State of Tasmania v Croft
[2013] TASSC 28
•27 June 2013
[2013] TASSC 28
COURT: SUPREME COURT OF TASMANIA
CITATION: State of Tasmania v Croft [2013] TASSC 28
PARTIES: STATE OF TASMANIA
v
CROFT, Terry Fortescue
FILE NO: 334/2012
DELIVERED ON: 27 June 2013
DELIVERED AT: Hobart
HEARING DATE: 17 June 2013
JUDGMENT OF: Blow CJ
CATCHWORDS:
Real Property – Compulsory acquisition of land – Compensation – Assessment of particular land and interests – Other land – Mortgage by company to secure obligations to debenture holders – Interest of debenture holder in mortgaged land.
Emu Bay Railway (Operation and Acquisition) Act 2009 (Tas), s7.
Land Acquisition Act 1993 (Tas), s27(1).
Aust Dig Real Property [1714]
REPRESENTATION:
Counsel:
Applicant: P Turner
Respondent: In person
Solicitors:
Applicant: Director of Public Prosecutions
Respondent: In person
Judgment Number: [2013] TASSC 28
Number of paragraphs: 31
Serial No 28/2013
File No 334/2012
STATE OF TASMANIA v TERRY FORTESCUE CROFT
REASONS FOR JUDGMENT BLOW CJ
27 June 2013
This case concerns the valuation of some debenture stock issued by the Emu Bay Railway Company Ltd ("the EBR Company"). The respondent, Terry Croft, is the beneficial owner of the stock in question.
The Emu Bay Railway runs southwards from Burnie, which is on the shores of Emu Bay, towards the mining areas of Tasmania's west coast. These days the line terminates at Melba Flats, between Rosebery and Zeehan, but once it used to continue all the way to Zeehan. Its original operator was the EBR Company. That company raised some capital by means of a debenture issue that was governed by a debenture trust deed dated 11 July 1899. Subsequently there was a further issue of debenture stock that was governed by a debenture trust deed dated 7 April 1925. Both deeds were drawn by solicitors in London. The debenture stock was valued in pounds sterling.
Two English gentlemen named Frederick John Gordon and John Henry Clifford Johnston were named as trustees in the 1925 deed. By cl 8 of that deed, the EBR Company mortgaged certain land to the trustees to secure the payment of the principal and interest payable to the debenture holders under the 1899 and 1925 deeds. The mortgaged land comprised a parcel of general law land extending along the railway corridor from Burnie to Guildford Junction. Memorials of both the 1899 and 1925 deeds were registered in the Deeds Office in Hobart pursuant to the legislation then applicable to the registration of deeds relating to the general law land.
On 18 September 1964 a debenture certificate was issued to Eileen Croft, the mother of the respondent. Pursuant to that debenture certificate, she became the holder of £5 per cent irredeemable debenture stock to the value of £441 sterling pursuant to the 1925 deed. She has since died. It is common ground that the respondent consequently became the beneficial owner of that debenture stock.
In 1998 the EBR Company sold the railway without procuring a reconveyance of the general law land that was mortgaged by the 1925 deed. The railway assets were sold to a number of companies belonging to the Pacific National group. The purchaser or purchasers of the general law land received a defective title to that land. It or they became the owners of an equity of redemption. The legal estate in the land remained vested in the trustees or their successors in title.
On 4 September 2009 the Crown in right of the State of Tasmania entered into a contract to purchase the railway from the companies in the Pacific National group. The Crown Solicitor, Mr Morgan, acted on the purchase. The defect in title in relation to the general law land came to his attention. Special legislation was enacted to extinguish the rights of the debenture holders in relation to the general law land, and to provide them with compensation.
For the purpose of the Crown's acquisition of the railway, the Tasmanian Parliament passed the Emu Bay Railway (Operation and Acquisition) Act 2009. For the purposes of that Act, the respondent's interest in the mortgaged land constituted a "remaining interest". That term was defined in s3(1) of that Act as follows:
"remaining interest means any estate in the subject railway, or part of the subject railway, that is not purchased by the Crown or a nominee under the Business Sale Agreement but, immediately before completion of the Business Sale Agreement —
(a)is owned or held by the Emu Bay Railway Company; or
(b)is owned or held by an affected person, or which an affected person is entitled to own or hold, pursuant to an Emu Bay security".
For the purposes of that Act, the respondent is an "affected person". That term is defined in s3(1) of the Act as follows:
"affected person means a person who, immediately before the completion of the Business Sale Agreement, owns or holds or is entitled to own or hold any estate in the subject railway, or part of the subject railway, pursuant to an Emu Bay security and, for the avoidance of doubt, includes (without limitation) —
(a)a trustee for the purposes of a debenture scheme created by an Emu Bay security; and
(b)a person claiming through such a trustee; and
(c)the holder, or a person entitled to be the holder, of a debenture issued under a debenture scheme created by an Emu Bay security".
Section 3(1) also defines "Emu Bay security" so as to include the debenture scheme created by the 1925 deed, and each mortgage, charge, encumbrance or other security granted under that scheme.
The Crown completed the purchase of the railway assets on 30 November 2009. At that time, the respondent's interest in the general law land vested in the Crown by operation of s6(1)(a) of the Act, which read as follows:
"(1) On completion of the Business Sale Agreement —
(a)if the Crown purchases the whole, or a part, of the subject railway, all remaining interests relating to that whole or part vest in the Crown; and
(b)…
without need for any further conveyance, transfer, assignment or assurance."
Once the respondent's interest in the general law land vested in the Crown, he became entitled to compensation pursuant to s7 of the Act. The relevant provisions in s7 read as follows:
"(1) An affected person is entitled to compensation for the vesting in the Crown or a nominee, by reason of section 6, of his or her remaining interest.
(2) …
(3) Compensation is the amount agreed, in writing, between the affected person and the Minister.
(4) Before agreeing an amount of compensation, the Minister must obtain the approval of the Valuer-General to that amount.
(5) In determining whether to approve an amount of compensation, the Valuer-General is to apply the same principles, with any necessary modification, as he or she would apply in approving an amount of compensation for the purposes of section 40(8) of the Land Acquisition Act 1993.
(6) If the affected person and the Minister cannot agree on the amount of compensation, the claim for compensation is to be determined as if it were a disputed claim for compensation under the Land Acquisition Act 1993 and, for that purpose —
(a) a reference in that Act to land is taken to be or include, as appropriate, a reference to rail infrastructure and related assets, including any estates in rail infrastructure and related assets; and
(b) this section is taken to be a notice of acquisition, within the meaning of that Act, validly gazetted on the day after the day on which completion of the Business Sale Agreement occurs; and
(c) the Crown is the acquiring authority."
Under s42(1)(d) of the Land Acquisition Act 1993, a claim for compensation can be determined by this Court on an application by the acquiring authority. The application before me is an application under s42(1)(d) by the Crown in its capacity as the acquiring authority.
The Crown contends that the compensation payable to the respondent comprises the following, and nothing more:
· The face value of the debenture certificate, namely £441, converted into Australian currency using the exchange rate applicable on 1 December 2009, amounting to $795.50.
· Unpaid interest to 1 December 2009. It is common ground that that unclaimed interest amounted to $441.
· Compensation for the respondent's time in preparing and pursuing his claim for compensation, payable to s27(1)(g) of the 1993 Act. The Crown contends that $3,000 should be allowed under this head.
· Interest on the above amounts from 1 December 2009 until judgment. It is common ground that if compensation is to be assessed in accordance with the submissions of the Crown (which the respondent contends to be wrong), then that interest amounts to $655.25 to 17 June 2013, and is accruing from that date at the rate of 3.42% per annum.
No point was taken on behalf of the Crown as to any possibility that the value of the respondent's interest in the general law land was less than the value of his debenture stock. I will therefore proceed on the basis that the value of his "remaining interest" was, at the relevant date, equal to the value of his debenture stock.
The respondent contends that his debenture stock is, and was at all material times, worth far more than its face value because of special circumstances relating to the 1925 deed and the mortgage that it created. According to information provided to the respondent by representatives of the EBR Company, that company pursued a policy of repurchasing debenture stock from its debenture holders; by June 1991 there were only four debenture holders left; and two of them could not be traced. At that stage the company offered to repurchase the respondent's debenture stock for 150% of its face value, but he did not agree.
In 2001, administrators of the EBR Company were appointed pursuant to a deed of company arrangement. By May 2008, the respondent had apparently received information that the EBR Company was required to pay £2,000 sterling each year into a fund for the redemption of debentures. Solicitors engaged by the administrators wrote to the respondent in January 2009 proposing to purchase his debenture stock for its face value. He did not agree. He took the view that, as either the last traceable debenture holder, or one of the two last traceable debenture holders, he was in a position to cause resolutions to be passed at any general meeting of debenture holders convened pursuant to the provisions of the 1925 deed, and that his stock therefore had a special value.
It is therefore necessary to determine what powers were conferred on debenture stockholders by the 1925 deed. My analysis of the relevant provisions can be summarised as follows:
· Under cl 1 of the Fourth Schedule to the 1925 deed, the holders of one tenth of the nominal amount of either the 4½% stock, the 5% stock, or both the 4½% and 5% classes of stocks, are entitled to require the trustees or the EBR Company to convene a meeting of stockholders.
· The powers exercisable by the stockholders at such a meeting are as set out in cl 15 of the 1925 deed.
· Such powers are exercisable only in the event of a trust for sale arising. By virtue of cl 16 of the 1925 deed, the trust for sale was to arise upon the happening of any of the events specified in subcls (1) to (5) inclusive of cl 13 of the 1899 deed. Under cl 13(1) of the 1899 deed, one of the specified events was the company defaulting in the payment of interest payable pursuant to that deed.
· According to the evidence before me, the company had defaulted in the payment of interest prior to 20 November 2009. The trustees of the 1925 deed were therefore entitled to exercise the powers conferred on them in relation to the trust for sale.
· Pursuant to cl 15 of the 1925 deed, the trustees were therefore empowered to "enter upon and take possession of the mortgaged premises and … sell call in collect and convert the same into money".
· The stockholders were empowered by cl 15 to direct the trustees to exercise any of the trusts and powers arising upon the trust for sale, or "to waive any default or postpone or delay the exercise of any trusts or powers". No greater powers were conferred upon the stockholders.
· Clause 15 also made the giving of directions by stockholders to the trustees conditional upon "a proper and sufficient indemnity" being given to the trustees "against the costs expenses and liability to be by them incurred".
· Clause 17 of the 1925 deed made provision as to how the trustees were to apply any moneys arising from the exercise of their powers. After the payment of the costs, charges and expenses of realising assets, and after the payment of the costs, charges and expenses of the execution of the trusts, including the remuneration of the trustees, the balance was required next to be applied to the payment of the principal and interest due to the debenture holders. They were not entitled to any more than that. Any balance after the payment of the expenses that I have referred to, and of the principal and interest due to debenture holders, was to be paid to the company or its assigns.
· Under cl 1 of the Fourth Schedule to 1925 deed, all meetings of stockholders were required to be held in London.
Whilst the respondent might well have been in a position to dominate any meeting of debenture holders, had he been willing to travel to London for the purpose, the exercise of his rights under the 1925 deed could not have resulted in the payment to him of anything more than the face value of his debenture stock and any unpaid interest. At most, he could have caused resolutions to be passed directing the trustees as to the exercise of their powers to take possession of assets and cause them to be sold. However the evidence before me establishes that the trustees had been inactive for some time. It might have been necessary for an application to be made to a court of competent jurisdiction for the appointment of a new trustee or trustees before any resolution of debenture holders could have any practical effect.
In theory the respondent could have requisitioned a meeting of stockholders, caused such a meeting to be held in London, and caused a resolution to be passed for the sale of the mortgaged general law land. In theory, such a sale could have been made to the Crown. That would have overcome the defect in title. But in my view it was simpler for the Crown to overcome the defect in title by arranging for special legislation to be passed, rather than dealing with the respondent, any other traceable debenture holders, and any trustees of the 1925 deed that were still alive, or anyone appointed to replace them.
In the circumstances, the rights conferred by the 1925 deed on the respondent as a debenture holder were of no practical use to him, and could not have been of any practical use to the Crown or to any person or company wishing to acquire his stock. I therefore reject the argument that his debenture stock had some special value as a result of there being so few debenture holders left.
At the hearing of this application, the respondent argued that the trustees had legal title to about 40% of the railway by virtue of the 1925 deed. That was certainly the situation until the Crown's purchase was settled, and s6(1)(a) of the 2009 Act extinguished their interest in the land. But that makes no difference to the value of the respondent's stock.
The respondent referred me to a passage in the second reading speech relating to the 2009 Act in the House of Assembly. The relevant Minister, Mr Sturges, referred to "historical legal issues" and said that they required resolution before the Government could be certain that it would hold proper legal title for the railway following the transfer of the business. The Minister was correct. The effect of the 2009 Act was to give the Crown a good title to the general law land. That makes no difference to the value of the respondent's stock.
The respondent made a submission to the effect that the 2009 Act was invalid; and that what it sought to achieve could only be achieved by a special resolution. I believe he was referring to a special resolution of the EBR Company. He referred me to s5G(3) of the Corporations Act 2001 (Cth). That section applies to the interaction between State legislation and Commonwealth corporations legislation in certain circumstances. It is clear that s5G has nothing to do with this case. The 2009 Act had nothing to do with the governance of the EBR Company or any other corporation. Its relevant provisions provided for the vesting in the Crown of certain interests in land, and the payment of compensation to their former owners.
The Valuer-General gave evidence at the hearing to the effect that he had valued the respondent's stock by reference to its face value and the exchange rate at the relevant time, and that he had done so on the basis of advice provided to him by the Solicitor-General. The respondent submitted that the Solicitor-General was not impartial, and that the Valuer-General should have sought and relied on independent advice. I have no reason to think that the Solicitor-General lacked impartiality, but I do not think it matters whether he was biased or not. In my view the approach taken by the Valuer-General was correct. At the relevant time, the respondent's interest in the debenture stock was worth £441, plus the value of any unpaid interest. The only appropriate way to value that stock was to convert its face value into Australian dollars according to the then exchange rate. That is what the Valuer-General did.
The respondent made submissions to me about arrangements that had been made to provide a fund for the acquisition or redemption of the EBR Company's debenture stock. He had information that very large amounts of money were placed in a trust account for that purpose. It may be that, as a result of uncertainty as to how much debenture stock was held by members of the public, far more money was set aside for the purpose of acquiring or redeeming that stock than was really necessary. In my view the value of the stock depends on the terms of the 1925 deed. The amount held in trust for the purpose of acquiring or redeeming that stock is of no relevance to the valuation of the respondent's stock.
The respondent relied on a letter dated 4 September 2009 from the Minister, Mr Sturges, to the companies in the Pacific National group. That letter concerned contractual arrangements for various matters, including the payment of debenture claims relating to the railway. In my view the actual or proposed contractual arrangements in relation to the sale of the railway have no bearing on the value of the debenture stock.
There was evidence that the Crown had offered the respondent substantially more money by way of compensation than it now suggests he should receive. I do not think any inference as to the value of the debenture stock should be drawn from that evidence. It was in the Crown's interests to make a generous offer in order to avoid the costs of litigation. The respondent gave evidence that he is a pensioner with no assets other than the debenture stock. It is therefore likely that, in the event of the Crown seeking and obtaining an order that the respondent pay its costs, it would never be able to enforce any such order. It follows that it was appropriate for the Crown to offer the respondent much more than his stock was worth, in order to resolve the matter and avoid further legal costs.
The respondent adduced evidence that the Crown Solicitor had provided a 26-page opinion in relation to the acquisition of the railway; that he had never seen that opinion; and that the Ombudsman had once said that something in that opinion was inconsistent with something said by the Crown Solicitor in correspondence with the respondent. I am not in a position to make a finding as to whether there was any such inconsistency. If there was any such inconsistency, that has no bearing on the approach that should be taken in valuing the respondent's stock.
Section 27(1)(a) of the Land Acquisition Act requires regard to be had to "the market value of the estate of the claimant in the subject land". The market value of the respondent's interest in the mortgage land cannot exceed the market value of his stock. In my view the market value of his stock cannot exceed the sum of its face value and any accrued interest as at the relevant date. The relevant date must be the date when the Crown acquired the property for which compensation is to be paid. Interest as from that date is payable pursuant to s47 of the Land Acquisition Act.
The respondent asserted that the unpaid interest on his debenture stock as at the date of the relevant acquisition was $441. That is not disputed by the Crown. The Crown asserts that $3,000 was a reasonable amount to allow for the time expended by the respondent in relation to his claim, pursuant to s27(1)(g) of the Land Acquisition Act. It may be that the respondent has spent a vast number of hours pursuing his claim. With all due respect to him, I consider that many of his ideas were misconceived, that much of his time has been wasted, and that it would not be reasonable to allow more than $3,000 under s27(1)(g).
For these reasons I accept all of the Crown's contentions as to how the respondent's compensation should be assessed, and assess his compensation as follows:
Face value of debenture stock at relevant date $795.50
Unpaid interest to that date $441.00
Compensation under s27(1)(g) $3,000.00
Interest to 17 June 2013 $655.25
Interest from then until today on $4,236.50 @ 3.42% per annum (10 days) $3.97
Total $4,895.72
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