INGLEBRAE COAL PTY LTD v NEW SOUTH WALES COAL COMPENSATION BOARD & ANOR

LOWER COURT Supreme Court - Common Law Division JURISDICTION : LOWER COURT SC 30072/2001 FILE NUMBER(S) : LOWER COURT Master Malpass JUDICIAL OFFICER :

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40374/2002 SC 30072/2001

MASON P MEAGHER JA SANTOW JA

Friday 3 October 2003 INGLEBRAE COAL PTY LIMITED v NEW SOUTH WALES COAL COMPENSATION BOARD & Anor

FACTS In 1995 the appellant acquired a coal title for $1,147,000, which was (re)vested in the Crown in 1998 by s5A of the Coal Acquisition Act 1981 (CAA). Compensation to the appellant was determined according to cl 6 of the Coal Acquisition (Re-acquisition Arrangements) Order 1997 (1997 Arrangements) at $9,500,100.

The issue on appeal is whether the appellant's ensuing capital gains tax liability (CGT) is a "consequential loss [being] a pecuniary loss that is directly attributable" to the discharge of its fee simple estate in the coal, thus entitling it to further compensation pursuant to cl 7 of the 1997 Arrangements.

HISTORY OF PROCEEDINGS The NSW Coal Compensation Board determined that the appellant's loss was not a consequential loss, and therefore did not give any consideration under cl 7(3) as to whether it was "just and equitable" to award compensation. The Coal Compensation Review Tribunal held that the tax liability was "directly attributable" to the compulsory acquisition, with the result that the loss was compensable under cl 7. The Tribunal then purported to exercise the Board's function under cl 7(3) of determining whether it was "just and equitable" to award compensation. The Tribunal referred the matter back to the Board for the limited purpose of determining what part of the CGT liability was directly attributable to the coal re-acquisition. The Board brought an application for prerogative relief in the Supreme Court. Master Malpass concluded that the CGT liability was not a "consequential loss" within the meaning of cl 7. The Master also held that the Tribunal was restricted by Sch 3 cl 6 of the Coal Acquisition (Compensation) Arrangements 1985 (1985 Arrangements) to hearing appeals by way of reconsideration and should therefore not have dealt with the issue of whether it was "just and equitable" for compensation to be paid, because this was not a matter considered by the Board.

The appellant appealed Master Malpass's decision (the substantive issue). By notice of contention, the Board argued that the Tribunal erred by not referring the application back to the Board to consider whether it was satisfied under cl 7(3) that it would be just and equitable for compensation to be paid (the procedural issue).

HELD, per Mason P (Meagher JA and Santow JA agreeing), allowing the appeal in part:

1. The CGT liability was a "consequential loss" according to Cl 7 of the 1997 Arrangements. [52] (a) Within its proper scope, cl 7 is intended to provide compensation that goes beyond that which is due under cl 6 to an owner for loss of the coal itself. [34], [49]

(b) The CGT liability was a direct pecuniary loss. [44] , [51]-[52] (i) The liability for CGT directly reduced the appellant's assets and therefore constituted a loss of a pecuniary nature. [45] (ii) The fact that the consequential pecuniary loss is "personal" to the claimant is not a disqualifying factor: Bloomfield's Case . [48] (c) It is impossible to accept that the CGT liability was not "directly attributable to the discharge by virtue of the operation of" s5A of the CAA . [44] (i) The phrase "directly attributable" refers to a causal connection. Clause 7 does not require something to be solely attributable in order for it to be "directly attributable". New South Wales Coal Compensation Board v New South Wales Coal Compensation Review Tribunal & Anor ("Bloomfield's Case") Court of Appeal, unreported, 29 July 1997 ; New South Wales Coal Compensation Board v New South Wales Coal Compensation Review Tribunal & Ors ("Gilder's Case") , Court of Appeal, unreported 29 July 1997 . [36]-[37], [45] (ii) The CGT liability was directly attributable to the acquisition. The Crown's acquisition of the coal title formed a "disposal" of an asset by the appellant according to Pt IIIA of the Income Tax Assessment Act 1936 (ITAA) , resulting in a capital gain and generating a CGT liability. The CGT liability would not have arisen but for the operation of s5A. [43]-[44] 2) It was not open to the Tribunal to decide in principle that it was just and equitable to award substantial compensation to the appellant for loss incurred by way of CGT, as this was not a matter considered by the Board. [54]-[56], [59], [65]

(a) Schedule 3 cl 6 of the 1985 Arrangements is emphatic in limiting the scope of the appeal to reconsideration of the matters considered by the Board. [63]

(b) Clause 7 (3), (3A) and (4) of the 1997 Arrangements are explicit and emphatic in providing that as a precondition to any entitlement to compensation for consequential loss, the Board must be satisfied that it is just and equitable to award cl 7 compensation. [62] (i) The mere conferral of a right of appeal under Cl 23(4) (b) of the 1997 Arrangements against wrongful refusal of an application does not do away with this requirement. [62]

(ii) Clause 29 (3) (b) of the 1985 Arrangements is wide enough to allow the Board, on a remitter, to address the just and equitable issues; and cl 23(6) of the 1997 Arrangements ensures that the appellant will have a further right of appeal if disappointed with the Board's handling of the matter. [64]

Discussion by Santow JA about the impact of capital gains tax and income tax upon damages awards in various situations: Fedorovitch v St Aubins Pty Ltd (No 2) (1999) 17 ACLC 1558, Osrick Investments Pty Ltd v Woburn Downs Pastoral [2001] FCA 1402, Namol v A W Baulderstone (No 2) (1993) 47 FCR 388, Joondalup Gate Pty Ltd v Minister for Lands as delegate for the Minister for Works (1996) 33 ATR 327, Fox v Wood (1981) 148 CLR 438 discussed.

IN THE SUPREME COURT OF NEW SOUTH WALES COURT OF APPEAL CA 40374/2002 SC 30072/2001

MASON P MEAGHER JA SANTOW JA

Friday 3 October 2003 INGLEBRAE COAL PTY LIMITED v NEW SOUTH WALES COAL COMPENSATION BOARD & Anor JUDGMENT

1 MASON P: In 1995 the appellant acquired a coal title for $1,147,000. This coal was (re)vested in the Crown in 1998 by operation of s5A of the Coal Acquisition Act 1981 (CAA). Compensation for this acquisition was determined in the sum of $9,500,100. The principal issue in the appeal is whether the appellant can recover further compensation with respect to its ensuing capital gains tax liability of $2,105,804. The appellant submits that the liability represents a "consequential loss … directly attributable to" the discharge of its fee simple estate in the coal, within the scope of a clause conferring a right to compensation for consequential loss. 2 Brief chronology of main events

1.1.82 All privately owned coal in New South Wales was vested in the Crown pursuant to s5 of the CAA . Mrs Reynolds then owned the relevant coal. 21.6.85 Coal Acquisition (Compensation) Arrangements 1985 (1985 Arrangements) established a regime for compensation claims under the CAA . [Mrs Reynolds' claim for compensation was determined in the sum of $562,100 in 1992.]

20.9.85 Acquisitions of assets on and after this date generated potential liability to capital gains tax (CGT) under Part IIIA of the Income Tax Assessment Act 1936 (ITAA).

22.6.90 Coal Ownership (Restitution) Act 1990 (CORA) commenced, enabling claimants to seek restoration of ownership of coal, subject to refunding of compensation.

11.93 New coal title 1/834458 (estate in fee simple) granted to Mrs Reynolds pursuant to the CORA .

17.11.95 Mrs Reynolds assigned the coal title to the appellant for $1,147,000.

14.11.97 Coal Acquisition Amendment Act 1997 commenced, inserting s5A into the CAA . This enabled the Crown to (re)vest coal granted under the CORA .

Coal Acquisition (Re-acquisition Arrangements) Order 1997 (1997 Arrangements) established a regime for compensation in respect of restored coal revested in the Crown.

13.3.98 Subject coal reacquired by Crown pursuant to s5A of the CAA .

In response to the appellant's application for compensation, Coal Acquisition Board (the Board) (on 27.8.99) determined compensation for re-acquired coal under cl 6 of the 1997 Arrangements in sum of $9,500,100.

9.1.01 Notice of Assessment of CGT issued to appellant in the sum of $2,105,802.54 in respect of year 1997/1998.

Appellant subsequently claimed compensation for this liability as a consequential loss pursuant to cl 7 of the 1997 Arrangements .

16.2.01 Board refused appellant's claim for consequential loss.

12.3.01 Appellant appealed to Coal Compensation Review Tribunal (the Tribunal) pursuant to cl 23 of 1997 Arrangements .

28.9.01 Tribunal allowed appeal as to that part of $2,105,804 CGT which was directly attributable to the re-acquisition of the coal. Claim referred back to the Board for determination of that amount.

3.12.01 Board sought declaratory and prerogative relief in Supreme Court.

19.4.02 Master Malpass quashed Tribunal determination ( NSW Coal Compensation Board v NSW Coal Compensation Review Tribunal & Anor [2002] NSWSC 326, reported at (2002) 49 ATR 514).

Earlier Proceedings 3 The substantive issue is whether the CGT liability incurred by the appellant was "a consequential loss that is attributable to the operation of section 5A of [CAA]" being "a pecuniary loss that is directly attributable to the discharge by virtue of the operation of that section of any trust, lease, licence, obligation, estate, interest or contract established, granted, incurred, created or entered into before" [14 November 1997]. The authority of the Board (at least) to award compensation for such loss is conferred by cl 7 of the 1997 Arrangements. 4 The Board determined that the appellant's loss was not of this nature. Having done so, it did not proceed to consider whether it was just and equitable to award compensation, as it would have been required to do under cl 7(3). 5 The appellant appealed to the Tribunal pursuant to cl 23 of the 1997 Arrangements. Invoking both arms of cl 23(4)(b), it appealed against the refusal of the claim by the Board on the alternative grounds that the applicant was entitled to compensation under that instrument or that the claim was wrongfully refused (Blue 166). 6 On appeal, the Tribunal held that the Board had erred in its determination. In the Tribunal's view, the tax liability was directly attributable to the compulsory acquisition, with the result that the loss was compensable under cl 7. 7 The Tribunal also proceeded to exercise the Board's jurisdiction (under cl 7(3)) and concluded that: On the question of the justice and equity of the public purse being required to pay CGT in this case the Tribunal points out that the compulsory re-acquisition was inter alia effected for the benefit of the public purse.

8 The appeal was allowed, but only "as to that part of the $2,105,804.54 CGT which is directly attributable to the re-acquisition of the parcel of coal the subject of this appeal". The claim was referred back to the Board for determination of that amount. 9 What the Tribunal had in mind by the limited remitter is somewhat obscure. The calculations upon which the CGT assessment was based are in the appeal papers (Blue 147) although they are probably not part of the record subject to the Supreme Court's scrutiny pursuant to s69(3) of the Supreme Court Act. Senior counsel for the appellant suggested in argument that there is no live issue still to be addressed (CA Transcript p21). Fortunately, these details do not require resolution. What is clear is that the Tribunal found that the Board had erred in rejecting the application of cl 7(1) and purported to exercise the Board's function under cl 7(3) of determining whether it was just and equitable to award compensation. The remitter concerned some aspect of the detailed mathematics, not the issues of principle which were decided against the Board. 10 No submission had been put to the Tribunal by the Board suggesting that the Tribunal lacked jurisdiction or power in the circumstances to consider the cl 7(3) issues. In the Supreme Court the respondent Board nevertheless submitted that it was open for this purely legal issue to be addressed. It is the contention or procedural point to which I shall return. 11 Master Malpass exercised the jurisdiction of the Supreme Court to try non-jury proceedings referred by a Judge to a Master (Supreme Court Rules, Pt 60 r1A(1)(c); Schedule D, Part 3, cl 4(a)). Appeal lies to this Court in accordance with s101 of the Supreme Court Act (see Pt 60 r17(a)). 12 The Master heard and determined an application in the nature of prerogative relief based upon a claim that the Tribunal had erred in law in its reasons for ultimate determination of the appeal to the Tribunal (cf Supreme Court Act, s69). The Tribunal was the first defendant in the Court below and it properly adopted a submitting stance both before Master Malpass and this Court (where it is the second respondent). The second defendant before Master Malpass was the present appellant. 13 In this Court, the respondent Board raises by notice of contention the argument that the Tribunal erred by not referring the application back to the Board for it to consider whether it was satisfied under cl 7(3) that it would be just and equitable for compensation to be paid. I refer to this as the procedural issue, without suggesting any lack of importance.

Legislation 14 Section 5(1) of the Coal Acquisition Act 1981 (CAA), operative on 1 January 1982, provides:

5 Vesting of coal in the Crown (1) All coal that, but for this Act, would be vested in: (a) an instrumentality or agency of the Crown, or (b) any person other than the Crown, is vested in the Crown freed and discharged from all trusts, leases, licences, obligations, estates, interests and contracts. 15 Section 5A of the CAA (inserted in 1997 by the Coal Acquisition Amendment Act 1997, commencing 14 November 1997) provides: 5A Revesting in the Crown of coal granted under Coal Ownership (Restitution) Act 1990 (1) This section applies to coal granted under the Coal Ownership (Restitution) Act 1990 , whether granted before or after the commencement of this section. (2) On the recommendation of the Minister, the Governor may, by proclamation, declare that specified coal to which this section applies is vested in the Crown. (3) In deciding whether to make such a recommendation, the Minister may have regard to the revenue that would be likely to accrue to the Crown if the coal were vested in the Crown. (4) On the publication in the Gazette of a proclamation under this section, the coal specified in the proclamation is vested in the Crown freed and discharged from all trusts, leases, licences, obligations, estates, interests and contracts. (5) The reference in subsection (4) to leases does not include a reference to mining leases within the meaning of the Mining Act 1992 . (6) This section expires at the end of 31 December 1992.

16 Section 6 of the CAA (as amended) authorised the Governor to make the 1985 and 1997 Arrangements for the determination of compensation payable as a result of the operation of s5 and s5A. Section 6(7)(a) (inserted in 1997) stipulated that: (7) The amount of compensation payable under arrangements under this section must be just and equitable in so far as the compensation: (a) results from the operation of section 5A, … 17 The 1985 Arrangements were made on 21 June 1985 and have been amended from time to time. They constitute the Board and the Tribunal and establish their respective powers. They also prescribe the procedure for determining compensation claims stemming from s5 of the CAA, including the procedure on appeal to the Tribunal. Clauses 28 and 29 (as amended) extend the Tribunal procedure to appeals under the 1997 Arrangements. 18 The relevant clauses of the 1985 Arrangements are: 3 Definitions (1) In this instrument, except in so far as the context or subject-matter otherwise indicates or requires:

applicant means an applicant for compensation under the 1997 Compensation Arrangements. application means an application for compensation under the 1997 Compensation Arrangements. base date means the date on which coal vested in the Crown pursuant to section 5 of the Coal Acquisition Act 1981 [ie 1 January 1982]. claim means a claim made under clause 10, 11 or 12. …

9 Persons eligible to make claims for compensation (1) Any person, other than the Crown or an instrumentality or agency of the Crown, is eligible to make a claim under clause 10 or 11 if: (a) saleable coal was, immediately before the base date, vested in that person, and (b) that coal was situated within a colliery holding at any time during the period beginning with the base date and ending with 1 January 1986. (2) Where a person claims to have sustained pecuniary loss which is directly attributable to the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of the operation of section 5 of the Coal Acquisition Act 1981 , and the loss is not one in respect of which a claim could be made under clause 10 or 11, the person is eligible to make a claim under clause 12.

… 22 Determination of claims made under clause 12 (1) Where, in the case of a claim made under clause 12, the Compensation Board is satisfied that: (a) the claimant is an eligible person to whom that clause applies and has sustained pecuniary loss which is directly attributable to the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of the operation of section 5 of the Coal Acquisition Act 1981 , and (b) having regard to all the circumstances of the case, it would be just and equitable for the claimant to be paid compensation in respect of that loss, the Board may determine an amount of compensation to be paid to the claimant, not exceeding the amount of that loss….

Part 4 Appeals 26 Compensation Review Tribunal (1) There shall, for the purposes of this instrument, be established a tribunal under the name of the "New South Wales Coal Compensation Review Tribunal". 27 Right of appeal against determination of the Compensation Board (1) Not later than 30 days after being notified of the determination of a claim by the Compensation Board or of the refusal by the Board of a claim, the claimant may, by notice in writing, lodge with the Compensation Review Tribunal an appeal against the determination or refusal. (2) An appeal shall not be entertained by the Compensation Review Tribunal unless it: (a) specifies the ground of appeal, and (b) is accompanied by a lodgment fee of $100. (3) The grounds on which an appeal may be lodged under subclause (1) are: (a) in the case of an appeal against a determination of the Compensation Board, that the Compensation Board has wrongly assessed the amount of compensation that is payable to the claimant, and (b) in the case of an appeal against the refusal of a claim, that the claimant was entitled to compensation under this instrument or that the claim was wrongfully refused. (4) A claimant is not entitled to appeal under this clause to the Compensation Review Tribunal on the ground: (a) that the claimant is dissatisfied with the determination of any rate of interest by the Compensation Board or the Treasurer for the purposes of clause 18 or 24, or (b) that the Compensation Board has declined to exercise its discretion under clause 20, 21 or 22, but if the Board has, in respect of a claim, exercised its discretion under clause 20, 21 or 22, the claimant is nevertheless entitled to appeal under this clause on the ground specified in subclause (3) (a). (5) If: (a) a claimant has appealed under subclause (1) against the refusal of a claim by the Compensation Board, and (b) in consequence of the Compensation Review Tribunal's having remitted the matter to the Board under clause 29 (3) (b) for reconsideration, the Board has made a determination assessing the amount of compensation to be paid to the claimant, the claimant is not precluded from lodging a further appeal under subclause (1) on the ground specified in subclause (3) (a). 28 Hearing of appeal by Tribunal (1) Schedule 3 has effect with respect to the hearing of an appeal lodged with the Compensation Review Tribunal. (2) Schedule 3 applies in respect of an appeal under clause 23 of the 1997 Compensation Arrangements as if a reference in that Schedule to "claim" and "claimant" were a reference to "application" and "applicant".

29 Decisions of Compensation Review Tribunal (1) As soon as practicable after hearing an appeal lodged with it under this instrument or the 1997 Compensation Arrangements, the Compensation Review Tribunal shall, if it finds the ground of the appeal to be sustained, allow the appeal, but otherwise it shall dismiss the appeal. (2) If in accordance with subclause (1) the Compensation Review Tribunal allows an appeal on the ground that the Board has wrongly assessed the amount of compensation concerned, it shall either: (a) vary the determination of the Compensation Board to which the appeal relates by substituting for the amount of compensation determined by the Board such amount as, in its opinion, the Board ought to have determined, or (b) remit the claim or application that is the subject of the appeal to the Board for reconsideration with a direction to vary its determination by correctly assessing the amount of compensation specified in the determination. (3) If in accordance with subclause (1) the Compensation Review Tribunal allows an appeal on the ground that the claimant or applicant was entitled to compensation or that the claim or application was wrongfully refused, it shall either: (a) make a determination specifying an amount of compensation that, in its opinion, the Compensation Board ought to have awarded to the claimant or applicant concerned, or (b) remit the claim or application that is the subject of the appeal to the Board for reconsideration with a direction to make a determination assessing the amount of compensation to be paid to the claimant or applicant concerned. (3A) If the Compensation Review Tribunal varies the determination of the Compensation Board under subclause (2) (a) or makes a determination under subclause (3) (a), that determination as so varied or, as the case may be, that determination shall be deemed to be the determination of the Board. (4) Where under subclause (1) the Compensation Review Tribunal dismisses an appeal, the determination of the Compensation Board appealed against shall be deemed to be confirmed. (5) The Compensation Review Tribunal may give such ancillary directions with respect to an appeal lodged under this instrument or the 1997 Compensation Arrangements as it considers appropriate. (6) It is the duty of the Compensation Board to comply with directions given by the Compensation Review Tribunal under this clause in so far as those directions apply to the Board. …. Schedule 3 Provisions relating to the hearing of appeals by the Compensation Review Tribunal (Clause 28)

…. 6 Appeal to be by way of reconsideration An appeal lodged with the Tribunal in respect of a claim shall be dealt with by reconsidering the matters that were considered by the Compensation Board and by considering any evidence or representations in addition to or substitution for any evidence or representations given before or made to the Board in relation to the claim. 7 Onus of sustaining grounds of appeal to be on appellant The onus of sustaining the grounds on which an appeal before the Tribunal is based is on the appellant. 8 Compensation Review Tribunal not bound by rules of evidence etc The Compensation Review Tribunal: (a) is not bound by the rules of evidence and may obtain such information to assist it as it considers to be appropriate, and (b) shall act according to equity, good conscience and the substantial merits of the case without regard to technicalities or legal forms.

19 The 1997 Arrangements commenced on 14 November 1997. Relevantly they provided: Part 2 Compensation in respect of restored coal revested in the Crown 6 Compensation to owner of revested coal (1) Any person, other than the Crown or an instrumentality or agency of the Crown, is eligible to apply for compensation under this Part in respect of saleable coal that: (a) is vested in the Crown under section 5A of the Acquisition Act, and (b) was immediately before it so vested in the Crown vested in the person. (2) The compensation payable is to be calculated in accordance with Schedule 1. (3) Compensation in respect of coal referred to in this clause is payable in accordance with this Order and not otherwise…. 7 Compensation for consequential loss when coal revested

(1) A person, other than the Crown or an instrumentality or agency of the Crown, who claims to have sustained a consequential loss that is attributable to the operation of section 5A of the Acquisition Act is eligible to apply for compensation under this Part but only if the consequential loss is a pecuniary loss that is directly attributable to the discharge by virtue of the operation of that section of any trust, lease, licence, obligation, estate, interest or contract established, granted, incurred, created or entered into before the commencement of this Order. (2) A claim cannot be made under this clause for a loss in respect of which an application could be made under clause 6 and cannot be made for a loss that is attributable to a liability to pay royalties to the Crown. (3) If the Board is satisfied that an applicant has sustained a loss to which this clause applies and that having regard to all the circumstances of the case it would be just and equitable for compensation to be paid in respect of the loss, the Board is to determine the amount of compensation to be paid to the person. The compensation to be paid is not to exceed the amount of that loss. The compensation must be just and equitable. (3A) If, on considering a claim to which this clause applies: (a) the Board is not satisfied that the applicant has sustained a loss, or (b) the Board is satisfied that the applicant has sustained a loss but, having regard to all the circumstances of the case, considers it would not be just and equitable for compensation to be paid in respect of the claim, the Board is to refuse the claim. (4) Compensation in respect of a loss to which this clause applies is payable in accordance with this Order and not otherwise. …. 23 Appeals (1) There is a right of appeal against a determination of compensation under this Order or a refusal of an application for compensation under this Order. (2) The appeal is to the Tribunal and is made by lodging with the Tribunal a notice of appeal in writing within 30 days after the Board notifies the claimant of the determination or the refusal of the application concerned. The notice of appeal must specify the grounds of appeal and be accompanied by a lodgment fee of $100. (3) The Tribunal may in a particular case extend and further extend the time for lodging a notice of appeal. The Tribunal may delegate to a member of the staff of the Board the power of the Tribunal under this subclause to extend or further extend that time. (4) The grounds on which an appeal may be lodged are: (a) in the case of an appeal against a determination of compensation, that the Board has wrongly assessed the amount of compensation that is payable to the applicant, or (b) in the case of an appeal against the refusal of an application, that the applicant was entitled to compensation under this Order or that the application was wrongfully refused. (5) There is no appeal against any determination or other action under this Order except as provided by this clause. In particular there is no appeal against a recommendation of the Board for the purposes of section 5B of the Acquisition Act or a determination of the Treasurer for the purposes of Schedule 1. (6) If on an appeal, the Tribunal has remitted the matter to the Board for reconsideration, the applicant is not precluded from lodging a further appeal under this clause against a determination of the Board of the amount of compensation on the ground that the Board has wrongly assessed the amount of compensation. …. Schedule 1 Calculation of compensation (Clauses 6 and 10) 1 Definitions In this Schedule: base date means: (a) in relation to a clause 6 application, the date on which the coal to which the application relates vested in the Crown under section 5A of the Acquisition Act, or (b) in relation to a clause 10 application, 1 January 1982. clause 6 application means an application under clause 6. clause 10 application means an application under clause 10. median date , in relation to a relevant period, means 1 January in that relevant period. relevant period means a period of 12 months that begins on 1 July in a year. 2 Calculation of compensation (1) The Board is to determine an application by calculating the amount of compensation payable on the application in accordance with the following steps: Step 1 (Calculation of total base compensation amount by calculating and totalling amounts of compensation for each relevant period) Calculate an amount of compensation in respect of each successive relevant period, beginning with the relevant period within which the base date falls and ending with the relevant period that, in the Board's opinion, is the last relevant period in which saleable coal will be extracted from the land to which the application relates. The calculation of compensation for each relevant period is to be in accordance with whichever of the following formulas is appropriate for the relevant period concerned:

(A) Relevant periods occurring before the date on which the Board determines the application: (B) Relevant periods occurring after the date on which the Board determines the application: (C) The relevant period during which the Board determines the application: The formula to be used is the formula in (B) if the determination is made before 1 January in the relevant period or the formula in (A) if the determination is made on or after 1 January in the relevant period. Then add together each of the amounts calculated under this step in respect of the application to obtain a total base compensation amount for the application. Make any adjustment to the total base compensation amount that may be necessary to ensure that the amount of compensation is just and equitable and to give effect to any reduction under clause 8 or 11 (Gains to be offset against compensation). Step 2 (Allowing for any interim and preliminary payments already made on the application after adjusting those payments according to when they were made) Subtract from the total base compensation amount determined under step 1 an amount calculated as follows (being the total of adjusted interim and preliminary payments): Adjust any interim and preliminary payments made in respect of the application by multiplying each such payment by the relevant incremental factor and then adding together each of those adjusted payments. The relevant incremental factor for an interim or preliminary payment is a number equivalent to the amount of money that would be accumulated on and from the date on which the interim or preliminary payment is made up to and including the day before the date on which the Board determines the application if $1 were invested on the terms determined by the Treasurer under clause 3 of this Schedule. (2) If the total of adjusted interim and preliminary payments calculated under step 2 exceeds the total base compensation amount determined under step 1, the excess is to be treated as an overpayment that the Board can recover from the applicant in accordance with this Order. However, only interim payments of compensation are recoverable under this subclause and the Board cannot under this subclause recover a preliminary payment of compensation except to the extent (if any) that the excess is due to any reduction in compensation under clause 8 (Gains to be offset against compensation). (3) In the formulas in this clause: a in respect of a particular relevant period is a number equivalent to the amount of money that would be accumulated on and from the median date of the relevant period up to and including the day before the date on which the Board determines the application if $1 were invested on the terms determined by the Treasurer under clause 3 or on such other terms as the Board considers just and equitable in the circumstances of the case. e in respect of a particular relevant period is the amount that, if invested at the date on which the Board determines the application on terms (including terms as to a rate of interest) determined by the Board in relation to the particular case, would produce the sum of $1,000 at the median date of that relevant period, or such other amount as the Board considers just and equitable in the circumstances of the case. r is $0.90 or such other amount as the Board considers just and equitable in the circumstances of the case.

t in respect of a particular relevant period is: (a) for the purposes of a clause 6 application - the number of tonnes of saleable coal that in the Board's opinion has been or will be extracted from the land to which the application relates during that relevant period, but (in the case of the relevant period within which the base date falls) ignoring coal extracted before the base date, or (b) for the purposes of a clause 10 application - the number of tonnes of saleable coal that in the Board's opinion has been or will be extracted from the land to which the application relates during that relevant period.

20 Clause 6 of the 1997 Arrangements conferred authority for the Board's determination that the appellant was entitled to $9,500,000 compensation in respect of saleable coal that was vested in the Crown under s5A of the CAA on 13 March 1998. 21 That compensation was calculated in accordance with Schedule 1 of the 1997 Arrangements. As with the 1985 Arrangements, the detailed formula provides a rate of compensation of 90 cents per tonne. This is based on the after tax benefit of compensation as a capital sum derived from a discounted cash flow of royalty income (see Minister's second reading speech on the introduction of the Coal Acquisition Amendment Bill, Parliamentary Debates Legislative Assembly 27 May 1997 p9251 and Commissioner of Taxation v Northumberland Development Co Pty Ltd (1995) 59 FCR 103). 22 Clause 7 of the 1997 Arrangements is the focus of attention in this appeal.

The Master's reasons 23 The Master set out the facts and legislation. He observed that the CGT liability of $2,105,804.54 was incurred by reference to the compensation determined by the Board on 27 August 1999 pursuant to cl 6 of the 1997 Arrangements. 24 The arguments before the Tribunal (as appear from its reasons) and the Tribunal's reasons themselves were recited. The Board had argued before the Tribunal that the liability to pay CGT was not a consequential loss of the kind referred to in cl 7 of the 1997 Arrangements. Rather, it was only a tax on the profit component of the compensation. The present appellant had argued before the Tribunal that the taxation liability was a loss which did not arise until after compulsory re-acquisition and therefore must be regarded as a consequential loss attributable to the operation of s5A of the CAA. It was a consequential loss in the form of additional taxation, directly caused by the compulsory acquisition. Were it not for the compulsory acquisition of the asset, it would have remained in the hands of the appellant and therefore not become liable to CGT. 25 The learned Master observed that cl 6 was implicitly confined to an owner of saleable coal whereas cl 7 was not so confined (at [29]). As regards Schedule 1, which contains the formula for calculating compensation in accordance with cl 6, the Master held (at [29]) that: … Broadly speaking, it has been said to compensate the owner for the after-tax value of the royalty income that may have been earned in the future but for the vesting. It seemed to be common ground that such compensation itself was not taxable.

26 In relation to compensation under cl 7, the Master held that the consequential loss has to be a pecuniary loss and it has to be directly attributable to the discharge by virtue of the operation of s5A of the specified entitlements ("trust" etc) (at [35]). The Master (at [36]) found it unnecessary to determine whether or not a tax on a profit could properly be treated as a loss within cl 7. 27 What appear to be the dispositive conclusions are the reasons in [37] and [42] as follows: [37] It seems to me that, when regard is had inter alia to the language used by the legislature, cl7 was not intended to provide eligibility for compensation to the owner for the incurring of a tax liability (such as CGT) on the profit component of compensation received because that coal has been revested in the Crown. The incurring of such a tax liability is not the discharge of an entitlement by virtue of the revesting. Accordingly, it seems to me, as a matter of construction of cl7, that what is sought by the second defendant in the present application is not consequential loss within the meaning of the clause. …. [42] In my view, the liability had by the second defendant to pay CGT is not directly attributable to the operation of s5A. It is attributable to the provisions of the Income Tax Assessment Act 1936 and to the collocation of matters that brought about an attraction of liability under that Act.

28 Before the Master, the Board also pressed the procedural point which is raised by way of contention in the appeal. It was unnecessary for the Master to deal with it, but he nevertheless concluded:

[45] The appeal to the Tribunal has to be dealt with by way of reconsideration. This is prescribed in cl6 of Schedule 3 to the Coal Acquisition (Compensation) Arrangements 1985 (the 1985 Order). The language of this provision restricts the reconsideration to a reconsidering of the matters that were considered by the Board. [46] In the present case, the plaintiff did not proceed to a consideration of the second of the two matters (whether or not it would be just and equitable for compensation to be paid). [47] In my view in the appeal then before it, the first defendant should not have proceeded to deal with that second matter and make its own determination on it.

The substantive issue 29 The appeal has been argued on the basis that the question whether or not the tax liability is a consequential loss under cl 7 of the 1997 Arrangements is a question of law. It has not been suggested that the Tribunal's conclusion in favour of the appellant was a decision on the facts or beyond the scope of review for error of law on the face of the record, in accordance with s69 of the Supreme Court Act. 30 The appellant submits that cl 7 should be construed on the basis that it seeks to compensate for loss. It therefore attracts what the appellant describes as the: general rule applicable to compensatory damages … that: (i) the purpose of awarding damages is to compensate for loss actually suffered; (ii) damages are for that reason assessed on after tax income; (iii) where the award of damages is itself taxable the damages are increased to compensate for the tax payable on the damages. 31 In support of this "general" rule, the appellant cites New South Wales Cancer Council v Sarfaty (1992) 28 NSWLR 68 at 79-80 (a wrongful dismissal case), Rabelais Pty Ltd v Cameron & Ors (1995) 95 ATC 4552 (a case involving potential income tax or CGT on damages awarded to the vendor of property against purchasers who failed to complete) and Daniels v Anderson (1995) 37 NSWLR 438 at 585 (general discussion about allowing for the identical and quantifiable impacts of taxation on compensatory damages). See also Pincus and White, "Taxation of Compensatory Payments and Judgments" (2001) 75 ALJ 378. This article cautions against drawing any firm conclusions about when the appellant's "general rule" is displaced as regards CGT (see esp at pp389-90). See also Fedorovitch v St Aubins Pty Ltd (No 2) [1999] NSWSC 776 at [31] reported at (1999) 17 ACLC 1558. 32 The appellant further submits that cl 6, which provides the basic formula for compensation, is calculated broadly by reference to the projected after tax sale value of the coal, taking into account that income tax is not payable on the compensation. It follows, the appellant submits, that the basic formula for which cl 6 provides is concerned with providing after tax compensation for an income stream foregone by reason of the acquisition: it is not concerned with providing compensation for the (pre-tax) capital value of the asset acquired. 33 As indicated previously when discussing cl 6, I accept this approach. The Northumberland Development decision in relation to cl 6's counterpart in the 1985 Arrangements also establishes that the compensation payable under cl 6 is capital, not income, for income tax purposes. 34 This said, I do not gain much assistance from this analysis of cl 6 in construing cl 7. Obviously the two clauses address distinct items of loss, a matter recognised expressly in cl 7(2) which stipulates that a claim cannot be made under cl 7 for a loss in respect of which an application could be made under cl 6. Within its proper scope cl 7 is intended to provide compensation that goes beyond that which is due under cl 6. 35 The fact that the 90 cent integer in the cl 6 formula can be shown to reflect a post-income tax tonnage rate does not establish a general principle whereby all compensation payable under the Arrangements must be adjusted to reverse tax impacts. 36 Of greater assistance are two earlier decisions of this Court (New South Wales Coal Compensation Board v New South Wales Coal Compensation Review Tribunal & Anor ("Bloomfield's Case") Court of Appeal, unreported, 29 July 1997; New South Wales Coal Compensation Board v New South Wales Coal Compensation Review Tribunal & Ors ("Gilder's Case"), Court of Appeal, unreported 29 July 1997). These cases involved cl 9(2) of the 1985 Arrangements which provides: (2) Where a person claims to have sustained pecuniary loss which is directly attributable to the discharge of any trust, lease, licence, obligation, estate, interest or contract by virtue of the operation of section 5 of the Coal Acquisition Act 1981 , and the loss is not one in respect of which a claim could be made under clause 10 or 11, the person is eligible to make a claim under clause 12.

37 The phrase "pecuniary loss which is directly attributable to the discharge … of any trust" etc is the key phrase in cl 7(1) of the 1997 Arrangements. The consequential loss claims in Bloomfield's Case and Gilder's Case did not relate to CGT. Nevertheless, it is relevant to this appeal to note that, in Bloomfield's Case Stein JA (with whom Handley JA and Grove AJA agreed) said: [Question 3] involves examining the meaning of "directly attributable". In a different context Lord Reid examined the meaning of "attributable" in Central Asbestos Co Ltd v Dodd [1972] 2 All ER 1135. His Lordship said: That means capable of being attributed. "Attribute" has a number of cognate meanings; you can attribute a quality to a person or thing, you can attribute a product to a source or author, or you can attribute an effect to a cause. The essential element is connection of some kind. (at 1141) In Walsh v Rother District Council [1978] 1 All ER 510 Donaldson J considered the meaning of "attributable" in an employment context. After referring to Lord Reid in Central Asbestos he remarked: Suffice it to say that these are plain English words involving some causal connection between the loss of employment and that to which the loss is said to be attributable. However, this connection need not be that of a sole, dominant, direct or proximate cause and effect. (at 514) In my opinion "directly" in cl 9(2) should not be construed to mean solely, which is in effect the submission of the appellant. What is required is a causal connection, but this need not be the sole or even dominant cause. In this instance there is no doubt that there exists a direct causal connection. The loss to Bloomfield was attributable to its need to acquire and pay for new surface rights and this loss was a direct result of the termination of the leases.

38 Gilder's Case was decided at the same time by a similarly constituted Court. The reasoning in Bloomfield was applied. Stein JA emphasised that cl 9(2) [cf cl 7 of the 1997 Arrangements] was available independently of cl 9(1) [cf cl 6 of the 1997 Arrangements], so long as a claimant did not double up. 39 It is appropriate at this stage to examine the provisions of the ITAA that support the capital gains tax (CGT) assessment in the present case. 40 CGT is imposed by Part IIIA of the ITAA. Portions of the opening sections of that Part sufficiently demonstrate its operation: 160AX Object The object of this Part is to provide for net capital gains to be included in assessable income (see section 160ZO). Simplified outline of scheme of Part [Simplified outline]

160AY. (1) The following is a simplified outline of the scheme of this Part. [Step 1---disposal of an asset] (2) This Part applies if a taxpayer disposes of an asset. For a basic definition of "asset", see section 160A. The taxpayer must have acquired the asset on or after 20 September 1985 and the disposal of the asset must occur on or after that date (see section 160L). 160M is the basic provision defining "disposal" and "acquisition". The timing of disposal and acquisition is dealt with by section 160U. There are various exemptions, … [ Step 2---disposal of asset may result in a capital gain or a capital loss] (3) The disposal of the asset may result in a capital gain or capital loss (see section 160Z). Capital gain---asset owned for 12 months or more

[Step 3---calculation of net capital gain ] (4) Capital gains and capital losses are netted under section 160ZC to work out the net capital gain. Example: [Step 4---net capital gain to be included in assessable income under section 160ZO ] (5) The amount of the net capital gain is included in the taxpayer's assessable income under section 160ZO. 41 The appellant incurred its CGT liability in the 1997-1998 tax year because the coal which it acquired from Mrs Reynolds for $1,147,000 on 17 November 1995 was an asset "disposed of" (cf s160M) at a higher value on 13 March 1998. That value was determined by the Board applying ss5A and 6(7) of the CAA and cl 6 of the 1997 Arrangements. 42 There were no other disposals generating capital gains or capital losses in the relevant tax year. The net capital gain was calculated at $4,480,431 and this constituted the appellant's taxable income for that year (Blue 147, 149). This generated the tax liability of $2,105,804.54, based upon the special rate of tax applicable to a resident trust estate (s99A). 43 In my view, the CGT liability was directly attributable to the acquisition, because the acquisition by the Crown was the "disposal" by the appellant and because that disposal generated the tax liability. In the very language of the ITAA, the disposal "resulted" in a capital gain (s160AX (3)) and a capital gain was "deemed …to have accrued to the taxpayer during the year of income" (s160Z(1)(a)). Since there were no other capital gains and no offsetting capital losses, the amount of the net capital gain was included in the appellant's assessable income under s160ZO. 44 It is hard to envisage a more direct pecuniary loss. It is impossible to accept that it was not directly attributable to "the discharge by virtue of the operation of" s5A of the appellant's interest in the coal acquired by the Crown. The CGT liability would not have arisen but for the operation of s5A. 45 I am unpersuaded by the Board's submission that the cause of the loss was the ITAA to the exclusion of the acquisition. The ITAA was the background circumstance that operated on the particular events befalling the appellant in 1997-98. Clause 7 does not require something to be solely attributable in order for it to be "directly attributable" (Bloomfield's Case). The liability for CGT directly reduced the appellant's assets and therefore constituted a loss of a pecuniary nature. It was no less a loss because the appellant had generated sufficient income to be taxable. 46 There is no doubling up in the award of compensation for consequential loss in the present case. That is because the income tax aspect of the 90 cent integer in the cl 6 standard compensation does not enter the area giving rise to the CGT liability in the present case. CGT was incurred in accordance with the indexed cost base formulae of the ITAA because of the difference between what the appellant paid Mrs Reynolds in 1994 and what the appellant obtained under the Board's determination applying the formula in cl 6. 47 On the substantive issue the respondent supported the Master's reasoning. It was submitted that the CGT liability was attributable to the ITAA and not to s5A of the CAA. Furthermore, any liability to pay CGT arose from the receipt of compensation assessed pursuant to cl 6 of the 1997 Arrangements and not the appropriation of the coal asset. The respondent submitted that the CGT that had been assessed related to the personal financial situation of the appellant. It did not relate to the compulsory acquisition per se and therefore could not be said to be "attributable" to s5A. It will be apparent that I cannot accept these submissions, which raise distinctions without differences. 48 Reference was made in the written submissions to Joondalup Gate Pty Ltd v Minister for Lands (1996) 33 ATR 327 at 330 and Harris v Welsh Development Agency [1999] 3 EGLR 207. The cases cited involve the application of general principles of assessment of compensation for compulsory acquisition. They are not directly in point. Clause 7 appears to have been designed to pick up situations where an individual person (who need not be a coal owner) has suffered some extraordinary loss over and above the loss of the coal itself. At any rate, the language of the clause bears this scope. The fact that the consequential pecuniary loss is "personal" to the claimant is not a disqualifying factor. The situation is quite the reverse, as Bloomfield's Case illustrates. 49 The respondent also cites the analogy of the well-established principle that a land owner's liability to federal taxation is not relevant to the assessment of compensation for compulsory acquisition (see Brown, Land Acquisition 4th ed (1996) at [3.49] and cases there cited). For my part, I find no assistance in this line of cases, nor in the cases dealing with the impact of taxation upon damages for personal injury. In those areas the courts are seeking to apply a general principle about the compensatory nature of compensation for land acquisition or tort damages. Here the court must struggle with the language of cl 7 and the fact that (unlike cl 6) cl 7 is addressing something beyond the compensation due to an owner for loss of the coal itself. 50 Echoing and developing the Master's reasons, the Board further submits that any obligation to pay CGT on the "profit" component of the compensation paid to the appellant by the Board is not a "loss". Again the analogies of the land acquisition and tort damages cases are invoked. The Board suggests that it is difficult to comprehend how tax on a profit can be said to be a "loss". 51 These submissions do less than justice to the steps leading to the CGT liability. That liability arose by virtue of the income tax assessment for 1997/98 in consequence of a transaction that constituted a "disposal" for the purposes of the ITAA. In a situation where there were no other capital gains and no offsetting capital losses, the appellant's CGT liability depended on the application of the detailed formulae in the ITAA to the capital gain obtained on disposal. For the appellant, that gain involved comparison between what it paid for the capital asset in 1994 and what it received for its disposal in 1998 through the application of cl 6. 52 Were it not for s5A of the CAA, the appellant could have retained the capital asset indefinitely. Or it could conceivably have disposed of it without making a capital gain. Unless one assumes a priori that a tax liability derived from a capital "gain" cannot be a pecuniary loss I do not see how the Board's submission enables the court to ignore the language of cl 7. That language calls for an analysis of the impact of an event (the revesting pursuant to s 5A). Has that event directly caused a consequential loss of a pecuniary nature? This appellant has not only lost its coal but it has also incurred a CGT tax liability in the process. In my view, that liability is a "consequential loss" and the language of cl 7 is otherwise engaged. 53 It follows that the Tribunal was correct to uphold the appeal and set aside the Board's determination refusing the claim for consequential loss. This part of the Tribunal's determination should not have been quashed by the Master.

The procedural issue 54 The Tribunal had power in the circumstances either to make a determination specifying the amount of compensation that, in its opinion, ought to have been awarded; or to remit the claim to the Board for reconsideration with a direction to make the determination assessing the amount of compensation to be paid (1985 Arrangements, cl 29 (3)). The Tribunal took the second option, but remitted the claim for the limited purpose of determining what part of the $2,105,804 CGT liability was directly attributable to the re-acquisition of the coal. The terms of limited remitter made it clear that the Tribunal had decided in principle that the appellant's CGT liability was directly attributable to the re-acquisition and that it was just and equitable to award substantial compensation because of the impact of CGT. 55 The Board submits that it was not open to the Tribunal to do this, having regard to the limited issues determined by the Board and the limited grounds upon which the appellant appealed from the Board to the Tribunal. 56 Clause 7 of the 1997 Arrangements requires an applicant to prove more than that it sustained a loss falling within cl 7 (1). Compensation for consequential loss will only be awarded if, in addition, the applicant satisfies the Board that having regard to all the circumstances of the case it would be just and equitable for compensation to be paid in respect of the loss (cl 7 (3)). If, having regard to all the circumstances of the case, the Board considers it would not be just and equitable for compensation to be paid in respect of the claim the Board is to refuse the claim (cl 7 (3A ) (b)). 57 In the present case the Board was not satisfied that the appellant had suffered a consequential loss within cl 7 (1). The application was refused on that ground alone. 58 Schedule 3, cl 6 of the 1985 Arrangements declared that the appeal to the Tribunal was to be dealt with by way of reconsideration. Specifically it provided: 6 Appeal to be by way of reconsideration An appeal lodged with the Tribunal in respect of a claim shall be dealt with by reconsidering the matters that were considered by the Compensation Board and by considering any evidence or representations in addition to or substitution for any evidence or representations given before or made to the Board in relation to the claim. 59 The Board accepts that it was open to the Tribunal to consider fresh evidence or representations. But the Board submits that the Tribunal was limited to "reconsidering the matters that were considered by the Compensation Board". Those matters did not extend to whether it would be just and equitable for compensation to be paid, because the Board itself had never considered this. Master Malpass agreed with this submission. 60 The appellant's response is the submission that Schedule 3, cl 6 does not confine the Tribunal to a consideration of only those issues that were considered by the Board at first instance. Clause 23 (4) (b) of the 1997 Arrangements enables an appeal against the refusal of an application to be brought on the grounds "that the applicant was entitled to compensation under this Order or that the application was wrongfully refused". Both arms were invoked in the appellant's appeal to the Tribunal. Clause 29 (1) of the 1985 Arrangements provides that the Tribunal shall, if it finds the ground of appeal to be sustained, allow the appeal. If the appeal is allowed on the said grounds, cl 29 (3) of the 1985 Arrangements states that the Tribunal shall either: (a) itself make a determination specifying an amount of compensation; or (b) remit the application to the Board for reconsideration with a direction to make a determination assessing the amount of compensation to be paid. 61 The appellant's point is that no other alternatives were stipulated in cl 29 (3). It further submits that the requirement of Schedule 3, cl 6 of the 1985 Arrangements that the Tribunal deal with the appeal by reconsidering the matters considered by the Board means nothing more than that the Tribunal is to "stand in the shoes" of the Board and to redetermine the application or so much of it as falls within the grounds of appeal. 62 The contending submissions have in common the implicit acceptance that someone must be satisfied that it is just and equitable to award cl 7 compensation before it becomes due. That, in my view, is clearly the position. Clause 7 (3), (3A) and (4) are explicit and emphatic in making the Board's satisfaction on this matter a precondition to any entitlement. The mere conferral of a right of appeal against refusal cannot write this requirement out of the equation, although it could expressly or impliedly put the Tribunal in the Board's shoes in that regard (as the appellant submits). 63 The source of the appellant's appeal right in the present case was cl 23 (4) (b) of the 1997 Arrangements. The grounds of appeal went beyond complaint about the wrongful refusal of compensation and extended to complaint that the applicant was entitled to compensation under the 1997 Arrangements. But Schedule 3, cl 6 of the 1985 Arrangements is emphatic in limiting the scope of the appeal to reconsideration of the matters considered by the Board. I read this as a reference to the matters actually considered, not the matters which could have been considered. The appellant's arguments on the present issue do not accommodate this provision and, if correct, mean that there would be no "first instance" consideration of the issues which cl 7 emphatically placed before the Board. This would deprive the Board of the capacity to address the just and equitable factors in its own determination and confine the Board to its role as contending party in a Tribunal appeal. 64 The appellant's submission that the Tribunal had no choice but to address the cl 7(3) issues reads cl 29(3)(b) of the 1985 Arrangements too narrowly. Clause 29 (3) (b) is wide enough to allow the Board, on a remitter, to address the just and equitable issues; and cl 23 (6) of the 1997 Arrangements ensures that the appellant will have a further right of appeal if disappointed with the Board's handling of this matter. 65 Accordingly, I would uphold the procedural point which the respondent Board raises by way of contention.

Costs 66 In the upshot, the appellant has had substantial success in the appeal and should therefore have the costs of the appeal as against the Board. Since the Board should have succeeded below, but only as to the limited procedural issue which had not been raised in the Tribunal, there should be no order as to the costs of the proceedings before the Master.

Disposition 67 I therefore propose the following orders: 1. Appeal allowed in part.

2. Set aside the orders made by Master Malpass and in lieu thereof order that (a) the determination of the New South Wales Coal Corporation Review Tribunal on 28 September 2001 is set aside so far as the remitter to the New South Wales Coal Corporation Board was limited to part only of the capital gains tax liability; (b) there should be no order as to the costs of the proceedings before the Master.

3. First respondent to pay the appellant's costs of the appeal and the costs of the second respondent as a submitting party. 68 MEAGHER JA: I agree with Mason P. 69 SANTOW JA: I have had the advantage of reading in draft the judgment of Mason P. I agree with his conclusions but would wish to add some additional observations on the difficult question of whether clause 7 of what Mason P refers to as the 1997 Arrangements must necessarily take into account as a "consequential loss" liability to capital gains tax on the sum paid by way of compensation to the owner of revested coal. 70 The exegesis of clause 7(1) of the Coal Acquisition (Re-acquisition Arrangements) Order 1997 involves the following elements: (a) a "consequential loss"; (b) being a "pecuniary loss"; (c) "directly attributable to the discharge by virtue of the operation of [s5A of Coal Acquisition Act 1981] of any … estate …" in the coal specified in the Minister's proclamation whereby specified coal is vested in the Crown; 71 If clause 7(1) is satisfied then the further hurdle must be satisfied of clause 7(3). Its exegesis follows: (a) the Board is satisfied that an applicant has sustained such a loss (as clause 7(1) describes); (b) having regard to all the circumstances of the case it would be just and equitable for compensation to be paid in respect of the loss, thereby requiring (c) the Board to determine the amount of compensation to be paid to the person, being in an amount (d) which is not to exceed the amount of that loss, and so that (e) the compensation must be just and equitable. 72 That exegesis works upon the basis that compensation is calculated in accordance with Schedule 1 of the 1997 Arrangements. The detailed formula provides a rate of compensation of 90 cents per tonne. The Minister in his second reading speech on the introduction of the Coal Acquisition Amendment Bill, Parliamentary Debates, Legislative Assembly 27 May 1997, p 9251-2, explains how that figure is derived, by reference to the starting point that the only benefit of coal ownership "is the receipt of income at seven-eighths of the royalty presently fixed at $1.70 per tonne". The Minister goes on to explain that "the major component of the discrepancy [between value to the Crown and lesser value to the claimant] is the fact that compensation is calculated at 90¢ per tonne to reflect the tax-free nature of compensation compared to $1.70 per tonne royalty as taxable income". The State, as the Minister points out, does not pay tax. The formula does not purport to share the benefit of any tax saving with the taxpayer claimant. Nor does the present value calculation do other than provide a present value for the royalty stream. In neither case does the claimant ordinarily appear to derive a profit as compared to the claimant's position if it simply received the original royalty revenue stream over its life. The importance of that "major component" is that it is based upon an assumption, namely that instead of the recipient paying income tax by reference to the matters relevant to assessment including in particular the receipt of $1.70 per tonne as royalty, the recipient receives a capital sum calculated on the basis of a net present value calculation at 90¢ per tonne. 73 The significance of this reduction in the amount paid by way of compensation to allow for income tax saved, is that it presupposes that the sum for compensation is tax free. I do not understand the Minister to have been limiting his statement to income tax and not capital gains tax. That assumption of tax-free compensation is clearly not correct in the present case, or like cases, to the extent that capital gains tax is payable. That is why, if the claimant were to enjoy "the tax-free nature of compensation" in the full sense, clause 7(1) would need to come into play so as to provide compensation for the capital gains tax indubitably payable in the present case. 74 I do not, however, suggest that the Minister's reference to "the tax-free nature of compensation" is by itself dispositive. But it does bear on the proper interpretation of the legislation to the extent it is ambiguous, in whether or not it leaves room for compensation for any capital gains tax where clearly payable. 75 In the context of awards, a number of cases have held that capital gains tax should not be the subject of additional compensation; by way of compulsory sale of shares in an oppression suit (Fedorovitch v St Aubins Pty Ltd (No 2) (1999) 17 ACLC 1558) or for breach of contract or contravention of the Trade Practices Act (Osric Investments Pty Ltd v Woburn Downs Pastoral Pty Ltd (2002) 20 ACLC 1); or damages for breach of copyright where in any event it was not clear whether or not capital gains tax would be payable in contrast to the position here (Namol v A W Baulderstone (No 2) (1993) 47 FCR 388). In the context of compulsory acquisition of land, Parker J of the West Australian Supreme Court sitting with Assessors as the Western Australian Compensation Court, disallowed compensation for capital gains tax upon compensation where the resumption was pursuant to the Land Acquisition and Public Works Act 1902; Joondalup Gate Pty Ltd v the Minister for Lands as delegate for the Minister for Works (1996) 33 ATR 327. But importantly, in none of these cases was the amount of compensation reduced to take account of the income taxation saved from receiving a lump sum in substitution for income that would otherwise have been received. In the first case, Fedorovitch, the oppression provisions were not actually predicated on compensation at all, as Young J pointed out. Thus each of those cases are distinguishable from the position here where the amount of compensation is explicitly reduced to allow for taxation supposedly saved. 76 A clear illustration of that is to be found in the judgment of Davies J in Namol Pty Limited v A W Baulderstone (No. 2) (supra) at 392-3: "The $350,000 compensatory damages were calculated by reference to profits from the exploitation of the copyright in the plans which were lost by reason of the respondents' actions. In assessing the $350,000, I made no allowance for income tax on the profits which Namol would have earned from the carrying on of that subcontract. As Namol would have been subject to income tax on any income derived from that subcontract, and as its financial returns from the use of the plans would have been reflected in that income, and thus subject to income tax, it is not inconsistent with the award for compensation to accept that Namol should pay capital gains tax upon that $350,000. The overall result of the different bases of taxation would not be the same, but there is no material before the court which would enable any precise quantification of the different liabilities to be made. Thus, in Pennine Raceway Ltd v Kirklees Metropolitan Council (No 2) [1989] STC 122, it was held that, although there was no certainty in that case as to the type of tax that would be levied, whether capital gains tax or income tax, it was not necessary for the court to decide such a matter in the assessment of damages." 77 But are the cases so readily distinguishable from the present situation? Here the respondents may contend that while there is allowance in the compensation for saving of income tax, the associated liability to capital gains tax on the compensation amount was never intended to be similarly treated. Thus capital gains tax is not a tax on assessable income after deductions. It is calculated by deducting an inflation adjusted cost base from any higher amount received from the disposal of a relevant asset; the excess is a capital gain. Here on the respondents' case all that is happening is that the owner of the coal, who might have sold the coal royalties in globo at any time, with consequent liability to capital gains tax, is simply being forced to bring forward that point of sale, by virtue of its compulsory revesting in the State. This could be equated to the situation in Joondalup Gate Pty Ltd v the Minister for Lands as delegate for the Minister for Works (supra). In the latter case the Compensation Court recognised that any future sale of the land would have been subject to capital gains tax in denying compensation for that element. Likewise Young J in Fedorovitch (supra). He recognised that the shares which he ordered be sold corresponding as they did to an investment home unit, simply caused "capital gains tax being paid now …. ahead of time"; [37]. Important to his consideration was that this was an investment unit whose future sale was within contemplation. 78 A pointer to the answer to this contention can be found by analogy to the way income tax was treated in Fox v Wood (1981) 148 CLR 438. Workers Compensation legislation provides for repayment of the gross amount of statutory benefits received by the employee to the employer or statutory fund in order for the employee to bring a claim outside the statute. Because it can be reasonably foreseen that it is the gross income replacement benefits that have to be reimbursed, though the worker receives only the net after tax amount of each statutory payment, the claimant receives an extra component in compensation, called the Fox v Wood component. It is an amount equal to the tax earlier paid. By analogy here, though income tax and capital gains tax are calculated on a differing basis, there is nonetheless a pecuniary loss suffered by the person whose coal has been compulsorily acquired. That loss is essentially the capital gains tax required to be paid on a compensation amount already reduced to allow for income tax saving. 79 Moreover there is no profit realised from the CGT taxed compensation to the claimant when comparison is made to the taxpayer instead simply retaining the royalty stream, paying income tax on it each year till the royalties cease. When that comparison is made, the claimant actually suffers a loss, equal to the capital gains tax on the compensation. It is true that if the comparison were instead between compulsory acquisition and a third party sale, each would give rise to a profit by comparison to the cost-base of the claimant so as to suffer the same capital gains tax. But is that the correct comparison? First, any profit is purely adventitious, depending on the cost base at the time. Second, the taxpayer may not want to sell, as compared to staying with the royalty stream. Third, the compensation formula ordinarily gives no advantage in suffering such a revesting of the coal, as compared to staying put with the royalties. There is in the present case no evidence that the claimant intended to sell anyway. In those circumstances, the correct comparison is to the claimant's position retaining the royalty stream as compared to having to accept its compulsory acquisition. That comparison yields no apparent profit. What occurs is simply a "zero sum game". 80 This point is further reinforced by the fact that the capital gains tax legislation actually recognises the need for general relief from double taxation. Thus a capital gain is reduced if, because of the CGT event giving rise to it, a tax provision (other than a CGT provision) includes an amount in the taxpayer's assessable income; see previously s160ZA of the Income Tax Assessment Act and currently s118-20. That logic of the CGT regime recognises the reciprocal relationship between capital gains tax and income tax. By way of proxy for income tax, the compensation amount is reduced according to a standard basis of reduction for all coal-owning taxpayers. Logic then calls for the compensation to be increased to reflect the incidence of capital gains tax. The logic is inescapable that, if coal royalties are compulsorily sold for a price which is reduced by the income tax saved, the taxpayer is worse off to the extent the compensation amount bears yet further tax. Capital gains tax so paid is clearly a "pecuniary loss". It is an easily calculated sum of money by way of loss; compare McRae v Commonwealth Disposals Commission (1951) 84 CLR 377 at 415. 81 There are of course individual factors which come to be considered under clause 7(3), in determining whether the prima facie clause 7(1) compensation, including for capital gains tax, is "just and equitable". An example might be if the claimant intended at the time to sell to a third party anyway. Whether past losses shielding the capital gains tax should be taken into account is a difficult question and should be reserved for a future case. On the one hand those losses could have shielded other gains. On the other hand, there is in fact no capital gains tax to be compensated for. The amount of compensation finally determined by the Board must reflect that further consideration, once the initial clause 7(1) threshold is past. Were there to be some adventitious gain from the compulsory acquisition, clause 8 of the 1997 Arrangements gives the Board the opportunity to make such reduction as it determines "to be the equivalent to the money value of any benefit obtained by the applicant from the discharge of any … estate … by virtue of s5A of the Acquisition Act" [the Coal Acquisition Act 1981]. 82 I agree with what Mason P says concerning the capital gains liability as being both a direct pecuniary loss and "directly attributable" to the discharge of the owner's estate in the coal. 83 To recapitulate: one may test the logic of this conclusion in favour of additional compensation for capital gains tax actually exigible. The owner of the coal royalties is in a position simply to continue to receive the coal royalties until exhausted, paying income tax on the royalties. When one compares that situation to the same taxpayer instead being forced to receive a capital sum for the present after-tax value of the coal royalty stream, what is the result? The supposedly compensated coal owner is ordinarily worse off from his starting position, by the amount of capital gains tax paid upon that compensation. In the event that further compensation for capital gains tax would exceed what was just and equitable, taking into account all the circumstances of the case, then the Board must take that into account and reduce the compensation accordingly. 84 Finally, I agree with the conclusions and reasoning of Mason P regarding what he describes as "the procedural issue" raised by the respondent's Notice of Contention. There should be a full remitter to the New South Wales Coal Compensation Board so that it is to consider not only the effect of the capital gains tax liability but also it is to address issues of what is "just and equitable". I agree with the orders proposed by Mason P. *********

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