Court of Appeal (Vic)|2011-12-16|Before: Mr J, Warren CJ, Tate JA

Love v Roads Corporation [2011] VSCA 434 (16 December 2011)

Roads Corporation v Love [2010] VSC 32 (Osborn J)

COSTS - Appeal from the trial judge's award of costs - Discretion as to costs under s 91 of the Land Acquisition and Compensation Act 1986 (Vic) - Whether it was open to the trial judge to have regard to an offer made 'without prejudice save as to costs' - Whether conduct arising from the making of a 'without prejudice' offer is unreasonable conduct for the purposes of s 91(1)(b)(i) of the Land Acquisition and Compensation Act 1986 - Whether the letter was a Calderbank offer - Coastal Estates Pty Ltd v Bass Shire Council [1994] VicRp 13; [1994] 1 VR 210 considered - Land Acquisition and Compensation Act 1986, s 91 - Supreme Court (General Civil Procedure) Rules 2005, O 26 - Leave to appeal granted - Appeal dismissed.

1 This appeal is a challenge by Mr Love to an award of compensation made by the trial judge[1] in respect of land that the Roads Corporation ('the Corporation') compulsorily acquired from him, pursuant to the Land Acquisition and Compensation Act 1986 ('the Act'). Mr Love submits that, due to errors made by the trial judge, the awarded sum does not sufficiently compensate him for the acquisition. He seeks to have the award set aside and the matter remitted for rehearing and determination.

2 Mr Love also seeks leave to appeal from the trial judge's award of costs.[2]

3 We deal with the appeal to the principal judgment first and then address the application for leave to appeal from the costs orders.

4 Mr Love owned and, in large part, occupied a 210-hectare property at 410 and 460 Cooper Street, Epping ('the land').[3] It comprised part of a property known historically as 'Clonard'. On 15 November 2001, the Corporation acquired[4] a 3.34 hectare strip of land running along the southern boundary of the land in order to facilitate the provision of an extra carriageway in Cooper Street by widening the roadway reserve. The strip formed part of the frontage of the land along Cooper Street, the major arterial road in the area. Mr Love had a right to claim compensation for the acquisition, pursuant to s 30 of the Act.

5 At the relevant time, quarrying operations were being carried out on a portion of the land that had been zoned for extractive industry. The quarry operations were being conducted in accordance with Works Authority 149 ('WA149') and the land on which the quarry operations took place was known as the WA149 land. The quarry operations were carried on by a company controlled by Mr Ron Kerr, known as Conundrum Holdings Pty Ltd ('Conundrum'), which leased the WA149 land from Mr Love.

6 The principal issue at trial was not the value of the strip of land which was acquired by the Corporation but the consequential loss of value caused by the acquisition to the balance of the land, in particular any loss in potential that the WA149 land had as landfill. The WA149 landfill proposal (as envisaged by Mr Love) was one to divert a relatively large quantity of putrescible waste to an as yet non-existent landfill in the void created by the quarry operations.[5]

7 The issue of loss of landfill potential arose in part because on or about 26 July 2001, about four months before the acquisition, the WA149 land was included as a potential landfill site by the Northern Region Waste Management Group ('NRWMG')[6] in a draft Prospective Landfill Site Schedule ('the draft Schedule') to its proposed Regional Waste Management Plan ('RWMP') which was subsequently submitted to the Environment Protection Authority ('the EPA') for approval[7] as an amendment to an existing plan. This enlivened its potential for landfill subject to works approval under the Environment Protection Act 1970 (the 'EP Act') and the need to obtain a planning permit under the Planning and Environment Act 1987. The EP Act was subsequently amended in July 2002 (eight months after the acquisition) to require that any landfill site be included first in a regional plan approved by the EPA.[8] By the time of the trial, the WA149 land had not been included in any such regional plan. Mr Love asserted that the result of the amendment to the EP Act was effectively to exclude the WA149 land as a potential site for future landfill.

8 Mr Love submitted at trial that there was thus a 'window of opportunity'[9] between June 2001 and July 2002 to obtain the necessary approvals to convert the WA149 land into landfill and that he missed this opportunity because access from the realigned Cooper Street to the WA149 land was uncertain during this time. He contended that this uncertainty made an application for landfill unfeasible.

9 In late 2005, the Corporation, unwilling to agree to Mr Love's claim for compensation for the acquisition, referred the matter to the Supreme Court for determination, pursuant to s 80 of the Act. The trial commenced in April 2009 and concluded in September 2009, occupying about 47 sitting days. Mr Love made a total claim for compensation (net of interest) for $16,267,000[10] made up of a principal claim of $10,507,000[11] together with further lesser claims for loss of amenity and the like. In February 2010, the trial judge gave judgment awarding Mr Love compensation in the sum of $444,344.92. In April 2010, his Honour made orders in relation to costs, requiring Mr Love to pay the Corporation's costs on a solicitor-client basis (including the costs of three counsel) up until the completion of the trial and to pay the Corporation's costs of, and incidental to, the application for costs.[12]

10 Section 41 of the Act sets out the relevant considerations to be taken into account in assessing the amount of compensation payable to a claimant in respect of an interest in land acquired under the Act. These include:

(a) the market value of the interest on the date of acquisition;

(b) any special value to the claimant on the date of acquisition;

(c) any loss attributable to severance;

(d) any loss attributable to disturbance;

(e) the enhancement or depreciation in value of the interest of the claimant, at the date of acquisition, in other land adjoining or severed from the acquired land by reason of the implementation of the purpose for which the land was acquired;

(f) any legal, valuation and other professional expenses necessarily incurred by the claimant by reason of the acquisition of the interest.

11 Section 41(3) of the Act provides that if less than the whole of the claimant's proprietary interest is acquired (as was the case here) then market value is to be assessed using a 'before and after' test; that is, the value is calculated by reference to the difference between the market value of the land before the acquisition and the market value of the land after the acquisition.

12 'Market value' is defined, pursuant to 40 of the Act, as meaning,

in relation to any interest in land on a particular date ... the amount of money that would have been paid for that interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

13 'Special value' is defined in s 40 of the Act as:

[T]he value of any pecuniary advantage, in addition to market value, to a claimant which is incidental to his ownership or occupation of that land.

14 'Loss attributable to severance' is defined in s 40 of the Act as:

[T]he amount of any reduction in the market value of any other interest of the claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land.

15 'Loss attributable to disturbance' is relevantly defined in s 40 of the Act as:

[A]ny pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of - ... (b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part.

16 As the trial judge observed, s 5A of the Valuation of Land Act 1960 (the 'VL Act') provides an underlying framework for the valuation of land compulsorily acquired:

5A Determining value of land

(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.

(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.

(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account -

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;

(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;

(c) the shape size topography soil quality situation and aspect of the land;

(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;

(e) the extent condition and suitability of any improvements on the land; and

(f) the actual and potential capacity of the land to yield a monetary return.

17 In Roads Corporation v Murdesk Investments Pty Ltd,[13] Chernov JA[14] discussed the general scheme for assessing compensation under the Act with particular reference to the acquisition of a portion of land (as here) and the notion of severance, one of the categories under which Mr Love claimed loss. He said:[15]

It is necessary to refer briefly to the statutory provisions that were relevant to the assessment of the respondent's entitlement to compensation. Section 30 of the Act essentially provides that a party in the position of the respondent 'has a claim for compensation' in respect of the acquired land. Part 4 of the Act then deals with the measure of such compensation. Thus, s 40 defines the 'market value' of the interest in the land that is to be acquired as 'the amount of money that would have been paid for that interest if it had been sold on [the relevant] date by a willing but not anxious seller to a willing but not anxious purchaser'. ... this provision reflects the test formulated by the High Court in Spencer v Commonwealth. Section 41(3) of the Act provides that, in the case of a partial acquisition of land, 'the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition'. Thus, the subsection requires the assessment of market value to be undertaken by way of a 'before and after' analysis and involves the determination not only of the loss of the value of the land acquired but also the effect of the acquisition upon the value of the balance of the land. Hence, loss attributable to severance, as that term is defined in the Act, is embraced by the 'before and after' analysis (at least in so far as the notion of severance applies to the balance of the land). The market value is to be assessed by reference to the potential highest and best use of the land as at the relevant date in order to reflect the full value of the land to the owner. Such an approach is recognised in Turner v Minister of Public Instruction and March v City of Frankston and in s 41(2) of the Act. Section 41(1) relevantly stipulates that 'in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to [factors that include] any loss attributable to severance ...'. 'Loss attributable to severance' is defined in s 40 as 'the amount of any reduction in the market value of any other interest of a claimant in the acquired land or any interest of the claimant in other land used in conjunction with the acquired land which is caused by its severance from the acquired land'. Hence, the Act recognises, generally, that [as stated in F W Hughes Pty Ltd v Minister for Conservation (1950) 17 LGR (NSW) 275, 281]:

...the taking of portion of an entire holding carried on as one property is not necessarily compensated by a mere reward of the value of the portion taken considered simply as if it were a separate and independent parcel of land. The taking of part may result in a diminution in value to the owner of what remains and, in particular, that may happen because of a disturbance in the previous proportions of different classes of land or of lands used for different purposes or in different ways.

18 Mr Love's claim at trial for the loss of landfill potential was expressed alternatively[16] as one for loss of (a) market value, (b) special value, (c) severance or (d) disturbance. Several further specific claims for disturbance, severance or special value were also made in relation to particular items, such as loss of amenity, loss of trees, power surge damage, reinstatement of water supply and fencing, as well as a claim for solatium. The compensation payable under s 41(f) (legal, valuation and professional expenses) was agreed between the parties.[17]

Three threshold difficulties - significant findings of fact by the trial judge

19 The trial judge identified the central question in the case as one relating to the loss of landfill potential of the WA149 Land. He said:[18]

The central question in this case ... concerns whether or not (and if so to what extent) the acquiring authority [the Corporation] is required to compensate Mr Love for any lost landfill potential inherent in the WA149 land component of the Cooper Street land, by reason of the proposal for and the implementation of the Cooper Street duplication project.

20 On appeal, Mr Love accepted that this was the central question.[19]

21 His Honour's approach to the central question was to identify three threshold difficulties in Mr Love's claim for compensation based upon findings of fact he made on the basis of direct evidence or inference.

22 The first threshold difficulty related to the claim for loss of market value[20] based upon uncertainty of access. The pre-existing access would have required alteration or replacement with new access if a landfill were to be permitted. The claim at trial was based in part upon the complaint by Mr Love that during the window of opportunity (June 2001 - July 2002) there was uncertainty about the effect of the duplication of Cooper Street upon access to the WA149 land which would have frustrated any application for landfill approval in the hypothetical purchaser's mind. The trial judge found that the hypothetical purchaser would not have regarded any uncertainty about access to the WA149 land in the 'after' situation as having affected any value the land had by reason of its landfill potential.[21] As a result, there was no difference in market value in the 'before' and 'after' situations on account of access uncertainty.

23 The second threshold difficulty also related to the claim for loss of market value; it consisted in the finding by his Honour that there was no realistic 'short-term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval'.[22]

24 The third threshold difficulty related to the question of causation. The trial judge found that no landfill approval could have been obtained in the time available during the window of opportunity.[23]

25 The findings of fact that comprised these three threshold difficulties created severe obstacles for Mr Love to overcome on the appeal.

26 Section 89(2) of the Act restricts an appeal to the Court of Appeal from a determination of the trial division of the Supreme Court only on a question of law. The notion of a question of law in this context is a particular and narrow one as discussed by Philips JA in S v Crimes Compensation Tribunal.[24] Phillips JA identified three propositions, the first of which was that a question of law clearly includes the construction of the relevant statutory provisions. It would also include the asking of the wrong question or the imposition of the wrong standard of proof.[25] The second proposition was that the application of the statutory provisions to the case at hand is primarily a question of fact not law, and entrusted to the trial judge. The third proposition was that a 'finding of fact will be overturned on an appeal on a question of law only if that finding was not open'.[26]

27 Each of the findings of fact that comprised the three threshold difficulties was unchallenged on the appeal. In his submissions, Mr Love did not argue that the findings comprising any of the threshold difficulties were not open to the trial judge.[27] He did not directly attack those findings but, rather, submitted that the trial judge, having made those findings, made inconsistent observations, failed to go on to consider other material issues that led him into error or erred in the conclusions he drew from the findings.

Grounds of appeal in the principal proceedings

28 The grounds of appeal in the principal proceedings were inter-related and many of the submissions made were relevant to more than one ground. The grounds were cast as follows:

(1) The learned trial judge erred in law in his assessment of the amount of compensation to be awarded for market value and severance in the 'before' scenario under ss 40 and 41 of the Act and s 5A of the VL Act when he declined to make any allowance for the potential use of that land for landfill purposes.

(2) The learned trial judge erred in law when he held that the prospects of works approval and planning approval of the WA149 landfill were low in the 'before' scenario by reason of the question of community need, when the finding was not open to him in circumstances where:

(a) the State Planning Policy Framework,[28] the State Environmental Protection Policies,[29] Best Practice Environmental Management Siting, Design, Operation and Rehabilitation of Landfills ('the BPEM'),[30] and the RWMP[31] were policy documents, not mandatory and did not contain a plain policy imperative against its approval;

(b) [there was] evidence that the relevant policies were open to its approval as an additional landfill in the northern region;

(d) [there were] merits of the site as a potential landfill.

(3) The learned trial judge erred in law when he disregarded the existence of a large quarry hole on the subject land in determining the market value of the subject land because inter alia of his conclusion that the use of the subject land as a landfill was not presently a viable use.

(4) The learned trial judge erred in law in his assessment of the amount of compensation to be awarded for market value and severance under ss 40 and 41 of the Act and s 5A of the VL Act in relation to Mr Love's interest in the WA149 component of the subject land in having found that there was:

(e) a 10 per cent prospect of landfill approval at 15 November 2001; and

(f) no prospect of approval after the amendment to the EP Act which took effect on 1 July 2002;

he made no allowance for the prospect of landfill approval in his award of compensation.

(5) The learned trial judge erred in law in relation to the assessment of market value, special value and severance under ss 40 and 41 of the Act and s 5A of the VL Act when he held that a properly advised hypothetical purchaser acting prudently and reasonably would not have delayed making an application for approval of a landfill by reason of the access uncertainty, notwithstanding his conclusion that Mr Love had acted reasonably in delaying any application for land use approvals during the window of opportunity having regard to the uncertainty which then existed as to the resolution of access arrangements for the WA149 land.

(6) The learned trial judge erred in law in holding that Mr Love was required to demonstrate a necessary causal link as a component of establishing loss as a consequence of severance.

(7) The learned trial judge erred in law in holding that severance sounds in loss of market value at the date of the loss, instead of being the difference between:

(a) the market value in the 'before', assessed at the date of acquisition; and

(b) market value in the 'after', assessed upon the crystallisation of loss in market value upon the change to the EP Act in July 2002.

(8) The learned trial judge erred in law in holding in relation to the assessment of special value under s 40 of the Act and s 5A of the VL Act that the landfill potential of Mr Love's interest in the land in the 'before' scenario did not have special value to the owner, Mr Love.

(9) The learned trial judge erred in law when he failed to hold that the landfill potential of the land was a pecuniary advantage to Mr Love which was incidental to his ownership and occupation of the land.

29 The grounds of appeal did not include a challenge to his Honour's findings with respect to Mr Love's claim of loss from disturbance, nor raise a question of law on his Honour's approach to disturbance loss.[32]

30 The Corporation invited this Court to conclude that the grounds of appeal raised no question of law (with the possible exception of ground (5)) but were rather attempts to agitate for a different award of compensation based on Mr Love's view of how the trial judge should have analysed the factual matters, and thus that the appeal was incompetent. Rather than ruling at the outset on each ground as to whether it raised a question of law, within the meaning of s 89(2) of the Act, this Court permitted argument on all the grounds, many of which were inter-related, so as to allow for a considered assessment of the issues raised, mindful that the scope of the appeal was restricted to questions of law.

31 Mr Love's principal submission was that the trial judge, having found that landfill was not the highest and best use of the land, wrongly disregarded the potential of the WA149 land for landfill uses for which additional potential use Mr Love ought to have been compensated. In disregarding that potential he was said to have failed to complete the valuation analysis. He also argued that the consequence of access uncertainty involved the 'loss of a chance' of obtaining landfill approval, the trial judge making inconsistent findings in that regard. It was further submitted that his Honour had erred in the approach he took to severance and to special value.

32 Mr Love submitted that the trial judge erred in law in failing to make an allowance for the potential use of the land for landfill purposes in the 'before' situation when assessing the amount of compensation to be awarded for market value (and severance), under ss 40 and 41 of the Act and s 5A of the VL Act.

33 The trial judge found that the highest and best use of the land at the date of acquisition, 15 November 2001, was for future industrial use.[33] He rejected Mr Love's submission that the WA149 land had a higher value as a potential landfill than it had as future industrial land.[34] Indeed, Mr Love's view of the use of the land for potential landfill was part of a projected co-ordinated use of the land, involving also quarry operations and farming. As the judge described it:[35]

Mr Love's view was that the optimum future sustainable use of his land was that of a resource based business comprising the farming of the land, coupled with extraction of rock and the use of completed quarry holes for waste management purposes. He also regarded the land as suitable for uses complementary to extractive industry including a large livestock saleyard.

34 In applying the test for the highest and best use of the land, the trial judge compared, on the one hand, the integrated and co-ordinated use of the land for which Mr Love contended,[36] use for the extractive industry and consequent landfill potential,[37] with, on the other hand, future industrial use.

35 The finding that the highest and best use was for future industrial use, which was not itself under challenge in the appeal, was a conclusion inevitably drawn from the second threshold difficulty,[38] that there was no real short term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval,[39] and found alternative support in the valuation evidence.[40]

36 As extracted above, s 5A(3) of the VL Act relevantly provides that when determining the value of any land, there shall, where it is relevant, be taken into account,[41]

(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use; ... and

(f) the actual and potential capacity of the land to yield a monetary return.

37 Mr Love relied upon the words emphasised above and submitted that the trial judge erred in failing to allow any amount for the land's inherent potential as landfill, notwithstanding that he had found the highest and best use to be future industrial use. He submitted that where there is land with more than one potential use, s 5A(3) of the VL Act requires that, in the 'before' scenario, any valuable potential use of the land, albeit a secondary use, should be added to the highest and best use when determining the value of the land.

38 Before considering Mr Love's submission we set out his Honour's reasons for arriving at his conclusion on highest and best use.

39 The trial judge found that, as at the date of acquisition, 15 November 2001, 'the prospect of obtaining land use approvals in the short term [was] no more than 10 per cent'.[42] This finding was based on his assessment of the lack of community need for a landfill.

40 At the date of acquisition, the WA149 land was zoned such that a landfill would have required both a planning permit and a works approval pursuant to the EP Act.

41 It was accepted by the expert witnesses on both sides that both the EPA, in considering granting works approval, and the council, in considering granting the planning permit, would have applied the BPEM policy document.[43] The BPEM considered 'community needs' as the first factor in the hierarchical list of aspects to consider when screening for potential landfill sites.[44] The BPEM stated that a landfill 'should not be located where it is not needed for the disposal of a community's waste'.[45]

42 The trial judge considered that the hypothetical purchaser would have regarded as extremely problematic the prospect of demonstrating community need as contemplated by the BPEM[46] and that the hypothetical purchaser would have apprehended that there was no real prospect of demonstrating need in the short to medium term.[47]

43 As we mentioned above,[48] in July 2001 the NRWMG included the WA149 land as a prospective landfill site in the draft Schedule to its RWMP and approval was sought for amendment to the relevant existing plan. However, such approval was never granted. In May 2002, the proposed amendment to the EP Act was introduced into Parliament. Section 30(1) of the Environment Protection (Resource Efficiency) Act 2002 subsequently took effect on 1 July 2002. From that date s 50RE(4) of the EP Act provided:

The [Environment Protection] Authority must refuse to issue a works approval for a new landfill within a waste management region if the landfill is not provided for in, or is inconsistent with, the relevant regional waste management plan.

44 As at the date of trial, the WA149 land had not been included in any approved RWMP and since 1 July 2002 the EPA has had no power to issue a works approval for a new landfill upon Mr Love's land.

45 The draft Schedule showed that a new landfill was not needed in July 2001 for disposal of the community's waste.[49] It contained conclusions that there was no need, from a capacity point of view, for new landfills as 'the airspace capacity available in existing landfills is sufficient for at least the next ten years and likely to be 25 years'.[50]

46 It was true that the WA149 land had been ranked in front of other new potential sites in the area for landfill purposes in the draft Schedule;[51] however, as the trial judge commented, this ranking was in the context of existing capacity being sufficient for at least 10 years and probably 25.[52]

47 Ultimately, the trial judge concluded that at the date of the acquisition the hypothetical purchaser would have apprehended that there was no real prospect of demonstrating 'need' in the short to medium term and that, consequently, the prospects of gaining a planning permit for landfill and a works approval under the EP Act would have been very low,[53] being no greater than 10 per cent at best.[54] Thus, any value to be placed on landfill potential had to be modified by the consideration that there was only a 10 per cent chance that that potential could be realised.

Valuation evidence of future industrial use much higher than landfill

48 At trial, there was valuation evidence given by witnesses called for the Corporation, Mr Brown and Mr Dudakov, both of whom were professional valuers. They gave evidence with respect to the use of the land for future industrial use, based on comparable sales. On that basis, the value of the land was $75,000 to $77,000 per hectare,[55] for at least 30 hectares.[56] Their evidence was effectively unchallenged at trial.[57] The valuers who advised Mr Love on the value of the land for future industrial use, Mr Hocking and Mr Kerr, were not called to give evidence.[58]

49 With respect to the value of the land for future landfill use, evidence was given by Mr Dudakov of comparable sales of land with extractive industry and consequential landfill potential as about $10,000 per hectare,[59] substantially below the $75,000 per hectare figure for future industrial use. This was accepted by the trial judge who commented that:[60]

There is no evidence of sales of land for quarry purposes with potential for landfill use at or about the relevant date for anything like $75,000 per hectare.

50 For the purposes of valuation for landfill, Mr Love relied at trial on the evidence of Mr Herdman, a valuer and chartered mineral surveyor. Mr Herdman accepted in cross-examination that if the level of value for future landfill came in below the value arrived at by the Corporation's valuers for future industrial use then, logically, the highest and best use was future industrial use.[61] His approach, and that adopted by Mr Love, was ultimately not to assert a credible alternative view of comparable sales but to adopt a different methodology that in effect sought to value the potential landfill business that Mr Love claimed was destroyed by the acquisition.[62] In other words, Mr Herdman sought to value a business that did not exist.[63] The trial judge did not accept this evidence partly on the basis that he did not accept a number of critical assumptions that Mr Herdman made in his calculations, as to, inter alia, waste stream, gate price, compaction rates and engineering costs, but more generally because he did not accept the reliability of his methodology.[64]

51 It followed, based on the evidence of comparable sales, that the value of the land for future industrial use was above that which the market demonstrated a buyer would generally pay for land with extractive industry and consequential landfill potential.[65] This conclusion was reinforced if one took into account the finding that there was only a 10 per cent prospect of obtaining approval for landfill which the hypothetical purchaser, properly advised, would have been aware of and which would have led him or her to in draw the same conclusion.

52 Furthermore, the trial judge was satisfied that the Discounted Cash Flow ('DCF') analysis, which was used by an accountant, Mr Lonergan, called by Mr Love, was not sufficiently reliable in respect of critical parameters to demonstrate a positive value for the proposed landfill.[66] Mr Lonergan accepted that the DCF calculations should be discounted to reflect the likelihood of land use approvals.[67] As the trial judge had found the prospect of obtaining landfill approval as being at best 10 per cent, the value arrived at for a hypothetical landfill development of Mr Love's land to be discounted using the 10 per cent probability.[68] So applied, the calculations did not generate a 'before' value higher than the future industrial value of land.[69] Importantly, the trial judge found that even if the risk as to land use approvals was disregarded, the DCF methodology upon which Mr Lonergan relied was not sufficiently reliable to demonstrate a positive value for the proposed landfill.[70] The Corporation argued that this was a critical finding, given the manner in which Mr Love presented his case on appeal, because it showed that even if a hypothetical purchaser considered that there was 100 per cent certainty of obtaining landfill approval (contrary to the actual findings made by the trial judge), nevertheless there was no positive value to be ascribed to the proposal to establish a landfill, taking into account the expert evidence on which Mr Love relied.[71]

53 Finally, the trial judge substantially accepted the Corporation's submissions that, based on the evidence as to operating costs and the expected waste stream to the landfill, the WA149 land was simply not viable as landfill.[72]

Did the trial judge err in calculating compensation?

54 The core of Mr Love's complaint on appeal was not that his Honour had erred in his rejection of the methodology of Mr Herdman, or in his conclusion that critical parameters of Mr Lonergan's DCF analysis were unreliable, but rather that he was mistaken in considering that, having found that the highest and best use of the land was for industrial purposes, he was not required, in addition, to allow any amount for the land's inherent potential as a landfill. Mr Love submitted that, notwithstanding the finding of highest and best use, the trial judge was nevertheless required to take into account the potential of the land for landfill and that he erred in failing to do that. It was contended that s 5A(3)(a) of the VL Act requires any potential use to be taken into account when determining the value of land; so too s 5A(3)(f) requires that any potential capacity of the land to yield a monetary return should be taken into account.

55 This submission reflected the issues raised in grounds 1, 2, 3, and 4.

56 In developing the submission, Mr Love contended that the trial judge made an error of law when he disregarded the potential of the WA149 land for landfill purposes, on the basis of his factual findings that the use of the subject land as a landfill was not presently a viable use. He submitted that this assessment ignored the potential use of the large void, created by the quarry, for use as landfill. This approach was argued to contravene established principles, namely, that the acquired land must be valued in its present condition but with all its potential including any alternative use which a hypothetical purchaser may have had in contemplation at the date of acquisition. Mr Love relied on the well known statement by Isaacs J in Spencer v The Commonwealth as guiding the determination of the value of land compulsorily acquired for the purpose of assessing compensation, and as reflected, as noted above, in the terms of s 40 of the Act:[73]

To arrive at the value of the land at that date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.

57 In Turner v Minister of Public Instruction[74] Sir Owen Dixon emphasised the need to take into account, in an appropriate way, the potential use to which the land may be put:[75]

Whatever else may be true as to the process of valuation employed, it is the entire land which must be valued as at the date of resumption. It is, of course, to be valued in cases of compensation with a view to ensuring that the actual value contained in the land is replaced in the hands of the owner by an equivalent amount of money. The value must therefore be the value to the owner which the land possessed to him in its condition at the date of resumption. That value was necessarily affected by all the advantages which the land possessed and these might be a matter of future or even contingent enjoyment. Future advantages or potentialities must not be excluded. At the same time the value of these things must be assessed according to the condition of the land as it stood at the time of resumption: 'it is the present value alone of such advantages that falls to be determined': Cedars Rapids Manufacturing & Power Co. v Lacoste. You must not notionally bring what is only potential into actual being and value it as if it existed.

58 Mr Love did not contend that, in assessing compensation, the trial judge should have taken account of all of the potentiality of the land by simply combining a figure representing the 10 per cent prospect of obtaining landfill approval in the short term with the figures ascertained by reference to future industrial use. Rather, he argued that it was necessary for the judge to have included some additional figure (which may not have been as high as 10 per cent) as representing the potentiality for landfill on top of that representing future industrial use. It was only by considering all of the potentiality the land enjoyed that the proper value could be determined for the purposes of compensation. In a somewhat similar context in the United Kingdom, Lord Scott, in Transport for London (London Underground Limited) v Spirerose Limited (in administration),[76] said that an expropriated owner has:[77]

the right to have included in his compensation the value to be attributed to any development potential the land may have. His compensation does not have to be confined to the existing use value of the land.

59 An alternative characterisation of this submission was that the trial judge had erred in failing to properly apply the 'loss of a chance' approach in making his award and had he done so he would have found that Mr Love had a compensable loss in relation to the landfill potential, as a minimum to the extent of the 10 per cent prospect of landfill approval existing as at 15 November 2001 such chance having been lost by July 2002, by the end of the window of opportunity. An analogy was drawn with the recognition of a loss of opportunity in contract and tort and claims made under legislation such as the Trade Practices Act 1974 (Cth) or the Fair Trading Act 1987 (NSW).[78] In Malec v JC Hutton Pty Ltd[79] Deane, Gaudron and McHugh JJ considered the future or hypothetical degeneration of the effect of physical injury, and said:[80]

The future may be predicted and the hypothetical may be conjectured. But questions as to the future or hypothetical effect of physical injury or degeneration are not commonly susceptible of scientific demonstration or proof. If the law is to take account of future or hypothetical events in assessing damages, it can only do so in terms of the degree of probability of those events occurring. The probability may be very high - 99.9 per cent - or very low - 0.1 per cent. But unless the chance is so low as to be regarded as speculative - say less than 1 per cent - or so high as to be practically certain - say over 99 per cent - the court will take that chance into account in assessing the damages. Where proof is necessarily unattainable, it would be unfair to treat as certain a prediction which has a 51 per cent probability of occurring, but to ignore altogether a prediction which has a 49 per cent probability of occurring. Thus, the court assesses the degree of probability that an event would have occurred, or might occur, and adjusts its award of damages to reflect the degree of probability. The adjustment may increase or decrease the amount of damages otherwise to be awarded ... The approach is the same whether it is alleged that the event would have occurred before or might occur after the assessment of damages takes place.

60 Mr Love submitted that the approach taken in Malec's case should have been applied by the trial judge with the result that allowance should have been made for the potential benefit of the landfill. He argued that such an allowance should have been made regardless of the valuation of the land on the basis of future industrial use as the landfill potential represented an additional potential use of the land and represented a potential capacity of the land to yield a monetary return. It was submitted that the chance to realise that monetary return was foreseeable as a result of the acquisition.[81]

61 On the basis of Spencer, Turner, Spirerose, and Malec, Mr Love argued that the judge had erred in failing to make allowance for the benefits to the hypothetical purchaser arising from the following features of the subject land:

(1) the Special Use category 4 Extractive (SUZ4) Zoning of the WA149 site;

(2) its present uses, including quarrying and the benefits of the continuance of this use for a prospective purchaser, including a purchaser with a mind to future industrial or commercial development;

(3) the synergies available to a combined landfill/quarry operation on the WA149 site especially given that the filling of the excavated hole was at the relevant time the most economic use to which the land could be put (in the short to medium term);

(4) the fact that none of these uses would 'necessarily have been foregone' in achieving the land's future industrial potential, especially given the likely extended timeframe for such redevelopment and the potential for industrial development to proceed on the other parts of the land at the same time as the quarry/landfill use.

62 In response, the Corporation argued that there was no substance to the contention that the trial judge disregarded the potential of the land for landfill purposes or that he failed to take into account the benefits arising from the features of the land. His Honour considered each such attribute of the land.[82] The Corporation submitted that rather than determining that he was not required to allow any amount for the land's inherent potential as a landfill, as Mr Love contended, the trial judge held that no separate or additional allowance should be made for an alleged loss of value due to lost landfill potential by reason of the acquisition because Mr Love was unable to overcome, relevantly, the first and second threshold difficulties, namely, that uncertainty of access did not adversely affect prospects of approval and could have been resolved by means of a permit condition and there was no real short term prospect of obtaining landfill approval because community need could not be established. In particular, the Corporation argued, the unchallenged finding on the first threshold difficulty meant that any loss of landfill potential arising from uncertainty of access could not be attributed to the acquisition. The hypothetical purchaser would not have regarded such uncertainty as existed as preventing a successful application for a planning permit and works approval in the 'before' or 'after' situation. As a result, there was no difference in value in the 'before' and 'after' situation on account of 'access uncertainty' that stood to be compensated.

63 The Corporation acknowledged that, in some circumstances, in determining the highest and best use of land, the Court might take into account an aggregation of potential uses. This was recognised to be so in ISPT Pty Ltd v Melbourne City Council[83] where there was a range of potential uses for the land in question. In ISPT this Court held that notion of highest and best use clearly permits a combination of uses.[84] In a joint judgment, the Court said:[85]

In our view the language of s 5A(3) is apt to embrace the potential description of highest and best use in terms of alternatives. First, in the absence of an apparent intention to the contrary, the use of the singular in the phrase 'the highest and best use' should be understood to embrace the plural. Secondly, subs (3) (a) couples the phrase 'highest and best use' with the phrase 'and to any potential use'. Further subs (3)(f) required the tribunal to take into account the actual and potential capacity of the land to give a monetary return. It seems to us that the notion of potential use applicable to vacant land must have the theoretical capacity to embrace potential alternatives if such alternatives are proven to exist. Thirdly, the underlying notion of highest and best use takes account of all factors affecting its present and future potential and there is no sensible a priori reason for necessarily excluding alternative uses from such concept.

64 Whether a single use or a number of alternative uses is 'the highest and best use' in the individual circumstances of a case will depend upon the evidence and the factual findings that are open to be made. This was emphasised by the Court in ISPT when it said:[86]

Whether the highest and best use is in fact proven to be a single use or a package of alternative uses will depend on the evidence. What use or uses are properly described as highest and best use will be a question of fact.

65 In ISPT the evidence supported a finding of a package of alternative uses as the highest and best use without specifying a single, precise use. The highest and best use of the land was held to be specifically an intensive development with a tower building, of a similar volume to an existing building, and underground parking. More generally, it was held that the tower block could be used for either office or residential or institutional purposes, or some combination thereof, but most probably office use. The ground floor level of such an intense development was considered most probably to be used for a retail or quasi-retail purpose.[87] However, importantly, there was a finding that it was not the case that there were two distinct markets in Melbourne, one for office space and one for residential redevelopment.[88] These were not competing markets or incompatible uses. The tower would have a capacity for mixed use, and a hypothetical purchaser would be aware of that, and a value could be arrived at which reflected a consistent package of alternative uses.

66 The circumstances of the case, and the evidence relied on in ISPT, are vastly different from the circumstances arising here and the evidence adduced before the trial judge. We do not consider that s 5A(3)(a) of the VL Act permits an aggregation of inconsistent potential uses to be subsumed within the identification of the 'highest and best use' of land, nor does it permit, as Mr Love would have it, that the value of land should include not only its highest and best use but any other potential capacity in addition, even where that potential use is incompatible with the realisation of the highest and best use. We agree with the Corporation that ISPT, while it recognised that in some circumstances the highest and best use will include a package of uses, it is not authority for the proposition that one can aggregate values for potential uses where those uses are inconsistent with each other.

67 On the issue of competing uses, on the appeal Mr Love appeared to shift his case from that presented at trial. It is apparent from his Honour's reasons that the co-ordinated or integrated use of the land Mr Love contended for at trial involved quarrying, landfill, farming and other related uses.[89] The evidence adduced was directed to what the Corporation described as 'a pretty stark contrast' between future industrial use, submitted to be the highest and best use by the Corporation, and the use contended for by Mr Love of a concurrent quarry and landfill. Indeed, it was initially conceded at the hearing of the appeal that there would be a point in time at which a hypothetical purchaser, having bought the land, would elect as to which pathway (industrial use or landfill) he or she was going down.

68 However, it was later contended before us that what Mr Love had in mind was an extension of the quarrying operation, followed at some subsequent time by landfill, followed again after the expiry of what might be a substantial period, the use of the land for industrial purposes. All three uses were argued to be compatible. This was said to demonstrate the complementarity of the use of the land for landfill and for future industrial use. Mr Love described the use of the land for landfill as an 'alternative interim use', following upon the end of long-term quarrying, that was consistent with future industrial use. In support of the proposition that landfill use was compatible with subsequent industrial use, Mr Love relied on the following

passage from the trial judge's reasons:[90]

I accept that at the date of acquisition Mr Love operated his property as an integrated unit used for interrelated and sequential land uses. He had for a number of years used it for the purposes of grazing beef cattle and progressively given it sequentially over to use for quarrying basalt, and a series of landfills. In turn he ultimately contemplated that it would go over to urban land use of some industrial nature.

The conclusion that the highest and best use of the land at the acquisition date was constituted by its value as future industrial land does not preclude it from having further special value to Mr Love. This is because the notion of future industrial use is itself consistent with interim alternative use not destructive of its future value. In the present case that interim use was most obviously the continuation of the residential and agricultural use of the land by Mr Love potentially for some 20 years or so before subdivision for industrial purposes.

...

The actual use of the land for industrial use remained at the date of acquisition a long term proposal, perhaps in the order of 20 years ahead. In the interim period the land was of value to Mr Love as a source of income from a profitable farming operation and as his family home.

69 Mr Love placed emphasis on the time frame envisaged before subdivision for industrial purposes. A period of 20 years was argued to provide the scope necessary for the interim use of the land for landfill purposes.

70 However, in our view, the reliance placed upon this passage is misguided. Mr Love's submission ignored the qualification placed on any interim alternative use by the trial judge, namely, that any such use must not be destructive of its future value. The submission also ignored the finding of the trial judge that the interim use of the WA149 land for the expanded quarrying operation that was contemplated as part of the landfill proposal would destroy the land's potential for subsequent development. In the context of considering whether the WA149 land had special value, his Honour made plain that while the continued use of the land for the integrated purpose of farming and quarrying was feasible, the WA149 land could not be used for a quarrying operation in the period leading up to industrial development. This was because such use would be destructive of its future potential. He said:[91]

It is more difficult to regard quarry use as potentially contributing to special value ... because that use was on the evidence destructive of the ultimate developmental potential of the land ... The proposal put at trial was that the landfill use would be concurrent with the expansion of the quarrying operation, not something that occurred some time after quarrying had been completed or within an interim period before industrial use could commence.[92]

71 Most importantly, the finding that the use of the WA149 land for a combined quarrying/landfill operation would be destructive of its developmental potential for industrial use was reinforced by the evidence of Mr Brown and Mr Dudakov. As the judge said:[93]

I also accept the evidence of Mr Brown and Mr Dudakov that if WA149 were extracted to its full extent and filled with putrescible waste above natural ground level, then its capacity for future industrial development would be regarded in the market as seriously diminished because of limitations on the form of development possible.

72 It follows that the potential uses of the land for landfill and future industrial use were not compatible and thus could not be combined under s 5A(3)(a) of the VL Act. There was no requirement for the trial judge to add landfill potential as a 'top up' to the highest and best use of the land for future industrial use.

73 Nor do we consider that s 5A(3)(f) permits an aggregation of conflicting and inconsistent potential uses because such an approach could lead to highly inflated and unfair valuations that could not sensibly reflect what a hypothetical purchaser would be prepared to pay.

74 Furthermore, putting to one side the question of inconsistent uses, the VL Act cannot be used to create entitlements to compensation on a compulsory acquisition over and above the entitlements conferred by Part 4 of the Act. Section 5A of the VL Act must be read in the context of the exercise mandated by the Act, which, so far as market value is concerned, requires the Court to determine the amount of money that would have been paid for the interest in land on the date of acquisition by a willing but not anxious seller to a willing but not anxious purchaser. This involves consideration of use or uses to which the land can be put, and the land is valued on the basis of its highest and best use or uses. This incorporates its income-earning potential.

75 At trial, the Corporation led evidence of comparable sales of land with future industrial potential. By contrast, Mr Love adduced evidence to support his contention that the hypothetical purchaser would value the land based on its potential to support the quarry/landfill operation that he envisaged. Mr Love did not call any evidence about the value of the land based on its future industrial potential.[94] He did not postulate a 'package' of uses representing the highest and best use for the land. The judge below accepted that the highest and best use for the land was as the Corporation had argued, namely for future industrial development, and rejected Mr Love's argument that its highest and best use was for a quarry and landfill operation. The future income generating potential of the land was thereby taken into account.

76 In any event, it is unnecessary to arrive at a definitive conclusion on the scope of s 5A(3)(a) and s 5A(3)(f) as the trial judge made an unchallenged finding that it would not be viable to use the land for landfill.[95] This was based on the assessment of the likely operating costs and was not dependent on the question of the prospects of landfill approval. The trial judge said:[96]

I accept the Corporation's submission that on the evidence the prudent hypothetical purchaser would expect a maximum of 100,000 to 130,000 tonnes per annum as a waste stream for the purposes of a reasonable hypothetical development calculation. This would result in a significant increase in operating cost from $7.40 per tonne. I accept as substantially correct the logic of the final written submission made on behalf of the Corporation to the effect that:

Adopting Mr Herdman's capex, initial Mr Alsop leachate cost of $7.95 (later increased) and Herdman's leachate cost of $2 (noting Messrs Meredith and Lonergan were at $3), for a total of $20.85 [capex and] opex based on 200,000 tonnes per annum, the margin, at $25, is only $4.15. If opex increases by more than $4.15 per tonne, as it inevitably will, based on Mr Currie's evidence and as accepted by Mr Herdman, the site is unviable. At an assumed 150,000 tonnes per annum, Mr Herdman adopted $10 per tonne opex and at an assumed 100,000 tonnes per annum, he adopted $15 per tonne opex, the site is not viable.

77 In finding that the use of the land for landfill was not viable, the trial judge was not confining his attention to the present circumstances. He considered hypothetical circumstances. The finding of a lack of viability meant that the landfill potential had not been proven to exist. It could thus be ignored for the purpose of determining the value of the land in accordance with s 5A of the VL Act. In other words, the trial judge found that, even if the potential uses could be combined, the landfill potential had no monetary value and thus could be properly ignored in assessing compensation. This was supported by the finding which the Corporation described as critical,[97] namely, that even if a hypothetical purchaser considered that there was 100 per cent certainty of obtaining landfill approval (contrary to the actual findings made by the trial judge), nevertheless there was no positive value to be ascribed to the proposal to establish a landfill, taking into account the expert evidence on which Mr Love relied.[98]

78 In our opinion, the trial judge, having found that the highest and best use of the land was future industrial use, did not err when he failed to take into account, in

addition, the landfill potential of the land.[99] Furthermore, far from disregarding the existence of a large quarry hole on the WA149 land in determining the market value of the land, the judge took the quarrying operations into account, as part of the proposal for concurrent use with landfill, and found, contrary to the contention of Mr Love, that such a combined use did not yield a value which was higher than future industrial use, was not viable, was destructive of future industrial development and had no positive value, even if the second threshold difficulty, the lack of any realistic short-term prospect of obtaining approvals, could be overcome.

80 For the sake of completeness, we mention that, insofar as Ground 2 challenged as not open to the trial judge the finding that the prospects of works approval and planning approval of the WA149 were low, we reject that ground on the basis of the evidence we have discussed with respect to the lack of a community need for a landfill. We consider that it was open to the trial judge to arrive at the finding that the prospects of obtaining approvals for the WA149 to be used as landfill were low.

81 In support of Ground 5 of the grounds of appeal, Mr Love emphasised that during the time that the Corporation made arrangements with contractors to carry out the duplication of Cooper Street, there was uncertainty as to how access was to be reinstated to the WA149 land.[100]

82 At trial Mr Love argued, as mentioned above, that because of the uncertainty of access to the WA149 land throughout the window of opportunity (June 2001 - July 2002), the market value of the land was diminished inasmuch as the land lost its landfill potential for the hypothetical purchaser. This was also characterised, on the hearing of the appeal, as a 'loss of a chance' caused by the uncertainty of access.

83 The trial judge accepted that an applicant for a landfill would need to demonstrate that satisfactory heavy vehicle access could be provided.[101] However, he found that there was no doubt that the hypothetical purchaser would be satisfied in principle that, despite existing uncertainties, long term satisfactory heavy vehicle access could indeed be provided to the WA149 land.[102] Further, the resolution of access issues would not per se have prevented a successful application for landfill approval, rather such issues would have been resolved by a permit condition, requiring access to be to the satisfaction of the Corporation (as the highway authority).[103] Thus, the trial judge found that the access uncertainty was not sufficient to prevent the grant of a permit or, in the longer term, the satisfaction of a permit condition relating to access.[104]

84 Moreover, he found that an independent and competent town planner would have advised the hypothetical landowner not to delay application for a planning permit on account of access issues as they then stood[105] and inferred that the hypothetical purchaser would not have regarded such issues as preventing a successful application.[106]

85 In any event, the trial judge found that the 'primary uncertainty' regarding reinstatement of the pre-existing access point was in a sense irrelevant as that access point would have been inadequate for landfill purposes.[107] It was 'entirely feasible', he added, in both the 'before' and 'after' scenarios, to have created a new access point from Cooper Street some 300 metres to the east of the existing quarry road access point.[108]

86 Thus, the primary claim for compensation failed at trial because the access uncertainty following the acquisition, such as there was, did not adversely affect the potential of the WA149 land for approval as landfill and thus would not have altered the value of the land in the mind of the hypothetical purchaser in that respect.[109]

87 On the appeal, as mentioned above, there was no direct attack upon the finding, which his Honour described as the first threshold difficulty, that the hypothetical purchaser would not have regarded any uncertainty about access to the WA149 land in the 'after' situation as having affected any value the land had by reason of its landfill potential.

88 Rather, Mr Love submitted that his Honour was inconsistent in finding that the hypothetical purchaser would not have delayed making an application for approval of a landfill, despite the uncertainty of access,[110] while yet finding that Mr Love had acted reasonably in delaying his decision to apply for approvals until the access issue was resolved.[111] The question to be addressed is: Was the trial judge inconsistent in the conclusions he drew from access uncertainty?

89 Mr Love submitted that, his land having been included by the NRWMG in the draft Schedule to its proposed RWMP, he considered the access problem caused by the Cooper Street duplication as a serious impediment to proceeding any further with his landfill approval process. This was supported by the evidence of Mr Kerr that the access uncertainty also delayed Conundrum's decision to move its plant. Mr Love was not to know that the EP Act was to be amended in July 2002 and that if he delayed, he would risk being excluded from obtaining approval for the WA149 land as a potential site for future landfill.

90 The trial judge accepted that Mr Love acted reasonably in delaying any application for land use approvals during the window of opportunity, having regard to the uncertainty that then existed as to the resolution of access arrangements for the WA149 land,[112] and his concerns about Whittlesea City Council ['the WCC']. He said: [113]

In my view it was not unreasonable for Mr Love to seek road access arrangements broadly equivalent to those provided to the adjoining WCC land and to the Pioneer Hanson Group quarry site on the opposite side of Cooper Street (which was also serviced by the intersection provided for the council tip road). The WCC and the Pioneer Hanson Group were as Mr Love submits not merely his neighbours, but also commercial competitors. I accept that this motivation with respect to equivalent treatment was a substantial cause of the position he adopted during the window of opportunity. The delay in applications for land use approvals was not simply motivated by a desire to improve access to his own property independently of the mode in which the Corporation implemented the duplication of Cooper Street.

91 His Honour rejected the submissions of the Corporation on this point:[114]

I do not accept the Corporation's submission that the relatively low pre-existing level of traffic on the quarry road and/or its inferiority in safety terms, meant it was unreasonable for Mr Love to respond as he did.

92 The judge noted the particular concerns in Mr Love's mind, partly based on his personal experience with the WCC. He commented that:[115]

Mr Love gave evidence the most significant issue in his mind was that WCC might use the need for upgraded access against him. He said he did not activate applications for land use approvals:

... basically because I took the view that if we'd gone down that track we would have highlighted the access problem that we were confronted with and it's an issue of - the road was growing in terms of traffic volume and what would have been an acceptable access in the 1990s wasn't going to be an acceptable access in the period after the duplication was completed because of the massively increased traffic volume. I felt that it was important to make sure that that issue was bedded down before we went down the track of applying for a permit. Because I was concerned that if it became highlighted, given what I had seen of what Whittlesea had done with regard to Planning Amendment L1430 and others before that that we stood a very good chance of the region pulling the plug on their recognition ... And it was just one of those commercial judgments.

I accept Mr Love's further evidence that WCC was a key player in the region. Mr Love believed that pressure would be brought to bear by WCC to extract from him a substantial cost to finalise the access matter. The basis of this belief was his previous experience of dealings with WCC involving both himself and others.

Whether or not the potential risk of trouble from WCC was as significant as Mr Love perceived, I accept that objectively it cannot be said to have been unreasonable to delay in making application for land use approvals, pending resolution of the access arrangements, having regard to the range of practical considerations I have referred to.

93 There are three reasons for rejecting Mr Love's submissions on inconsistency.

94 First, the trial judge himself noted that he was willing to make the finding that Mr Love had acted reasonably in delaying despite his finding that the hypothetical purchaser would not have delayed. He said:[116]

Further I accept that the resolution of access arrangements was from Mr Love's perspective, not unreasonably regarded as a building block for land use approval applications for a landfill, despite my conclusion that the hypothetical purchaser properly advised, would not have regarded resolution of such arrangements as a reason for necessarily delaying application for approval. The resolution of the issue affected the choice of practical arrangements Mr Love might wish to make in progressing the landfill proposal (eg could access be kept well removed from his house; could costs be avoided; could the need for agreement with WCC be avoided; what arrangements should be made with Conundrum; could a ground for potential difficulty with WCC in respect of land use approval be avoided). It was not unreasonable of Mr Love to pursue resolution of this issue during the period of the window of opportunity.

95 The trial judge was thus drawing a distinction based on the peculiar concerns of Mr Love, which he subjectively and reasonably held on the basis of his own personal history and the relationships he had formed with the WCC, but which would not, objectively speaking, have concerned the hypothetical purchaser. They were not considerations that could be properly imputed to the properly advised hypothetical purchaser who would not have regarded the need to finalise access arrangements as materially affecting the landfill potential of the land.

96 Secondly, the Corporation submitted, and we agree, that the findings of the trial judge that, on the one hand, the hypothetical purchaser would not have delayed in applying for land use approvals and, on the other hand, Mr Love had acted reasonably (or not unreasonably[117]) in delaying his application, were consistent because they were made for conceptually different and unrelated purposes under the Act. The test for loss of market value is to consider the hypothetical purchaser as at the relevant date, a static date, and to ask, what would that purchaser, properly advised, have done?[118] That is a very different question from the question whether Mr Love had experienced a loss suffered as the natural, direct and reasonable consequence of a divestment or diminution in his interest in land for which provision is not otherwise made. That question is appropriate to the issue of loss attributable to disturbance[119] and not to an assessment of loss of market value. Mr Love's claim in this context was, as he put it, a claim for 'consequential damage',[120] one for 'lost opportunity arising from changes to the legislative environment during a period of uncertainty and delay as to reinstatement of quarry/tip access roads',[121] even if 'the precise type of damage may not have been fully or precisely foreseen or anticipated'[122] by the Corporation. This question involved an assessment of the loss a claimant might have personally sustained on the day of acquisition or at some later time. The Corporation argued, and we agree, that disturbance loss, unlike severance, is personal to the disposed owner and depends upon the owner showing that he or she has suffered an actual loss that is a natural, direct and reasonable consequence of the acquisition, drawing on notions from tort.[123] The two questions are distinct and raise quite different considerations. There was thus no inconsistency between his Honour's findings.

97 At the hearing of the appeal, Mr Love conceded that the reasonableness of his conduct, while relevant to disturbance, may not be relevant to an assessment of loss of market value or severance. As mentioned above, there was no ground of appeal challenging his Honour's findings in relation to disturbance.

98 Third, his Honour found that the reasonableness or otherwise of Mr Love's conduct was immaterial because no landfill approval could have been obtained during the window of opportunity, even if there had been no delay and preparations had commenced in June 2001.[124] In a finding which is not under challenge, he said:[125]

I am satisfied on the basis of the evidence ... that the works approval process could not have been completed within the window of opportunity identified on behalf of Mr Love between June 2001 and July 2002, irrespective of any delay occasioned by uncertainty as to the resolution of the Cooper Street access issue.

99 The evidence on which his Honour relied was given by Mr Borelli, a town planning consultant, called by Mr Love and Mr Lane, a hydrogeologist, also called by Mr Love.[126] The evidence of Mr Parker, a geotechnical engineer, called by the Corporation 'compel[led] this conclusion'.[127]

100 In other words, even assuming, contrary to the second threshold difficulty, that approval was likely, such a process would not have been completed in under two years.[128] There was thus no loss of a 'chance'. This comprised the third threshold difficulty, described above, and which led to a rejection of the consequential loss claim, the claim of loss attributable to disturbance. His Honour said:[129]

Nevertheless [even if Mr Love acted reasonably], the consequential loss claim must fail because no landfill approval could have been obtained in the time available during the window of opportunity ('the third threshold difficulty'). Mr Love's strategy but for the acquisition was to obtain approvals in the period between 2001 and 2003. In practical terms it was necessary for him to resolve arrangements with Conundrum before a works approval application could be made to the EPA. In commercial terms it was also necessary for him to sort out some arrangement with a major waste source collector. In addition to these steps it was necessary to undertake site specific investigations before the works approval application was made to the EPA. In turn the EPA required time to consider the application and in the present case that consideration would have included consideration of the difficult issue of need. After the EPA's decision the matter would on the balance of probabilities have gone to the Victorian Civil and Administrative Tribunal ('VCAT') either by way of appeal by Mr Love or by way of appeal by the WCC. The EPA's approvals process would have been accompanied in parallel by an application for planning approval and the evidence supports the view that the WCC would have refused planning permission also requiring an appeal to VCAT.

Both the planning permit application and the works approval application would require co-ordination with the conditions governing the continuing operation of the quarry. The EID Act works authority governing WA149 would also require modification if a quarry and a landfill were to be operated on the same site simultaneously. Conditions relating to buffers between the two uses and constraints upon landfill use during blasting and similar matters would require resolution.

The evidence as a whole demonstrates that the landfill could not have obtained final land use approvals pursuant to the relevant legislation and most critically the EP Act in under two years.

101 The finding, described as 'critical' by the Corporation, is also of importance here. That is, even if one put to one side the concerns about the limited prospects of approval for landfill, it was nevertheless the case that no positive value could be ascribed to the landfill proposal.[130]

102 The 'loss of a chance' was thus the loss of something with no positive value. If that chance was qualified by the finding that actually the prospects of approval were no more than 10 per cent, the loss of the chance would be 10 per cent of something with no positive value.[131] Thus, whatever landfill potential there was it did not sound in monetary value; the potential was thus not to be included within an assessment of compensation based on the notion of market value, as the trial judge correctly held.[132]

103 For all these reasons, we reject the submissions based on the consequences of the uncertainty as to access.

105 In his discussion of the notion of severance in Roads Corporation v Murdesk Investments Pty Ltd[133] Chernov JA emphasised two key concepts associated with it: the connection to market value and the need for the reduction in market value to be caused by the severance. He said:[134]

It is plain enough, and the contrary was not pressed by either party, that where only a portion of the owner's land is compulsorily acquired the proper measure of compensation payable to the owner is the value of the land taken as well as the value of any depreciation in the remaining land occurring by reason of the acquisition. As is made apparent in Castle Hill Brick Tile & Pottery Works Pty Ltd v Baulkham Hills Shire Council, 'severance damage' is the depreciation in the value of the retained land resulting from its division into two or more parts, or its reduction in area, and consequent loss of value for some current or higher potential use. So much is recognised by s 41(1)(c) of the Act which requires the Valuation Court, in assessing the amount of compensation payable to a claimant in respect of an interest which is compulsorily acquired, to have regard to factors that include 'any loss attributable to severance'. ... the term 'loss attributable to severance' is defined in s 40 as meaning 'the amount of any reduction in the market value of [the remaining land] ... caused by its severance from the acquired land'. And ... s 41(3) relevantly prescribes:

If less than the whole of the land ... is acquired ... the market value of the acquired interest is the difference between the market value of the interest before the acquisition and the market value of the interest after the acquisition.

106 Mr Love placed emphasis upon the finding by the trial judge that 'interference with the pre-existing right of access onto Cooper Street ... was one potentially capable of causing loss falling within the statutory definition of severance'.[135] His Honour further held that:[136]

It seems to me ... that subject to demonstration of the necessary causal link, it is open to Mr Love to contend that the severance of access to the WA149 land after the acquisition and during the window of opportunity occasioned delay in seeking approval for a landfill, which crystallised in loss of market value upon the change to the EP Act. Such a claim potentially falls within the concept of severance as statutorily defined.

107 While the trial judge accepted that it was conceivable that the loss of access could fall within a claim for severance, he ultimately found that no compensation should be awarded. His Honour based this conclusion on two separate reasons. First, the trial judge found that, because of the inadequacy of access points for landfill purposes in the 'before' scenario, there was no severance of access which could itself have been utilised for landfill purposes.[137] Secondly, in any event, the trial judge found that the claim for severance was confronted by the first threshold difficulty. Whatever access difficulties resulted from the severance of access to the WA149 land after the acquisition and during the window of opportunity occasioning delay in seeking approval for a landfill (alleged to have crystallised in loss of market value upon the change to the EP Act), access difficulties did not in fact cause a loss of market value. Rather, the underlying potential for landfill was unaffected because of the first threshold difficulty;[138] the uncertainty of access would not have been regarded by the hypothetical purchaser as having affected any value the land had by reason of its landfill potential.

T]he fundamental problem confronting Mr Love is that severance sounds in loss of market value as at the date of the loss. Loss of market value means the amount of money that would have been paid for the relevant interest if it had been sold on that date by a willing but not anxious seller to a willing but not anxious purchaser.

109 Mr Love submitted that the trial judge applied the wrong test to the assessment of severance compensation. The error was argued to lie in the consideration by the judge of whether or not an application could have been brought within a 'window of opportunity' rather than assessing the value of the land at the relevant dates, having regard to the prospects of approval at those dates. This was argued to reflect the same set of vices as his Honour's analysis of market value in assessing the highest and best use of the land and the omission of the effect of the potential of the WA149 land for landfill use. It was alternatively characterised as the claim that the trial judge erred in requiring Mr Love to demonstrate a necessary causal link as a component of establishing loss as a consequence of severance.

110 Mr Love submitted that while his Honour found that the WA149 land had:

(1) a 10 per cent prospect of approval for a landfill in the 'before' scenario; and

(2) no prospect of approval after the amendment to the EP Act which took effect on 1 July 2002 ,

he erred in law in his assessment of compensation for severance in failing to make an allowance for this 10 per cent reduction in the assessment of market value, having regard to the events after the date of acquisition. The 10 per cent reduction in market value attributable to the difference in the prospects of approval should have been taken into account in the assessment of severance and, it was submitted, should have been additional to the diminution of the market value of the land as assessed under its highest and best use.

111 Mr Love relied on Adelaide Fruit & Produce Exchange Co Ltd v Adelaide City Corporation[140] as authority for the proposition that, unlike market value, severance claims can be assessed, and in appropriate cases ought to be assessed, by reference to events after the acquisition date. This was accepted by the trial judge.[141] Mr Love urged that although the lack of any prospect of approval was not crystallised until July 2002 (months after the acquisition), the 10 per cent reduction in market value that the amendment to the EP Act brought should have been taken into account as part of the severance claim.

112 To this, the Corporation responded in a variety of ways. First, they submitted that the trial judge did not make a finding there that there was 'no prospect' of approval after the amendment to the EP Act. His Honour said only that this was an argument presented by Mr Love. This is reflected in the following paragraphs of the Reasons:

In July 2002, however, the EP Act was amended to require in effect that the site be included in a regional plan approved by the EPA as a pre-condition to the grant of a works approval. Mr Love's land was not so included at the time and has not been so included since. As a consequence there was what was described on behalf of Mr Love as a window of opportunity for the obtaining of land use approvals for landfill use only between June 2001 and July 2002.[142]

Nevertheless severance of the right of access to the highway potentially embraces a loss of market value in the balance of Mr Love's land, occurring after the date of acquisition, and in the present case crystallising at the end of the window of opportunity which Mr Love alleges closed with the amendment to the EP Act in July 2002.[143]

Although the access was not fully constructed until April 2004, its nature was resolved by late October 2002. Nevertheless that resolution occurred only after the closure of the window of opportunity in July 2002, upon which Mr Love's claim is premised.[144]

113 Without a finding that, as at the end of the window of opportunity, there was no prospect of approval, it could not be concluded that there had been a comparable reduction in market value. More importantly, the Corporation submitted that in the 'after' situation which was assessed as after 1 July 2002, given that severance loss may crystallise later in time, there was no prohibition upon new sites. It was rather that the amended EP Act required that a site first be on the relevant regional plan. There was thus no 'closing' of the window; it was a matter of satisfying the new test for obtaining approval. We agree.

114 The problem to be faced by Mr Love, once the EP Act was amended, was satisfying the new test in circumstances in which there was no realistic short-term prospect of obtaining approval for a landfill at the date of acquisition either by way of planning permit or works approval. This was primarily due to the absence of community need, which was discussed above. There was unlikely to be any community need for a landfill from at least the start of the window of opportunity, through the whole of its duration, and beyond. This was the factor which created the primary difficulty for the WA149 land to obtain approval. It was, as the Corporation argued, not a matter of the amendment to the EP Act 'closing' the window of opportunity but the likely inability of the WA149 land to satisfy the new test for the same reason that there would be difficulties in obtaining approvals in any event, because of an absence of community need. In those circumstances, it would be wrong to conclude that as on 1 July 2002 a loss had crystallised, namely, that the 10 per cent prospect of approval had been eliminated by reason of the acquisition.

115 Insofar as the trial judge made a finding about Mr Love's prospects after the amendment to the EP Act it was in these terms:[145]

[A]lthough it continues to be open to Mr Love to request the EPA to modify the relevant RWMP (now a Metropolitan Plan), I accept (having regard to the evidence of Dr Bellair and the documentary evidence as a whole) that there are and have been no practical prospects of modification given the scheduled provision of landfill space within it and the patent lack of need for further space.

116 While Mr Love was correct, in a sense, contrary to the submissions of the Corporation, to suggest that the trial judge found that, in the 'after' scenario, he had no prospect of obtaining landfill approval once the amendment had been made to the EP Act, the finding was qualified by indicating that there was no practical prospect of satisfying the new test by reason, again, of the lack of community need. Given the qualified nature of the finding, it could not be inferred, as Mr Love urged, that the elimination of his prospects of approval was attributable, in the circumstances, to the acquisition.

117 Furthermore, Mr Love's submissions fail by reason of the time period upon which his submissions are premised. If the loss argued to be attributable to severance was crystallised in July 2002, as the relevant 'after' date, this would mean that the relevant planning permit and works approval would have to have been obtained at some time prior to 1 July 2002 as the relevant 'before' date, to demonstrate the diminution of market value of the land between the two dates. Even assuming, contrary to the second threshold difficulty, that approval was likely, the process of obtaining landfill approval could not have been obtained in under two years. The claim thus depends upon overturning the unchallenged finding that 'no landfill approval could have been obtained in the time available during the window of opportunity',[146] even if preparations has commenced in June 2001.[147] This third threshold difficulty removed the viability of any claim for loss attributable to severance, dependent as it was upon landfill approvals being able to be obtained in the 'before' scenario and thus amounting to a compensable loss by reference to the 'after' scenario. In other words, the failure to obtain planning approvals was not attributable to the severance because the planning approvals could not have been obtained before July 2002; the severance did not cause any reduction in market value associated with the inability to obtain planning approvals. The second key element Chernov JA associated with severance, that of causation, was not made out and Mr Love was unable to demonstrate any error in the reasons of the trial judge with respect to his approach or findings on severance.

119 The trial judge was not satisfied that the landfill potential was of special value[148] to Mr Love, as there was 'no evidence justifying the conclusion that any landfill potential of the land was of greater value to Mr Love than its market value'.[149] However, he accepted that the land had some special value to Mr Love in respect of its residential and agricultural uses.[150] He made an award in respect of specific items of special value, inter alia, loss of trees,[151] loss of access facilities,[152] and loss of amenity,[153] totalling over $70,000.[154]

120 On appeal, Mr Love argued that the lost landfill potential did constitute a pecuniary advantage that was incidental to the value represented by his ownership and occupation of the land and that his Honour erred in failing to recognise its special value as an alternative to the market value claim.

121 The principles underlying special value were considered by Callinan J in Boland v Yates[155] in which he emphasised the economic character of special value and the near exclusivity of the interest:[156]

The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. None of the examples given by the Full Federal Court are true examples of special value. There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.

122 In Dangerfield v Town of St Peters,[157] the High Court specifically considered landfill potential as bearing a special value present in the circumstances of the case. There the land which was compulsorily acquired had been leased to a rubbish collector and used for the disposal of rubbish. It had an on-going capacity to accommodate rubbish for another 35 to 45 years, and the rubbish collector's lease had 23 years to run from the date the land was acquired. The land was not suitable for construction but could be used for recreational purposes. The High Court held that it was wrong for the land to have been valued at the price that a purchaser wanting it for recreational purposes would have been willing to pay for it and that it should have been valued as land used and usable for the disposal of rubbish, in accordance with its special value.

123 Barwick CJ[158] reaffirmed the principles governing the assessment of compensation for land with a special value as the additional amount that the owner would have been prepared to pay to purchase the land to use it for the purpose for which it has a special value, rather than see the land foregone. He said:[159]

The basis of assessing compensation for the taking of land which has a special use, as undoubtedly the land had, has long been settled. Lord Moulton said, speaking for their Lordships of the Privy Council in Pastoral Finance Association Ltd. v. The Minister:

'Probably the most practical form in which the matter can

be put is that they' (the dispossessed owners) 'were entitled

to that which a prudent man in their position would have been

willing to give for the land sooner than fail to obtain it.'

That is to say, one supposes that the owner of the land, with his knowledge of it and its suitability for the special purposes to which he has been putting it, was considering buying that land for that purpose from a willing seller. The sum he would pay to secure that land for those purposes rather than lose it will be the value of the land to him. The knowledge and experience he had of the particular use to which it could successfully and lawfully be put must be reflected in that sum. Here the owners were familiar with the business of the cartage of city garbage and aware of the potential of this land for the disposal of it. They knew that there was no other land available for that purpose. They knew that the land might lawfully be put to the proposed use for a very considerable time. That time, even if clean air regulations or the like were to prevent the burning on the land of combustible material, was apparently of the order of fifteen or twenty years. But no such regulations were in existence and as things then stood the land may well have been usable for rubbish disposal for up to some thirty or forty years.

124 Mr Love described himself as a 'resource based business operator' and his primary production business as an integrated one included quarrying, landfilling, farming and other related uses. He submitted that the complementary nature of quarrying and landfill also reduced the risk involved in establishing the landfill operation. It was argued that the land had the potential for a co-ordinated package of land use and that this gave rise to its special value to Mr Love.[160]

125 The Corporation pointed out that the trial judge made no finding that Mr Love was a 'resource based business operator'. It was not shown that Mr Love had a capacity for economic exploitation of the landfill potential that was exclusive, or almost exclusive, to him, by reason of his knowledge and experience of putting the land to that use over a period of years. The evidence was that Mr Love had not operated a landfill or a quarry. The quarry on the WA149 land was operated by Conundrum. His evidence was that he would need 'bankable contracts' before he could proceed to operate a landfill, yet as at the acquisition date each of the major collectors of waste was bound by arrangements tying them to other sites save for Collex.[161] As mentioned above, ultimately, his Honour found that a hypothetical purchaser would conclude that landfill was 'not viable' because, amongst other reasons, the waste stream would not be sufficient to make it a viable enterprise.[162]

126 In our opinion, the complementarity which Mr Love asserted, and which formed the basis of his claim for special value, was no more than assertion.

127 The circumstances considered in Dangerfield are vastly different from those applying here, not least the extensive period of time in which the land had been used in the manner which gave it its special value, its suitability for rubbish disposal, together with the significant prospects of lawful future use in that manner for 15 to 20 years, were it not for the acquisition. In sharp contrast, there was no history here of a landfill business having been established. Indeed, there was evidence that there were significant hurdles facing Mr Love in any attempt to establish such a business. To apply for permission to operate a landfill required excision of the landfill application area from existing works approval WA149 under the Extractive Industries Development Act 1995. As Conundrum leased the WA149 land from Mr Love for its quarry operations, the co-operation of Conundrum was required before a joint quarry/landfill business could be established.[163] The trial judge found that, in June 2001, there was no agreement between Conundrum and Mr Love as to their ongoing relationship.[164] There were significant issues that remained unresolved as at the relevant date.[165] It was not until 2006 that the existing lease was renewed and then, importantly, without agreement on matters concerning landfill.[166] Furthermore, Dangerfield can be distinguished because here Mr Love was faced again with the second threshold difficulty that there was no realistic short term prospect of approval for a landfill as there was no demonstrable community need at the time of the acquisition nor was it estimated that there was likely to be community need for a landfill in the area for some considerable time, the existing capacity being sufficient for at least 10 years and probably 25.[167]

128 Moreover, there was a finding by the trial judge that any landfill would have exploited the market value of such a use and was not a characteristic of the land of special value to Mr Love. This was based upon evidence given by the valuers called on Mr Love's behalf.[168] We consider the judge's rejection of the claim for special value based on landfill potential to have been open to him and to have been arrived at without error.

130 It follows that the appeal should be dismissed.

131 On 23 April 2010, the trial judge made orders as to the costs of the proceeding as follows:

(1) The Corporation pay Mr Love's costs including any reserved costs and costs of transcript up to 15 November 2007.

(2) Mr Love pay 80 per cent of the Corporation's costs including any reserved costs and costs of transcript from 16 November 2007 to 3 April 2009.

(3) Mr Love pay the Corporation's costs on a solicitor-client basis, including the costs of three counsel, reserved costs and transcript, from 4 April 2009 up until the completion of the trial of the proceeding.

(4) Mr Love pay the Corporation's costs of, and incidental to, the application for costs heard on 26 February 2010 including the costs of three counsel and transcript costs.

132 His Honour also made orders referring the assessment of costs to mediation.

Love v Roads Corporation [2011] VSCA 434

At a glance

Court

Decision date

Before

Source

Judgment (370 paragraphs)

Love v Roads Corporation [2011] VSCA 434 (16 December 2011)

Parties

Legislation Cited (12)

Cases Cited (22)