Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services

The Court's Question

1. When, on the morning of Day 26, there had been, over several days of questioning of the land valuation experts (Mr Dyson for the applicant, and Mr Lunney for the respondent), no evidence elicited about the lease, Acting Commissioner Maston, who is assisting me in this matter, directed a question to Mr Lancaster, and Mr Lancaster responded, in these terms (T1943, LL5 to 14): THE ACTING COMMISSIONER: Mr Lancaster, I had a query with respect to lot 2. No mention was made in the oral evidence yesterday by the land valuers of the market value of the Boiling lease or its impact, if any, on the market value of the [reversion]. Has there been some agreement between the parties? MR LANCASTER: No, there hasn't. After this topic, I was proposing, as one of a couple of miscellaneous questions, to ask Mr Dyson about that very topic.
2. The Court notes that the lease did not appear as a topic on the apparently "agreed" list of topics to be the subject of question to be asked of the respective land valuers (Exhibit R23, tendered by the respondent at the commencement of their joint oral evidence). Nor was it included in the equivalent list (Exhibit R25) tendered at the beginning of the joint oral evidence of the business valuers.
3. In due course, Mr Lancaster asked Mr Dyson (Tp1968, L44-p1969, L10): MR LANCASTER: Can I show you a copy of a lease. Before I do that, you understand, Mr Dyson, that as at the date of acquisition, lot 2 was subject to a lease from ALF to Boiling? MR DYSON: Yes. MR LANCASTER: What assumption did you make about the purchaser of lot 2 in respect of what that purchaser would think or do in respect of the Boiling lease? MR DYSON: Can I look at my report? MR LANCASTER: Certainly, you can look at your report.
4. After a short adjournment to allow the applicants' advisors to consider the position, Mr Hemmings objected to that question (Tp1970, LL23-29 and p1971, LL9-25): MR HEMMINGS: ... I object to the question. I'm objecting to a question that Mr Lancaster has put. Of course, it is apparently consequent on a question that the Commissioner asked. MR LANCASTER: No, it's not. I was going to ask it anyway. I told you that. ... MR HEMMINGS: As I say, it's fundamentally an objection based upon fairness, or unfairness, on day 26, and after the completion of all of the expert evidence but for cross-examination in the last question that we are asking the valuers, to address this topic. This topic is one that has been approached by both parties on the basis - a slightly different foundation for both bases - that the land is being sold subject to a lease to Boiling that will expire in 11 days. As a consequence, we make no claim for value in the Boiling lease and, as you will see in some words I'll take you to in a moment, it's being assumed a sale, for all intents and purposes, on vacant possession because there is merely 11 days left. That's been the approach that the parties have taken both through the evidence, instructions to witnesses, and pleadings to date.

Rulings

1. I allowed the question to be asked of Mr Dyson (Tp1981, L42).
2. On Day 27, 21 March 2018, Mr Lancaster sought to ask a similar question of Mr Samuel. Mr Hemmings made a formal objection at that time, and, again, I allowed the question (Tp2167, LL21-34).
3. The testimony given in response is a matter for another stage of these proceedings, but I should now recount the submissions made on the objection.

The Applicants' Submissions on the objection

1. Mr Hemmings took the Court through some of the evidence before the Court, which included the instructions given by the respondent's solicitors to Mr Lunney, and various reports to which Mr Lunney subscribed (Tpp1971-2).
2. I will not set out all of that material, but I should note some aspects of it.
3. Mr Lunney noted that he was engaged to value the fee simple interest, itself noted to be subject to the unregistered lease due to expire 11 days after the date of acquisition, but also subject to three separate one-year options to renew. He commented in a joint report with Dr Ferrier (in Court Book document 60, pp3-4, including footnote 1): If the Court finds that Boiling could have exercised its option(s) of renewal of the Lease and the lease could not have been terminated by the hypothetical purchaser, my assessment of the market value of the Fee Simple Interest may change¹. I would need to revise my assessment of the market value of the Fee Simple Interest. (¹ My assessment of the market value of the Fee Simple Interest would likely decrease as a purchaser would not gain vacant possession until approximately three years after the Date of Acquisition. The occupation and use of the Subject Property by Boiling may potentially have a significant and depressing effect on the value of the Reversionary Interest (e.g. by filling the landfill void or depositing material on the Subject Property which could create a future financial burden for an owner of the Reversionary Interest).)
4. Later in that report, they jointly opined (at pars 112-117, including footnote 23): 112. We have undertaken our valuation on the basis of the assumption that a Section 56 purchaser of the Subject Property would be entitled to vacant possession as at the Date of Acquisition or shortly thereafter. 113. Although we note that Boiling held a leasehold interest over the Subject Property, we note that the term of Boiling's lease was to expire 11 days after the Date of Acquisition. 114. We note that Boiling had three options of renewal, each for a further lease term of one (I) year. We have been instructed by Henry Davis York Lawyers to assume that a hypothetical purchaser would have a legal right to terminate the lease and achieve vacant possession on the basis that Boiling had breached an essential term of the lease as at the date of acquisition. 115. Accordingly, and on the basis of the assumptions we have been instructed to make, it is our opinion that an intending purchaser would anticipate, and be confident of being able to obtain, vacant possession shortly after the Date of Acquisition. 116. It is our opinion that our assessment of value, which assumes a sale of the Subject Property effectively with vacant possession, captures the value which is referable to the actual or potential business which could be conducted on the Subject Property. This is because the assessment of value includes the Present Value of future earnings an intending purchaser could generate from operating a business on the Subject Property. 117. In our opinion it would represent "double dipping" if the total value of the Subject Property was to be determined on the assumption that the Subject Property was sold with vacant possession²³ and another entity, which was related to ALF, were to claim compensation for either the extinguishment of an existing business or a loss of value for an existing business. (²³ Or essentially vacant possession, having regard to the very short period of the Lease which remained as at the Date of Acquisition.)
5. Mr Hemmings also referred (Tp1972, L40-p1973, L21) to what the applicants see as the relevant paragraphs of the "final" versions of their Points of Claim ("POC") and of the respondent's further amended Point of Defence ("FAPOD"). He submitted (Tp1973, LL23-35) that the POC were "entirely consistent with the instructions given by the solicitors for the respondent to their valuers ... [and] with the approach' taken by the applicants' valuers. He also noted that Mr Lunney had never sought to revise his report.
6. Mr Hemmings insisted (Tp1974, LL25-31) that he was: "... not taking a strict pleading point; I'm simply identifying a procedural unfairness if, for the first time, arising in questions in cross-examination at the end of four days of these witnesses being cross-examined, they are to seek to depart from the instructions upon which their experts assessed value, which is a consistent basis upon which we have assessed value".

The Respondent's Submissions on the objection

1. In reply, Mr Lancaster insisted that he was entitled to ask Mr Dyson (and later Mr Samuel) "how, if at all, [their] valuation accommodated" the lease to Boiling (Tp1974, LL41-2). Section 56 "requires consideration of a willing but not anxious hypothetical seller of Boiling's former interest in Lot 2" (Tp1975, LL32-34). That was the substance of FAPOD 18(b)(ii), and raised (Tp1976, LL12-16), "as an issue between the parties, the attitude that a party in the position of Boiling would have had to the sale of its former interest, obviously its former leasehold interest, in lot 2 as being a relevant fact that needs to be addressed in the proceedings". He was "not seeking to bring forward a different valuation from Mr Lunney and Dr Ferrier", but was "simply seeking to examine the basis for Mr Dyson's valuation" (Tp1981, LL1-8).
2. The parties agree that the lease "was in existence", but have not agreed that it "would be of no effect, or would be regarded as having no effect. That's never been agreed", Mr Lancaster concluded (Tp1981, LL11-13).

Reasons

1. Boiling lodged a claim for compensation with respect to the lease (in accordance with s 39) on 22 March 2015 (Tender Bundle document 31), and Alexandria Landfill Pty Ltd lodged its claim for compensation for the reversionary interest in Lot 2 DP 1168612 as registered proprietor subject to the lease to Boiling (document 30).
2. Recognition of the existence of the right to compensation of Boiling Pty Ltd for the acquisition of its lease and of the impact of the acquisition of the lease on the Court's assessment of compensation in the proceedings between Alexandria Landfill Pty Ltd and Roads and Maritime Services with respect to the reversionary interest in Lot 2, are fundamental to the determination by the Court of the entitlement of Boiling Pty Ltd and Alexandria Landfill Pty Ltd to compensation in their respective appeals pursuant to ss 66(1) and (2) of the Land Acquisition (Just Terms Compensation) Act 1991, subject to any agreement between the parties otherwise, or if a claim for compensation is withdrawn by the claimants: see s 39(4) of the Act.
3. I was satisfied that the submissions made by Mr Lancaster, summarized above, were well-based, and ought be accepted by the Court.
4. Given the clear joinder of issue, in oral argument, if not on the face of the pleadings, and dating from the very beginning of the trial, I could identify no basis for the applicants' claim of unfairness or prejudice.

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