Words and phrases - "Value of land_"_ - s36(2b) Metropolitan Region Town Planning Scheme Act - Value to the owner - Plaintiffs' loss greater because of circumstances relating to the land which gives the owner particular advantage - Plaintiffs lessors of a piggery - True market value is that of an operating piggery - Value to be determined upon market value where there is a willing buyer and willing seller of such a business in that location

Land Administration Act 1997, s 241(6)

Metropolitan Region Town Planning Scheme Act 1959, s 36(2)(b)

Brown Bros (Marine) Holdings Pty Ltd v NSW Land and Housing Corporation (1991) 72 LGERA 50

Emerald Quarry Industries PL v Commissioner of Highways [1979] HCA 17; (1979) 24 ALR 37

Folkestone v Metropolitan Borough Council [1968] WAR 164

Hughes v Doncaster Metropolitan Borough Council (1991) 2 WLR 16

Joondalup Gate Pty Ltd v Minister for Lands (1996) 33 ATR 327

Kin Kin Resorts Pty Ltd v Water Authority of Western Australia [1990] WAR 48

Minister Administering the Heritage Act 1977 v Haddad (1988) 67 LGRA 438

Pastoral Finance Association v Minister [1914] UKPC 77; [1914] AC 1083

Re The Board of Valuers; ex parte Bond Corporation Pty Ltd (1998) 101 LGERA 268

Russellan Pty Ltd v Roads and Traffic Authority (1992) 75 LGRA

Spencer v Commonwealth [1907] HCA 82; (1907) 5 CLR 418

The Commonwealth v Milledge [1953] HCA 6; (1953) 90 CLR 157

1 SCOTT J: By order of Master Sanderson of 10 December 1999, a preliminary issue in this action was segregated for determination prior to trial. In terms of par 1, of Master Sanderson's order, par 9A and par 10 of the points of claim dated 1 November 1999 were directed to be tried as a preliminary issue. Master Sanderson ordered that until the trial of those issues, proceedings in the action be stayed.

2 Paragraph 9A and par 10 of the points of claim dated 1 November 1999 are:

"9A In point of law, the Plaintiffs say that the value of the Land may be determined pursuant to section 36(2b) of the Act, [the Metropolitan Region Town Planning Scheme Act 1959], inter alia, by taking into account the losses arising from the disturbance to the Plaintiff's use of the Land, and the costs of reinstatement of the Plaintiff's use of the Land at a suitable alternative location.

10 Further, the Plaintiffs say that the value of the Land, as referred to in paragraph 9 herein, is determinable by the following relevant criteria, namely:

1. The market value of real property comprising the Land, or alternatively the market value of an alternative suitable location for the commencement of a piggery business in the Boddington or Wandering area.

2. The cost of erecting a piggery business (including a manager's residence) and all other necessary infrastructure at a suitable alternative location as aforesaid.

3. The costs of relocating Tact's piggery business to an alternative suitable location, so as to retain Tact as a tenant (including the connection of electricity, gas, water and other necessary amenities, and all removal expenses).

4. The cost of stamp duty and other costs associated with the purchase of land at an alternative suitable location for use of as a piggery business.

5. The loss of anticipated income payable by Tact to the Plaintiffs during the period from when Tact vacates the Land to the date when a piggery business is recommenced at a suitable alternative location.

6. The loss of benefit to the Plaintiff's from capital gains tax exemption applicable to the Land (as the Land was acquired by the Plaintiffs in or about 1977 or otherwise prior to the commencement of capital gains tax upon sales of real property).

7. The sum that would be payable by the Plaintiffs to Tact to offset the latter's increased capital operating costs (including transport costs) by continuing to operate a piggery business at a suitable alternative location in or around the Boddington or Wandering area instead of on the Land, and to offset the loss to Tact caused by the said disturbance to the latter's business."

3 It is of fundamental importance to note that this is a preliminary issue. Necessarily, any determination on the issues to be resolved at this stage of the proceedings must be based upon some facts. However, there is no agreed statement of facts or any common factual position from which the decision can be made. Nonetheless, the parties have agreed that the court may take into account all of the affidavits filed in these proceedings for the purpose of determining the preliminary issues. In deciding the preliminary issues, however, it is important to note that the underlying facts may be in dispute and may ultimately be the subject of contested evidence at trial. No matters of fact, therefore, contained within these reasons should be taken as being a resolution of any factual matter in dispute.

4 It is not in dispute between the parties that the plaintiffs are the registered proprietors of Swan Location 1977 being Lots 5 and 6 on Diagram 63983, comprised in Certificates of Title Vol 1639 Folio 369 and Vol 1639 Folio 370, which in the course of these reasons will be called "the land".

5 In the plaintiffs' points of claim it is said that since October 1990 a company, Tact Holdings Pty Ltd ("Tact"), has operated a piggery business on the land and paid rental to the plaintiffs for the use of the land. There is some dispute as to the beneficiaries of a trust known as the Pinjar Unit Trust, which is operated by Tact. There is evidence to suggest that parties other than the plaintiffs are beneficially involved in that company and the corresponding unit trust.

6 The land is in a declared planning control area and the papers reveal that the land is on an area known as the "Gnangarra Mound", which is a ground water mound utilised, or to be utilised, as part of the reticulated water supply of the Perth Metropolitan area.

7 In early 1998 the plaintiffs lodged an application for approval to commence development in relation to Lot 6 of the land by constructing an extension to the shed and lagoon relining of the existing piggery. The application was rejected under letter signed by the Secretary of the Western Australian Planning Commission and dated 19 August 1998 on the basis that "it would increase the risk of pollution to the ground water resource".

8 As a result of the rejection of the application, the plaintiffs lodged a claim for compensation for injurious affection claiming as compensation the sum of $2,525,000. The basis of the claim was that the value of the land before the refusal was $2,525,000 and after the refusal the land value was nil. In response to the claim for injurious affection, the respondent, pursuant to s 36(2)(b) of the Metropolitan Region Town Planning Scheme Act 1959 ("the MRTPSA") elected to acquire the land.

9 Section 36(2)(b) of the MRTPSA provides:

"(b) The Commission shall, within 3 months of the claim for injurious affection being made, or where such a claim is made before the date of the coming into operation of the Metropolitan Region Town Planning Scheme Amendment Act 1968 within 3 months of that date, by notice in writing given to the claimant, either elect to acquire the land or advise that it does not intend to acquire the land.

(2a) Where the Commission elects to acquire the land as provided in subsection (2), if the Commission and the owner of the land are unable to agree as to the price to be paid for the land by the Commission, the price at which the land may be acquired by the Commission shall be the value of the land as determined in accordance with subsection (2b).

(2b) The value of the land referred to in subsection (2a) shall be the value thereof on the date the Commission elects to acquire the land under that subsection, and that value shall be determined -

(b) on the application of the owner of the land, made in the prescribed manner -

(ii) by the Supreme Court - if the value of the land claimed by the owner thereof is more than $1,000;

and that value shall be determined without regard to any increase or decrease, if any, in value attributable wholly or in part to the Scheme."

10 The issue that falls for determination on the preliminary issue is the basis at which the "value of the land" is to be determined. The plaintiffs contend that the proper basis for valuation is the "value to the owner" as traditionally applied in compulsory acquisition statutes. The defendant, on the other hand, maintains that the correct basis of determining value is "market value".

11 The plaintiffs' contention is that, because the effect of the defendant's election is to compulsorily acquire the land, the cases that refer to compulsory acquisition values are determinative of the issue.

12 There is considerable authority to support the plaintiffs' proposition that in compulsory acquisition statutes the correct basis of valuation is "value to the owner": Boland v Yates Property Corporation Pty Ltd [1999] HCA 64; (1999) 74 ALJR 209 where Callinan J said at 269 [292]:

"The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. ... There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else."

13 That principle follows a long line of authority: see Moreton Club v The Commonwealth [1948] HCA 21; (1948) 77 CLR 253 per Dixon J at 259; Birmingham Corporation v West Midland's Baptist Trust (Association) [1970] AC 874 at 983; and Housing Commission of New South Wales v Falconer & Ors (1981) 50 LGRA 334.

14 In my opinion, those cases establish that in compulsory acquisition statutes, where there is a value to the owner which is over and above the market value of the land, that valuation is appropriate. Such a construction is consistent with the concept of compensating the owner of compulsorily acquired land in circumstances where the plaintiff's loss is greater than market value because of particular circumstances relating to the land which gives to the owner a particular advantage. Callinan J in Boland v Yates Property Corporation Ltd (supra) gives as an example of such a case, land owned and operated by a blacksmith in close proximity to a racetrack where the blacksmith would be geographical proximate to persons who may require his services.

15 The common thread in those authorities, in my opinion, is that they expressly apply to compulsory acquisition statutes where the owners of land are being deprived of their land without their consent and where compensation on the basis of "market value" would not provide to the dispossessed owners just compensation.

16 The opposing contention advanced by counsel for the defendant is that the MRTPSA does not create a compulsory acquisition scheme in the present circumstances. It is said that the Act gives to the defendant an option that arises from the plaintiffs' claim for compensation for injurious affection. The option is either to pay compensation for the injurious affection or to elect to acquire the land. It is argued by the defendant that the plaintiffs, following such an election by the defendant, are under no obligation to transfer the land to the defendant and that the defendant's election would "fall away" should the plaintiffs discontinue the claim for injurious affection. It follows, so counsel contends, that the authorities relating to compulsory acquisition have no application to the present problem. It is contended by the defendant that the statutory scheme created by the MRTPSA is not intended to be a compulsory acquisition scheme of the type that would require compensation to be paid to the plaintiffs on the basis that they contend.

17 The evidence, which the plaintiffs placed before the court, revealed that the plaintiffs are the lessors of a piggery. The lessee, Tact, operates the piggery on the land and pays rental to the plaintiffs. The photographs of the piggery annexed to some of the valuation reports indicate that the piggery is substantial. A number of buildings have been constructed on the land to facilitate its use as a piggery. The evidence also establishes that effluent ponds have been developed on the land, lined with vinyl in order to prevent seepage into the Gnangarra Mound water supply. As I understand the plaintiffs' position, they maintain that there are particular advantages to them in having a piggery conducted on the land because of the geographic proximity of the land to suppliers and facilities necessary for a piggery to be operated. It is said that it would be difficult to find other suitable land in the same location upon which the same operation could be conducted and that to find other suitable land may necessitate moving the piggery to either Boddington or Wandering, many miles from Perth, and away from the advantages that the plaintiffs' land presently enjoys. To shift the stock, plant and equipment and buildings (if that was necessary), or even to construct an equivalent piggery at another location, would involve the plaintiffs in substantial expenditure. Further, the plaintiffs contend that they would lose the benefit of the capital gains exemption that they presently enjoy by reason of the fact that the land was purchased by the plaintiffs before the introduction of Capital Gains Tax. To conduct the piggery elsewhere would involve additional costs in transport and the like for the transport of the pigs to market.

18 From this brief summary of the facts it can be seen that the cost involved to the plaintiffs should it be necessary to relocate the piggery elsewhere would be substantial and the loss to the plaintiffs would be far greater than the market value of the land. Thus it is, that the issue between the plaintiffs and the defendant is of critical importance in this action, and in monetary terms there is a substantial difference in value, depending upon the method of valuation.

19 The first matter that falls for consideration is whether the cases involving compulsory acquisition of land have any application to the present case. Compulsory acquisition of land can be effected through Part 9 of the Land Administration Act 1997 ("the LAA"). It is not necessary to outline the provisions of that legislation for the purposes of these reasons save, and except to say, that the LAA provides for a system of awarding compensation to the owner of land subject to a resumption. In particular, under s 241 of that Act, express provision is made for the assessment of compensation where land is resumed. Section 241(6) provides:

"Regard is to be had to the loss or damage, if any, sustained by the claimant by reason of -

(c) the halting of building works in progress at the date when the interest is taken and the consequential termination of building contracts;

(d) architect's fees or quantity surveyor's fees actually incurred by the claimant in respect of proposed buildings or improvements which cannot be commenced or continued in consequence of the taking of the interest; or

(e) any other facts which the acquiring authority or the court considers it just to take into account in the circumstances of the case."

20 Where resumptions occurs under the provisions of the LAA, the statute provides for the assessment of compensation to the dispossessed owner.

21 In my view there is a fundamental distinction between the compulsory acquisition of land under the LAA and the acquisition of land under the provisions of the MRTPSA. The former provides for the assessment of compensation utilising the statutory method provided. The latter, under the provisions of s 36(2a) refers to the "price" to be paid for the land "acquired". The difference between the two statutes is that the former focuses upon "compensation" whilst the latter focuses upon the "price" to be paid for the "acquisition".

22 Had it been the case that Parliament intended that the price under s 36 of the MRTPSA should encompass such factors as are referred to in s 241(6) of the LAA, in my view it would have said so and a provision equivalent to s 241(6) would have been inserted in the MRTPSA. No such provision is to be found.

23 The scheme under the MRTPSA is that the respondent/defendant makes an election as to whether to compensate the owner for the value of the "injurious affection" (s 36(2)(b)) of the MRTPSA or to elect to acquire the land at a price to be determined under the statutory scheme. In my opinion it is therefore clear that the intention of the legislature under the MRTPSA is to fix market price as the appropriate method of valuation.

24 In further support of the conclusion to which I have come, there is a provision in the MRTPSA to the effect that where the owner of the land has been paid compensation for injurious affection and as a result of the scheme being amended or revoked the reservation is revoked or reduced, there is capacity in the Commission to obtain a refund from the then owner. It would clearly be inappropriate for a refund to be calculated on the value of the land to the owner in such circumstances. In my view, therefore, the intention of Parliament under the MRTPSA is to equate "value" in that section with "market value".

25 That is not, however, in my view, the end of the matter. As can be seen from par 10 of the points of claim, if the plaintiffs' case is made out, they will be subject to far greater loss than would be the case if the land was vacant land. That is because of the additional expense that would be occasioned to the plaintiffs in having to re-establish a piggery elsewhere. As I indicated to counsel in the course of argument, I will assist them as far as possible in resolving their difficulties by referring to factors that should be taken into account in determining the appropriate valuation.

26 In my opinion, in assessing market value in this case, a valuer should properly take into account not only the value of the plaintiffs' land but also the fixtures attached thereto and the use that is presently being made of it. The valuation should reflect the fact that the true market value is that of an operating piggery. There is, of course, no evidence before me as to whether there is a market for land utilised in such a way, or if there is such a market, what that market is. In my view it would be appropriate for market valuation to be based upon the sale of the existing piggery in circumstances where there is a willing buyer and a willing seller of such a business in that location. Regard should be had to the plant and equipment that is on the land together with its geographical location and convenience for the conduct of such a business.

27 It is not possible at this stage of the action to assist the parties further without trespassing upon the proper role of the trial Judge. In addition, any further intrusion into the facts likely to be ventilated at trial, would be beyond the proper resolution of the preliminary issue.