park, Tarneit and Wyndham Vale.
On 29 April 2015, the Victorian Civil and Administrative Tribunal ordered the Authority to pay CRG compensation in respect of the acquisition under the Land Acquisition and Compensation Act 1986 (‘LAC Act’). Compensation was ordered under the following headings in the following amounts:[1]
[1]The Tribunal also ordered interest to be paid on any unpaid amounts in accordance with the statutory requirements.
Loss of market value pursuant to s 41(1)(a) of the LAC Act
$1,945,000
Award for legal and other expenses necessarily incurred pursuant to s 41(1)(f) of the LAC Act
$ 216,900
Solatium
$ 40,000
The Authority now seeks leave to appeal against the Order insofar as it concerns the award for loss of market value and solatium.
The parties agreed that if leave was granted the appeal should be heard and determined instanter.
For the reasons that follow, leave to appeal is granted but the appeal is dismissed, as none of the grounds is made out.
Background
The acquired land formed part of approximately 85.4 hectares of land situated at 16 - 40 Hobbs Road, Wyndham Vale, comprising Lots 2 and 3 on Plan of Subdivision 125673 (referred to by the Tribunal as the ‘subject land’). Lots 2 and 3 are contiguous, running generally in an easterly direction from Hobbs Road in the case of Lot 2, and from the intersection of Hobbs and Ballan Roads in the case of Lot 3.
The subject land is close to the new Wyndham Vale railway station in an area that is being extensively developed for residential purposes.
The subject land originally belonged to the Grima family.[2] Lot 3 was sold to CRG by contract dated 7 September 2007. Lot 2 was subject to a ‘put and call’ agreement also dated 7 September 2007. The sales of Lots 2 and 3 to CRG were settled on 7 September 2012. A small parcel of land was carved out of Lots 2 and 3 fronting Hobbs Road to enable Grima family members to continue living in the family home.
[2]Or entities controlled by members of the Grima family.
The area of land acquired by the Authority was approximately 2,710m², and took the form of two slivers of land on either side of the south-western corner of Lot 3. One sliver ran along Hobbs Road; the other sliver ran along Ballan Road. The acquired slivers of land were required to facilitate the excavation of the local section of the new rail track, the creation of a new bridge where the rail track passes under Ballan Road and the upgrading of the intersection of Hobbs and Ballan Roads.
The broader RRL project at Wyndham Vale involved the acquisition of a wedge shaped parcel of land to the north of the new Wyndham Vale railway station for future stabling yards for electric trains. The stabling yards land lies between Hobbs Road and the railway line extending north from Ballan Road. At its southern end, the stabling yards land is opposite the subject land.
The stabling yards land will only be developed for use as stabling yards for trains if the electrified metropolitan train service is extended to Wyndham Vale from Werribee, which is the current metropolitan limit. There is and was no timetable for any such extension.
Because the compulsory acquisition of the slivers from Lot 3 was a partial acquisition of land, in order to determine the market value of the acquired land the Tribunal carried out a ‘before and after’ analysis in accordance with s 41(3) of the LAC Act. The Tribunal arrived at the figure of $1,945,000 for market value by calculating the difference between the market value of the subject land[3] before the acquisition and the market value of the subject land after the acquisition.
[3]Less the Grima parcel. Wherever I refer to the subject land, I mean Lots 2 and 3 less the Grima parcel.
In the ‘after’ scenario the Tribunal considered, in accordance with authority and well-established practice, what a hypothetical purchaser would have been willing to pay for the subject land at the date of the compulsory acquisition of the slivers (the ‘acquisition date’).
The Tribunal received expert land valuation evidence from Mr Les Brown of m3 Property Strategies and Mr Marcus Willison of Ernst & Young. The Tribunal also received expert evidence from acoustic engineers in relation to possible noise impacts from the stabling yards on the subject land.
CRG’s noise expert (‘RTA’) produced predicted noise contours reflecting general stabling yard noise and, subsequently, also horn noise, assuming that the stabling yards were located at the southern end of the stabling yard land opposite the subject land. The expert retained by the Authority, Dr Burgemeister, produced a predicted noise contour based on the stabling facilities being located only on the northern portion of the stabling yards land.
Both valuers agreed that in the ‘after’ scenario, part of the subject land was adversely impacted due to the railway line and/or the future stabling yards. Mr Willison allowed a 15% diminution in value across 16 hectares of the subject land due to the influence of the railway line, but disregarded the influence of the stabling yards entirely as he considered them to be 20 to 30 years away. Mr Brown allowed an 18% diminution in value across two 22.48 hectare segments of the subject land due to the impact of the railway line and stabling yards.
Based on the expert valuation evidence, the Tribunal settled upon rates per hectare for a small amount of what it described as ‘encumbered land’ towards the rear of the subject land (which cannot be developed because it forms part of an environmental buffer area) and for the much larger area of ‘developable land’ comprising the remainder of the subject land.[4] It assessed the encumbered land at $15,000 per hectare and the developable land at $450,000 per hectare. These amounts were used in the ‘before’ and ‘after’ scenarios.
[4]Less the much smaller Grima parcel.
In the ‘after’ scenario, the Tribunal identified an area of ‘affected land’ in respect of which it applied a discounted rate per hectare of $369,000 (involving a reduction of 18% on the value of the ‘developable land’). The ‘affected land’ was assessed by the Tribunal at the discounted rate due to what it described as the ‘severance’ impact of the stabling facilities on the retained land.
The difference between the ‘before’ and ‘after’ values for the subject land was $1,945,000, which was the amount awarded to CRG for market value pursuant to s 41(3) of the LAC Act. Approximately $121,950 of that amount reflected the value of the slivers of acquired land; the remaining amount of approximately $1,820,880 was attributable to the 18% discount applied to the value of affected land as a result of the impact of the stabling facilities.
The Authority now complains, in substance, that CRG has received a windfall, because in assessing the impact of the stabling facilities on the remaining land, the Tribunal misapplied the law relating to the evidence that was relevant to that question. It adopted a ‘worst case’ scenario in relation to the location of the stabling facilities on the stabling yards land and did not take into account a concept plan for the stabling yards land prepared in August 2010 by consultants to the agency VicTrack known as the ‘AECOM plan’, which showed the location of the stabling facilities to be much further away from the subject land. The AECOM plan showed the stabling facilities on the northern portion of the stabling yards land with a large protective bund around the stabling area, reducing any impact on the subject land.
The AECOM plan existed, but was not publicly available, at the date of the acquisition. It only came to the Authority’s attention following the joint conference of valuers in August 2013.
The Authority complains that the Tribunal did not consider the information contained in the AECOM plan in relation to the location of the stabling facilities on the stabling yards land, or the fact that there was no known timeframe for the extension of the electric metropolitan train line from Werribee (necessitating the construction of the stabling yards), in circumstances where the development of the subject land would occur within six to ten years.
It also complains that, in assessing compensation, the Tribunal failed to consider the probability of future facts occurring (the construction of the stabling facilities on parts of the stabling yards land) and instead opted for a ‘worst case’ scenario in relation to the location of the stabling facilities on the stabling yards land.
The AECOM plan
The AECOM plan was tendered in the proceeding and referred to in the course of the Tribunal hearing.
In its opening submissions, the Authority submitted as follows:
There is some discussion of the stabling yards in the materials. Development of the future stabling yard land is a possible future project that is not part of the RRL Project. The stabling yard land may be required in the future for metro (electrified) trains if the electrified metropolitan train service is extended from Werribee (the current metropolitan limit) along the Melbourne Geelong corridor and utilising the RRL corridor through the Black Forest Road (not built) station and Wyndham Vale (built) station.
For safety reasons, turn out for metro trains into the stabling yard must be from a straight in the main RRL running tracks. The only location this can occur is on the short straight between the reverse curves to the north of Ballan Road. This geometry is a key constraint for the location of the future stabling yard. Likely operations to be conducted at the stabling yard are train parking, maintenance and washing.[5]
[5]Authority’s Opening Submissions, [26] and [27].
Dr Burgemeister, the noise expert called by the Authority, prepared his noise assessment based on the location of the stabling yards in the AECOM plan. In his report, dated 25 September 2014, he stated as follows:
The current proposed arrangement of the stabling facility is shown in conceptual plans prepared by AECOM (drawing WYN_C0101 dated 10/8/10) which was obtained from the Authority. An extract of this drawing is provided in figure 2 below and indicates that the stabling yard is likely to be several hundred metres north of the nearest properties in the proposed Hobbs Road development. This is the best indication of the ‘after’ arrangement of the stabling facility.
Having regard to the location of the stabling yards in the AECOM plan, Dr Burgemeister concluded that at the relevant distance from the dwellings, noise from general cleaning and light maintenance would generally be relatively low, and was likely to be well within the SEPP N-1 noise limit. Referring to the RTA noise contour, Dr Burgemeister said:
Nevertheless, the stabling conceptual plans prepared by AECOM indicate that stabling is likely to be considerably further to the north than assumed by RTA. … This further reinforces our assessment that noise from stabling operations is likely to easily comply with the relevant SEPP N-1 noise limits at the Hobbs Road properties and that mitigation is not required in the ultimate ‘after’ scenario where the stabling yards have been constructed and development has been undertaken.
Dr Burgemeister prepared a further report dated 5 November 2015 commenting on an RTA report addressing the impact of noise from train horns at the proposed stabling yards. Again, Dr Burgemeister noted that the AECOM plan indicated that the stabling facility was planned to be much further to the north of the site and, further, that the AECOM plan indicated a large earth bund on the eastern side of the stabling area, which was likely to provide some noise shielding for the stabling activities and horn testing.
The Authority’s valuer, Mr Willison, also referred to the AECOM plan in his expert report.[6] He included the AECOM plan in his report, with the caveat that he reserved the right to review his assessment once a more detailed specification and timing information was available in relation to the future stabling yards.
[6]Dated 4 April 2014.
In his reply report,[7] Mr Willison reviewed and commented on a letter of addendum provided by CRG’s expert valuer, Mr Brown, dated 17 October 2014. Mr Willison noted that the RTA report stated that under conditions reflected in the AECOM plan for the train stabling area, the noise impacts from horn testing would comply with the triggers that were applied by RTA.
[7]Dated 7 November 2014 .
Mr Willison was asked about the AECOM plan in cross-examination. When it was put to him that there was no reason to think that the hypothetical purchaser would have understood that the configuration of the stabling facilities would be in the layout in the AECOM plan as distinct from any other layout, he agreed that that was correct.
In closing submissions, the Authority dealt with the AECOM plan in the following terms:
The Authority acknowledges that the AECOM plans were not publicly available at the date of the acquisition, but submits that they represent a sensible and practical indication of the proposed location of the stabling yards and are the appropriate reference to measure the actual impact of the stabling yards on the claimant’s land.
Grounds of appeal
The grounds of appeal are as follows:
(1)In assessing the market value of the land under s 41(3) of the LAC Act, the Tribunal erred in law by failing to consider relevant facts that were known at the date of the decision, but not known at the date of acquisition, including the likely location of future stabling yards.
(2)In assessing the market value of the land under s 41(3) of the LAC Act, the Tribunal erred in law by failing to consider the probability of facts relevant to the assessment of the said market value.
(3)In assessing the market value of the land under s 41(3) of the LAC Act, the Tribunal erred in law by inferring a worst case outcome, rather than a probable outcome for the location of the stabling yards.
(4)In assessing the market value of the land under s 41(3) of the LAC Act, the Tribunal erred in law by approaching the matters as if loss was caused by severance (s 41(1)(c)), rather than by reason of the implementation of the purpose for which the land was acquired (s 41(1)(e)).
(5)In assessing solatium, the Tribunal erred in law in holding that the cap on a solatium award was 10% of the amount assessed under s 41(3) of the LAC Act, rather than 10% of the amount assessed under s 41(1)(a) of the LAC Act.
The proposed grounds of appeal advanced by the Authority can be divided into two parts: grounds 1 to 4 concern the way in which the Tribunal considered the impact of the future stabling yards and its treatment of the AECOM plan; ground 5 concerns the application of the ceiling imposed by the legislation on awards for solatium.
On the last day of the hearing of the appeal, the Authority raised a further proposed ground of appeal concerning the identification of the land used in the ‘before and after’ analysis carried out pursuant to s 41(3) of the LAC Act to determine the market value of the acquired interest in land. That proposed ground is related to grounds 1 to 4.
Statutory framework
Section 30 of the LAC Act provides for a right to compensation on acquisition in the following terms:
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 the notice relates has a claim for compensation.
Section 41 sets out the general principles on which assessment of compensation is to be based. Relevantly, it provides as follows:
(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.
‘Market value’ is defined in s 40 as follows:
market value, in relation to any interest in land on a particular date, means the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser;
‘Loss attributable to severance’ is defined in s 40 as follows:
Loss attributable to severance, in relation to the acquisition of a claimant’s interest in land, means the amount of any reduction in the market value of any other interest of the claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land.
There is a special provision for the assessment of compensation for market value where less than the whole of the land owned by the claimant is compulsorily acquired. Section 41(3) provides:
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.
Section 44 concerns solatium and relevantly provides:
(1)The amount of compensation may be increased by such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the claimant for intangible and non-pecuniary disadvantages resulting from the acquisition.
(2)In assessing the amount payable under sub-section (1), there must be taken into account all relevant circumstances applicable to the claimant including, without limiting the generality of the foregoing —
(a)the interest of the claimant in the acquired land; and
(b)the length of time during which the claimant had occupied the land; and
(c)the inconvenience likely to be suffered by the claimant by reason of removal from the land; and
(d)the period of time after the acquisition of the land during which the claimant has been, or will be, allowed to remain in possession of the land; and
(e)the period of time during which, but for the acquisition of the land, the claimant would have been likely to continue to occupy the land; and
(f)the age of the claimant; and
(g)where the claimant at the date of acquisition is occupying the land as the claimant’s principal place of residence, the number, age and circumstances of other people (if any) living with the claimant.
Tribunal’s Reasons
The Tribunal set out the (convoluted) history of the proceeding, identifying the key issues still in dispute on the final hearing day. Those issues included the ‘severance impact’ associated with ‘the rail line’, the distance into the subject land that impacts ought to be accounted for, and the extent of any alleged acoustic impacts and any mitigation measures required.
The Tribunal then went on to consider the claim for ‘loss of market value’, its treatment of which is the basis for grounds 1 to 4 in the proposed Notice of Appeal.
In determining the market value of the acquired land, the Tribunal discussed and made findings in relation to the central questions in this appeal under the heading ‘How much of the subject land will incur “severance” impacts due to the railway line/future stabling yards and how should that impact be quantified?’ The Tribunal considered and made findings about the nature of the impact, how much of the subject land was affected and how that impact should be quantified.
The Tribunal observed that the valuers’ approaches differed in three ways:
(a) As to the cause of the impact, Mr Brown emphasised the industrial nature of the stabling yards in the ‘after’ scenario, while Mr Willison focused on the influence of the railway line itself. Mr Willison considered that the impact of the stabling yards could be disregarded as it was in the order of 20 to 30 years away.
(b) As to the area impacted, Mr Brown identified 44.96 hectares impacted by the stabling yards, which he split into two 22.48 hectare segments (part of Lot 2 and part of Lot 3), while Mr Willison assessed the impact of the railway line on 16 hectares in total.
(c) As to the quantification of the impact, Mr Brown applied a discount of 18% to the northern portion (part of Lot 2) and 3% to the southern portion (part of Lot 3), while Mr Willison applied a discount of 15% to the whole of the 16 hectares that he had identified, extending over part of Lot 2 and part of Lot 3.
As to the cause of the impact, the Tribunal agreed with Mr Brown that the cause of the impact to the subject land would be the stabling yards rather than the railway line itself. The Tribunal acknowledged that the access point for trains entering the stabling yards land would be from the north, but it found as follows: [8]
…the hypothetical purchaser at the relevant date has no information at that time that would refute the real possibility that all the land designated for stabling yards could be utilised for that purpose.
[8]Reasons, [51].
The Tribunal said it agreed with Mr Brown’s ‘analogy of an industrial use and the marketplace translating the negative aspects of an industrial neighbour to the subject property’.[9] It observed in relation to noise activity that there would be a real prospect of train activity throughout the night.[10]
[9]Ibid [52].
[10]Ibid.
In relation to the impact of the stabling yards on amenity, the Tribunal said: [11]
We accept that the situation where the main entrance to the future residential estate on the subject land lies opposite the anticipated stabling yard will be a compromised feature of such an estate. Mr O’Brien’s affidavit at paragraph 20 refers to the subject site moving from an A-grade development site to a B-grade development site. His evidence (which we consider credible on this issue) was that the proposed stabling yards would diminish the subject land’s capacity for high quality residential development. A person driving into this main entrance would (instead of seeing an adjoining residential estate) presumably be seeing industrial-style fencing and land and quite possibly also industrial-style night time security lighting (or even an acoustic fence).
[11]Ibid [53].
The Tribunal found that this factor would be likely to be included in sales pitches for competing new residential estates.[12]
[12]Ibid [54].
The Tribunal found Mr Willison’s assumption that the stabling yards would not be developed for at least another 20 years to be ‘unsubstantiated’.[13] It observed that there was an express qualification in his report and that, in cross-examination, Mr Willison did not dispute the proposition that a prudent hypothetical purchaser at the relevant date would need to allow for the possibility of the stabling facilities being developed ‘more in the short-medium term’.[14] The Tribunal stated that the Authority had not provided any reliable evidence to narrow the timing of the development of the stabling facilities. It found that the hypothetical purchaser would have no reliable information excluding the ‘real possibility’ of all of the stabling yards land being utilised for stabling facilities, and with a shorter rather than longer development time, and that much of the subject land would be affected.[15]
[13]Ibid [55].
[14]Ibid.
[15]Ibid [57].
In this context, the Tribunal referred to closing submissions filed on behalf of the Authority in which it was submitted that the Tribunal ought to give weight to the AECOM plan showing stabling yards activity occurring in the northern area of the stabling yards land. The Tribunal noted that the Authority’s expert acoustic evidence referred to the AECOM plan but that counsel for the Authority had conceded that the AECOM plan was not publicly available as at the date of acquisition.[16] There was no reasonable basis for the Tribunal to give any significant weight to the AECOM plan, when it was not publicly known at the relevant date. [17]
[16]Ibid [58].
[17]Ibid.
The Tribunal described the Authority’s case ‘at its highest’ in the following terms:[18]
(a)there was a development timeframe for the stabling yards of no less than 20 years;
(b)it was reasonable to assume that only the northern section of the stabling yards would be actively used for train storage and movement; and
(c)noise mitigation measures could be implemented to meet relevant acoustic standards.
[18]Ibid [66].
The Authority’s case, so described, meant that the hypothetical purchaser at the relevant date would conclude that the possibility of the future development of the adjacent train stabling yards would not have any adverse market impact on the value of the subject land.
However, the Tribunal assessed the Authority’s case as follows:[19]
The Tribunal does not consider this scenario likely or reasonable. Rather, the Tribunal agrees with Mr Brown’s basic premise, as follows. This premise is that in the ‘before’ scenario, the subject property has a residential neighbour on the western side of Hobbs Road, whereas in the ‘after’ scenario the neighbour is an industrial neighbour. Whilst there may well be mitigation measures that are and will be provided, it’s still an industrial neighbour.
[19]Ibid [67].
Moreover, according to the Tribunal, the Authority provided ‘no credible evidence excluding the possibility of the southern section of the stabling yards area being actively used for train movement and storage’.[20] It was reasonable to conclude that at the relevant date, a hypothetical purchaser ‘would consider the designation of the wedge-shaped land adjacent to Hobbs Road as a future train stabling yard to constitute a significant compromised aspect of any future use of the subject land as a residential estate’.[21]
[20]Ibid [68].
[21]Ibid [69].
As to the area impacted by the stabling yards, the Tribunal had regard to the valuers’ opinions about the extent of impact and stated that it generally concurred with Mr Brown’s assessment in relation to the northern segment (part of Lot 2), but was unconvinced of the impact on the southern portion (part of Lot 3), because this portion was already close to a major intersection. It did not support Mr Willison’s use of the design and development overlay area because it was not in place at the relevant date.
As to the quantification of the impact, the Tribunal settled on the figure of 18% proposed by Mr Brown because it said that the anticipated stabling yards (unlike ordinary railway lines) were expected to operate during the more sleep-sensitive overnight period when background noise levels were otherwise generally low. It rejected Mr Willison’s evidence in relation to railway line impact and said that the key factor was ‘the real possibility of trains operating in the southern area of the anticipated stabling yard area within at least the medium term’.[22]
[22]Ibid [65].
Grounds 1 to 4
Grounds 1 and 4 were argued together, the Authority conceding that ground 1 could only succeed if ground 4 were made out. In fact, as will be seen, each of grounds 1 to 3 hinge on the acceptance of the Authority’s argument that the main part of CRG’s claim was, in substance, a claim for injurious affection under s 41(1)(e) of the LAC Act.
Authority’s submissions
In substance, the Authority submits that the case before the Tribunal was conducted and decided by the Tribunal as if the relevant factors for assessment were ‘market value’ and ‘severance’, when in fact compensation for the impact of the stabling yards on the retained land fell to be considered under s 41(1)(e), namely, in terms of the depreciation in the value of the claimant’s interest in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired. Senior Counsel for the Authority described this form of loss as ‘injurious affection’.
The Authority submits that the method made obligatory by s 41(3) is not only designed to ascertain the market value of the acquired land, it is also designed to address loss attributable to severance and any enhancement or depreciation in the value of adjoining land by reason of the implementation of the project. Thus, despite the fact that the Tribunal made an award for market value under s 41(1)(a) and s 41(3) of the LAC Act, the amount awarded was made up of two elements: the market value of the acquired land in the amount of approximately $121,000 and the remainder for what is best described as injurious affection or depreciation in the value of the remaining land by reason of the implementation of the purpose for which the land was acquired, under s 41(1)(e). This means, in substance, that compensation of approximately $1,820,880 was awarded for the depreciation in the value of the retained land.
The Authority’s central point is, therefore, that while the use of the ‘before and after’ method prescribed by s 41(3) may capture both a loss attributable to a severance and the depreciation in the value of the retained land by reason of the implementation of the purpose for which the land was acquired, a different temporal perspective from the perspective used in the assessment of loss of market value is required in respect of the loss for which the Tribunal sought to compensate the claimant in this case.
According to the Authority, as the depreciation in the value of the retained land is a loss that occurs by reason of the implementation of the purpose for which the land was acquired, relevant matters will often take place after the date of acquisition. The Tribunal ought therefore to have taken into account all matters relevant to this issue known at a later date, that is, at the date of the Tribunal’s decision. Instead, the Tribunal saw its task as putting itself in the shoes of the hypothetical purchaser at the date of acquisition, without any knowledge of facts that occurred after that date.
The Authority submits that in limiting its inquiry in this way, the Tribunal made errors of law. In particular, it failed to consider the information contained in the AECOM plan in relation to the likely location and impact of the stabling yards, and it failed to consider the probability of events occurring in the future, including the probability of the worst case scenario for the location of the stabling yards actually ever eventuating. In awarding an amount of compensation for the depreciation in the value of the retained land, the Tribunal did not consider relevant or place any significance upon the AECOM plan, which showed that the stabling facilities were very likely to be in the northern part of the area available, rather than in the southern part, with a consequent lessening of impact on the subject land.
This, so the Authority contends, involved error.
As a further matter, the Authority says that if it is wrong about this and the Tribunal was confined to facts that existed at the date of acquisition, then all facts of this kind are relevant, and not just those facts which were publicly known.
In the alternative, the Authority submits that the Tribunal was required to consider relevant evidence at the time of its decision that related to a foresight, that is, to a matter that would have been in contemplation of the hypothetical purchaser at the date of acquisition. Evidence of future events is admissible to confirm foresight (as opposed to hindsight). Such evidence may confirm contingencies that the purchaser of land would have foreseen at the date of acquisition.[23] This was referred to in argument as the ‘Falconer principle’ after the case in which that proposition was articulated.
[23]Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547.
Analysis
The Authority has raised a broad conceptual point about the operation of s 41(3) of the LAC Act. It submits that in carrying out the ‘before and after’ analysis required by s 41(3), the Tribunal was not solely measuring market value, but assessing in a ‘rolled-up’ way the market value of the acquired land and the depreciation in the value of the retained land due to the stabling yards, which is, in substance, a s 41(1)(e) claim.
However, the actual error upon which the Authority focuses as giving rise to an excessive and unfair award of compensation to CRG is the Tribunal’s failure to take into account the AECOM plan and what it showed about how the stabling yards land might be used and the likely actual location of the stabling facilities. The Tribunal’s treatment of the AECOM plan lies at the heart of the complaint made by the Authority.
As the Authority conceded, its contention that the Tribunal was bound to take into account the AECOM plan in assessing compensation for the acquisition of the acquired land rests on the proposition that CRG made a claim in respect of the impact of the stabling yards on the retained land that was in substance — if not in form — a claim for injurious affection under s 41(1)(e).
In my view, there are a number of difficulties with the Authority’s submission.
The case before the Tribunal was conducted, correctly, as a case that required the determination of the market value of the land taken in accordance with s 41(3) of the LAC Act. The LAC Act stipulates that the ‘before and after’ method is to be used to determine the ‘market value’ of land compulsorily acquired where the acquisition is a partial acquisition. CRG’s claim was a claim for market value, ‘including severance’.[24] In fact, the claim was a claim for market value and was treated as such by the Tribunal.
[24]Thus, CRG’s Particulars of Claim dated 13 March 2014 were expressed in terms of a claim made ‘pursuant to ss 41(1)(a) and 41(3) of the LAC Act for market value … including loss for severance’. In addition, the joint valuers’ report dated 15 August 2014 variously referred to ‘market value’ and ‘severance’; CRG’s opening submission and the Authority’s submission referred to the Tribunal’s order as comprising an allowance for market value and ‘severance’ and the Tribunal’s Reasons dealt with the matter as one of market value and ‘severance’.
Because the acquisition was a partial acquisition, the Tribunal used the ‘before and after’ method in s 41(3) to determine the claim for the market value of the acquired land. In the conduct of the case, ‘severance’ and other impacts on the retained land such as injurious affection were subsumed in the assessment of market value pursuant to s 41(3). This accorded with the terms of the LAC Act and was consistent with authority. It was explained in Roads Corporation v Murdesk Investments Pty Ltd,[25] where Chernov JA said:
Section 41(3) of the Act provides that, in the case of a partial acquisition of land, ‘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’. Thus, the sub-section requires the assessment of market value to be undertaken by way of a ‘before and after’ analysis and involves the determination not only of the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance of the land. Hence, loss attributable to severance, as the term is defined in the Act, is embraced by the ‘before and after’ analysis (at least in so far as the notion of severance applies to the balance of the land).
[25](2008) 18 VR 329, [12]. See also Murdesk Investments Pty Ltd v Roads Corporation [2006] VSC 363, [26]; Roads Corporation v Love (2010) 31 VR 451, [87].
Having regard to the claim and the task mandated by s 41(3), the Tribunal was not required to treat CRG’s claim for the market value of the acquired land as requiring consideration of a separate claim for injurious affection under s 41(1)(e) of the LAC Act. There was no separate claim for injurious affection under s 41(1)(e), presumably because CRG recognised that any impacts of the proposal on the retained land would be ‘embraced’ in its claim for market value.
That meant, in turn, that the Tribunal was not permitted to have regard to events that occurred after the date of acquisition, except insofar as they confirmed the foresight of the hypothetical purchaser in accordance with the Falconer principle. While it remained open for CRG to make a separate claim for injurious affection based on facts that became known after the date of acquisition, that is not what occurred. Insofar as the ‘after’ scenario included the effect of the proposal on the retained land, that effect was seen through the eyes of the hypothetical purchaser of the land on the date of acquisition.
The Tribunal accepted the evidence of CRG’s expert valuer as to what the hypothetical purchaser wishing to buy the land in the ‘after’ scenario would have paid for it on the date of acquisition, in accordance with the Spencer test. The Tribunal said:
In our view it is reasonable to conclude that, as at the relevant date, a hypothetical purchaser (for the purposes of the LACA assessment) would consider the designation of the wedge-shaped land adjacent to Hobbs Road as a future train stabling yard to constitute a significant compromised aspect of any future use of the subject land as a residential estate.[26]
[26]Reasons, [69].
I see no error in this analysis. It was based on expert opinion received by the Tribunal that it accepted.
The Authority relied on a suite of cases,[27] commencing with the decision of the High Court in Adelaide Fruit & Produce Exchange Co Ltd v Adelaide Corporation,[28] to establish that severance and injurious affection will often (or even ordinarily) be evidenced by subsequent acts and events and that evidence of subsequent acts and events is admissible in support of such claims. So much is uncontroversial. However, none of the cases from jurisdictions other than Victoria dealt with a provision in the terms of s 41(3).
[27]Including the following: Coastal Estates v Bass Shire Council [1993] 2 VR 566; Mario Piraino Pty Ltd v Roads Corporation [No 2] [1993] 1 VR 130; Roads Corporation v Love [2010] VSC 32; Commissioner of Highways v George Eblen Pty Ltd (1975) 10 SASR 384; Sorell Council v Downie [2005] TASSC 2; Lenz Nominees Pty Ltd v The Commissioner of Main Roads (2012) 182 LGERA 58; McKay v Commissioner for Main Roads (No 7) [2011] WASC 223; Cairns City Council v CMV Number One Pty Ltd (1997) 96 LGERA 306; Brisbane City Council v Mio Art Pty Ltd [2012] 2 QdR 1; Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd [2015] QCA 96.
[28](1961) 106 CLR 85.
The Authority relied, in particular, on two reasonably recent decisions of the Queensland Court of Appeal in which the ‘before and after’ method was applied to establish land value, and the court differentiated between what it was permissible to consider when determining the value of the land taken and what it was permissible to consider when assessing compensation for damage caused by severance and injurious affection.
The relevant statutory provision was s 20 of the Acquisition of Land Act 1967 (Qld) (‘ALA’), which provided, relevantly:
(1)In assessing the compensation to be paid, regard shall in every case be had not only to the value of land taken but also –
(a)to the damage, if any, caused by any of the following -
(i)the severing of the land taken from other land of the claimant;
(ii)the exercise of any statutory powers by the constructing authority otherwise injuriously affecting the claimant’s other land mentioned in sub-paragraph (i); and
(b)the claimant’s costs attributable to disturbance.
(2)Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.
In Brisbane City Council v Mio Art Pty Ltd,[29] the Queensland Court of Appeal considered whether a draft plan affecting height limits on the acquired land published after the date of acquisition ought to have been taken into account when determining the value of the land. The court below had refused to consider the draft plan when determining the land value, but did find it likely that a prudent purchaser would have been informed at the date of acquisition that the original plan was under review. However, because there was no evidence as to the content of the review at that time, and in particular no evidence as to whether there was any proposal to raise the height limit, a prudent purchaser would not have taken it into account.
[29][2012] 2 Qd R 1 (‘Mio’).
Justice Fryberg, with whom McMurdo P and Fraser JA agreed, reviewed the authorities, including Falconer, concluding that none of them demonstrated that events subsequent to the date of acquisition could be taken into account in assessing market value.[30] There was therefore no error in excluding the draft plan from consideration when assessing the market value of the land taken. Based on the text of s 20 of the ALA, however, compensation for severance, injurious affection and disturbance was not explicitly required to be assessed by reference to the date of acquisition. These were not elements of land value under the ALA and losses arising from these matters would often arise or be quantified after the resumption of the land. The value of the land taken was ‘quite separate from’ damage caused by severance or injurious affection and disturbance costs.[31]
[30]Ibid [77].
[31]Ibid [30].
It is not the case that the market value of the land taken is ‘quite separate’ from loss caused by severance and injurious affection under s 41(3) of the LAC Act. The Victorian statute provides for them to be treated inseparably in that context and, indeed, for the amount of compensation assessed under that provision to be the ‘market value’ of the acquired interest.
The same provision of the ALA was considered in Chief Executive, Department of Transport and Main Roads v Cidneo Pty Ltd,[32] which concerned whether a post-resumption agreement providing for a development contribution to be made could be taken into account in assessing compensation. Justice Fraser (with whom Carmody CJ agreed) observed that the argument before the court was not that the requirement for the contribution bore upon the market value of the resumed land. Rather, the argument assumed that the contribution requirement amounted to injurious affection or severance damage to the retained land. Subsequent events could be relevant in assessing compensation for such loss. His Honour then said:[33]
The choice of the appropriate assessment method in any particular case must be driven by the requirement to make a fair assessment of the allowable heads of compensation in accordance with s 20 of the ALA. It was not contentious in this application that the before and after method is apt to include in the assessment both the value of the resumed land and other losses, including injurious affection and severance damage, but those various heads of compensation remain conceptually distinct. It is conventional for injurious affection and severance damage to be assessed with reference to events occurring after resumption.
[32](2015) 207 LGERA 448.
[33]Ibid [42].
Likewise, Dalton JA observed that the ‘before and after’ method is nothing more than a tool to assess the compensation which s 20 of the ALA allows. If the ‘before and after’ method is used, it can only be used to assess the compensation which s 20 allows and there may be cases where the method is inapt. In such cases, the court must reject it as a proper method. [34] The use of the ‘before and after’ method may or may not be appropriate when assessing compensation under s 20 of the ALA, depending on the facts of the case and the form of compensation sought. This, again, is entirely different from what is required by s 41(3).
[34]Ibid [60]. (Citation omitted.)
As to what information could be fed into an assessment using the ‘before and after’ method, Dalton JA said:[35]
The statute [the ALA] required that compensation for land taken be assessed as at the date the land was taken. It did not require that if a valuation was made of the englobo land, or the retained land, as part of a rolled-up before and after exercise, that that valuation be at any particular date. ... Given that Mio Art allows evidence of subsequent events to be used in assessing all matters relevant to s 20 compensation other than the value of land taken, there is no warrant to assume as a general rule that all information fed into that rolled-up process must be known or foreseeable at the time of resumption. In any case, it is a matter for the valuers to use information which most accurately produces an assessment of the compensation required by s 20 of the Act.
[35]Ibid [85].
Under the ALA, therefore, the ‘before and after’ analysis could be ‘un-rolled’ so as to limit the information used for assessing land value to information known or foreseeable at the acquisition date, but allow post-resumption events and information to be taken into account when assessing losses attributable to severance or injurious affection.
This is, as I understand it, the kind of exercise that the Authority contends should have been undertaken by the Tribunal and that it erred in law in not undertaking.
Such a submission cannot be accepted.
It is necessary to consider the language of the Victorian statute and to give effect to that language. None of the case law relied on by the Authority considered a legislative provision such as s 41(3), which is the provision the Tribunal had to grapple with and apply in this case. There are significant differences between s 20 of the ALA and s 41 of the LAC Act.
First, unlike the ALA, under the LAC Act the ‘before and after’ method must be applied to determine land value where the acquisition is a partial acquisition. Section 41(3) provides that there will always be a ‘rolled-up’ assessment in these circumstances.
Secondly, the ‘rolled-up’ assessment produces what the provision defines as the ‘market value’ of the acquired land. The Act stipulates that market value is to be determined as at the date of acquisition. While compensation for severance and injurious affection (as well as disturbance) may be awarded in respect of matters arising or quantifiable only after the date of acquisition, the market value of the land taken is not to be ascertained by reference to events or facts that were not known or foreseeable at the date of acquisition. Because s 41(3) specifies how the market value of an acquired interest is to be assessed and stipulates a method that embraces the assessment of losses resulting from impacts on the retained land, there is no scope within the LAC Act to ‘un-roll’ the assessment or disaggregate the sum assessed for market value into a component representing land value and components representing losses for severance and/or injurious affection.
Contrary to the Authority’s submissions, the Tribunal did not make a finding as to ‘market value of the interest that was acquired’ and (separately) a finding of loss attributable to severance (or injurious affection). It assessed the market value of the acquired interest on the date of acquisition using the ‘before and after’ method mandated by s 41(3) of the LAC Act. That assessment included in a rolled up way any loss suffered as at the date of acquisition due to impacts on the retained land.
In this case, there was no separate claim for loss arising or quantifiable only after the date of acquisition. There was therefore no occasion to have regard to matters arising after the date of acquisition, except as might be permitted pursuant to the principle in Falconer.
The alternative submission made by the Authority is that the AECOM plan was admissible to confirm the foresight of the hypothetical purchaser at the date of acquisition in accordance with Falconer.
The Authority submits that there were a number of contingencies that the hypothetical purchaser of the subject land would have foreseen at the date of acquisition. It was known that land opposite had been acquired for stabling yards. What would have been in contemplation was how the stabling facilities would be configured on the stabling yards land. There were certain facts that existed at the date of acquisition that made it likely that the stabling facilities would be located in the northern part of the stabling yards land. The first of these was topography. The topography of the land was such that it would be difficult to access the stabling yards from the south, because the railway line is in cut at that point. The topography levels off to the north, and it is logical that the flatter land to the north would be used for the stabling facilities. A second factor in existence at the date of acquisition was the illogicality of stabling trains on the southern part of the stabling yards land, because of the extra distance that they would need to travel to get there. The third matter was that for safety reasons, the turnout from the rail track to the stabling facilities had to be on a straight line, rather than on a curve, and that would also need to be to the north of the stabling yards land.
According to the Authority, all of these factors existed at the date of acquisition, and the AECOM plan shows how they would influence and be accommodated in the design of the stabling yards. Even though the AECOM plan was not publicly available, it represented a sensible and practical indication of the proposed location of the trains in the stabling yards. The AECOM plan therefore showed matters that would have been in the foresight of the hypothetical purchaser at the date of acquisition and it ought, therefore, to have been taken into account by the Tribunal.
The Tribunal had regard to the AECOM plan in the context of submissions that were made about its relevance and admissibility based on Falconer. It referred to the pages of the submissions where the principle that post-acquisition material is admissible to confirm foresight was advanced but decided not to give ‘any significant weight’ to the AECOM plan. It said:[36]
Even allowing for these legal principles/cases, we see no reasonable basis for the Tribunal to give any significant weight to the AECOM plans, when they were not publicly known at the relevant date.
[36]Reasons [58].
The Authority submits, correctly, that there is no requirement for information to be ‘publicly’ known in order for it to be within the knowledge of the hypothetical purchaser at the date of acquisition.
In Spencer v The Commonwealth,[37] Isaacs J described the hypothetical purchaser as a person ‘perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.’[38]
[37](1907) 5 CLR 418.
[38]Ibid.
In Mio, Fryberg JA described the Spencer test in the following terms: [39]
The Spencer test postulates hypothetical parties in full possession of knowledge generally available on the date of acquisition. That knowledge includes knowledge of future possibilities, but only as possibilities, and with the weight which prudent persons would ascribe to them.
[39][2012] 2 Qd R 1, [78].
Knowledge that is ‘generally available’ to the hypothetical purchaser is not derived exclusively from information that is ‘publicly’ available. The hypothetical purchaser has access to the knowledge of persons best capable of forming an opinion about the value of the land. Such a person will have knowledge about the land that is ‘generally available’, in the sense that it is available to a person who sets about making detailed inquiries, and in so doing, knows where to look, including who to ask and what to ask. That person is also the person best capable drawing inferences from the generally available facts to form an opinion as to the future possibilities for the land and other matters affecting its value.
However, as Fryberg JA said in Mio, while the knowledge of the hypothetical purchaser will include knowledge of future possibilities, he or she will give those possibilities only such weight as prudent persons would ascribe to them. The weight ascribed by the hypothetical purchaser to information derived from certain sources will also vary, depending on how reliable those sources are considered to be.
The Tribunal concluded that there was no ‘reliable’ or ‘credible’ evidence excluding the possibility of the southern section of the stabling yards land being actively used for train movement and storage. This was a question of fact and it was open to the Tribunal to so find. The AECOM plan was a draft plan of unknown and unproven status. It was not a document about which any witness gave evidence. There was no evidence at all as to the authorship, origins or purpose of the plan, or that it was ever adopted by anyone or even proposed to be adopted by anyone, whether prior to or after the relevant date. There was no evidence as to what design, planning or other assumptions guided or informed the preparation of the AECOM plan or even as to when or how the Authority or the legal representatives of the Secretary came to have the AECOM plan.
Given the dearth of information and the uncertainty surrounding the genesis and status of the AECOM plan, it was unsurprising that the Tribunal gave it little, if any, weight.
That is not to say that at the date of acquisition the hypothetical purchaser of the subject land would not have given consideration to the future use of the stabling yards land and as to how and when any impacts on the subject land would be felt. He or she would have applied a well-informed mind to the fact that the land had been designated for future stabling yards for electric trains, taking into account that electric trains could not use the existing railway line and that there was no proposal to extend the electrification of the metropolitan rail network in the direction of Wyndham Vale. The hypothetical purchaser would also have recognised that the topography of the stabling yards land and immediate surrounds would influence where points of access would be situated and the layout and design of the future stabling facilities.
The Tribunal approached the question of the impacts of the stabling yards on a different level, however, based on the evidence of Mr Brown.
Mr Brown applied his knowledge and expertise to assessing the effect of the future stabling yards on the value of the subject land. He concluded that the industrial nature of the potential use of the stabling yards land would make residential developments on the surrounding land less attractive than competing residential developments in the area, and that this would have a particular impact on the value of the subject land in the ‘after’ scenario. The Tribunal accepted this evidence.
The Tribunal based its decision on the evidence of Mr Brown as to the effect of the industrial nature of the proposed use of the stabling yards land on the marketability of the subject land as residential land. It was open for it to do so.
Given the Tribunal’s approach to assessing the impact of the potential stabling yards on the residential development of the retained land, it is difficult to see what influence the AECOM plan could have had on the Tribunal’s decision had it had regard to it. As the industrial nature of the proposed use of the stabling yards land is identified as the critical feature affecting the subject land, it matters little where on the stabling yards land the stabling facilities might be located or when their development is anticipated.
Thus, regardless of whether the AECOM plan was ‘generally available’ as opposed to ‘publicly’ available or confirmatory of the foresight of the hypothetical purchaser, the Tribunal’s treatment of the AECOM plan did not give rise to a vitiating error.
As to grounds 2 and 3, the Authority contends that the Tribunal erred in identifying that there was a possibility that the stabling facilities would be in the south-eastern corner of the stabling yards land and proceeding on that basis as though it was the proper basis for assessment without factoring in the low probability of that occurring in the future. It says that the Tribunal adopted the worst case scenario without allowing for the low probability of the stabling facilities being located near the subject land in the south-eastern corner of the stabling yards land.
According to the Authority, the need to weigh probability also applied in relation to the timing of the development of the stabling yards.
The Authority contends that the Tribunal ought to have adopted a probabilistic approach to the issue of what would occur on the stabling yards land and when. It says that while it was correct, as a matter of logic, that at the relevant date the hypothetical purchaser had no information that would refute the possibility that all the land designated for stabling yards could be utilised for stabling facilities, this told the Tribunal very little and it was required to assess the probability of that possibility actually occurring.
In support of this proposition, the Authority referred, among other cases, to Crouch v Minister for Works,[40] in which Wells J discussed the role of probabilities in valuation matters and said:[41]
Where a court finds facts in issue in a civil case it is empowered to act, of course, on the balance of probabilities, but where the circumstances of a case yield only probabilities to a court’s evaluation, leaving open doubts and misgivings, a valuer must, when dealing with the same circumstances, reflect in his reasoning, not only the probabilities, but also the doubts and misgivings. In short, if the purchaser-developer judges that planning approval is virtually certain, the price that he will pay will be higher than that which he will pay if planning approval is not more than probable, and is attended by a real risk that it will be refused.
In my judgement, therefore, a correct application of the Spencer’s case test implies that, if the valuer is proceeding on the basis of a hypothetical subdivision contemplated by the willing, but not anxious buyer and seller alike, the risk that approval of the subdivision would have been refused must be taken into account in determining the bargain price and cannot be eliminated by attributing to the valuer the liberty to treat as certain that which, in truth and in deed, would have been no more than probable.
[40](1976) 13 SASR 553.
[41]Ibid, 560-561.
This case speaks, in substance, of not treating as certainties things are no more than probabilities or possibilities. When applying the Spencer test, it is necessary to factor in the doubts and misgivings of the hypothetical purchaser arising from the circumstances of the case. This uncertainty may be reflected by discounting the compensation awarded, as occurred in McCann v Roads Corporation[42] and in many other decisions.
[42]McCann v Roads Corporation, [2011] VSC 96, [215].
In this case, the Tribunal did not conduct a finely textured analysis of the probabilities and possibilities that the hypothetical purchaser of the subject land might identify and consider concerning the future development and use of the stabling yards land. It found, based on the expert evidence of Mr Brown, that the proposed industrial character of the stabling yards land, in the context of surrounding residential developments, would have an adverse impact on the value of the subject land.
I have already held that it was open to the Tribunal to accept the evidence of Mr Brown that the industrial use on the stabling yards land would have a negative impact on the value of surrounding residential land, wherever the actual stabling facilities might be located and whenever they might be developed. The Authority may well consider that a different and more detailed consideration of the likely development of the stabling yards land was called for, but, for the reasons I have given, the approach taken by the Tribunal did not give rise to an error of law.
Grounds 1 to 4 are not made out.
The new ground
The proposed new ground of appeal was first identified well into the hearing of this appeal. It does not reflect the way in which either party presented their case before the Tribunal.
In substance the new ground is this. The Tribunal treated the two lots owned by CRG as ‘the whole of the land’ in which CRG’s interest subsisted for the purpose of carrying out the ‘before and after’ analysis under s 41(3) of the LAC Act. In fact, the acquired land formed a part of only one of those lots (the ‘southern lot’). There was no partial acquisition of the other lot (the ‘northern lot’). The Authority now contends that the ‘before and after’ analysis under s 41(3) should only have been carried out in relation to the land comprising the southern lot and that the northern lot should have been treated as the subject of a claim under s 41(1)(c) and/or s 41(1)(e) only.
This is, in effect, a belated attempt to avoid the ‘rolled-up’ operation of s 41(3) for part of the land in question (the northern lot). It would allow consideration of events after the date of acquisition in determining an award of compensation for injurious affection of the northern lot as a result of the proposed use and development of the stabling yards land. The Tribunal would be required to have regard to the AECOM plan as a fact bearing on the extent of the injurious affection of the northern lot.
This contention was not included either as a proposed ground of appeal or in the Authority’s written submissions filed in support of the application for leave to appeal and in the appeal. It was not put to the Tribunal in any shape or form. To the contrary, the Authority’s case before the Tribunal was that the northern and southern lots constituted the whole of the land in which CRG’s interest subsisted. It formed no part of the instructions to the Authority’s valuer, and it was not considered by any witness who gave evidence to the Tribunal.
In the proceeding in the Tribunal, what was ‘the whole of the land’ for the purposes of s 41(3) of the LAC Act was a question of fact upon which the parties agreed and that agreed fact formed the factual basis upon which the Tribunal proceeded to carry out its ‘before and after’ analysis. As both parties, and their valuers, approached the case (and their evidence) on the basis that the northern and southern lots combined were ‘the whole of the land’ in which CRG’s interest subsisted on the date of acquisition, and the Tribunal accepted as a matter of fact that CRG’s interest subsisted in the whole of that land, it is not a matter that is amenable to challenge on appeal as an error of law under s 148 of the VCAT Act.
The right of appeal from the Tribunal to this court is confined by s 148(1) of the VCAT Act to ‘a question of law’. It must be a question of law that arose in the proceeding.[43] The Tribunal proceeding did not give rise to the question that the Authority now seeks to agitate.
[43]Ovidio Carrideo Nominees Pty Ltd v The Dog Depot Pty Ltd [2006] VSCA 6, [59].
Moreover, the point was not identified in the proposed notice of appeal and should not now be entertained by this court.[44]
[44]Roads Corporation v McCarthy & Ors [2004] VSC 369, [71].
Leave to add the proposed new ground of appeal is refused.
Ground 5
Section 44(1) of the LAC Act provides that the amount of compensation may be increased by such amount, not exceeding 10% of the market value of the land, by way of solatium.
The Tribunal considered how the 10% ceiling on solatium operated, comparing and contrasting what it described as the ‘narrow approach’ and the ‘broad approach’. Under the narrow approach, the words ‘market value of the land’ in s 44(1) mean the ‘market value’ (as defined in s 40 of the LAC Act) of the land actually acquired or taken. On the facts in this case, this is a small area of land, being the two slivers of land having a combined area of 2,710m² and a value of $121,950. The ‘broad approach’ is based on the market value of the land being the market value as determined pursuant to s 41(3), which, as has been seen, includes compensation for the effect of the acquisition on the balance of the land.
After reviewing decisions of this court and other Tribunal decisions, the Tribunal concluded that the appropriate approach to applying the 10% ceiling on solatium was to adopt the ‘broad view’. This, so the Tribunal said, was more consistent with the critical role played in partial acquisitions by s 41(3) of the LAC Act. It reasoned that it would be a disjointed scenario for a court or tribunal dealing with a dispute involving a partial acquisition to apply the ‘before and after’ analysis to determine what compensation was payable for market value, but then to disregard s 41(3) for the purposes of interpreting the words ‘market value of the land’ in s 44(1).
Put simply, the Authority argues that the statutory cap on an award of solatium must be assessed by reference to market value, which is a defined term. Pursuant to s 41(1)(a), in assessing the amount of compensation payable to a claimant in respect of an interest in land which has been acquired under the LAC Act, regard must be had to the market value of the interest as defined in s 40.
By contrast, CRG submits that, in a partial acquisition, the market value of the interest in land is the sum calculated pursuant to s 41(3). Section 41(3) is the only means provided by the Act to ascertain the market value of acquired land on a partial acquisition. The LAC Act does not call for an assessment of market value based on only the area of land taken.
The Authority submitted that the Tribunal was bound to follow the decision of Vickery J in Roads Corporation v Love,[45] as it was directly on point and the question was squarely before the Court in that case. Justice Vickery held that the 10% ceiling on an award of solatium applied to the market value of the acquired land itself.[46] His Honour so held on the basis of competing submissions that the ceiling was 10% of the market value of the land that was actually acquired, on the one hand, and that the ceiling was 10% of the market value of the whole of Mr Love’s land in the ‘before’ scenario, on the other.
[45][2010] VSC 537 (‘Love’).
[46]Ibid [738].
According to CRG, the decision of Vickery J in Love was not binding on the Tribunal because the issue as raised in this case, and upon which the Tribunal decided the question of solatium, was not considered by his Honour. In Love, the Authority urged Vickery J to consider the value of the land actually taken, while Mr Love urged it to consider the whole of the ‘before’ land value. CRG submits that it was appropriate for the Tribunal to have regard to the cases set out in its Reasons, in which both the Court and the Tribunal awarded solatium as a percentage of the market value compensation in partial acquisitions.
I accept CRG’s submission that the holding in Love in respect of the cap on solatium was not binding on the Tribunal. Justice Vickery was presented with alternative courses that were different from those before the Tribunal. Furthermore, this court has previously applied the ‘broad approach’. In Coastal Estates Pty Ltd v Bass Shire Council,[47] Gobbo J awarded solatium capped at a percentage of market value assessed on a ‘before and after’ basis. His Honour appears to have taken the same approach in the authority to which Vickery J referred in Love, Waalt Homes Pty Ltd vRoad Construction Authority,[48] although the dollar figures in the judgment do not allow the basis for the calculation of solatium to be precisely identified.
[47][1993] 2 VR 566.
[48](1987) 64 LGRA 346.
The clearest exposition of the issue and reasoning is, in my view, the Tribunal decision in Secretary to the Department of Economic Development, Jobs, Transport and Resources v Driver.[49] The Tribunal asked itself the critical question, ‘But what does the statute say?’ and concluded that the ‘market value of the land’ in the case of a partial acquisition is, as is provided in s 41(3), the difference between the before and after values. This comprehends both the value of the land actually acquired and any diminution in the value of the balance of the land as a result of severance. The Tribunal said:[50]
It is artificial and antithetical to the scheme of the legislation to attempt to apportion that difference between the market value of the land actually acquired and diminution in the value of the balance of the land due to severance. What has to be valued is the whole of the land before the acquisition and the whole of the land remaining after the acquisition. The difference is the market value for the purpose of the Act, including s 44.
[49][2015] VCAT 813.
[50]Ibid [96] (emphasis original).
I adopt this analysis. Section 41(3) provides for ‘the market value’ of acquired land to be determined in a particular way where the acquisition is a partial acquisition. In the present case, the ‘market value’ of the land compulsorily acquired from CRG is the difference between the market value of the whole of CRG’s land before the acquisition and the market value of the whole of CRG’s land after the acquisition.
As I have held in respect of the other grounds of appeal agitated by the Authority, s 41(3) of the LAC Act provides for ‘market value’ to be determined on a particular basis in the case of partial acquisitions. The market value of land in s 41(3) is a product of the relationship between two other market values, which are to be determined in accordance with the definition in s 40. Where there is a partial acquisition, the definition of ‘market value’ in s 40 does not, on its own, determine the market value of the land taken.
Accordingly, in the case of a partial acquisition, the words ‘market value of the land’ in s 44(1) refer to the market value of the land as determined by applying s 41(3).
Ground 5 therefore fails.
Conclusion
None of the grounds of appeal is made out.
Leave is refused to add the new ground.
Leave to appeal is granted but the appeal is dismissed.
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