Hunters Hill Council v Cunningham, & Ors

IN THE SUPREME COURT OF NEW SOUTH WALES COMMON LAW DIVISION ADMINISTRATIVE LAW LIST

30073/03 - HUNTERS HILL COUNCIL v PETER CHARLES CUNNINGHAM, VALUER-GENERAL OF NEW SOUTH WALES, GRAHAM WILLIAM PORTER and MEREDITH RUTH PORTER

JUDGMENT 1 HIS HONOUR: By Statement of Claim Hunters Hill Council (the Council) seeks relief by declaration and setting aside of a determination of compensation made by the first defendant (the Valuer-General) pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act). The second defendants (the Porters) were owners of certain land which I will later describe. 2 The Council asserts that the Valuer-General erred in law in making the determination, particulars of which are set out in par 10 of the Statement of Claim. The particular in par 10(d) was not pressed. 3 The merits of the decision sought to be impugned lie outside of administrative law remedy but it may assist to place the issues into focus to sketch some background facts. 4 The Porters owned land described as Lots 1 and 3 in Deposited Plan 607282. On Lot 1 was erected a house known as Mornington. Lot 3 was zoned 9(d) (Local Open Space) in the applicable Local Environment Plan (LEP No 1). As noted in a report of the General Manager of the Council (Exhibit 2), that zoning (prescribed in 1980) effectively placed a caveat against development and obligated the Council to compulsorily acquire the land on request from the owners. The Porters made such a request. Following litigation between them and the Council, a plan of subdivision of Lot 3 was prepared and registered, creating of it two lots (Lots 31 and 32 in Deposited Plan 1040602). Lot 31 was 526.9 m² and was situated on the foreshores of the Lane Cove River. This was acquired by the Council pursuant to the Just Terms Act and the necessary notice was published in the Government Gazette of 15 November 2002. That notice expressed the obligation under LEP No 1 and an order of the Land and Environment Court whereby the Council consented to purchase of that part of the former Lot 3, now Lot 31. Lot 32 was 443.2 m² and was retained by the Porters (the retained or residual land). 5 The house block (Lot 1) has a frontage to Vernon Street and running to the (approximately) southeastern boundaries of the now Lots 31 and 32 is a designated and unconstructed access known as Serpentine Road. 6 It is common ground that the quantum of valuation is not within administrative law jurisdictional compass but it casts some light on the inspiration for litigation to note that at the time of the original request the Porters submitted a suggested valuation of $900,000 representing compensation for 453 m² (part of Lot 3); the whole of Lot 3 was said to be valued at that time at $1,800,000.00. The Council sought advice of a valuer who opined that the value of the land to be acquired was $300,000. 7 No agreement between the Porters and the Council was reached and the provisions of the Just Terms Act were operative. The objects of the Act are declared in section 3. The Porters became entitled to be paid compensation in accordance with Part 3 (Section 37). The Council was obliged within thirty days (with possible extension of up to a further sixty days) after the gazettal on 15 November 2002 to give to the Porters notice of their entitlement to and the amount of compensation offered. That amount was specified "as determined by the Valuer-General". 8 Had the Porters been dissatisfied with any such offer they could lodge an objection to be dealt with by the Land and Environment Court (Section 66). In a practical sense, a potential recipient of compensation has a right to challenge (to be exercised, no doubt, if the compensation assessed is deemed too little) but the State authority (defined to include a Council) has no similar avenue of challenge if the assessment is deemed too much. This observation is no novelty and I will make some further reference later: Gosford City Council v Valuer-General 1996 90 LGERA 413. 9 The Valuer-General is the specified person to determine the amount of compensation (section 47). 10 On 12 February 2003 a document entitled "Determination of Compensation" subheaded with references to the Just Terms Act and the Valuation of Land Act 1916 issued under the signature of D. Cunningham for P.C. Cunningham Valuer-General. 11 The exclusive relevant ingredients to be taken into account in making such an assessment are set out in section 55 with definitions in succeeding provisions. In this instance, two ingredients were determined comprising market value of $2,500,000 and loss attributable to disturbance of $15,000, a total of $2,515,000. Serious financial implications of acquisition were canvassed in a report by the General Manager to the Council in October 2000 (Exhibit 1) although, at that time, the recommendation was to acquire the whole of Lot 3 DP 607282 whereas, in the event, a little over half the land area of that Lot was acquired. In a further report by the General Manager in May 2002 (Exhibit 2) a "worst case scenario" of $1,200,000 (necessary expenditure) was postulated. 12 The present action was commenced by Statement of Claim on 18 August 2003. 13 The cooperation of counsel has reduced the issues, in effect, to two, first, was the determination of the amount of compensation infected by error of law and second, if there was any such error should relief be withheld on discretionary grounds. Paragraph 7 of the Valuer-General's defence pleaded that the determination was not amenable to judicial review but that was not relied upon, the Court being asked to note that the concession was made for the limited purpose of this case only. 14 I turn to the contentions of error. I accept the submission of the Council that it would amount to error of law and thus be amenable to review, if it be shown that the decision maker ignored a principle of assessment of compensation for compulsory acquisition or regarded some material as irrelevant which afforded some evidence of value for reasons which were not rational: Melwood Units Pty Limited v Main Roads Commissioner 1979 AC 426; Maurici v Chief Commissioner for State Revenue 2003 212 CLR 111. 15 A question arises concerning whose error of law, if detected, gives grounds for relief. The formal determination document has been signed "D. Cunningham for P.C. Cunningham, Valuer-General". It is clear that the Valuer-General need not conduct valuation personally: cf Payce Properties Pty Limited v Harrisons Timber Pty Limited unreported NSWSC 14 December 1990. In this instance Mr Alan Vincin, a district valuer in the office of the Valuer-General contracted with Crown Valuation Service Pty Limited (CVS, named in correspondence as Crown West Valuations but nothing turns on this) to "provide a recommendation of the amount of compensation payable". 16 The letter of instruction included: "Your recommendation is to comply with the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 and is to be accompanied by a comprehensive report detailing all relevant information including valuation methodology, the basis of determination and the items of compensation considered in your assessment." 17 Attention was directed to s 13A of the Valuation of Land Act 1916 which authorizes the Valuer-General to contract for the provision of services but provides: "(3) Contract valuers are not agents of and do not represent the Valuer-General, except where expressly provided by or under this or any other Act or by the terms of the relevant valuation service contract." 18 Also referred to in that Act was s 8(5): "(5) The Valuer-General may delegate to any person any of the functions conferred or imposed on the Valuer-General by or under this or any other Act or law, other than this power of delegation." 19 Counsel for the Valuer-General argued that s 13A had no relevance to the present case, as by definition in s 13B (and the related provisions in ss 13C and 13D) what was neither a contested nor uncontested valuation service was involved, the former emerging from tender and the latter being contracts specifically with the State Valuation Office. 20 Mr Craig QC for the Council drew attention to the terms of the retainer of CVS which were to provide a recommendation, hence there was no delegation of function to CVS. The apparent delegation was by the Valuer-General (Mr P.C. Cunningham) to staff, Mr. D. Cunningham and/or Mr Vincin. So far as the latter's retainer of CVS was concerned, the maxim delegatus non potest delegare was applicable. 21 The issue of agency is not, in my opinion, germane to the contest. It is implicit in the submissions of all parties (Mr Griffiths SC for the Porters essentially adopted the key submissions of the Valuer-General) that if some error of law is to be detected, the acts or omissions of CVS have to be investigated. The formal determination revealed nothing concerning matters now the subject of submissions but it is significant that the despatch of the determination to the Council was accompanied by the CVS valuation report within which those matters are to be found. 22 As already mentioned, s 55 of the Just Terms Act specifies the matters to which regard must be had exclusively in determining the amount of compensation. The contention of the Council is that there has been error of law in three aspects: "(a) Ignoring a principle of valuation by failing to identify the highest and best use of the retained land; (b) Ignoring a principle of valuation by failing to identify and have regard to any truly comparable sales, having regard to the determination of the highest and best use of the retained land; and (c) Failure to act in accordance with valuation principle in assessing the 'after' value of the acquired land by failing to take into account the potential for amalgamation of the retained land with adjoining land." 23 Other pleaded particulars were not abandoned but the consequence of rulings during trial were recognized. There is no issue between the parties that it was a requisite of valuation that a decision should be based on consideration of the highest and best use of the land, both "before" and "after". The thrust of the Council's submission was directed to an alleged failure by CVS to undertake that exercise. It needs to be acknowledged that a decision as to the highest and best use of land is a question of fact and it is incumbent on the Council to demonstrate, in effect, that there was no proper consideration at all in order to sustain its submission. 24 Particular attention was directed to the content of the CVS report (pages 13-14) where under the heading "'after' acquisition potential of residue site" there appears: "An access handle to lot 2 DP 607282 physically separates the claimant's residue land from the lot occupied by the claimant's house, ie; lot 1 DP 607282. This prevents the possibility of amalgamation and subdivision into 2 developable home sites. The acquisition has denied the claimant's legal access to the river frontage and boat shed. Regard to this consideration is included in the application of comparable sales to the subject determination. However, it is noted that other homes adjoining 'Mornington Reserve' do enjoy similar practical access to the river frontage and boat sheds. During negotiations with the claimants, council suggested a number of proposals to motivate the claimants to withdraw their ' notice to acquire '. These proposals included rezoning the subject land residential & a land swap of the subject land with the unformed Serpentine Road reserve. In this regard, it is considered Council has displayed a flexible approach. Hunter's Hill planning controls indicate that the acquisition has sterilised the residue sites potential to be developed as a serviced home site. Council does have a discretionary provision under State Environmental Planning Policy No 1 to approve non complying applications. However, it is considered approval to solely develop the residue land as a home site is not likely. Issues that limit development of the residue site include; - The area of the residue site is significantly lower than that required by LEP No 1 for residential 2 (a2) land. - Council planning controls also require a portion of the site be reserved for open space & garden use. - Protection of views between the Lane Cove Rive (sic) and the items of environmental heritage, ie; 'Mornington' and the house to the western side. - Consideration of the proposal by Council's Conservation Advisory Panel. - Maintenance of the immediate localities development density, especially if council obtains a residential rezoning and amalgamation of the subject land and the unformed road reserve." 25 The contention is that this does not demonstrate that necessary consideration has been given the highest and best use of the retained land. 26 The portion of the report upon which this attention was focussed needs to be read in the context of the whole report when seeking to determine whether there has been an omission to consider and apply requisite principle. 27 There is an express statement (page 11, CVS Report) when introducing the valuation methodology: "This is a case where only part of the claimant's land has been acquired, compensation must have regard to the potential of the claimant's land before and after acquisition" (a typographical error whereby the word 'not' should be excised is dealt with in the affidavit of Mr O'Leary). 28 There are references to the nature of the site and congruent difficulties throughout the report leading to the final observations above recited which, in short, assess the retained land as residential zoned, affected by multiple obstacles rendering dwelling house approval unlikely, without water frontage which has passed with the acquired portion and without realistic ability to amalgamate with any other block. 29 It may be true that one could speculate upon the dis-establishment of Serpentine Road as a thoroughfare but, taking this as an example, it highlights a conclusion that ability to imagine does not demonstrate that error in law has occurred simply because ingenuity can suggest an unmentioned matter for exploration. It was outside of the power of the Council to close the road: See Roads Act 1993 Part 4. 30 The contention that there was a failure to have regard to comparable sales is answered by paragraphs 14 and 15 of Mr O'Leary's affidavit viz: "14. In order to identify sales of comparable residential land within Hunters Hill, I electronically searched the Valuer General's 'Valnet' database which records particulars of all reported sales. I considered all sales referred to in Valnet of both vacant residential land and improved residential land on the Hunter Hill peninsula which were transacted within the period May 2001 up to the date of acquisition (15/11/2002), including the sale of the Santow land (lot 2, DP 607282) which adjoins the subject land and which was transacted in November 2002. 15. There were no sales within the period mentioned, of allotments of vacant residential land on the peninsula of Hunters Hill where the area of the allotment was below the minimum size (under the plaintiff's Local Environment Plans) of allotments on which a dwelling house is permitted to be erected." 31 The Council submitted that any knowledge of Mr O'Leary (who performed the task contracted to CVS) could not be treated as knowledge of the Valuer-General. It was sought to distinguish Carltona Limited v Commissioner of Works 1943 2 All ER 560 and to note the doubt about its application in New South Wales in Hill v Woollahra Municipal Council 2003 127 LGERA 7. That stance created something of a paradox. If the actions of Mr O'Leary (that is to say, the examination of sales information and the making of comparisons) are quarantined from examination, the Council can point only to the bare certificate of the Valuer-General. There would therefore be no material examinable to demonstrate asserted underlying legal error. It became therefore necessary in order to consider the Council's submissions to examine what Mr O'Leary allegedly did not do. It cannot be that the material is admissible to ascertain what he did not do but inadmissible to ascertain what he did do. 32 As above indicated, the conclusions in the report concerning the perceived obstacles offer discernment that Mr O'Leary did not omit to consider relevant principles. 33 It follows that there should be judgment for the defendants on the Statement of Claim. 34 The Porters have instituted proceedings by way of Cross Claim against the Council. At the hearing, only the relief sought in paragraph 10(a) of the Amended Cross Claim was pursued. The terms of the orders sought effectively mandate compliance by the Council with a statutory requirement. It appears to be common ground that, no doubt because these proceedings were on foot, the requisite notice has not been given although the time specified in the statute expired some time ago. No particular submission on this aspect was made by the Council. Obviously if it had been successful in the principal proceedings, the orders sought in the Cross Claim would not be made. In the circumstances, I will make an order as sought in the Cross Claim but I will excise the words "forthwith and without delay" as the Council should have appropriate opportunity to consider its position in the light of this judgment. 35 Before departing from this matter I would once again emphasize that I have no jurisdiction in respect of the merits of the quantum of the amount of compensation as assessed and I do not suggest that I am in a position to comment upon it. There is material (Exhibit 2) which mentions the serious financial consequences to the Council, that is to the ratepayers in the Local Government area, of obligation to meet the cost of compulsory acquisition in accordance with the subject valuation. I cite and echo the observations of Powell JA (with whose judgment Priestley and Sheller JJA agreed) in Gosford City Council (supra) @ pp 422-3 where his Honour, after noting the absence of capacity in an authority to object to valuation said: "Although, in my view, this result is clear, it may be that this apparently anomalous result was not intended by the Parliament. This being so, I would suggest that the Court's judgment in these proceedings be drawn to the attention of the Government, or of the relevant Minister or Ministers, so that consideration might be given to the question whether, in the light of the Court's judgment in these proceedings, some amendment of the Just Terms Act is called for. " 36 I direct entry of the judgment for the defendant in the action on the Statement of Claim. 37 On the Cross Claim, I order the cross defendant to give to the cross claimants a written notice of compensation entitlement and offer of compensation in accordance with the amount determined by the Valuer-General on 24 February 2003 and as required by ss 42 and 43 of the Land Acquisition (Just Terms Compensation) Act 1991 for the land which was compulsorily acquired by the cross defendant on 15 November 2002 in accordance with s 19 of the Act. 38 The plaintiff is ordered to pay the defendants' costs of the action including payment as cross defendant to the cross claimants of any additional costs incurred in relation to the Cross Claim.

Last Modified: 06/15/2004 DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated.