Turner v Minister of Public Instruction

The appellants, trustees of a deceased estate, appealed to the High Court of Australia from a decision of the Supreme Court of New South Wales. The dispute concerned the compensation payable for the compulsory resumption of a parcel of unimproved residential land. The land was suitable for sale in sub-division, but had not yet been sub-divided at the time of resumption. The core of the dispute lay in how to value this potentiality for sub-division when determining the compensation amount.

The legal issues before the High Court were whether, in valuing the land for compensation purposes, it was necessary to make deductions for "risk of realisation" (the risk of overestimating gross proceeds or underestimating expenses) and for the profit a purchaser would expect to make by buying the land in globo with a view to sub-dividing and reselling it. The Land and Valuation Court had allowed a deduction for the risk of realisation but not for the purchaser's profit, while the Supreme Court held that both deductions should be made.

A majority of the High Court, comprising Dixon C.J., Fullagar, Kitto, and Taylor JJ., held that both deductions were necessary. Their reasoning was that when valuing the land on the hypothesis of a sale in globo to a purchaser intending to sub-divide, it was essential to account for the fact that the land's potentiality for sub-division was not immediately realisable at the date of resumption. This required an allowance for the risks and profit associated with the development and sale process, reflecting the difference between the immediate sale price of the undeveloped land and the ultimate net proceeds from its sub-division and sale. Williams J. dissented, finding that neither deduction should be made.

The High Court, by majority, affirmed the decision of the Supreme Court of New South Wales. The appeal was dismissed, and the compensation was to be determined in accordance with the principles that both a deduction for the risk of realisation and a deduction for the expected profit of a sub-dividing purchaser should be made.