State of Tasmania v Effingham Pty Ltd
[2005] TASSC 55
•19 July 2005
[2005] TASSC 55
CITATION: State of Tasmania v Effingham Pty Ltd [2005] TASSC 55
PARTIES: STATE OF TASMANIA
v
EFFINGHAM PTY LTDTITLE OF COURT: SUPREME COURT OF TASMANIA
JURISDICTION: ORIGINAL
FILE NO/S: M285/2003
DELIVERED ON: 19 July 2005
DELIVERED AT: Hobart
HEARING DATE: 10 – 13, 16 – 18 May 2005
JUDGMENT OF: Blow JCATCHWORDS:
Real Property – Resumption or acquisition of land – Compensation – Assessment and related matters – Injurious affection of other land – Pipeline easement through grazing property.
Land Acquisition Act1993 (Tas), s27(1)(e).
Aust Dig Real Property [361]REPRESENTATION:
Counsel:
Applicant: C J Delany SC, T J Williams
Respondent: M J Temple-Smith
Solicitors:
Applicant: Director of Public Prosecutions
Respondent: Temple-Smith BarclayJudgment Number: [2005] TASSC 55
Number of paragraphs: 65Serial No 55/2005
File No M285/2003
STATE OF TASMANIA v EFFINGHAM PTY LTD
REASONS FOR JUDGMENT BLOW J
19 July 2005
1 This is an application pursuant to the Land Acquisition Act 1993 ("the Act"), s42(1)(d), for the determination of the amount of compensation to be paid by the Crown in right of the State, as an acquiring authority, to the respondent with respect to certain acquisitions of land that the respondent owned, and of easements over other land still owned by the respondent. The respondent owns a rural property known as "Effingham" to the north-east of George Town. An underground natural gas pipeline has been constructed through its land. Pursuant to the Act, the Crown has acquired the following: (a) a small parcel of the respondent's land, comprising 3,503 square metres, which is now the site of a valve installation, about 400 metres inland from the shoreline of Bass Strait; (b) pipeline easements 20 metres wide and altogether about 5.6 kilometres long, running from the northern boundary of the respondent's property, which is very close to the shoreline of Bass Strait, through farmland, to the boundary of an adjoining property; and (c) access and services easements for the purpose of vehicular access to the valve site, and for the purpose of an underground anode bed. It is common ground that the respondent is entitled to compensation for the land, and interests in land, that the Crown has acquired. In most respects, the quantum of compensation has been agreed. However, the parties have been unable to agree on the amount of compensation payable for the "injurious affection" of the other land owned by the respondent, ie its remaining land, excluding the sites of the acquired easements.
2 The basis for determining compensation under the Act is set out in s27(1), the provisions of which include the following:
"27 (1) In determining compensation under this Act, regard is to be had to the following matters:
(a) the market value of the estate of the claimant in the subject land;
(b) … ;
(c) the damage caused by severance of the subject land from other land belonging to the claimant;
(d) the betterment of other land belonging to the claimant which is caused by the carrying out of, or the proposal to carry out, the authorized purpose;
(e) whether other land belonging to the claimant is injuriously affected by the carrying out of, or the proposal to carry out, the authorized purpose;
(f) any disturbance relating to any loss or damage suffered, or cost reasonably incurred, by the claimant as a consequence of the taking of the subject land; … ".
3 In s3 the word "land" is defined to include inter alia "any estate in the land"; the word "estate" is defined to include "any estate, interest, easement, right, title, claim, demand, charge, lien or encumbrance in, over, to or in respect of that land"; and the term "subject land" is defined as meaning "land acquired or being acquired under this Act". By s24(1), an owner of subject land whose estate in the land is taken under the Act, either wholly or in part, is entitled to compensation under the Act.
4 It is common ground that I should determine that the compensation to be paid by the Crown is to include the following:
(a)in respect of the estate in fee simple in the valve site parcel comprising 3,503 square metres, the sum of $367;
(b)in respect of the interests acquired by the Crown in the access and services easements, the sum of $965.50;
(c) in respect of the interests acquired by the Crown in the pipeline easements, the sum of $7,461; and
(d) in respect of disturbance, pursuant to s27(1)(f), the sum of $8,000.
It is also common ground that a further $21,000 should be paid to a partnership referred to at the trial as "the Archer partnership" as compensation for disturbance in accordance with s27(1)(f). When the parties agreed that the compensation to be determined in respect of the acquisition of the access and services easements was to be $965.50, they also agreed that the respondent was to transfer to the Crown an estate in fee simple in the sites of those easements without any further payment in respect of the land to be transferred.
5 It is common ground that the respondent became entitled to compensation on 10 November 2001. Entry on to the land first took place on that day, pursuant to an authorisation given under the Act, s54A. An entitlement to compensation therefore then arose under s24(5)(b)(ii). By virtue of s35(d), compensation in respect of the respondent's losses of estates in the relevant land is to be determined as at the day on which a person entered onto the land pursuant to an authorisation under s54A(2). I must therefore determine the amount of compensation payable by reference to land values as at 10 November 2001.
6 Before the acquisition of the valve site, Effingham comprised 2,471.3 hectares, made up of 12 contiguous parcels with separate certificates of title. The pipeline passes through four of those parcels of land. Two more of those parcels are adjacent to the pipeline easements. There are three access and services easements. The most significant one is over a strip of land 10 metres wide and 716.85 metres long, running approximately southerly from the valve site along the boundary of Effingham. A gravel road has been constructed along it. At the southern end of that easement, that road turns through a gate onto a property belonging to other people. It continues to a public road, Soldier Settlement Road, which links George Town and Beechford. A little north-east of the point at which the access road meets Soldier Settlement Road, another access and services easement, the site of the underground anode bed, passes through another parcel of the respondent's land for a total distance of about 148.3 metres. Part of it is 3 metres wide, and part of it is 6 metres wide. The other access and services easement runs south-west from the valve site for 55.82 metres. It is 3 metres wide. A plan showing the approximate location of the valve site and the easements, and the parcels of land that they pass through, is attached to these reasons.
7 Effingham is primarily a grazing property. The respondent has a large number of sheep on it, as well as some cattle. It has some forestry plantations to the west of the pipeline, on the land comprised in Certificate of Title Volume 43381 Folio 1. It has a mining lease over the land comprised in Certificate of Title volume 104545 Folio 1, which extends from the pipeline easement on its west side to Soldier Settlement Road on its east side. A company known as Boral is mining sand at a location on that parcel of land, and paying royalties to the respondent for the sand it extracts. The pipeline passes through pasture land for nearly all of the relevant 5.6 kilometres, but Effingham also includes significant areas of bush, where sheep are sometimes run during the winter.
8 For nearly all of the relevant 5.6 kilometres the pipeline is more than 1.2 metres below the surface of the ground. The pipeline easement is unfenced, and therefore does not impede the free movement of vehicles and stock. The ground surface has been rehabilitated following the laying of the pipeline. The location of the pipeline is marked by warning signs on posts along its length at intervals of no more than 500 metres. Such posts are installed at points where the pipeline changes direction, and at intervals along straight sections. Cathodic protection boxes have been installed at two points along the pipeline on the property. These are small metal boxes, at about chest height, on poles above the pipeline. They are used to conduct tests, using electronic equipment, to check on the integrity of the pipeline and its coating.
The approach to the determination of compensation for injurious affection
9 Under the Act, when an interest is acquired in land belonging to a claimant, but not in other land belonging to the claimant, and that other land is injuriously affected by the acquisition, the quantum of compensation for that injurious affection is to be calculated, and compensation awarded accordingly: s27(1)(e). If the carrying out of the authorised purpose leading to the acquisition has resulted in any betterment of any of the claimant's other land, or if the proposal to carry out the authorised purpose has resulted in any betterment of that other land, then the betterment of that other land must be quantified and the amount of the betterment set off against the compensation payable to the claimant: ss27(1)(d), 27(2). However, it is common ground that there has been no relevant betterment in this case. Under s33, various matters are required to be disregarded in the determination of compensation. I do not see any need to mention in these reasons any of the specific matters that I am required to disregard. My task is to assess the compensation payable in respect of the injurious affection to land owned by the respondent other than the valve site acquired from the Crown, and the land over which the Crown has acquired easements in respect of the injurious affection resulting from those acquisitions.
10 The compensation to be assessed is for the effects on the respondent's other land of "the carrying out of, or the proposal to carry out, the authorized purpose": s27(1)(e). It is common ground that the "authorized purpose" is the major infrastructure project specified in the Major Infrastructure Project (Natural Gas Project Northern Pipeline Extension) Order 2000. That project is, of course, the pipeline project.
11 Compensation has to be assessed having regard not only to the value of any land acquired, and of any interest in land acquired, but also to the damage caused by the exercise of statutory powers by the acquiring authority that has injuriously affected the remaining land of the respondent: Marshall v Director General, Department of Transport (2001) 205 CLR 603. In that case at 626, McHugh J said the following (omitting footnotes):
"Injurious affection does not include damage resulting from the act of severing the land. That is a separate head of damage. But it includes any other injurious consequence, resulting from the exercise of a statutory power, which depreciates the value of or increases the cost of using the 'other land'. If the exercise of the power limits the activities on or the use of that land, interferes with the amenity or character of the land, deters purchasers from buying the land or makes it more expensive to use the land, the claimant is entitled to compensation for injurious affection."
12 The leading Australian case on the assessment of compensation in respect of compulsory land acquisitions is Spencer v The Commonwealth (1907) 5 CLR 418. In that case, Griffith CJ said the following, at 432:
"In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."
13 Barton J said the following, at 436 – 437:
"… a claimant is entitled to have for his land what it is worth to a man or ordinary prudence and foresight, not holding his land for merely speculative purposes, nor, on the other hand, anxious to sell for any compelling or private reason, but willing to sell as a business man would be to another such person, both of them alike uninfluenced by any consideration of sentiment or need."
14 The appellant in that case was entitled to compensation based on the value of the acquired land as at 1 January 1905. Isaacs J said the following, at 440 – 441:
"The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted. The plaintiff is to be compensated; therefore he is to receive the money equivalent to the loss he has sustained by deprivation of his land, and that loss, apart from special damage not here claimed, cannot exceed what such a prudent purchaser would be prepared to give him. To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be 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."
15 The approach to be taken when determining compensation in respect of the acquisition of an easement was considered by the Land Appeal Court in Brisbane in Joyce v Northern Electrical Authority of Queensland (1974) 1 QLCR 171, in which Staple J said the following:
"The principles to be applied in the compulsory taking of an easement are no different from those applying when the full fee simple is taken. This Court must restore, as best it may, the claimant, in money form, to the position which he enjoyed prior to the taking of the easement. For practical purposes it becomes a matter of assessing the extent to which he has been disadvantaged as the natural and reasonable consequence of the taking of the easement.
The test is the attitude of the hypothetical prudent purchaser and the extent to which in the opinion of such a person the claimant has suffered diminution in the value of his property resulting from the erection of the transmission line over his land, the creation of the easement including where appropriate severance and injurious affection damage."
Those paragraphs were cited with approval by Jacobs J in Longeranong v Electricity Trust (SA) (1990) 55 SASR 493 at 497.
16 Both of those cases concerned the acquisition of easements for power lines. In Longeranong, the acquiring authority sought to rely on evidence of agreements reached between it and 160 different landowners for the payment of compensation in respect of easements acquired for the same power line. At 504, Jacobs J said:
"The fact is that ETSA has struck the best negotiated settlement possible with each landowner, but it by no means follows that they have received full compensation in terms of the Act. That has never been put to the test, for the very obvious reason that, faced with the threat of compulsory acquisition and the prospect of fighting a disputed claim, most landowners have accepted ETSA's best offer rather than incur the trouble and expense of a contest which, as in this case, far exceeds the uncertain benefit by way of increased compensation."
17 I understand that a planning corridor has been declared in respect of the pipeline pursuant to the Gas Pipelines Act 2000, s70B(1). The effect of such a declaration is that the local council, in its capacity as a planning authority, must give the pipeline licensee notice of any application for a permit relating to the development or use of land within 350 metres on either side of the pipeline corridor, and is restricted in the granting of permits. However, by virtue of the Gas Pipelines Act, s70G(2), the declaration of the pipeline planning corridor over the respondent's land "does not constitute injurious affection of that land or any other land for the purposes of the Land Acquisition Act 1993".
18 In assessing the compensation for injurious affection, it is necessary to distinguish the direct effects of the acquisition of the easements relating to land within the easement corridors from the less direct effects of the acquisitions on land adjacent to the easement corridors. For example, there was evidence that cattle like to rub against the marker posts on the pipeline easement corridor, and that their movements in the immediate vicinity of the marker posts tend to result in soil erosion. Since the soil erosion affects only the easement corridor, it cannot be the basis for a claim for compensation for the injurious affection of adjacent land. I think it would be fallacious to treat this problem as requiring steps to be taken in relation to stock management on the adjacent land since there is no evidence that the taking of any such steps on the adjacent land is necessary or appropriate.
The terms of the instruments creating the easements
19 Under the Land Titles Act 1980, s169C, a person may lodge with the Recorder of Titles a memorandum containing provisions which are intended for inclusion in dealings and instruments to be lodged subsequently for registration. Under s169D, a dealing or instrument lodged with the Recorder may then incorporate the provisions contained in such a memorandum. Those sections have been availed of by the Crown in relation to the easements acquired by it for the purposes of the natural gas pipeline project. Each of the pipeline easements acquired by it over lands of the respondent were in the terms of Memorandum of Provisions registered no 225. Subsequently, it was agreed between the parties that the Crown would make application to the Recorder of Titles to substitute a different Memorandum of Provisions, no M261, and that the assessment of compensation should be based upon M261 in place of M225. The rights conferred, or purportedly conferred, on the Crown pursuant to M261 are not as great as those conferred, or purportedly conferred, by M225. I will assess the compensation for injurious affection on the basis that the respondent has waived any entitlement that it had in respect of rights that the Crown would not have acquired if the easement had originally been in the terms of Memorandum of Provisions M261.
20 To make matters more complicated, the authors of both M225 and M261 appear to have had inaccurate and inflated ideas as to the rights and liabilities that can be created upon the acquisition or granting of an easement. The rights acquired by the Crown must be limited by the terms of the notice to treat served on the applicant under the Act, s11, and by the notice of acquisition gazetted under the Act, s18. In relation to the pipeline easements, each of those notices referred to "An easement in the terms of Memorandum of Provisions registered No M225 over the land shown as Gas Supply Easement '2', '3', '4', '5' and '6' 20.00 metres wide on Plan of Survey P137000 the same being portion of the land comprised in Folio of the Register Volume 104543 Folio 1, Volume 104543 Folio 2, Volume 104545 Folio 1 and Volume 107403 Folio 1." However, Memorandum of Provisions M225 purported to confer rights on the grantee, its operators, contractors, servants and so forth, not just in respect of the easement corridor 20 metres wide, but in respect of the whole of the land comprised in each folio of the register upon which an easement adopting its terms is registered. I am inclined to think that the Crown could not have acquired any rights over any land in the four certificates of title referred to in the relevant notices other than the strips of land 20 metres wide burdened by the pipeline easement. That question has become academic for me, since Memorandum of Provisions M261 did not purport to grant rights over the whole of the land in every certificate of title upon which a pipeline easement was registered. However, as will be seen, the purported scope of M225 is relevant to my assessment of the evidence of a valuer who gave evidence at the trial.
21 Both M225 and M261 purport to restrict the use of land by the registered proprietor. The purported restriction does not apply to the whole of the land in each affected certificate of title, but only to that part of the relevant land that is shown on the relevant registered plan as "Gas Supply Easement". Each memorandum relevantly provides as follows:
"4 Restriction on Use by the Registered Proprietor of Gas Supply Easement
The following restriction on the use of the Gas Supply Easement is appurtenant to, and annexed to, the Gas Pipeline Right for the Grantee's benefit:
The Registered Proprietor must not and must not permit any person to:
•excavate, plough or drill or otherwise penetrate the surface of the soil within the Gas Supply Easement below a depth of 30cm, except as authorised in writing by the Grantee, which authorisation must not be unreasonably withheld; or
•install or erect, or permit to be installed or erected, on, under or over the Gas Supply Easement, any pit, well, foundation, pavement or other structure, installation or improvement without the written approval of the Grantee, which approval must not be unreasonably withheld; or
•plant any trees within the Gas Supply Easement without the authorisation of the Grantee which authorisation must not be unreasonably withheld.
Nothing herein contained shall prevent the Registered Proprietor from using the Gas Supply Easement provided that such use does not derogate from this grant or, in the opinion of the Grantee, compromise the safe and lawful operation of the Assets."
22 I am inclined to think that, when an easement is granted or acquired, the owner of the dominant tenement obtains rights to use the servient tenement or part thereof, but that a restriction on the use of a piece of land by its owner is something different from an easement, and cannot be imposed by the granting or acquisition of an easement. If I am right, the provisions that I have quoted are of no effect at all. However, that issue is academic since it relates only to the strips of land 20 metres wide, and the parties have agreed upon the compensation to be paid in respect of the acquisition of the easements over those strips of land.
23 However cl 2(d) of Memorandum of Provisions M261 is potentially relevant to the injurious affection claim. It purports to confer a right to compensation on the registered proprietor. It provides as follows:
"2 Conditions
The Gas Pipeline Right is subject to the conditions that:
…
(d)If after the finalisation of the quantum of compensation in respect of the acquisition of this Gas Pipeline Right under the Land Acquisition Act 1993:
(i) the Grantee in replacing, relocating or enhancing the Assets or any part thereof, causes damage or occasions the Registered Proprietor financial loss, the Grantee must compensate the Registered Proprietor for such damage or loss to the extent that the damage or loss has not been made good or otherwise compensated;
(ii) without limiting sub-clause (i) financial loss includes financial loss suffered by the Registered Proprietor by reason of destruction of or damage to crops."
24 No doubt the terms of an easement can be worded so that the rights conferred upon the owner of the dominant tenement are conditional rather than absolute. Thus, cl 2(d) must have the effect of making the right to use the pipeline conditional upon the grantee complying with the requirement to pay compensation if the grantee causes damage or occasions loss as contemplated by that clause. It would seem, however, that if the grantee caused damage or occasioned loss as contemplated, and did not pay compensation, the registered proprietor would have no contractual or statutory right to sue for compensation, but the grantee would lose the right to use the pipeline, and the registered proprietor would have the right to apply for an injunction to restrain the use of the pipeline. If the pipeline operator, in replacing, relocating or enhancing anything within the boundaries of the pipeline easement, causes damage to the respondent's other land or anything belonging to the respondent on its other land, the respondent would almost certainly have a remedy in tort. It would therefore seem that the scope of the rights conferred by cl 2(d) is of no real significance in relation to the assessment of compensation for injurious affection.
The safety issue
25 One of the issues at the trial was whether the value of Effingham was affected by a risk that the pipeline would leak, rupture or explode, resulting in injury or death. The pipeline has been constructed using the highest strength steel in common use in the world. The sections of pipe have been welded together, with the result that the pipeline is stronger at the welds than between the welds. The standard operating pressure inside the pipe is 15.3MPa, whereas the minimum yield strength of the steel that has been used is 482MPa. It has been constructed so as to comply with the applicable Australian Standard, AS2885. If an excavator with a working mass of 30 tonnes were to pass over the pipeline, it would not be able to puncture the pipeline. It is buried for its protection. It is inspected regularly by employees of the pipeline operator, Alinta Network Services Pty Ltd ("Alinta"), both from a helicopter or light aircraft at an altitude of about 700 ft once per month, and by using a 4-wheel drive vehicle once per year. The Alinta employees check for erosion, subsidence, fallen or broken marker posts, and any matters that might involve a risk to the pipeline. It is also proposed that the pipeline authority will undertake a process known as "intelligent pigging" about once every five years. That process involves sending a sophisticated and mysterious piece of electronic equipment through the pipeline over its full length for the purpose of inspecting it from within. Under the Gas Pipelines Act, s90(1), it is an offence to carry out any boring or excavation in or on the pipeline easement without authority from the pipeline operator. Permission is not needed for hand excavation, ploughing or cultivation down to a depth of 30 centimetres: Gas Pipelines Regulations 2002, reg23.
26 It is the policy of the pipeline operator to liaise with landowners along the route of the pipeline in order to maintain good relationships with them and ensure that there is no threat to the pipeline or its safety. This involves undertaking site visits whenever appropriate. Landowners have been provided with a telephone number for a "Dial Before You Dig" service. Calls can be made to that number during normal business hours. An out of hours emergency contact number has also been made available to landowners. Permission for excavation can be sought either through the "Dial Before You Dig" service or through Alinta's Launceston office. It is the policy of Alinta to respond promptly to telephone requests for permission to undertake excavations. There is of course some risk that Alinta's policies might not be implemented successfully, and some risk that they might not be adhered to assiduously in the long term, perhaps, for example, if there is a change of operator after all the outstanding claims for compensation by landowners have been resolved. One of the directors of the respondent gave evidence of having telephoned the "Dial Before You Dig" service and having spoken to a person who was unable to understand simple information as to where Effingham was. However a telephone call to Alinta's Launceston office resulted in a sensible and prompt response.
27 In the event of the pipeline being ruptured and escaping gas being ignited, any unprotected person within 250 metres might be killed. However, the engineer who chairs the Standards Australia sub-committee responsible for that part of AS2885 that deals with the design and construction of gas and liquid petroleum pipelines, Mr Venton, gave evidence to the effect that the probability of such a catastrophe occurring is "less than unlikely" and "practically hypothetical". I accept that evidence. In my view, the risk of injury or death resulting from the escape of gas at Effingham is so slight as to be immaterial. It would be wrong to attribute to the hypothetical purchaser a fear of the pipeline resulting from ignorance as to how safe it is since, to use the words of Isaacs J in Spencer (supra) at 441, the hypothetical purchaser must be supposed "to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value".
28 There was no evidence of the respondent having to pay higher insurance premiums as a result of the presence of the pipeline.
The occupational health and safety issue
29 The respondent relied on expert evidence from an occupational health and safety ("OH&S") consultant, Mr Shorter. In the past, the respondent has not had a formal OH&S programme. Mr Shorter's stated opinions were that, because of safety risks associated with the pipeline, the respondent should implement and continue formal OH&S management systems, and that the reasonable cost thereof would be, according to his calculations, $15,647.52 in the first year and $9,401.30 in each subsequent year. The respondent did not claim by way of compensation a lump sum sufficient to cover such expenditure in perpetuity. Instead it contended that such expenditure was required, and would continue to be required; that a hypothetical purchaser would take the need for such expenditure into account in determining how much he or she would be prepared to pay for the property; and that compensation ought to be assessed accordingly.
30 The applicant adduced expert evidence in relation to the OH&S issue from a chartered professional engineer, Adjunct Professor Viner. His views were very different from those of Mr Shorter. He noted the requirement that there be no excavations on the pipeline easement below a depth of 30 centimetres without authorisation by the pipeline operator, and said it was excessive to consider that a "system" was needed to ensure that that obligation was satisfied. He said that the respondent's obligations could be satisfied by showing any new worker the pipeline easement and its markings, explaining the width of the easement, and explaining the nature of the restriction on excavation with reference to such tasks as fence post driving, hole digging, trench and drain digging, and so forth. He said that any farming operation should have some formal approach to managing safety and health in the farm operations, but that the costs of making additions to such a system to take account of the pipeline would be so minor that they would hardly warrant consideration. He said that if a written OH&S plan already existed, perhaps half an hour's work would be needed, at most, to make modifications to an induction checklist, and that the added time required to explain the pipeline to a new employee could be five minutes in the course of a farm familiarisation tour. He said a similar amount of time might be needed to provide explanations to existing employees.
31 I prefer the evidence of Professor Viner to that of Mr Shorter, for a number of reasons. For one thing, Professor Viner is much better qualified. He is an experienced consulting risk engineer, with a special interest in OH&S management systems, holding academic positions at two universities. Mr Shorter's background is not in engineering but in human resources. He completed a graduate diploma course in occupational health practice in 1993, and provides consultancy services in relation to OH&S, human resources, and industrial relations.
32 More significantly, I think that Mr Shorter had an unrealistic view as to the likelihood of the pipeline being damaged, that he took an unrealistic view as to the number of hours that would be required for the respondent's management and employees to be trained in relation to safety issues concerning the pipeline, and took a wholly unrealistic approach to the quantification of the cost of OH&S measures relating to the pipeline. He considered that there was a risk of inappropriate underground agricultural activities being undertaken within the easement corridor, and a possibility of mining excavation being undertaken in the vicinity of the pipeline. He thought the possibility of a threat to the pipeline was "certainly higher than hypothetical". He provided detailed calculations showing how he arrived at his figures. They reveal that he allowed for hundreds of person-hours each year to be spent by management, employees, contractors and consultants in attending courses, undertaking training, undertaking supervision, inspecting the easement, taking advice, liaising with the operating authority, and so forth. However Effingham does not have a large workforce. The farm workforce comprises two brothers named Archer who are directors of the respondent company, two family members who work as casual farm hands when required, another casual farm hand, a woman who does administrative work, and a man who spends most of his time running another property owned by the respondent at Weymouth. This workforce is small and stable. New employees come to the property infrequently. The idea that the Archer brothers should spend hour after hour speaking to the employees and emphasising the dangers of digging near the pipeline is unrealistic in the extreme. To make matters worse, Mr Shorter double counted, first allowing at hourly rates for the time of the Archer brothers and company employees to attend training programmes and so forth, and then allowing for the cost of replacement workers at a rate of $18.97 per hour. This double counting alone results in him having allowed $4,617.32 too much in the first year and $3,623.27 too much in each subsequent year.
33 The evidence of Professor Viner, unlike that of Mr Shorter, was completely consistent with common sense. The land not directly burdened by the pipeline easements has been injuriously affected by the need to take OH&S precautions, and those precautions involve not just acquainting individuals with the appropriate safety restrictions but also the reinforcement of their knowledge. However the amount of time that the management and employees of the respondent or any subsequent landowner will need to spend attending to OH&S issues is minimal.
Significant causes of injurious affection
34 The land retained by the respondent outside the easement corridors has been injuriously affected by the acquisition of the valve site and the easements in various respects. One such effect concerns OH&S, which I have just dealt with. The others are as follows.
Visual impact
35 The two carthodic protection boxes, the various marker signs, and the valve site installation are all visible from considerable distances. To a degree, their presence spoils the appearance of the respondent's pasture land. The valve site is the ugliest and most prominent feature. That site was excised from the land comprised in Certificate of Title Volume 104543 Folio 1, which originally comprised 161.88 hectares. That parcel has a frontage onto the "Crown reservation" along the shore of Bass Strait, though the water is not visible from most of that land because of coastal sand dunes. If the respondent ever wished to sell that parcel as a rural residential property or hobby farm, the visibility of the valve site might have a significant detrimental effect on the sale price. One of the valuers called by the applicant, Mr McNamara, took the view that farming might soon cease to be the highest and best use of that property.
Sound and smell
36 At the valve site, there is sometimes a very faint smell of gas, and a very faint hissing sound. Apparently gas is intermittently discharged into the atmosphere there, but the rate of discharge would not be sufficient to sustain a small pilot light. In my view, these factors have no significant impact on the amenity of the surrounding land.
37 The monthly inspection of the pipeline from the air is no doubt noisy, given that it is normally conducted from a helicopter at an altitude of about 700 ft, but the noise is unlikely to last for long.
Security
38 Because a gravel road has been constructed from Soldier Settlement Road to the valve site, there is some chance that trespassers may enter the respondent's property by that route. That would not be easy at the moment, since it would be necessary for those trespassers to pass through a number of gates that are kept chained and padlocked. I do not think that road significantly increases the risk of trespassers coming on to the property at present since there is another roadway, with no closed gates, leading from Soldier Settlement Road to the Boral sand mining site, and a side road leading from it westwards across the property to the respondent's tree plantations. Those roads can be used by trespassers without any impediment. Further, there is a chance that individuals associated with the pipeline operator might leave the easement and trespass on the respondent's property. It follows that, because of the new road to the valve station and because of the need for people to go to the valve station and to go onto the easement, there is some increased risk of trespassing, some increased risk that trespassers will steal or cause damage, and a chance that the respondent's workers will need to investigate the presence of individuals unexpectedly seen on the property.
Privacy
39 The Effingham homestead is about 450 metres from the pipeline. Before the construction of the pipeline there was little reason for anyone other than the respondent's directors, employees and contractors, and the directors' and employees' families, to be on the property. As a result of the pipeline being there, some 36 visits per year need to be made to the valve site; there are the monthly aerial and annual vehicular inspections that I have referred to; and workers will need to come onto the easement for various other purposes at irregular intervals. For example, workers will need to come to a point quite near the homestead to construct a culvert over a creek in the near future. The presence of workers undertaking tasks related to the pipeline is likely to be more disruptive during lambing and calving than at other times.
Contamination
40 Whenever a visitor, or a visiting vehicle, comes onto Effingham for purposes connected with the pipeline, there is some risk that weeds, plant diseases, or stock diseases might be spread as a result. I regard those risks as minimal. Some of the sheep on Effingham already have footrot, but if the footrot were eradicated, there would be a risk that footrot might be brought back to the property by someone visiting on business associated with the pipeline. Effingham already has a number of visitors with no connection to the pipeline, including workers at Boral's sand mining operation, truck drivers who travel to and from the sand mining site, truck drivers who travel to and from the forestry plantations, and contractors who come to the farm on business. The additional risk posed by the introduction of visitors connected with the pipeline is therefore marginal, and quite small.
Digging near the easement
41 In the ordinary course of the respondent's farming operations, there are various situations in which the soil below a depth of 30 centimetres is disturbed. Drains and pipes are installed. Dead animals are sometimes buried. The deep ripping of pastures is occasionally undertaken. The restriction of these activities within the boundaries of the pipeline easements had to be taken into account in assessing compensation under s27(1)(a) for the acquisition of those easements, and therefore cannot be taken into account again in assessing compensation under s27(1)(e) in respect of the injurious affection of the respondent's land outside the 20-metre easement corridor. However, reasonable prudence and caution require the respondent not to engage in such activities near the easement because there is a risk that such activities might inadvertently or unintentionally extend onto the easement corridor. In that way, the acquisition of the pipeline easements has resulted in the injurious affection of the respondent's adjacent land, and an entitlement to compensation under s27(1)(e).
42 Generally speaking, the pipeline does not run along the centre of the easement corridor, but is a few metres off-centre. As a result, the strip of land within which it would be imprudent to engage in activities disturbing the soil below a depth of 30 centimetres is greater than it otherwise would be.
43 Such activities will normally be permitted on the easement by the pipeline authority. The applicable restrictions will normally result only in a need to obtain permission, and a need for supervision, rather than a prohibition. Since the acquisition of the easement, the respondent has installed a drain and a pipeline across the easement with the permission of the pipeline operator. However there remains a possibility that future drains or pipes might have to follow a less direct course than they could have if there had been no natural gas pipeline.
Heavy machinery
44 There are of course some machines that are so heavy that it would be unsafe to move them across the pipeline, at least without the supervision of appropriately qualified engineers. For example, an excavator weighing over 30 tonnes would require special precautions. It can therefore be said that the ability of the respondent to use very heavy machinery on the land outside the pipeline easement corridor has been injuriously affected. It is also significant that special precautions would need to be taken if a heavy vehicle of any sort became bogged in the vicinity of the pipeline.
Restriction on mining
45 The original mining lease expired on 10 April 2002. It appears that the relevant Minister decided to renew it, but to include a condition requiring mining and associated activities not to be undertaken within 100 metres of the pipeline without the approval of the pipeline operator. Boral's present site is about a kilometre from the pipeline. The sand on the relevant parcel of land is not of uniform quality. If it were, it could be mined for many years without any need to go within 100 metres of the pipeline. Further deposits of good quality sand have not yet been located on the relevant parcel. It is possible that, in years to come, the deposit of high quality sand presently being mined will become exhausted, the demand for such sand will continue, and deposits of it will only be found near the pipeline. However, I do not consider that to be a particularly likely scenario. The pipeline passes through pasture along the western boundary of the parcel in question. If the western 100 metres of the parcel were found to include a valuable sand deposit not replicated elsewhere, the respondent might be reluctant to mine it because of the impact on its pastures.
Fencing
46 A number of gates have been installed in the respondent's boundary fences in order to permit access to the easements. As a result, the respondent and its successors in title will have to maintain strainer post systems and gates where, but for the acquisition of the easements, it would have been necessary to maintain only an uninterrupted fence line. The pipeline operator should of course contribute to the maintenance of fences and gates, but the landowner will need to liaise with the pipeline operator, and will have to do any work that, rightly or wrongly, the pipeline operator is unwilling to undertake.
The blot on the title
47 It is common ground that the mere fact that an easement is recorded on each of the certificates of title in question is likely to have an adverse impact on the market value of the affected parcels. For example, if a hypothetical purchaser has a number of properties with similar attributes to choose from, he or she is likely to prefer one not burdened by a pipeline easement to one that is, all other things being equal. That is likely to have an effect on the price or value of the affected property. This could be quite significant, since many farmers enjoy autonomy, and might be put off by the thought of having to liaise with a pipeline operator in relation to farming activities.
The expert evidence of the valuers
48 The respondent adduced expert evidence from one valuer, Mr Harrison. The applicant adduced expert evidence from two valuers, Mr McNamara and Mr Grant. I will deal with the evidence of the three valuers in that order.
Mr Harrison
49 Mr Harrison has been a registered valuer since 1980, and has expertise in the valuation of rural properties. In a report annexed to an affidavit that he swore on 5 April 2004, he expressed the opinion that the amount of compensation that should be allowed for the injurious affection of the balance land retained by the respondent was $110,846. It was his opinion that the balance property had depreciated in value by a sum of $20 per hectare. His figure of $110,846 represented depreciation in respect of 5,542.3 hectares at $20 per hectare. It was subsequently pointed out that the land that comprised 5,542.3 hectares included not only the properties of the respondent, but also properties comprising over 3,000 hectares belonging to members of the Archer family. Because of the wording of the Act, s27(1)(e), compensation for injurious affection is payable only in respect of "other land belonging to the claimant". The land not owned by the respondent therefore had to be disregarded. Subsequently, in an affidavit sworn on 29 September 2004, Mr Harrison expressed the opinion that injurious affection had reduced the value of Effingham by approximately $100,000 to $110,000. He said that he had arrived at the figure of $20 per hectare in the report annexed to his first affidavit by first forming the opinion that the appropriate sum for injurious affection would have been between approximately $100,000 and $110,000, and that he had then divided that figure by "the total area of the affected land". He said he had accepted that the titles that were significantly affected by the presence of the pipeline would be those through which it travelled, together with two "adjoining titles", referring to two parcels that are adjacent to the pipeline easement. On that basis, it was argued that the inclusion of 3,000 hectares of additional land in his calculation by mistake made no real difference to the quantum of compensation.
50 Mr Harrison's opinion was based on an assumption that the pipeline easement would be fenced. He said that the respondent's managing director wished the easement to be fenced. He said that not fencing the easement would result in management problems being accentuated, with the result that the injurious affection would increase by approximately $40,000. On that basis, the respondent's claim in respect of injurious affection is for $140,000 to $150,000.
51 In my view, fencing the pipeline corridor would be a waste of money, and would do more harm than good. The property is a grazing property. For practically all of its route through Effingham, the pipeline passes through open grazing land. Fencing it would prevent the free movement of stock, farm workers, and farm vehicles. Workers would have to move stock on and off the easement corridor whenever it was used for grazing. Fences and gates would need to be maintained. The fences might be regarded as spoiling the landscape. Fencing would serve no purpose other than defining the boundaries of the easement corridor, thereby reducing the risk of pipeline workers straying off the corridor, and of farm workers digging illegally within the corridor. It appears from Mr Harrison's evidence that one of the respondent's directors wanted him to prepare a report based on the assumption that the easement would be fenced, and that he obliged, and proceeded accordingly. Mr Harrison gave evidence that the cost of fencing the easement would have been about $115,000. Even if, as he asserted, the additional injurious affection resulting from not fencing the easement would have equated to $40,000, fencing the easement would have been financially impractical.
52 In June 2002 Mr Harrison provided a valuation of part of Effingham to a mortgagee. Apparently the mortgagee had an interest in 10 of the respondent's 12 parcels of land, comprising 2,116.39 hectares of the company's 2,471.3 hectares. The valuation related to those 10 parcels, and not to the respondent's two southernmost parcels, ie those comprised in Certificates of Title Volume 43382 Folio 1 and Volume 229788 Folio 1. In that valuation, Mr Harrison wrote the following:
"We note that Duke Energy have an easement through four (4) of the titles involved. Until such times as the Schedule of Easements are released we can not determine the total impact of the acquisition. We would suggest that due to the location of the easement and the current use of the property as a grazing property that no significant problems will occur, which will not be compensated for in the final claim. An estimate of the maximum damage in our opinion at this stage is $100,000 depreciation in the assets."
53 The respondent had been served with a notice to treat that referred to Memorandum of Provisions M225 prior to Mr Harrison providing that valuation, but it is possible that he was not aware of the terms of that memorandum. The notice of acquisition was gazetted on 24 July 2002. On 20 August 2002 Mr Harrison prepared a report containing an assessment of the compensation payable to the respondent at $482,000. That figure included a component of $300,000 in respect of the rights of access over the whole of the land comprised in the affected certificates of title in accordance with the terms of Memorandum of Provisions M225. Even if Mr Harrison became aware of M225 only after providing the mortgagee with the valuation of June 2002, the approach taken in his report of August 2002 is inconsistent with his comment that "due to the location of the easement and the current use of the property as a grazing property … no significant problems will occur".
54 In my view, Mr Harrison's report significantly overstated the adverse effects of the pipeline easement relating to security risks, disease risks, and the loss of privacy. He took into account the possibility of problems in relation to the introduction of centre pivot technology, when its introduction was not contemplated and not likely to be. A comparison between his evidence and the security valuation of June 2002 suggests that he has seriously exaggerated various impacts of the pipeline. The report attached to his affidavit of April 2004 suggested that he had arrived at a compensation figure expressed in dollars per hectare on the basis of his professional expertise, and then multiplied by the number of hectares, but his subsequent evidence revealed that the report was misleading in that regard, and that he had apparently arrived at a gross figure on the basis of intuition, converted that figure to a figure per hectare, and dressed the figures up to look as if he had undertaken a more professional calculation. He made an elementary mistake by taking into account land not belonging to the respondent. His evidence as to greater injurious affection resulting if the pipeline is not fenced simply does not bear scrutiny. For all of these reasons, I regard his opinion on the critical question of what compensation should be paid for injurious affection to be unreliable.
Mr McNamara
55 The first of the valuers to give evidence for the applicant, Mr McNamara, has very impressive credentials. According to his evidence, the compensation to be paid for injurious affection should be $27,000, made up as follows:
Pipeline easement (five affected titles)
$14,000
Pipeline easement (two adjacent titles)
4,000
Access and services easements
1,000
Valve site (visual effect, noise and smell)
8,000
Total
$27,000
56 Mr McNamara undertook a very thorough investigation of any evidence that could conceivably have assisted him in determining what diminution in value, if any, was evident in relation to sales of properties affected by similar pipeline easements. He identified 56 sales of properties through which the pipeline passes. He selected eight such sales that had some degree of comparability in his view. He analysed them with a view to identifying any perceivable impact of the pipeline. He formed the view that the sales evidence was inconclusive. He said, "… it generally reflects, at worst, a minor detriment to value. There is obviously no fearsome effect." His investigations were so thorough that he was criticised at the trial for taking into account information that was said to be irrelevant or only of the most peripheral relevance. In my view, writing a report as to the compensation that should be paid to the respondent for injurious affection was a difficult task for any valuer. I do not think Mr McNamara should be criticised for having been unduly thorough.
57 However, there is one aspect of his evidence that causes me to have very serious reservations about his conclusions. Although he prepared a report that was lengthy and apparently very thorough, the true reasoning behind his conclusions as to the quantum of compensation for injurious affection did not emerge until he was cross-examined. He gave evidence to the following effect. He was retained to advise as to the compensation payable in respect of a very large number of acquisitions relating to the pipeline project. He thought it appropriate to be consistent. The only published material he had ever seen concerning a gas pipeline related to a pipeline that was constructed from the Moomba natural gas field in South Australia to Sydney. When that pipeline was built, compensation was paid to landowners on the basis of a formula relating to the length of pipeline passing through each property. He therefore advised on a similar basis in relation to the Tasmanian pipeline. Ordinarily he used a figure of about $1,000 to $2,000 per kilometre. He adopted a higher figure in relation to Effingham because "the land was a bit more sensitive". Ordinarily he varied the rate per kilometre depending upon the degree of injurious affection. In most cases other than the southern ones, he used a figure of about $1,000 per kilometre. He believed that to be a fair approach.
58 It seems logical to me that, where a pipeline easement is concerned, compensation for injurious affection should be assessed on the basis of a rate per kilometre. Only the land in the immediate vicinity of the pipeline easement is likely to be significantly affected. The extent of any injurious affection is likely to bear little proportion to the total area of the land owned by a claimant. However, I have difficulty in forming any judgment as to the reasonableness or otherwise of the rates per kilometre adopted by Mr McNamara. He gave no evidence as to the rates per kilometre paid in respect of the Moomba pipeline. None of the other valuers has had an opportunity to comment on the rates selected by him. The evidence as to what other landowners were prepared to accept is likely to reflect their desire not to have to fight for more money, rather than the appropriateness of the amount agreed to. The situation is similar to that in Longeranong (supra). I understand there are many more landowners who have not yet settled their compensation claims in respect of acquisitions relating to the pipeline.
59 I have no criticism of Mr McNamara's evidence concerning the access and services easements and the valve site. The figure of $1,000 in respect of the injurious affection resulting from the acquisition of the access and services easements appears to be a reasonable nominal figure. His figure of $8,000 in respect of the valve site took into account its visual impact, smell and noise, as well as the fact that workers will have to have access to it from time to time. He also took into account the possibility that, because of its proximity to Bass Strait, the highest and best use of the land around the valve site might change. He foresaw the possibility that Effingham's 12 titles might be sold off separately, not as agricultural properties, but as rural residential or tourist properties. I infer that he thought such a change of use might affect the value of the land.
Mr Grant
60 Mr Grant has been working as a valuer since 1980. He is employed by the applicant, but I think he retained professional objectivity throughout his evidence. His expert opinion was that the compensation that should be paid to the respondent for injurious affection is $47,300. He prepared a report that included detailed "before and after" valuations, ie valuations of Effingham as at 18 November 2001 before and after the applicant's acquisitions. These valuations comprised separate figures for the improvements (farm buildings and two houses), and a series of separate figures for areas of vacant land, divided according to the type of land and according to location. He made no allowance for the diminution in value of Effingham as a result of injurious affection except in relation to vacant land on the north-west side of Soldier Settlement Road. He divided that land into five different categories according to the type of land. He arrived at a value per hectare for each of those types of land before the injurious affection, and a second set of figures representing values per hectare after the acquisition. The diminution in value varied between 4 per cent and 5.33 per cent, according to the type of land. The result was a diminution in value of $47,300 that was attributable to injurious affection.
61 It has been said that the assessment of compensation using "before and after" valuations is an unsuitable method "when the compensation is small as compared with the value of the affected property because a slight error in either valuation might affect the compensation to a considerable degree": Longeranong (supra) at 498. However I do not think Mr Grant can have fallen into error through using such an approach since he arrived at "before and after" figures for 10 separate areas of vacant land, each of the two houses, and the farm buildings, including values per hectare, "before and after", for each of the 10 areas of vacant land. He gave the same thought to the diminution of value to particular areas of land as would have been given by a valuer not adopting a "before and after" approach. It is true that there is an artificiality to his calculations, but the same can be said of the calculations of both Mr Harrison and Mr McNamara. It was submitted that Mr Grant is not an agronomist, and is therefore not in the best position to categorise different areas of farmland according to quality for valuation purposes. It was also submitted that, as a government valuer, he is not in as good a position as Mr Harrison to know how the notional hypothetical purchaser might think. Whilst his experience and knowledge are limited in those respects, I have no reason to doubt his overall reliability.
62 In my view Mr Grant ought to have made some adjustment to the value of the principal homestead on the property to take account of the loss of domestic privacy resulting from workers needing to have access to the pipeline easement, and to take account of the noise occasioned by the monthly aerial inspections. Despite that shortcoming, I regard his opinion as to the quantum of compensation for injurious affection as more reliable than the opinions of Mr Harrison and Mr McNamara as to that subject.
Conclusion
63 A judge assessing compensation is not obliged to accept the valuation of one expert witness, but is entitled to "arrive at a figure or figures which constitute a modification or modifications of the figures submitted by one or more valuers": Doherty v Commissioner of Highways (1974) 7 SASR 57 at 83. See also Anthony v The Commonwealth (1973) 47 ALJR 83 at 94. I think the most appropriate course in this case is to assess the compensation for injurious affection on the basis of Mr Grant's evidence, modifying it so as to take into account the injurious affection to the Effingham homestead. Mr Grant valued that residence at $61,000. Having regard to the percentages by which he treated the vacant land as having been diminished in value, and doing the best I can, I think it would be appropriate to allow 5 per cent of that figure by way of compensation for injurious affection to the homestead. I will therefore assess the respondent's compensation for injurious affection in the sum of $50,350, calculated as follows:
Compensation as assessed by Mr Grant
$47,300
Plus 5 per cent of $61,000
3,050
Total
$50,350
64 It is common ground that the assessment of compensation should allow 10 per cent for GST, and that the respondent will be entitled to statutory interest. The compensation to be paid to the respondent is as follows:
For the estate in fee simple in the valve site parcel comprising 3,503 square metres
$367.00
For the access and services easements
965.50
For the pipeline easements
7,461.00
For disturbance
8,000.00
For injurious affection
50,350.00
Sub-total
$67,143.50
Plus GST
6,714.35
Total
$73,857.85
65 I determine that the compensation to be paid to the respondent with respect to the acquisitions referred to in the originating application is $73,857.85 excluding interest.
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