Vass and Lambert v Coordinator-General
[2014] QLAC 9
•28 November 2014
LAND APPEAL COURT OF QUEENSLAND
CITATION: | Vass and Lambert v Coordinator-General [2014] QLAC 9 |
PARTIES: | JAMES VASS and TAMMY RENEE LAMBERT (respondent) |
FILE NO/S: | LAC 010-13 Land Court Number AQL031-11 |
DIVISION: | Land Appeal Court of Queensland |
PROCEEDING: | Appeal from the Land Court of Queensland |
ORIGINATING COURT: | Land Court at Brisbane |
DELIVERED ON: | 28 November 2014 |
DELIVERED AT: | Brisbane |
HEARING DATE: | 24 March 2014; 27 March 2014 |
THE COURT: | Peter Lyons J WA Isdale, Member of the Land Court |
CATCHWORDS: | REAL PROPERTY – COMPULSORY ACQUISITION OF LAND – PROCEEDINGS FOR COMPENSATION – QUEENSLAND – APPEAL TO THE LAND APPEAL COURT – where the appellants operated a hairdressing and beauty business – where the property from which the business operated was resumed for a children's hospital in 2009 – where a press release in September 2006 gave notice of the intention to build the children's hospital – where throughout 2007 representatives visited the appellants' business to discuss the resumption – where the appellants' business suffered a downturn from about the time of the September 2006 notice – where the learned Land Court Member found that the downturn was not related to the notice – where the appellants closed the beauty component of the business due to finding smaller premises to relocate to after the resumption – where the learned Land Court Member was critical of the evidence of one of the appellants – whether the business was adversely affected by the proposed resumption – whether the appellants should be compensated for business losses, the loss of the beauty component of the business, and/or the costs of relocating the business Land Court Act 2000 (Qld), s 56(2) Commissioner of Highways v Shipp Brothers Pty Ltd (1978) 195 SASR 215, followed Vass and Lambert v Co-ordinator General [2013] QLC 64, related |
COUNSEL: | PW Hackett for the appellants EJ Morzone for the respondent |
SOLICITORS: | H Drakos & Company for the appellants Clayton Utz for the respondent |
THE COURT:
On 31 October 2008, land located at 489-491 Stanley Street, South Brisbane (491 Stanley Street), was resumed by the publication of a notice in the Queensland Government Gazette[1]. This and other parcels of land were resumed for the Queensland Children's Hospital. At the date of the resumption, the appellants conducted a hairdressing business in part of a building constructed on the land, having a lease of that part. The Land Court determined compensation for the appellants in the sum of $92,276, together with interest[2]. The primary issues in the appeal are whether compensation should have been assessed on the basis that the business was substantially adversely affected by notice of the proposed scheme and the resumption, before the resumption occurred, so that losses relating to the business should have been included; and whether the compensation should have included relocation expenses.
[1]Volume 3 Appeal Record (3 AR) p 396; an amended notice was published on 13 February 2009 (exhibit 12, 4 AR p 725), but it was not suggested that the amendment was of any significance on the appeal.
[2]See Vass and Lambert v Coordinator-General [2013] QLC 64 which records the reasons for judgment of the Land Court (RJ).
Background
The building on the land is two storeys in height. For many years, part of the ground floor had been used for a business involving hairdressing. Ms Lambert became the owner of the business, and a tenant of the building, in March 1994. The business was then known as "Stanley's Hair Salon". It occupied 50 (or 45) square metres of the building. It was conducted by Ms Lambert with the assistance of one junior staff member[3].
[3]The history of the business is taken from the affidavit of Mr James Vass sworn 14 June 2011 at 3 AR p 323ff, and the learned Member’s reasons. Much of it was agreed: RJ [24].
On 1 March 2005, Tammy Renee Pty Ltd as trustee for the TRP Discretionary Trust (TRP), and Christian Winston Elliott as trustee for the Winston Discretionary Trust as tenants in common, entered into a contract to purchase the land at 491 Stanley Street. They became the registered proprietors on 24 June 2005[4]. Ms Lambert was, it would appear, a director of Tammy Renee Pty Ltd.
[4]4 AR p 702.
In 2005, Mr Elliott and Ms Lambert agreed to enter into a partnership for the conduct of the business. The name of the business was to be changed to "Beauty Edge"; and the premises were to be expanded, so that the business would occupy 190 square metres, with 15 hairdressing stations, four basins, and five beauty rooms. The business was identified as a hair and beauty salon. A document described as a Commercial Tenancy was prepared and executed. It was dated 30 September 2005[5]. In the document the landlord was said to be "Christian Winston Elliott Trustee & Tammy Renee Pty Ltd Trustee", and the tenant was said to be "The Elliott Trust & The TRP Discretionary Trust trading as Beauty Edge". The term was said to be three years, with an option for a further term of three years; and the rent was $5,000 per month. No submission was made about the validity of this document.
[5]See 3 AR p 378.
In the meantime, changes were made to the premises to accommodate the expanded business. The fit out of the expanded premises was completed by 30 September 2005, and the expanded business operated in accordance with the agreement between Ms Lambert and Mr Elliott from 1 October 2005.
In June 2006, Mr Elliott advised Ms Lambert that he did not wish to continue to be involved in the business. On 14 December 2006, a document was signed by Mr Elliott and Ms Lambert, on behalf of The Elliott Trust and TRP respectively, by which they agreed that the business partnership would cease on 31 December 2006, and that TRP would continue to operate the business at the same premises thereafter[6]. Mr Vass gave evidence that on 1 January 2007 he became a partner in the business[7]. The management reports record his working in the business in the first quarter of the 2007 calendar year[8]. However, it was an agreed fact that from 1 January to 30 June 2007, the proprietor of the business was TRP; and that Mr Vass and Ms Lambert were the proprietors thereafter[9].
[6]3 AR p 387.
[7]3 AR p 327
[8]4 AR pp 671-673; see 1 AR pp 39-40.
[9]RJ [24].
A press release was published on 30 September 2006 giving notice of the State Government's intention to build a new children's hospital adjacent to the Mater Mothers and Mater Adults Hospital. Mr Vass gave evidence that in early 2007 he was approached by a Mr John McAulliffe, originally purporting to represent the Mater Hospitals, and subsequently to represent Queensland Health, together with a number of other persons, discussing the proposed resumption of 491 Stanley Street in connection with the proposed children's hospital. In this period, Mr Vass was informed that notices of intention to resume would be issued by 30 June 2007; and that the resumption would occur "with little notice"[10]. Mr Vass and Ms Lambert then began to look for alternative premises. They came to realise that for financial reasons, they would not be able to obtain premises of equivalent size; and the business would therefore not be able to include the beauty component. They registered the name "Allure Salon", in recognition of the need to omit the word "beauty" from the business name. They identified a suitable site on Manning Street. They entered into a written agreement on 16 April 2007 relating to the purchase of the property at Manning Street, for the conduct of a business to be called "Allure Salon on Manning"[11]. The agreement anticipated that business would commence from the Manning Street premises from 1 July 2007.
[10]3 AR pp 332-333.
[11]3 AR p 391.
In July 2007, the beauty component of the business was closed[12]. However the resumption did not proceed swiftly. Mr Vass gave evidence that on four occasions, he was informed of different dates by which it would be necessary to vacate 491 Stanley Street. The resumption ultimately occurred on the date mentioned at the commencement of these reasons. The business ceased trading at 491 Stanley Street in February 2009, and commenced at Manning Street shortly thereafter. Some work had been done in the meantime to fit out the Manning Street premises for the purposes of the business[13].
[12]3 AR p 334.
[13]3 AR p 338.
Evidence before the Land Court
Mention has been made of the fact that Mr Vass gave evidence. He was a qualified hairdresser. However between about 1987 and 2006, he worked in real estate. He provided assistance to Ms Lambert in 2005 relating to the acquisition of an interest in 491 Stanley Street; and about the modifications to the building to accommodate the expanded business. He was in a de facto relationship with Ms Lambert by about the end of 2006. He provided a sum of approximately $40,000 by way of capital, to include a retail outlet in the salon, and to upgrade the equipment, apparently about the beginning of 2007. He gave evidence that in the period from February 2007 to June 2008, there was uncertainty about when the business would have to leave 491 Stanley Street, which made it difficult to retain staff, especially those associated with the beauty aspect of the business. He gave evidence of the locational advantages enjoyed by the business at 491 Stanley Street, related to both an expanding residential population and the institutions and businesses in the general area. The business had grown after the expansion in 2005. After the announcement of the children's hospital project, there was a clear decline in business at least from January 2007[14]. He also gave evidence that some work associated with the children's hospital project had commenced before the business vacated the premises in February 2009, including fencing off adjoining properties and boarding them up, during 2008[15].
[14]See 4 AR pp 521-522.
[15]1 AR pp 47-48, 75-76.
Mr Vass also gave evidence about the cost of fitting out the Manning Street premises, being an expenditure of $70,000 up to the beginning of 2009; with a quotation for $146,000 to complete the work[16]. Some, but not all, of this work has since been done[17].
[16]1 AR p 88, lines 19-22.
[17]1 AR p 89.
Mr Gil Wright, a real estate agent specialising in business brokerage and business valuations, was called to give evidence in the appellants' case. He had conducted his business in the area for many years, first at Merivale Street, South Brisbane, then at Horan Street, West End[18]. He gave evidence that the September 2006 press release resulted in many businesses leaving the catchment area for the appellants' business, with some closing and others relocating; and that clients of the appellants' business started looking elsewhere for hairdressing and beauty services. In addition, staff looked for employment elsewhere, being concerned about security of employment[19]. In response to a question about the effect of the press release on customers, he said that the local community knew what would be impacted by the project[20]. He relied on the records of the business for his view that the trade of the business was affected by knowledge of the children's hospital project[21]. In his view, the management reports for the business showed a decline in all client categories commencing in October 2006. He expressed the view that sales lost between then and 2009 (excluding sales lost in relation to the beauty component of the business) resulted in a nett loss of $91,483[22] (with a correction, the figure became $84,852[23]). He considered that the business did not reach "anywhere near its potential" before the resumption[24]. This view appeared to be based on a comparison with the performance of other businesses which he considered to be comparable, and the location of the business. The loss of the premises had caused the loss of the beauty department[25].
[18]1 AR p 138, lines 1-6; 2 AR 186, lines 46-51; 6 AR 1209.
[19]6 AR p 1015.
[20]2 AR p 186, lines 42-43.
[21]2 AB 195, lines 55-57.
[22]6 AR p 1018.
[23]2 AR p 255, lines 25-29.
[24]6 AR p 1018.
[25]6 AR p 1019.
Mr Wright considered that the business should be valued not by reference to its trading performance, but by reference to what Mr Wright considered to be a maintainable trading performance. For that purpose, he relied upon a business which he considered sufficiently similar, conducted at Bardon. This resulted in his assessing the value of the business, on the basis that the resumption had not occurred, at $176,125[26]. On that basis, he considered that relocation costs of $216,000 should be included in the compensation awarded. He also considered that the growth in sales in the period between the 2005 expansion and the announcement of the children's hospital project in September 2006 (said to be 250 per cent) was sufficient to justify the decision to relocate[27].
[26]6 AR p 1026.
[27]2 AR p 184
In addition, he allowed for the loss of the beauty salon. On the basis of annual sales of $100,000 for the beauty department, Mr Wright considered its value to be $29,300[28].
[28]6 AR p 1019.
In his oral evidence, Mr Wright said that the downturn in the business conducted at 491 Stanley Street had started in about October 2006. Generally economic conditions in the business's catchment area were "particularly strong in that period"[29]. He considered that the September 2006 press release identified the site as included in the area for the proposed children's hospital[30]. He drove past the property "something like 300 days a year"[31], but gave evidence that he stopped driving past the site on his way to work in 2008 "because of the works and the boarding up that was happening around the area"[32]. He again gave evidence that the hoardings were introduced to nearby buildings in 2008[33].
[29]1 AR p 137, lines 55-57.
[30]2 AR p 154, lines 1-6.
[31]See 1 AR p 138, lines 3-4.
[32]2 AR p 186-187.
[33]2 AR p 258, line 19.
Mr Norbert Calabro, a forensic accountant, was called to give evidence on behalf of the respondent. He attributed a value of $50,000 to $80,000 to the business, assuming the rent identified in the agreement previously referred to. If rent had been charged at a commercial rate, that value would have been between $35,000 and $55,000. He attributed no value to the beauty salon component of the business. He assessed the value of the business on what he described as the "buy yourself a job" approach[34]. He considered that the business had not been affected by announcements regarding the children's hospital proposal and related resumptions of land. In particular, he had been told that access to the business had not been impaired before the resumption. Its performance was affected by "other economic factors which led to a lack of confidence and consumer spending"[35]. The global financial crisis affected economic conditions in the period for which business loss was claimed by the appellants. On his analysis of the financial statements and tax returns for the business, it suffered a loss of $69,479 in 2006 and a loss of $28,015 in 2007. It made a profit of $48,233 in the 2008 financial year; and a further profit of $42,604 in the six month period to 31 December 2008. However, these figures were the results of the payment of very low wages in the 2008 year and the six month period to 31 December 2008; as well as the payment of rent in amounts well below those required under the tenancy agreement[36]. He acknowledged a downturn in gross revenue from 1 January 2007, which he attributed to economic conditions and lack of consumer confidence[37].
[34]6 AR p 1035.
[35]6 AR p 1036.
[36]6 AR p 1044.
[37]See 6 AR pp 1044, 1046-1047.
In cross-examination, Mr Calabro accepted that after the refit in 2005, turnover increased by more than 200 per cent; and the increase in turnover was maintained for the next 13 months[38]. He also acknowledged that customer numbers commenced to decline immediately after the September 2006 press release[39]; and that the global financial crisis did not affect economic conditions in Australia until early 2008[40]. He acknowledged that there was an upward trend in the amount spent by each customer of the business from September 2006 onwards (from $47 in the quarter ending 30 September 2006 to $58 in the quarter ending 31 December 2008, the last quarter completed at 491 Stanley Street; and $71 in the quarter ending 30 June 2009[41]). In his view, while the mere presence of hoardings might affect trade "a little bit" the real effect would be associated with a restriction on access to the business[42].
[38]2 AR p 304, lines 46-57.
[39]2 AR pp 296-297.
[40]2 AR pp 303-304.
[41]2 AR p 298, lines 10-21.
[42]2 AR p 279, lines 37-44.
Determination of compensation by the Land Court
At a relatively early point in the reasons for judgment, there is an extensive discussion of the evidence of Mr Vass relating to the history of the business. The learned Member described this evidence as "far from satisfactory". He pointed to difficulties apparent in Mr Vass's understanding of "the difference between a partnership between corporate entities, trustee entities and individual persons"[43]. He commented critically on the agreement dated 14 December 2006, prepared by Mr Vass[44]. He commented adversely on the absence of evidence about the relative roles of Tammy Renee Pty Ltd and Ms Lambert personally in the business[45]. He construed the 16 April 2007 agreement as establishing a partnership between Ms Lambert as trustee for the TRP Discretionary Trust and Mr Vass on behalf of Beneficial Project & Land Pty Ltd[46]; and on that basis concluded that Mr Vass's evidence that he and Ms Lambert "were sole traders, if that makes any sense" as evidence which could not be correct[47]; though conceding that the relevant entities were "the alter-egos of Ms Lambert and Mr Vass respectively"[48]. He was then critical about the lack of evidence providing "any explanation as to how the various assets of the manifold entities which seemed to have operated the business between a date prior to September 2005 and the date of resumption of the land on 31 October 2008 were dealt with"[49]. He later described Mr Vass's answers to questions about the identity of the persons conducting the business between July 2005 and June 2008 as "entirely unsatisfactory"[50].
[43]RJ [37].
[44]RJ [40]-[44].
[45]RJ [46]-[47].
[46]RJ [52].
[47]RJ [53]-[54].
[48]RJ [55].
[49]RJ [58].
[50]RJ [86].
The learned Member extracted from the evidence before him figures which he set out in a table recording the quarterly sales, purchases and salaries from July 2003 to June 2009[51]. He stated that Mr Vass was not one of the partners or operators of the business in 2005-2006; and he expressed the view that it was "surprising" that Mr Vass should give evidence about the success of the business following the 2005 expansion and fit out[52].
[51]RJ [68].
[52]RJ [76]-[79].
The learned Member went on to discuss the evidence about the impacts of the announcement of the children's hospital project in September 2006. He considered that the recorded client numbers which appear in Mr Wright's report did not demonstrate a decline consequent upon the announcement; nor did they support the view expressed by Mr Vass that the announcement "caused an immediate concern for the staff and business clients within the surrounding areas"[53]. He then said that there was no evidence to support Mr Vass's contentions, nor was Mr Vass asked to identify the source of his opinions. The learned Member stated that he did not accept that the downturn in the business, if any, "was of the magnitude contended for by Mr Vass"[54]. He then rejected the proposition that the actions of persons associated with the children's hospital project contributed to a decline in the business. He stated that there was no evidence that staff or clients were aware of those actions[55]. He accepted Mr Calabro's evidence that any loss in business which occurred at about this time was due to other economic factors (in fact, as discussed later, factors associated with the global financial crisis)[56].
[53]RJ [90]-[93].
[54]RJ [94].
[55]RJ [96].
[56]RJ [104]-[105].
The learned Member noted that Mr Vass was unable to say with any precision when the boarding up of nearby properties occurred; or even whether it was done at the behest of the resuming authority, or by other property owners[57]. He described Mr Vass's evidence as "unsubstantiated evidence given by a witness whose performance under cross-examination was far from impressive"[58].
[57]RJ [100].
[58]RJ [101].
The learned Member was critical of the fact that the appellants had claimed $216,800 for the fit out of the Manning Street premises, when they could produce invoices for the work totalling only $70,367.26; and "quotations for further works"[59]. The learned Member described Mr Vass's evidence on this matter as "evasive, unhelpful and of little assistance to the court"[60]. He described it as "incomprehensible" that an applicant should claim an amount in excess of $200,000 without documentary evidence demonstrating that such an amount had in fact been paid[61].
[59]RJ [106]-[112].
[60]RJ [114].
[61]Ibid.
His Honour recorded that the "totality of the evasiveness by Mr Vass" was illustrated by a passage in his evidence relating to this expenditure (that evidence was that records had been destroyed in a flood[62]; that Mr Vass did not know what a general ledger would record; that an enquiry to his bank resulted in his being informed that certain records had been archived; and that Mr Vass was not able to identify a person who had told him, presumably in about 2009, why a neighbouring building had been boarded up)[63]. The learned Member also referred to opportunities given to Mr Vass to obtain further documents, which were not taken up; and concluded that the only acceptable evidence of the cost of fitting out the Manning Street premises was that found in the invoices, totalling $70,367.26[64].
[62]Incorrectly transcribed in the record as "my flat": see 1 AR p 89, line 25.
[63]1 AR p 88-91; RJ [114].
[64]RJ [115]-[117].
The learned Member then referred at some length to the evidence of Mr Calabro, noting his conclusion that it was only in the 2008 year that the business made a profit; and observing that that was based on a rent which was below market rental. He had earlier noted Mr Calabro's evidence that the value of the business was considerably less than the amount claimed for relocation costs, contrasting that with Mr Wright's view that it was appropriate to relocate to Manning Street. He considered that Mr Wright focused too heavily on gross revenue, without a proper consideration of profit[65]. He also stated that Mr Wright "fails to recognise that there were changes in ownership which may have affected the operation of the business"[66]. He regarded Mr Wright's view about the impact of the September 2006 announcement on the business as "speculative"[67]. He characterised Mr Wright's evidence as considering that there were two separate businesses, a hairdressing salon and a beauty salon, and concluded that they were not two separate businesses[68]. He considered Mr Wright's evidence to be, to some extent, self-contradictory, noting the reference to the personal client base which had been built up by Ms Lambert; as well as Mr Wright's evidence that to attempt to assess compensation on the basis that the business had been extinguished, without recognition of potential and uninterrupted trading trends, would be falsely low[69].
[65]RJ [141].
[66]RJ [142].
[67]RJ [148].
[68]RJ [154]-[155].
[69]RJ [156]-[158].
The learned Member was critical of the fact that neither Mr Vass nor Ms Lambert had provided their own tax returns (although financial statements and some partnership documents had been provided)[70]. His Honour then stated that no satisfactory explanation had been provided "for the failure by the applicants to obtain copies of taxation returns which, in my view, would reveal the true position of the company and its prospects for growth in the future"[71].
[70]RJ [159].
[71]RJ [161].
The learned Member then expressed his preference for the approach of Mr Calabro, and concluded that the applicants were entitled to compensation for the extinguishment of the business, based on the rent which they were in fact paying[72]. He rejected Mr Wright's reliance on the performance of the business at Bardon[73]. He considered that Mr Wright was valuing the business, not at the date of the resumption, but some years later[74]. He considered that Mr Wright's reliance on the financial information provided by the appellants, which the learned Member said provided a less than clear picture of the business, was “a fundamental flaw to the whole of the process embarked upon by Mr Wright”[75].
[72]RJ [162]-[163].
[73]RJ [168]-[171].
[74]RJ [177], [180].
[75]RJ [172]-[173].
The learned Member concluded that "it was not a reasonable business response to relocate the business" at a cost of more than $200,000[76], relying on a statement of Wells J in Commissioner of Highways v Shipp Brothers Pty Ltd[77].
[76]RJ [189].
[77](1978) 195 SASR 215 (Shipp Bros) at 221; RJ [192].
The learned Member then set out a number of conclusions, including that public knowledge of the proposed resumption had a relatively minor effect on the business, and any downturn in revenue and patronage "can easily be attributed to other factors"[78]. As a result, he determined the value of the business to be $80,000, and assessed compensation for the effect of the resumption on it on the extinguishment basis. The difference between that amount and the amount finally determined by the learned Member is accounted for by disturbance items totalling $12,276[79].
[78]RJ [193].
[79]RJ [201].
Submissions on appeal
The appellants' submissions pointed out that many of the critical comments made by the learned Member about the evidence of Mr Vass related to matters which were not in issue, and a number of which were of no relevance to the questions to be decided by the Land Court. Although Mr Vass had given evidence of some matters about which he had no personal knowledge, that was done without objection. Moreover, that evidence was based upon business records, which were themselves admissible evidence. The learned Member's criticism of the evidence of Mr Vass on the effect of the September 2006 announcement demonstrated a misunderstanding of that evidence[80]. The learned Member's finding that there was not a downturn of substantial magnitude after the September 2006 announcement was inconsistent with the business records, in turn supported by the evidence of Mr Wright; and the finding was in error. The downturn was also supported by the evidence of Mr Calabro, not considered by the learned Member. The submissions also referred to other evidence of Mr Calabro in this context, namely that Mr Calabro could not explain the reduction in customer numbers; the global financial crisis had not affected Australia until early 2008; and that hoardings might have had some effect on turnover. Some of this evidence would support the contention of the appellants that the downturn was not explicable by economic conditions generally, but rather was related to the resumption. It was submitted that the evidence of Mr Wright, together with photographs which are in evidence, demonstrated that hoardings had been erected on adjoining buildings; and that the only likely explanation was action on the part of the respondent, associated with the resumption. It was also submitted that the evidence demonstrated the cost of completing the fit out of the Manning Street premises.
[80]RJ [93]-[94].
It was submitted that there was no basis for the finding by the learned Member that changes in ownership of the business "may have affected the operation of the business". Nor was this something for which the respondent had contended in the Land Court, nor was it put to any witness. It was submitted that the learned Member erred in finding that the performance of the business prior to the involvement of Mr Vass was influential in, but not determinative of, the results which were achieved after his involvement and his ultimate participation in ownership[81]. It was submitted that in reaching these conclusions, the learned Member referred to irrelevant matters, namely Mr Wright's evidence that the appellants outlaid $189,909 on the 2005 expansion and refurbishment, when this work was carried out on behalf of Ms Lambert and Mr Elliott, though with some involvement of Mr Vass in the design and layout[82].
[81]RJ [145].
[82]RJ [143]-[144].
The submissions for the appellants referred to the statement of the learned Member that the apparently high level of outlays (referred to as sales and purchases, though no doubt intended to refer to wages and purchases) was not explained[83]. It was submitted that no explanation was sought from Mr Vass about this matter. It was also submitted that the observation of the learned Member was based on his own analysis of sales, purchases and salaries[84], an analysis on which the parties had not had any opportunity to comment. It was submitted that the learned Member erred in suggesting that parts of Mr Wright's report were contradictory. It was submitted that in view of the sales which had been achieved prior to the September 2006 announcement, it was reasonable to relocate the business following the resumption. It was also submitted that the Bardon business referred to by Mr Wright was directly comparable to the appellants' business, and accordingly the learned Member's criticism of Mr Wright's reliance on it was in error.
[83]RJ [153].
[84]Found at RJ [68].
The submissions for the respondent acknowledged that from in or about the middle of 2006, the business conducted at 491 Stanley Street had fallen into decline. However, Mr Calabro gave evidence that that was not the result of the September 2006 announcement. It was submitted that the learned Member was correct to find that the announcements about the children's hospital project and the activities of those associated with the project were not sufficient to affect patronage of the business[85]. This finding was said to be supported by the learned Member's analysis of patronage figures found in Mr Wright's report[86]. The respondent had submitted to the Land Court that Mr Vass's participation as an owner in the business accounted for the downturn in sales, the respondent having submitted that Mr Vass had not brought any goodwill with him. It had also submitted that overexpansion and overcapitalisation of the business, and the global financial crisis, accounted for the downturn. The fact that the downturn commenced at about the time of the September 2006 announcement was coincidental, rather than demonstrating a causal link. It submitted that it was inherently improbable that the September 2006 announcement and the visits by Mr McAulliffe could have affected the turnover of the business. Neither the erection of hoardings, nor a press release of 14 September 2008, could explain it as these occurred well after the downturn. The evidence about the erection of hoardings was unsatisfactory; and in any event, if it occurred it would have had (on Mr Calabro's evidence) at most a slight effect.
[85]The respondent did not submit that compensation was not recoverable under this head as a matter of law, perhaps because of the application of the decision in Pointe Gourde Quarrying and Transport Co Ltd v Sub-Intendent of Crown Lands [1947] AC 565, in Director of Buildings v Shun Fung Ltd [1995] 2 AC 111, 135-139.
[86]RJ [91]-[92].
The respondent submitted also that the fact that the turnover of the business was higher before the September 2006 announcement was significant in another context. At that time, the business operated at a loss. Mr Wright's evidence given on the basis that the business could achieve an annual turnover of $400,000 was not justified. At no time had it achieved an annual turnover greater than $265,000 (the level achieved in the year after the 2005 expansion and refurbishment). Even on Mr Wright's evidence, a turnover of $400,000 was something which might be achieved "probably in three or four years' time"[87], and accordingly did not reflect the state of the business at the date of resumption.
[87]2 AR pp 236-237.
The respondent submitted that Mr Wright erred in assessing compensation for the relocation of the business, when the entity conducting it changed at the time of the relocation. In any event, the relocation costs were not adequately proven. The relocation costs claimed by the appellants were considerably higher than the value of the business, which, even on Mr Wright's evidence, was only $176,125.
The respondent submitted that the learned Member's criticisms of Mr Vass's evidence were relevant, going to his reliability and credibility. Mr Vass had given evidence that the resuming authority had caused the business serious financial hardship between February 2007 and June 2008[88]. Mr Vass also gave evidence about the extent of his knowledge of and involvement in the business; and about relocation costs.
[88]3 AR pp 339-340; 4 AR pp 521-522; 1 AR pp 75, 114.
It was submitted that the learned Member was correct to find that Mr Wright focused too heavily on gross revenue without sufficient consideration of costs. There were a number of features which distinguished the Bardon business from the business at 491 Stanley Street. With respect to the relocation costs, reliance was placed on a passage from the judgment of Wells J in Shipp Bros[89], to the effect that if the costs of relocation plainly and substantially exceed the value of the business as a going concern, it would not be reasonable to incur them.
[89]At 221.
It was submitted that the beauty business had ceased operating by June 2007, before the resumption date. Having rejected the appellants' argument that the business had been impacted prior to resumption, there was no basis for awarding compensation in respect of it. Mr Wright's valuation of this component of the business was unsupported by the earnings of the business. Income generated by this component of the business was taken into account by both Mr Wright and Mr Calabro in their assessments.
Preliminary observations
The appellants' case may in broad terms be summarised as follows. The business conducted at 491 Stanley Street was adversely affected by the children's hospital project, from about the time of the September 2006 announcement. That resulted in a downturn in revenue, and the economic loss claimed by the appellants. It also resulted in the closure of the beauty salon element of the business. Compensation should have been awarded under both these heads. Notwithstanding these effects, it was reasonable to relocate the business, because of its potential, the achievement of which had been impaired by the effect of the proposed resumption. The evidence called on behalf of the appellants as to the cost of relocation should have been accepted, and this amount awarded, in lieu of the amount of $80,000, as the value of the business at the date of resumption.
Accordingly, a critical finding of the learned Member was the finding that the downturn in the business was unrelated to the resumption. That was linked to his rejection of Mr Vass's evidence. There is force in a number of the criticisms made in the appellants' submissions of the reasons of the learned Member, particularly in relation to Mr Vass's evidence.
Much of the learned Member's criticism of Mr Vass's evidence related to Mr Vass's inability accurately to identify the owners of the business prior to the time when he acquired an interest in it[90]. This was not a matter which Mr Vass sought to deal with in his evidence in chief; and was the subject of agreement between the parties[91]. In part, it required the interpretation of documents (a matter of law) which were not without their complexities[92]. This criticism of his evidence was influential in the learned Member's conclusion that Mr Vass was an unsatisfactory witness[93]. It did not provide a proper foundation for criticism of other aspects of his evidence.
[90]See RJ [36]-[54], especially [37], [53]; [56]; [86]-[87].
[91]See RJ [24].
[92]See RJ [44], [45], [48], [51]-[54].
[93]See RJ [37], [86], [101], [114].
The learned Member, in dealing with the question whether there was a deterioration in the business as a consequence of community knowledge of the children's hospital proposal, concluded that he did not accept that "the downturn, if any, was of the magnitude contended for by Mr Vass"[94]. It is not clear to what evidence of Mr Vass the learned Member was referring. Mr Vass made a broad statement that there had been a loss of profits and opportunities since about the beginning of 2007, without any contention relating to magnitude[95]. He also gave evidence (without reference to magnitude) that there had been a decline in "the services and the walk ins from January to June 2007"[96]. That is supported by the records on which the evidence was based[97].
[94]See RJ [89]-[94].
[95]See 3 AR p 340.
[96]See 4 AR p 521, para 7.
[97]See 4 AR pp 663, 667, 671, 675. See also pp 639, 644.
In rejecting Mr Vass's evidence linking the downturn with the September 2006 announcement, the learned Member did not appreciate the true effect of the management reports which were the source of some of the information on which he relied (discussed later in these reasons). Nor did he take into account the acceptance by Mr Calabro that the downturn commenced immediately after the announcement. The learned Member's description of Mr Vass as evasive is not borne out by the evidence to which the learned Member made reference[98]. The answers given by Mr Vass in that evidence are consistent with a witness giving honest evidence about matters of which he has a limited knowledge or recollection.
[98]See RJ [114], n 44, referring to parts of the transcript, found at 1 AR pp 88-91.
It is convenient, therefore, to consider the question of whether the downturn in the business was causally linked to the proposed resumption, disregarding the learned Member's observations about Mr Vass's evidence.
The nature of the claims for compensation make the financial records of the business conducted at 491 Stanley Street documents of considerable importance. The financial records in evidence included documents described as management reports from July 2005 to June 2009[99]; Business Activity Statements (BAS Statements) from 2 December 2002 to 30 June 2009[100]; financial statements for Beauty Edge for the year ended 30 June 2006 (in fact for the nine month period which ended on that date)[101]; financial statements for Beauty Edge for the year ended 30 June 2007[102]; financial statements for the appellants for the year ended 30 June 2008[103]; financial statements for the appellants for the six month period which ended on 31 December 2008[104]; a tax return for Beauty Edge for the 2007 financial year[105]; and a tax return for TRP for the 2007 financial year[106].
[99]See 4 AR p 521; pp 611-680; see also 5 AR pp 767-831.
[100]See 4 AR p 521; pp 524-609; see also 5 AR pp 890-929.
[101]5 AR p 930.
[102]5 AR p 848.
[103]5 AR p 853.
[104]5 AR p 860.
[105]5 AR p 871.
[106]5 AR p 878.
The tax returns and the financial statements were prepared by an accountant, Ms Carrall. BAS Statements since 2006 were prepared by Ms Carrall; with earlier BAS Statements apparently prepared by other tax agents.
The information contained in these documents is by no means entirely consistent. Thus the annual totals of sales apparent from the BAS Statements are not identical with the financial statements. However, the differences are generally not large, and given the nature of BAS Statements, which at least on some occasions were prepared by an external accountant[107], and the fact that the financial statements in evidence were prepared by an accountant, those discrepancies do not seem to be significant, and may be ignored. More troubling are discrepancies in some of the amounts recorded for purchases. The financial statements to 30 June 2006 (for a period of nine months) record a total of $39,256.24 for purchases. The BAS Statements for the same period record purchases of $114,127. In the following year the BAS Statements record purchases totalling $113,389; whereas the amount for purchases in the financial statements and tax returns[108] is $28,834. The financial statements for the six months ending 31 December 2008 record purchases at $16,625.32, but the BAS Statements show a total for this period of $84,668. These discrepancies were not explored in the evidence, nor in submissions; and accordingly it is undesirable to place much weight on them. However, where there are significant discrepancies, the financial statements and tax returns, being likely to be the final result of the work of the accountant, should be preferred to the other documents.
[107]See 4 AR pp 562, 564, 569, 557, 528.
[108]Aggregating the figures for Beauty Edge at 5 AR p 848 and for TRP at 5 AR p 888.
Nevertheless, the criticisms of the financial records by the learned Member, including his comments about the unavailability of the personal tax returns of the appellants, may be disregarded. He did not rely on the discrepancies revealed by an examination of the BAS Statements, just discussed. Mr Calabro did not suggest that no reliable records were available to him, or that the financial records were insufficient for the formation of a valid opinion. In fact, his valuation, accepted by the learned Member, was based on the financial statements. Nor is there any reason to think that the financial statements and tax returns presented a view of the business which is unduly favourable to the appellants. Indeed, the picture which they present seems at odds with the fact that for a lengthy period Ms Lambert was able to continue to operate the business, to purchase a half interest in the building in which it was conducted, and, with Mr Elliott, to spend a substantial sum of money on the expansion and refurbishment of the premises in which it was conducted. The personal tax returns of the appellants are, in the circumstances of this case, unlikely to have suggested that the financial statements presented an unreliable (and in particular an unduly favourable) view of the business. There was evidence which explained the absence of some of the documents requested by the respondent, namely their destruction in a flood[109]. That evidence was not challenged, nor was any reason identified to disbelieve it.
[109]6 AR p 1203; 1 AR p 89, line 25 (as noted earlier, wrongly transcribed as "my flat").
Was the business adversely affected by the proposed resumption?
As has been mentioned, Mr Calabro acknowledged that there was a downward trend in turnover which commenced at about the time of the September 2006 announcement. To some extent, it is reflected in the annual sales recorded by Mr Calabro in his report[110]. The downturn appears more clearly in the quarterly sales figures, taken from the BAS statements, and recorded in Mr Wright's report[111]. Thus for the 12 months to the end of September 2006, quarterly sales were on average approximately $73,000. For the quarter ending 31 December 2006 sales were $64,670. Thereafter, through to 31 December 2008, quarterly sales were generally of the order of $50,000 or less, and in one quarter (ending 31 March 2008) were as low as $36,435. The trend which Mr Calabro accepted as commencing at about the time of the September 2006 announcement, led to a downturn in the business which was firmly and permanently established by the beginning of the 2007 calendar year.
[110]6 AR p 1044.
[111]6 AR p 1010; and see RJ [68].
In view of Mr Calabro's acknowledgment, it is not necessary to comment on any change in customer numbers in this period. Nevertheless, it should be noted that there are some difficulties with the learned Member's conclusion relating to them. The learned Member relied on customer numbers for six-monthly periods from Mr Wright's report, including the period from 1 July to 31 December 2006[112]. That period spans the September 2006 announcement, and thus includes a period for which the announcement could not have had any effect. Accordingly, the learned Member's reliance on the fact that the customer numbers for this period were comparable with the numbers for the preceding six months could not provide a firm ground for a finding that trade was not affected by the announcement. The client numbers appear to be an aggregate of the numbers in the quarterly management reports[113]. In those reports there is a clear downturn in customer numbers between the quarter ending 30 September 2006 and that ending 31 December 2006 (some 18.5 percent), which the learned Member failed to recognise. Nor does his reasoning take account of the greater downturn in customer numbers in the first six months of the 2007 calendar year (some 50 percent, when compared with the same period in the previous year).
[112]See RJ [90]-[94].
[113]Compare 6 AR p 1016 and 4 AR pp 663, 667, 671, 675. The annual total of the customer numbers in these reports does not coincide with the total in the annual report: see 4 AR p 656, also reproduced at 5 AR p 773. However, this discrepancy does not appear to have been explored in the evidence; and does not assist in a consideration of the learned Member’s reasoning.
Mr Calabro gave evidence that the period for which loss was claimed "was affected by other economic events such as the GFC and its aftermath which affected confidence which led to a cut in consumer spending…"[114]. That evidence was accepted by the learned Member[115]. In view of Mr Calabro's acceptance that the global financial crisis did not affect economic conditions in Australia until 2008, that cannot account for the reduction in sales recorded from about the end of September 2006. The learned Member erred in accepting this evidence.
[114]6 AR p 1036, para 2.5.
[115]RJ [104].
On the agreed facts, the only change in ownership which occurred between 1 October 2005 and 30 June 2007 was that, from 31 December 2006, Mr Elliott ceased to be a proprietor of the business. Since he had been a non-working partner, it is difficult to see that the sales figures were affected by this change.
Mr Vass became involved in the conduct of the business from 1 January 2007[116]. As mentioned earlier, he invested $40,000 to establish a retail outlet and upgrade equipment. He apparently introduced other revenue streams. These actions are unlikely to have reduced turnover, and no evidence was identified to show that they had that effect. Nor is there any rational basis for thinking that the fact that Mr Vass formally became a partner in the business might account for the downturn in sales. Nothing else was identified which would suggest that his involvement accounted for the downturn in sales, which commenced in any event at a slightly earlier time. There is no satisfactory basis for concluding that the downturn in sales is attributable to Mr Vass's role in the business.
[116]3 AR p 327.
Indeed, there is force in the appellants' submission that, in the Land Court, the respondent had not contended that the downturn in the business was a result of Mr Vass's involvement. The respondent's submission in that Court that Mr Vass did not bring any goodwill with him was not a submission that the downturn was related to his involvement in the business.
The respondent's submissions contended that the downturn was the result of "the unaffordability of the business to continue at a loss"[117]. This proposition was not explained, and it seems unlikely to be correct. Rational responses to a loss-making situation would include reducing costs, or increasing sales (without a commensurate increase in costs); but not a reduction in sales.
[117]Respondent's Supplementary Outline of Submissions para 9(a).
Events which occurred in 2008, including the erection of hoardings on adjacent buildings (if this was done before the resumption), could not explain the reduction in turnover, which commenced at an earlier time.
The analysis provided by Mr Wright[118] reveals a substantial reduction in sales in the beauty salon in particular from January 2007, though in the six months to 30 June 2007 there are also significant reductions in the balance of the sales. After that, there were further declines in sales associated with beauty salon services, though to a limited extent beauty services continued to be provided while the business was conducted at 491 Stanley Street.
[118]6 AR p 1017.
Mr Vass gave evidence that one beauty therapist left in January 2007, with the second (it would seem from his evidence) leaving in June 2007. The first left after the visit from Mr McAulliffe, stating that she could not see any future in a place that could be resumed. The second left because by then a decision had been made to close the beauty salon[119]; according to Mr Vass's evidence, because the appellants could not afford premises large enough to accommodate the beauty component of the business, when forced to move as a consequence of the resumption.
[119]See 1 AR pp 65-66.
The evidence of Mr Vass, if accepted, would establish a connection between the proposed resumption, and the closing of the beauty salon. If his evidence of the explanation for the departure of the first beautician were accepted, then her explanation for leaving is related to the resumption. Although there was a general attack on Mr Vass's credit, no specific reason was identified for doubting his account of the explanation given to him for this beautician's departure. As mentioned, there is force in the submissions made on behalf of the appellants about adverse comments made by the learned Member about Mr Vass as a witness. Moreover, some of his evidence was accepted[120]. Mr Vass's evidence about the circumstances of the departure of the beautician early in 2007 was not specifically rejected by the learned Member, nor is there sufficient reason to reject it. His evidence about the circumstances of the departure of the second beautician is also credible. It is consistent with the events which happened at about that time, and in particular, the decision to relocate to smaller premises.
[120]See for example RJ [64], [75]-[76], [96]-[97], [144], [155].
Mr Vass's evidence relating to the visits of Mr McAulliffe shows that about the end of January 2007 Mr McAulliffe indicated that 491 Stanley Street might be resumed for the children's hospital[121]. Mr Vass's evidence that these visits occurred seems to have been accepted by the learned Member[122]. It is not apparent whether any clients were present. Although, as the learned Member noted, there is no evidence of the presence of staff, staff may well have been on the premises on some occasions. Only one meeting[123] is identified as occurring outside business hours; although another occurred at the Mater Hospital[124]. Mr Vass gave evidence that there were further meetings, as a result of which he complained to Mr McAulliffe that "his unannounced visits intimidated and caused anxiety upon my staff, partner and customers"[125]. It is not clear when this occurred, though the sequence in which the evidence is presented would suggest that the complaint was made in the latter part of 2007. In late 2007, Mr Maroske indicated that he alone would be dealing with Mr Vass[126].
[121]3 AR p 328.
[122]RJ [96]-[97].
[123]3 AR pp 330-331.
[124]3 AR pp 329-330.
[125]3 AR p 331.
[126]3 AR p 332.
The evidence relating to Mr McAulliffe's visits does not of itself provide a strong link between the proposed resumption and the downturn in the business. Some of the events occurred in circumstances where clients were unlikely to have been present. However, Mr Vass gave evidence that the appellants had been advised of four different dates by which they would have to leave 491 Stanley Street; and that media controversy about the proposed children's hospital created uncertainty which made it difficult to retain staff, and contributed to the decision to close down the beauty section of the business[127]. It seems clear that from early 2007, staff were aware that the premises were likely to be resumed, with one beautician leaving the business at this time. Mr McAulliffe's visits were likely to have confirmed the prospect of the resumption, and the uncertainty about the continuation of the business, at least at 491 Stanley Street, in the minds of its staff. It would by no means be surprising for staff to communicate that uncertainty to clients.
[127]3 AR p 339.
Mr Wright's evidence linked the downturn with the September 2006 announcement. His evidence that at that time, general economic conditions in the business's catchment were strong, derives some force from the nature of his business, and the fact that he carried it on in the local area. That evidence tends to negate some other explanation for the downturn.
It is not immediately obvious that matters associated with the resumption would have had an adverse effect on the turnover of the business. There is, however, a striking coincidence between the September 2006 announcement and the downturn in business. That, together with the fact that at least the downturn in the beauty side of the business was a consequence of the resumption, the prospect of staff communicating to clients that there was uncertainty about the future of the business, the evidence of Mr Wright and Mr Vass, and the absence of any other credible explanation, leads to the conclusion that the downturn was the result of the then proposed resumption.
In reaching this conclusion, it is recognised that the learned Member had the advantage of observing Mr Vass give evidence[128]. There are, however, errors in the reasoning which led to the rejection of the evidence of Mr Vass which linked the downturn in business with the September 2006 announcement. That evidence was also supported by uncontested testimony, as to the time at which the downturn occurred. The rejection of Mr Vass's evidence on this point is associated with the acceptance of the evidence of Mr Calabro as to the explanation for the downturn. That evidence was irrational. In reaching his conclusion, the learned Member has acted on evidence which is inconsistent with incontrovertible fact[129]. This is a case where this Court, as an appellate court, is required to consider for itself the correctness of the conclusion of the learned Member (which, ultimately, is in any event a matter of inference), notwithstanding his Honour's observations about the credibility of Mr Vass[130].
[128]See Fox v Percy (2003) 214 CLR 118 (Fox) at [23]
[129]See Devries v Australian National Railways Commission (1993) 177 CLR 472, 479; cited with approval by McHugh J in Fox at [66].
[130]See also Fox at [24]-[30].
This conclusion has been reached without reference to the evidence about the erection of hoardings on nearby premises. Some of the evidence indicates this occurred in 2008. Mr Wright's evidence was that it was in 2007-2008; but some time after he changed the location of his office in 2007[131]. Taken as a whole, the evidence indicates that the hoardings were erected well after the downturn became established.
[131]See 2 AR p 186, lines 46-53.
Compensation
There were three elements of the appellants' claim for compensation that are relevant to this appeal. They may be identified as the claim for business losses, the claim relating to the beauty component of the business, and the claim for relocation costs.
The claim for business losses was based on the evidence of Mr Wright, which appears to have assumed that, but for the announcement of the project, turnover could have been maintained at the level achieved from October 2005 until September 2006. He accordingly identified the difference between that turnover, and the turnover actually achieved (ignoring that portion of the turnover associated with the beauty component of the business), to identify an amount representing lost sales. He then reduced that amount by a percentage representing the gross profit margin; and further reduced it by an item identified as "Operational Savings", being an amount of $41,600. Ultimately this resulted in a claim for $84,852[132].
[132]See 6 AR p 1018, 1209.
Although asked to do so, Mr Wright was not able to provide a working paper or other calculations which identified the amount he adopted for Operational Savings. In cross-examination, he described it as "a combination of reduction in wages, reduction in consumables, for the appropriate periods"; and stated that the sources of the figures were the "business statements, profit and loss statements, those sorts of source documents"[133]. In re-examination, he stated that the reduction involved the use of "benchmark standards"[134].
[133]2 AR p 216, lines 29-36.
[134]2 AR p 257, lines 17-18.
Mr Calabro's primary approach was that the loss claimed by the appellants did not occur, because the announcement of the project had no effect on the business. However, his alternative approach was to examine changes in turnover on a year by year basis; but otherwise to follow an approach similar to that taken by Mr Wright. On that basis, he considered the loss of profit to be $17,377[135]. The submissions for the respondent on the appeal supported Mr Calabro's primary approach.
[135]6 AR pp 1046-1047.
Mr Calabro's alternative approach could not be said to identify reliably impacts suffered in about September 2006, because he does not compare turnover before that date with turnover after that date. He used the 2006 year as a basis for comparison, thus including in the basis the three months in which refurbishment of the premises occurred. He included, in the years where some loss was recognised, the three months ending September 2006, which was prior to the September 2006 announcement and was a period of relatively high returns. The approach taken by Mr Calabro therefore masked the downturn which occurred subsequently. However, the approach identified costs savings resulting from the downturn, which represent approximately 30 per cent of gross profit. Mr Wright's savings represent some 31.25 per cent of gross profit[136]. There being little difference between their methodologies, there is no reason not to accept the approach taken by Mr Wright to costs savings. Ultimately, with a later adjustment adopted by Mr Wright, the lost profit was calculated by him at an amount of $84,852[137]. It follows that business losses (excluding losses related to the beauty component of the business) should be determined at this level; and compensation awarded accordingly (in practical terms, in an amount of $85,000). Given the change of ownership in the business during the period for which it was conducted, it may be necessary to consider whether some apportionment needs to be made; or whether some other course should be followed. That is a matter which requires further submissions.
[136]Calculated from the table at 6 AR p 1018.
[137]6 AR p 1209.
The amount claimed in respect of the beauty component of the business was $29,000. That was based on the evidence of Mr Wright. His view, as mentioned previously, was that but for the resumption, this part of the business had the capacity to grow to a stage where its annual sales would be $100,000. It might be observed that in the 12 month period to September 2006, Mr Wright attributed some $58,000 to such sales[138]. It is not clear whether this represents sales for nine months or twelve months; although the sales for the three months to 30 September 2006 were slightly under $19,000.
[138]6 AR p 1018.
Mr Calabro made no separate allowance for the beauty component of the business, considering it to form part of the value he otherwise attributed to the business[139]. Mr Calabro's valuation of the business was ultimately based on the sales made in the six month period ending 31 December 2008[140]. He also made reference to the results for the year ending 30 June 2008, without relying on them for his conclusion. Since the beauty component of the business had ceased to operate before either of these periods, it is not correct to conclude that his valuation reflects the loss of this element of the business.
[139]6 AR p 1047.
[140]6 AR p 1045.
The respondent's submission on appeal supported Mr Calabro's approach, namely, that the beauty component was reflected in the value attributed to the business. The respondent submitted that this component of the business ceased to operate by June 2007, long before the resumption date. On the basis that that was not a consequence of the resumption, then no compensation was payable in respect of this component of the business. It was submitted that in any event, Mr Wright's evidence was based upon a level of sales which had never been achieved by the business.
There may be some optimism in Mr Wright's assumption that the beauty component of the business should be valued on the basis it would have grown to achieve a turnover of $100,000 per annum by the time of the resumption. Unlike the remainder of the business, it was relatively new, and it is easier to infer a prospect of growth beyond what was shown in the 12 months to September 2006. In the last quarter of this period, sales for this part of the business were slightly under $19,000. It therefore seems appropriate to resolve any doubt about the adoption of Mr Wright's approach, in favour of the appellants. That would result in the adoption of the amount of $29,000 as compensation for this aspect of the claim. It might also be observed that an award in this amount would not appear to result in an unjust award of compensation, when one considers that the claim for business losses did not include any amount for lost sales in relation to the beauty component of the business.
In dealing with the question whether relocation costs should be awarded in lieu of the $80,000 as the value of the business at the date of resumption, the respondent submitted that when the business relocated (in 2009) the entity conducting it changed. That submission is inconsistent with what the learned Member recorded as the admitted history of the business[141]. No basis for the submission was identified. Accordingly, it should be rejected.
[141]RJ [24]; see also the respondent’s submissions in the Land Court, 6 AR p 1219, para 8(d).
In Shipp Bros[142] Wells J expressed the view that if the costs of relocation substantially exceed the value of the business as a going concern, those costs would not be the reasonable and natural consequence of the resumption, and compensation could not be assessed by reference to them. His Honour's judgment was referred to with approval in Director of Buildings and Lands v Shun Fung Ironworks Ltd[143]. In that case, Lord Nicholls, for the majority, identified the ordinary rule, in a case where land is resumed on which the land owner is conducting a business, to be that compensation will include the cost of relocation[144]. His Lordship identified three conditions which nevertheless must be satisfied to make such an award. The first is that there be a causal connection between the resumption and the cost of relocation; the second, that the loss not be too remote; and the third, that any expense incurred be incurred reasonably[145]. His Lordship rejected the view that compensation would never include the cost of relocating a business, if that would exceed the value of the business[146]. His Lordship also stated that the cost of relocation would not be recoverable as compensation in a case in which no reasonable businessman would incur those costs, if unable to continue the business in its present location[147]. The submissions of both sides proceeded on the basis that compensation should include the cost of relocation, only if it was reasonable for a person in the position of the appellants to have taken that course.
[142]At 221, 232.
[143][1995] 2 AC 111 (Shun Fung), 127.
[144]Shun Fung, 125.
[145]Shun Fung, 126.
[146]Shun Fung, 126-127; see also 125.
[147]Shun Fung, 127.
A threshold question is the determination of the costs of relocation. Those costs were identified by reference to the cost of fitting out the Manning Street premises. The learned Member accepted evidence that the sum of $70,367.26 had been spent for this purpose, but was not prepared to find that those costs extended to a total of $216,800, the amount for which the appellants contended[148].
[148]See RJ [106]-[117].
It might first be observed that on that finding of the learned Member, the amount awarded for compensation could be regarded as generous. On the basis of that finding, the value of the business was greater than the cost incurred in relocation; which would justify an award based on the costs so incurred.
The appellants challenged the learned Member's finding as to the costs of relocation. In part, the finding was based on the proposition that the appellants had to demonstrate that the whole of the amount claimed had in fact been paid[149]. That proposition is itself erroneous. The finding was also, to a significant extent, based on the learned Member's rejection of the evidence of Mr Vass, save to the extent the evidence was supported by invoices. Reference has already been made to his Honour's approach to Mr Vass's evidence. In particular in the present context, no adequate reason was identified for rejecting his evidence or for finding that the invoices represented the full cost of fitting out the new premises at Manning Street. The amount rejected by his Honour was supported by a quotation. It was open to the respondent to seek to establish that items included in the quotation were not reasonably required for the relocated business; or that the amounts set out were excessive. However, the respondent did no more than rely on other, generally unrelated, criticisms of Mr Vass's evidence.
[149]See RJ [114].
The criticisms made by the appellants of the learned Member's approach to Mr Vass's evidence should be accepted. Given that his evidence was supported by a quotation, and in the absence of any other evidence, it should be accepted that the reasonable costs of fitting out the Manning Street premises for a hairdressing salon amounted to $216,800. A question remains as to whether this amount should have been awarded as compensation.
In Shun Fung, Lord Nicholls considered a case where a businessman had spent large sums of money setting up a new business, but before the business had time to prove itself, the premises were compulsorily acquired; with the consequence that the business had no profit record, and little value. His Lordship stated that a reasonable business person might, nevertheless, consider it worthwhile incurring expenditure in fitting out new premises in which to continue the business. In such a case relocation costs should be included in the amount of compensation.[150]
[150]Shun Fung, 127.
His Lordship's example is an instance of the application of the general principle referred to earlier. The present case is not identical to his Lordship's example. The expanded business had operated for a period of 12 months at 491 Stanley Street prior to the announcement of the children's hospital project. The business had demonstrated a capacity to expand substantially, in the extended premises with the refurbishment which occurred from July to September 2005. The difficulty faced by the appellants, however, is that they did not explain why the business was conducted unprofitably in this period; or attempt to show how, with time and but for the effect of the announcement of the project, it could have been conducted profitably at this or a higher level of trade. That this matter needed to be addressed should have been apparent to those advising the appellants from about June 2011[151]. The absence of such evidence is of some significance.
[151]See 5 AR p 984.
The difficulty is emphasised by a consideration of the position of the business in the period leading up to the resumption, as reflected in the financial statements. While it was profitable in the 18 month period ending 31 December 2008, that is only on the basis that no allowance was made for wages for the two proprietors involved in its conduct. It might be noted that in the first 12 months of this period, the proprietors together are recorded in the management reports as being responsible for some 65 per cent of the sales[152]; and in the following six months, for between 75 per cent and 80 per cent of the sales[153].
[152]4 AR p 637.
[153]4 AR p 613, 615, 618.
In summary, a consideration of the financial statements for the business leads to the conclusion that it would not be reasonable to expend $216,800 to relocate the business, given its low level of profitability. The evidence did not provide a sufficient basis for concluding that, if the business had not been adversely affected by the announcement of the resumption, it would have been reasonable to expend that amount to relocate it. Accordingly, this aspect of the appellants' claim fails; and the award of compensation on the extinguishment basis should stand.
Application to adduce further evidence
The respondent made an application under s 56(2) of the Land Court Act 2000 (Qld) for the admission of further evidence on the appeal. The evidence consisted primarily of photographs said to have been taken at about the date of resumption, and relevant to the question whether properties in the vicinity of 491 Stanley Street had by then been boarded up.
A number of tests must all be satisfied under s 56(2) before such evidence might be admitted on the hearing of the appeal. The critical test in this case is whether the admission of the evidence is necessary to avoid grave injustice. The evidence was directed to the question whether the downturn in the sales of the business was attributable to matters associated with the resumption.
It will be apparent from what has been said earlier in these reasons that the condition of premises near to 491 Stanley Street at the date of resumption is of no assistance in determining this question. Accordingly, the admission of the evidence is not necessary to avoid grave injustice.
It follows that the application to adduce further evidence should be dismissed.
Conclusion
It is appropriate to award compensation for business losses in accordance with these reasons, and for the loss of the beauty component of the business; but to leave otherwise undisturbed the award based on the value of the business at the date of resumption, and the award for other disturbance items.
The appeal should be allowed. Directions should be for the parties to provide submissions about the course to be followed in awarding compensation, in light of these reasons. Those submissions should also deal with interest, and costs, both in the Land Court and in this Court.
PETER LYONS J
CAC MacDONALD
PRESIDENT OF THE LAND COURT
WA ISDALE
MEMBER OF THE LAND COURT
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