Chief Executive, Department of Main Roads v Regan, Ross River Distributors Pty Ltd & Tropic Distributors Pty Ltd [2000] QLAC 51 (2000) 22 QLCR 112

IN THE LAND APPEAL COURT OF QUEENSLAND In the matter of an appeal to the Land Appeal Court from the decision of the Land Court in the matter of the determination of compensation payable consequent upon the resumption by the Chief Executive, Department of Main Roads, under the provisions of the Acquisition of Land Act 1967 and the Transport Planning and Coordination Act 1994 for (i) road purposes of an area of 97m² being Lot 2 on Plan SP 102852 and (ii) for sale or otherwise being dealt with of an area of 720m² being Lot 1 on Plan SP 102852, County of Davenport, Parish of Charters Towers. (A98-24). BETWEEN Chief Executive, Department of Main Roads Appellant AND JG & LM Regan, Ross River Distributors Pty Ltd and Tropic Distributors Pty Ltd Respondent BEFORE THE HONOURABLE JUSTICE CULLINANE, MR JJ TRICKETT AND DR NG DIVETT REASONS FOR JUDGMENT - THE COURT Delivered at Townsville, this eleventh day of August 2000. In this matter the Appellant (The Chief Executive, Department of Main Roads) appeals against the award of compensation in the sum of $370,000 made in favour of the Respondents, Mr and Mrs Regan, consequent upon the resumption of lands owned by them at Charters Towers. Mr and Mrs Regan, who will be referred to as the Respondents, together with two companies which it was accepted were controlled by them, namely Ross River Distributors Pty Ltd and Tropic Distributors Pty Ltd, were the claimants in the Land Court. Included were claims for the relocation of businesses conducted on the subject land by the two companies. Following agreements between the parties, the subject land was resumed in two parts, the relevant date for the purposes of the assessment of compensation in respect of the subject lands as a whole being 22 August 1997. [2000] QLAC 51 -- 1 of 9 -- 2 As at the date of resumption, the subject land was in use as a service station site. The business sold Caltex Ampol products. There were certain features associated with the businesses conducted there which involved particular advantages to the two companies in the conduct of their businesses and which would not necessarily have been able to be obtained by any other operators on that site. These are accurately summarised in detail in paragraph 12 of the outline of submissions of the Appellant (then the Respondent) before the Land Court. The companies occupied the land pursuant to tenancies terminable at will. In order to understand the case for the Appellant upon appeal, it is necessary to appreciate that it was common ground between the valuers called by the parties that as at the date of resumption, there was no scope in the market in the relevant area for an additional service station business. The Respondents (Mr & Mrs Regan) acquired a parcel of land in Gill Street, Charters Towers, by a contract dated 5 August 1997. This contract was entered into some three weeks before the date of resumption, but some two weeks after the parties had entered into the agreements which led to the acquisition of the subject site. The contract for the purchase of the site in Gill Street was settled on 1 September 1997. By agreement, the companies were allowed to continue their business on the subject site until the Gill Street site was developed. Trading commenced on the new site on 17 August 1998. The Gill Street site is substantially larger than the subject site and the learned member describes the facilities on the site as being "much grander" than those which existed on the subject site. The Appellant in this appeal conducted its case in a way which raises the following issue: To what extent can the fact of relocation, or alternatively the prospect at resumption of relocation of the businesses to land acquired shortly before the resumption, be taken into account in the assessment of compensation for the loss of the resumed land and improvements? There was no dispute between the parties as to the right of Mr and Mrs Regan to recover the full value of the improvements on the subject site. It was the case for the Appellant at the hearing before the learned member, as it was before this court, that as at the relevant date, the subject site no longer had any value as a service station site and that its value was a much lesser one, falling to be assessed as a commercial site. The case for the Respondents was that the subject site had to be valued as a service station site based upon capitalisation of rental. Whilst -- 2 of 9 -- 3 the grounds of appeal raise some challenge to the method by which the learned member arrived at this value and in particular the manner in which the learned member dealt with, analysed and applied three of the sales, this ground was not ultimately pursued. It can be said then, that if the Appellant fails on its primary point, there is no challenge to the findings of the learned member as to the value of the subject land as a service station site. The effect of the learned member's findings is that the acquisition by Mr and Mrs Regan of the land in Gill Street was something that they determined upon after becoming aware of the possible resumption of the subject land. It seems plain that they did not commit themselves to such a purchase until after entering into the agreements pursuant to which the resumption occurred. As has already been mentioned, completion did not occur until after resumption. It would seem plain in our opinion that the acquisition of the Gill Street land and the transfer of the businesses by the two companies, were the consequence of the resumption and would not have occurred but for it. There was some evidence that at an earlier date, Mr Regan had approached the Appellant to ascertain whether there was any proposal to take any part of the subject land. When he was informed that there was not, plans were made to effect considerable improvements at the subject site. Some of those had been effected at the time that Mr and Mrs Regan became aware of the proposed resumption, at which time work ceased. There was no evidence to suggest that Mr and Mrs Regan were contemplating the purchase of another site, or would have been likely to have done so, but for the resumption. It is the Appellant's case that the fact of the acquisition of the Gill Street site prior to the date of resumption, with the intention of the two companies' businesses being transferred to it and the subsequent relocation of those businesses, are matters which are to be taken into account in determining the value of the subject land as at the date of resumption. The consequence is that in view of the common ground that there was no room in the relevant market for an additional service station site, the subject site did not at the relevant date, have any value as a service station site. The Respondents on the other hand, contended that since the purchase of the new site and the transfer of the two businesses would not have occurred but for the resumption, these must be left out of account. For the Appellant, it was also contended that the matter should be viewed as being in no way different to the situation where Mr and Mrs Regan, independently of -- 3 of 9 -- 4 the resumption, had voluntarily relocated the two businesses conducted by the companies to the Gill Street site. We will refer to this a little later. The manner in which land which has been acquired for a public purpose is to be valued for the purposes of compensation is long settled. In Australia the judgment of the High Court in Spencer -v- The Commonwealth (1907) 5 CLR 418, is accepted as containing the classic statement of principle in this regard. Griffith J said at p.432: "[T]he 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, i.e. 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. " In the same case Isaacs J said at p.440 and 441: "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 cognisant 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." It would seem fundamental to such an approach that any factor which is a consequence of the resumption is to be ignored in arriving at the value of the land. The exercise involves the assumption that the land is being sold as a result of voluntary bargaining between the dispossessed owner as a willing but not anxious vendor and a willing but not anxious purchaser, both of whom are taken to be fully informed. -- 4 of 9 -- 5 The assessment of compensation in accordance with these principles is described in the following way in Davies "Law of Compulsory Purchase and Compensation" fourth ed., 1984, p.128: "The question of market value is a paradox which lies at the heart of the law of compulsory purchase of land. 'Market value' as a concept means a purely natural phenomenon, namely a price level reached between buyers and sellers bargaining with the minimum of artificial constraints: in theory without any such constraints. But this condition of the 'free market' is the very opposite of the condition of the compulsory purchase, which is ex hypothesi a situation of constraint. Therefore to say that compulsory purchase compensation is to be assessed at 'market value' is to say that a state of affairs is to be visualised in terms of its direct opposite. " An approach which requires the assessment of the value of resumed land at market value in the way which the High Court in Spencer's case and later cases establishes, would seem inconsistent with an approach which permitted the value of that land to be affected by events which are a product of, or flow from, the resumption of the land and which would not have occurred but for such resumption. The principle known as the Pointe Gourde principle, derived from the judgment of the Privy Council in Pointe Gourde Quarrying and Transport Co Ltd v Sub Intendent of Crown Lands (Trinidad) (1947) AC565, can be regarded as a particular application of and extension to this rule. This principle, which is much older than the case from which it derives its name, requires that when the value of land acquired for public purposes is to be assessed, there is to be left out of account in assessing the value of the land, any factor flowing from the resumption, or the scheme of which the resumption forms a part, which might tend to increase or decrease the market value of the land. Some of the cases dealing with this principle are concerned with steps taken by authorities which pre-date the actual date of resumption by many years. See for example, Woollams -v- The Minister (1957) 75 WN (NSW) 103. Nor is such a principle limited to the impact of the scheme or any part of it, or the process of resumption alone upon the relevant market, or upon the subject land itself, or upon any right of use of the subject land. In Abbey Orchard Property Investments Pty Ltd -v- Sydney City Council (1978) 37 LGRA 230, the Court was concerned with assessment of compensation in a case where the subject land had been affected by town planning controls providing for street setbacks which affected the land concerned. These were in place for some years prior to an application being -- 5 of 9 -- 6 made by the land owner for the erection of an office block which provided for a setback as required by the relevant control plan. The building constructed resulted in a net lettable floor area less than would have been the case but for the setback required and which was more expensive to construct. The resumption occurred in 1974, many years after the first of the controls requiring the setback was introduced. It was contended on behalf of the resuming authority that the dispossessed landowner, by developing the land in the way in which it did, had itself precluded the development of the land in the way contended for as the basis for compensation upon the resumption of the site. The argument was put in the following way at p.243. "Mr Gummow submitted that the plaintiff's case was a claim for damages for severance, not the value of the resumed land, and that such a claim was insupportable, in as much as it was caused, not by the resumption, but by the plaintiff erecting its building with the setbacks prior to the resumption taking place. Even if it so erected the building out of necessity, because of the proposed road widening, this was, he said, immaterial, for it would still be the case that the damage had occurred before the resumption, and was not a consequence of it. As he said, if the land had not been resumed, the damage would none the less have been suffered." This argument was rejected. The Court applying the Pointe Gourde principle held that the scheme which is a process, is to be ignored in assessing the compensation for the resumed land. The landowner was entitled to be compensated upon the basis of such development as would have been possible if there had been no scheme of resumption, the development control plans being identified as a component of this scheme. The significance of the case is, in our view, that the response of a landowner faced with a pending dispossession, or restrictions imposed by a scheme culminating in such dispossession, should not when the land is resumed, have the compensation determined upon the basis of market value reduced because of steps taken by him when faced with the dispossession, or the constraints imposed by the scheme leading to such dispossession. As the Land Appeal Court said in D R Murphy and Cove House Australia Pty Ltd -v- The Crown (1986-87) 11 QLCR 34 at page 39 (in a judgment subsequently approved by the High Court of Australia) in a judgment reported in (1990-91) 13 QLCR 90: "We think that the correct approach is to put aside the fact of the resumption…". -- 6 of 9 -- 7 In our view, the Appellant's approach in so far as it contends for a value effected by the actions of Mr and Mrs Regan in response to the resumption of their land, cannot be correct. If the resumption is to be ignored, any factor which would not be present but for such resumption must, as a matter of logic, also be ignored. There is nothing in the judgment of the Queensland Court of Appeal in CMB No 1 Pty Ltd v. Cairns City Council (1999) 1 Qd.R.1, a case which is concerned with the principles governing the use of evidence of events after the date as at which market value is to be assessed, which affects this principle. This approach is in no way inconsistent with an approach to the market value of the subject land, which takes into account any risk arising from the fact that the existing businesses as at the date of the material sale would not have continued for reasons unrelated to the resumption of the land. Nor is it inconsistent with taking into account that there were features of the businesses conducted upon the land which were personal to those conducting the businesses and which could not necessarily be assumed to remain in the event of others conducting a service station upon the subject land. It also takes into account the fact that as at the relevant date, the businesses were being conducted upon the land by operators occupying the land under tenancies determinable at will, or upon a very short period of notice. These are factors which are relevant and in no way dependent upon the fact of resumption or matters which flow from the resumption. However it seems to us that the learned member correctly addressed these matters. We think that both in terms of the principle involved in the learned member's approach to this issue and in terms of the conclusions which he reached, there is no basis for criticism of his decision on this subject. The Appellant did not argue that greater allowance should have been made for those factors when assessing the value of the site as a service station site. We should mention that whilst we think the principles which determine the issue raised upon the appeal here are of a fundamental nature and are implicit in the principal judgments dealing with market value, it is somewhat surprising that neither counsel was able to refer to any particular authority expressly dealing with the principle. Counsel for the Respondents suggested that the argument for the Appellant was so obviously illogical that it would be improbable that one would find authority for the proposition that it was incorrect. The decision of the learned member was a lengthy one and a number of issues were addressed, including a claim relating to what was said to be a "market share -- 7 of 9 -- 8 premium" transferred from the subject site to the Gill Street site. However, as the case was argued before us, the issue was accepted as being confined to the single proposition which has been dealt with in these reasons. The Appellant's primary submission was that the fact of the acquisition of the new parcel at Gill Street as at the resumption date, with the proposed relocation of the businesses that entailed, or taken with the later relocation, deprived the subject land of any value as a service station site. However, it was also submitted that the position would be the same absent the resumption and on the basis of a voluntary sale of the subject land by the Regans to a hypothetical purchaser. It was said that given the relationship between the Regans and the two companies carrying on business on the site, the absence of any leases of any duration and the features of the business, which in the words of the learned member were captive to the companies and which could not be assumed to continue at the site, the subject site would not have any value as a service station site. This argument, as we understood it, was in support of the argument already referred to, although it might also be regarded as being an alternative to it. In so far as the proposition is one based upon principle, in our view, it is not possible to equate the two situations. In one case, one of the parcels of land which together with others satisfies the need for service stations in the area, is removed from the market through resumption. The dispossessed owner acquires another parcel in substitution for the resumed parcel and by substituting it again brings the market to a position of constraint. On the other scenario, the land which is in fact being resumed continues to be available as a service station site, with the necessary improvements and approvals for that purpose and with a history of successful use as such a site. Even making due allowance for the relationship between the landowners and the two businesses and the absence of any leases binding the companies to the site for any significant period, the vendors in the case of the hypothetical sale would be taking a substantial risk in purchasing and developing another site for a service station in a market where the need for such sites was already satisfied. Given the unavoidable delay in acquiring and developing a new site (in the events which happened here, the transfer took about a year) and given the right to determine the companies' right to occupy the subject site forthwith, or on short notice, the businesses would, in such circumstances, become hostages to fortune once any plan to move became known, as it inevitably would. -- 8 of 9 -- 9 Indeed, Mr Regan gave evidence that in the case of a sale of the site, he would have expected the businesses would have continued on the subject site. The learned member found that a hypothetical prudent purchaser would not proceed on the basis that the Regans would relocate their business. However, as we have said, he addressed the question of how, given the factors to which reference has been made, the hypothetical prudent purchaser would assess any risk of relocation and he made some allowance for some of these factors by applying a discount to the litreage to be assumed for rental purposes. It was not the Appellant's case that inadequate allowance was made in this regard by the learned member, or that this court should make a more substantial allowance. Rather, the Appellant's approach was that even if the matter were to be viewed in this way, the same result would follow as with the primary argument, namely that the subject site had no value as a service station site as at the date of resumption. We cannot accept this for the reasons already given. The appeal is dismissed. (Cullinane J) JUSTICE OF THE SUPREME COURT (JJ Trickett) PRESIDENT OF THE LAND COURT (NG Divett) MEMBER OF THE LAND COURT -- 9 of 9 --