Maloney v Cowra Shire Council

IN THE LAND AND Matter No. 30032 of 1997 ENVIRONMENT COURT Coram: Talbot J OF NEW SOUTH WALES Decision Date: 29 February 2000

Gregory Ross Maloney and Pamela Irene Maloney Applicants v Cowra Shire Council Respondent

1. The effect of a notice published in the New South Wales Government Gazette No 119 on 25 October 1996 is that the respondent, Cowra Shire Council acquired Lots 1 and 2 in DP 862429, being a formed road generally 30 metres wide through Portions 75 and 103, Parish of Conimbla, County of Forbes, forming part of the property "Glenbrook", Kangarooby Road, Gooloogong, owned by the applicants, Gregory Ross Maloney and Pamela Irene Maloney, for the purposes of the Roads Act 1993 ("the Roads Act").

2. The parties have not been able to agree on all aspects of the compensation payable to the applicants for the compulsory acquisition of their land. These class 3 proceedings have been commenced to resolve the applicant's claim in full.

3. It is not in dispute that a road was constructed over the land the subject of the claim by a predecessor of the respondent, Waugoola Shire Council, in 1965.

4. The road was constructed on the site of the land acquired to overcome problems with the use and maintenance of an existing road through a formal road reserve which necessitated a number of creek crossings.

5. The Kangarooby Road provides a connection between the town of Gooloogong in the north and Cowra in the south. It also provides access to a National Park and other rural properties in the locality, besides the property owned by the applicants.

6. Evidence has been tendered that in 1965 Gregory Ross Maloney's father signed a document dated 18 October 1965 purporting to be a "Consent to Resumption" under the Public Roads Act 1902 ("the 1902 Act"). At some time, probably contemporaneously with the other document, a further document was signed by Mr Maloney Snr. The latter document gave permission to the council "to enter the lands … for the purposes of carrying out works prior to the actual resumption of the said lands" which were described as two acres, two roods in Portion 103, Parish of Conimbla, County of Forbes. Mr Maloney Snr may have provided some fencing materials to the council but the actual arrangements made between him and the council in relation to the construction of fencing are not clear.

7. In answer to the applicant's call, the council has produced from its records a sketch plan of some antiquity (but undated) which shows the proposed deviation of the Kangarooby Road to avoid creek crossings nine miles from Gooloogong and identifies the land proposed to be resumed and the road proposed to be closed by distinct colours.

8. Some issues have already been settled and consent orders have been made to the following effect:- a) The amount payable for severance (excluding fencing ) $12,500 b) Market values of land to be acquired (excluding any allowance for road improvements thereon) $5,500 c) Disturbance (legal costs and valuation fees) $8,000 Total $26,000 plus statutory interest from date of acquisition until date of payment. 9. An agreement has also been reached in respect of an adjustment for transfer of part of the former road reserve to the applicants.

The remaining issues to be resolved are firstly, what account, if any, should be taken of the road improvements and adjoining owner influence in determining whether there is any added value to the market value of the land and secondly, whether the applicants are entitled to recover the cost of a new fence either as loss attributable to severance or as a financial cost reasonably incurred (or that might reasonably be incurred) pursuant to s 59(f) of the Land Acquisition (Just Terms Compensation) Act 1991 ("the Just Terms Act").

The applicants rely heavily on the judgment of Beazley JA in Blue Mountains City Council v Mulcahy (1998) 100 LGERA 193, particularly at 200, where her Honour identified the only purpose for which the land could have been acquired as the opening of a public road. Although the council had not become aware that the road was not built on the Crown Reserve until some years later, it had carried out substantial work, bitumenising the surface 22 years before the land was acquired. Beazley JA accepted that the compulsory acquisition was necessary because although the land was part of a formed road, it was not a Crown Reserve road. Her Honour was satisfied that the roadworks carried out 22 years before were not for the purpose of the opening of a public road, as at the time they were constructed there was no intention to open a road.

Although the remarks of Beazley JA were not strictly necessary to resolve the appeal, they are nevertheless important for the purposes of s 56(1)(b) of the Just Terms Act which requires that in determining "market value" the Court must disregard any increase in the value of the land caused by the carrying out by the road authority, before the land is acquired, of improvements for the public purpose for which the land is to be acquired.

In Collins and Anor v Livingstone Shire Council (1972) 127 CLR 477 the public authority proceeded to construct a reservoir placing a substantial portion of the structure on the subject land without obtaining the consent of the owner and before giving notice of its intention to exercise its powers of compulsory acquisition. The majority view was that the improvements being fixed to the soil thereby became subject to the ownership of the proprietor of the land. In so far as the work done on the reservoir was done in pursuance of the scheme underlying the acquisition, it could not be disregarded for it affected the condition of the land itself.

In Corben and Anor v Commissioner for Main Roads (1983) 52 LGRA 388 at 397 Perrignon J expressly rejected an argument that where improvements were constructed pursuant to a road widening scheme the roadworks must be disregarded in circumstances where compensation is being assessed upon the basis that the works were constructed without the authority of the owners and prior to resumption taking place.

Notwithstanding the point of policy that an acquiring authority ought not to pay twice for improvements which it carried out unlawfully, Beazley JA in Mulcahy at 198 accepted a submission, which relied on the obiter remarks of Perrignon J in Corben, that works carried out unlawfully were not to be excluded from the compensation for compulsorily acquired land.

According to Mr Ayling, appearing for the council, the physical work of constructing the road is only capable of being regarded as a step in the process of opening the road, of which the acquisition of the land it occupies is also a step. He disclaims any suggestion that failure to complete legal formalities before commencement of work or subsequently, is indicative of any abandonment of a commitment to the opening of the road or the bringing of it into public ownership. Even if the delay was due to mistake or incompetence on the part of the council, Mr Ayling nevertheless contends it would be unrealistic to infer the abandonment or cessation of the scheme which, based on the documentary evidence, clearly existed in the 1960s.

On the other hand, Mr Maston relies on the evidence which shows that the purpose of actually acquiring the land in order to open a public road was not precipitated until about August 1996, when Mr and Mrs Maloney caused gates to be placed across the road.

Earlier, in a letter dated 30 November 1992, the council dealt with a number of matters raised by Mr and Mrs Maloney regarding the use of the road and some proposed works relating to drainage. The letter concluded as follows:- In an attempt to bring the matter of dedicating the road to a conclusion it would be appreciated if you would advise this Office by 31 st January, 1993, whether you wish Council to proceed with acquisition, exchange of roads and dedication of the existing road, or not.

Should no reply or agreement be reached by you by that date, Council's remaining options are to commence the process of resumption, or abandon the proposal.

Mr Maston says the above statements confirm an equivocation on the part of the council indicating that no firm decision to acquire the land had been made at that time.

No direct evidence of the formation of the intention of the council to resume the land has been produced.

The submission by Mr Maston is that after 31 years from the date of construction of the road, any inference that might otherwise be drawn from the facts of the construction of the road to the effect that there was a continuing intention to open a public road over the land, is no longer available.

In response Mr Ayling says that no council could sensibly decide to leave a road designated and constructed for use by the public in private ownership and that there is nothing to displace the inference that the resumption constitutes the completion, long postponed though it was, of the process which began in 1965.

In my view, the facts can be distinguished from the circumstances in Mulcahy where there was never any previously declared intention to open the road or acquire the land. In Mulcahy , no connection was shown between the intention to carry out the roadworks and the subsequent acquisition.

The Court accepts that the evidence shows that, for whatever reason, the council did not pursue any resolve that it may have formed in 1965 to acquire the land for the purposes of a road. If it had not been for the provocative action of Mr and Mrs Maloney to in effect control access to the road by erecting a gate across it, the Court infers the council may have taken no action in 1996 or indeed at any relevant time thereafter to acquire the land.

The Court also accepts that when the road was constructed, the improvements were carried out for the public purpose of forming a road. Nevertheless the effluxion of time and the lack of any subsequent stated intention or overt act to acquire the land on the part of the council leaves the possible inference open that any intention to resume was subsequently abandoned.

Assuming that the inference is not available, then the evidence does not disclose whether the council ever formally resolved to acquire the site of the road.

The only evidence or mention of resumption is under the hand of Mr Maloney Snr or in the undated sketch plan produced out of council records.

Mr Maloney granted permission for the council to enter the land for the purpose of carrying out works "prior to the actual resumption of the said lands or part thereof" .

The Consent to Resumption dated 18 October 1965 specifically refers to "resumption under the Public Roads Act 1902" . The 1902 Act was wholly repealed by the Crown and Other Roads Act 1990 which itself was repealed by the Roads Act.

The Sketch Plan produced from the council records refers only to the "Land Proposed to be Resumed". It is undated and bears no imprint which identifies it as a council document or that it was ever formally adopted by the council or Mr Maloney Snr.

Although originally the council might have held an intention to acquire the land for the purpose of opening the road in 1965, the objective was not achieved until 1996. The construction of the road was achieved without the original intention to acquire being acted or relied upon. Arguably, the road having been constructed, it was only necessary for the council thereafter to acquire the land for the purpose of opening the road as a public road. Even if the original intention was to acquire the land solely for the purpose of opening the road under the 1902 Act that was never done.

According to Mr Maston the lack of contemporaneity between the construction of the improvements for the road and the acquisition suggests a conclusion that they may not be connected in the context contemplated by s 56(1)(b) of the Just Terms Act.

Section 4 of the Just Terms Act defines "public purpose" as any purpose for which land may be acquired by compulsory process under the Act.

Section 171 of the Roads Act gives the council power to acquire land for any of the purposes of that Act.

Pursuant to s 71, a council may carry out roadwork on any public road under its control. There is no relevant proposal to carry out roadworks in this context.

Under s 10 of the Roads Act a council may by notice published in the Gazette declare any land held by it as a public road.

The purpose for which the land was acquired must be taken as being to enable the council to declare the land as a public road under s 10.

After paying due regard to the evidentiary history starting in 1965, I find that the roadworks were carried out for the purpose of providing a flood free alternative route to the Kangarooby Road across privately owned land. If the improvements were carried out for the purpose of enabling the land upon which the works were constructed to be used as a public road under the 1902 Act then that purpose was not fulfilled at that time. Any decision to acquire the land in 1965 was not carried into effect. The council has not acted on it.

Consistently with the construction placed upon the expression "for the public purpose for which the land is to be acquired" by Bignold J in Shannon Luka v Lake Macquarie City Council (Bignold J, NSWLEC, 24 July 1998, unreported), it might be said that the improvements constructed in 1965 may be categorised as being for the public purpose of providing a roadway. It is self evident that when they were carried out, the stated purpose of the acquisition of the subject land in 1996, namely, for the purpose of the Roads Act, could not have been contemplated by the council. I have concluded that the ultimate decision to acquire was not relevantly made until some time after the letter dated 30 November 1992.

The decision to acquire the land which is reflected in the acquisition notice published on 25 October 1996 was made for the first time after 1992. However, the purpose of the acquisition was to declare the land a public road within the meaning of the Roads Act which did not have effect until 1 July 1993.

The submission by the applicant's counsel is that it is imperative the improvements must be carried out at a time when it is contemplated that the land is to be acquired for that purpose. Section 56(1)(b) in terms requires only that the improvements be for the public purpose for which the land is to be acquired. There can be no doubt that the construction of roadworks is an integral part of any scheme to open a public road. The fact that the public authority does not concentrate its effort into a particular time frame is in the Court's opinion irrelevant for the purpose of s 56(1)(b) so long as the connection between the improvements and implementation of the purpose remain. To hold that legislative changes which do not change the nature of the underlying purpose nevertheless have the result that the public purpose within the meaning of s 56(1)(b) is changed, would have the potential to bring windfall benefits to a former owner of resumed land.

The Court accepts that the improvements were relevantly completed at the expense of the council, notwithstanding a suggestion that Mr Maloney Snr may have made a minor contribution.

The public purpose referred to in s 56(1)(b) is not qualified except by reference to "the public purpose for which the land is to be acquired" .

Notwithstanding Mr Maston's argument to the contrary, the opening of a public road under the 1902 Act is not distinguishable in practical effect from the declaration of a public road under the Roads Act. The end result is the same notwithstanding procedural differences under the two statutory regimes.

The documents signed by Mr Maloney are in many respects inconclusive.

The consent to resumption does not identify the land. Although there is reference to Portion 103 and land "shown on attached sketch as proposed road" the sketch has not been identified by the evidence, although the applicants do not appear to strongly resist the implication that the sketch plan in evidence was the plan referred to.

The permission to enter does not on its face refer to the whole of the land as it makes reference only to Portion 103. Although Mr Maston submits that the document is no more than a licence terminable at will, there is no evidence that Mr Maloney Snr took any steps to terminate the licence during the relevant period, namely, while the work was being completed.

Section 238(1) of the Local Government Act 1919 ("the LG Act 1919") which applied at the time the roadworks were carried out in 1965 allowed the council to acquire land required for the purpose of providing a public road under the 1902 Act or under the provisions of the LG Act 1919. By dint of s 237 of the LG Act 1919, a new public road could not be opened except in accordance with the provisions of that Act.

Section 327(1)(b) prohibited the opening of a public road until the road had been constructed and drained to the satisfaction of the council.

The Roads Act commenced on 1 July 1993 when the LG Act 1919 was repealed and the Local Government Act 1993 came into operation. Under the legislative scheme in place in 1965 the works of construction and drainage were required before the road could be opened. It was not necessary to carry out the work before the land was acquired. In the present case however the council was able to carry out the necessary work with the consent of the owner, Mr Maloney Snr.

Mr Ayling's argument is that the ultimate acquisition involved the completion of the scheme which began in 1965 for the provision of a new flood free deviation of the Kangarooby Road in part across the applicant's land. He reiterates there is nothing to displace the inference that the compulsory acquisition in 1996 constitutes the completion, albeit long postponed, of the process which began in 1965.

Despite the sparsity of the evidence it has never been suggested by the applicants that the road was constructed without the consent of the then owner, Mr Maloney Snr. Rather, the applicants have concentrated on the issue that the intention to carry out the public purpose to acquire the land has lapsed since 1965. The consent signed by Mr Maloney Snr appears to satisfy the description of an agreement contemplated by s 9 of the 1902 Act, thereby avoiding any necessity for commencing the formal steps to resume the land before work commenced. There is no logical explanation for confining the consent to Portion 103. Either there was a mistake or there are other documents which have not come to light.

In 1965 the best evidence is that the improvements were to be commenced if not finally carried out before acquisition. At all relevant times therefore, the sole purpose of the acquisition can be regarded as being to open a public road.

In Pointe Gourde Quarrying and Transport Company, Limited v Sub-Intendent of Crown Lands [1947] AC 565, Lord MacDermott, in delivering the judgment of their Lordships, expressed the well established principle as follows:- It is well settled that compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition. As it was put by Eve J. in South Eastern Ry. Co. v. London County Council [1915] 2 Ch. 252, 258: "Increase in value consequent on the execution of the undertaking for or in connexion with which the purchase is made must be disregarded".

Section 56(1)(b) deals only with any increase in the value of the land caused by the carrying out of improvements for the public purpose for which the land is to be acquired.

In Mulcahy , Beazley JA was satisfied that s 56(1)(b) re-enacted the effect of the words of s 124 of the Public Works Act, which provided that compensation should be ascertained "without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed" . Her Honour noted that s 56(1)(b) was enacted at a time when the decisions in Geita Sebea and Ors v Territory of Papua New Guinea (1941) 67 CLR 544 and Collins were longstanding and at a time when the Australian Law Reform Commission had drawn attention to the constraints they imposed. Furthermore, there was a well-known construction of s 124 which applied the Geita Sebea constraint of which it should be taken the legislature was aware. In the circumstances, Beazley JA expressed the opinion that if it had intended to introduce a different basis upon which compensation was determined, one would have expected to have found clear words to signify the change. Accordingly, the principle that works carried out unlawfully upon land are not to be excluded from the compensation payable for compulsorily acquired land enunciated in Geita Sebea still applies, notwithstanding s 56(1)(b).

The council bears the onus of proving the existence of enhancement ( Emerald Quarry Investments Pty Ltd v Commissioner of Highways (1976) 14 SASR 486). There is a presumption of regularity in respect of the entry on the land to construct the road which the applicant has not dislodged. If there was evidence that the works had been carried out unlawfully, then it is reasonable to assume that the applicants would have personally made an assertion to that effect or at least attempted to allow the Court to draw the necessary inference from any available evidence. Instead, the applicant's case is primarily, indeed solely, based upon the concept of abandonment.

The Court has a duty to approach the task of assessing the amount of compensation payable by seeking to ascertain the maximum amount the owner would have obtained for the land under the best possible circumstances. Accordingly, where land is acquired by compulsory acquisition, the dispossessed landowner is entitled to have the benefit of any doubt in the determination of market value of the land to be resolved in its favour.

I agree with Mr Ayling that general principle dictates compensation to be paid, but this should not be enlarged by gratuitously adding the value of improvements carried out by the resuming authority at its expense.

Cases such a Mulcahy and Luka are distinguishable on their own facts. In Mulcahy the carrying out of the road improvements was clearly unauthorised, whereas in Luka Bignold J determined that the roadworks were carried out for the purpose of providing road access on privately owned land to an approved residential development on existing lots where the council, in its dealings with the successive owners of the compulsorily acquired land and the associated residential lots, consistently held and expressed the opinion that the roads were not dedicated public roads.

In the present case it is clear that the council was at all relevant times aware that the roadworks had been constructed on land held in private ownership.

Whatever the reason was for the council's neglect to formally acquire the land, the Court is satisfied, having regard to the whole of the circumstances, that the roadworks were provided as part of the bringing into effect of the public purpose or scheme for which the land was ultimately acquired, namely, the opening and provision of a public road.

The Court is not satisfied that the applicants are entitled to compensation which reflects the added value of the improvements, being roadworks, constructed by the council.

The applicants make a claim for the cost of fencing on each side of the road, either as loss attributable to severance or a financial cost to be reasonably incurred as a direct and natural consequence of the acquisition. The estimate of the replacement cost of the existing fencing provided by the applicant's Consultant Engineer, Mr Max Hosgood and supported by the applicant's valuer, Mr William Alfred Pye is $17,060, being 1706 metres, at $10 per metre.

The council's valuer, Mr Kenneth John Robertson, Area Manager of the State Valuation Office, recognises that the existing fence has deteriorated due to lack of maintenance and in some sections would not be stock proof. No attempt is made by any of the council witnesses to refute the cost of replacing the fencing.

Mr Pye and Mr Maloney have given evidence that because the road passing through the property of the applicants is a public road, it is necessary that it be fenced to provide security for livestock. Mr Robertson, on the other hand, is of the opinion that no fence is required.

In Mood and Anor v Cowra Shire Council (1999) 103 LGERA 260 the Court recognised that the applicant might necessarily incur the cost of fencing on either side of the road without any expectation of a contribution from the council as the owner of the road and that notwithstanding the pre-existence of the made road, the formal establishment of the road as a public road justified fencing on either side to enable the applicants in that case to carry on their agricultural pursuits with the appropriate degree of confidence that livestock would not escape and further ensure that an appropriate barrier was erected between the road and private land ( Mood at 267).

Although the factual circumstances in Mood were different in the sense that the made road was not constructed entirely within the land resumed, the principle in my opinion is nevertheless the same.

The Court is prepared to allow the sum of $17,060 as a financial cost that the applicants might reasonably incur as a direct and natural consequence of the acquisition and that accordingly, compensation should be paid in that respect as loss attributable to disturbance in accordance with s 59(f). The cost of fencing the road is not regarded as being equivalent to the amount of any reduction in the market value of the adjoining land caused by severance of the other land thus, being a loss attributable to severance in accordance with s 58.

At the date of compulsory acquisition the council owned the land adjoining the land acquired, at its northern and southern extremities.

The question of whether there is an adjoining owner influence in the determination of compensation must always be a question of fact. The council in this case must be regarded as a potential purchaser of the land acquired. Even if the council is the only potential purchaser it is relevant that it may have been persuaded to pay more than the actual value of the land in order to acquire it, having regard to its special value to it as the owner of a road which abutted the subject land.

Mr Robertson recognised that if the council is treated as the hypothetical purchaser in the market, it might pay more than someone who wanted the land for rural use. However the premium it paid would only represent what was necessary to secure the property. It would only need to pay enough extra to outbid someone who wanted to buy the land for a non-road purpose. I agree.

Mr Pye recognised the decision of Bignold J in Croghan v Hawkesbury City Council (1998) 99 LGERA 375 as the basis for his opinion that the council would pay an additional amount over the market value because it is an adjoining owner of the compulsorily acquired land. He considered that a reasonable sum to add to the market value of the land could be calculated as five per cent of the market value of the improvements on the land, whereas he noted that in Croghan, Bignold J had allowed an additional premium of ten per cent.

I am satisfied that the council would have paid an additional amount over and above the actual market value of the land in order to acquire it as an adjoining owner, but as the market value of the land has been agreed at $5,500, this would not be a considerable sum. I am satisfied that the council might have been persuaded to pay an additional $500 to take account of its interest in connecting the two extremities of the existing road.

The Court has decided that the applicant's objection to the amount of compensation to which they are entitled be determined by having regard to the following relevant matters pursuant to s 54 and s 55 of the Just Terms Act: Severance (as agreed) $12,500 Market value $6,000 Loss attributable to disturbance $25,060 76. The amount of compensation is determined as $43,560.

77. Neither party has been wholly successful on all of the issues, but the applicants have persuaded the Court to determine the amount of compensation in an amount above that which the council was prepared to pay. The Court will reserve the question of costs for seven days to allow either party to make an application in respect of that issue. If no application is made, then the respondent is ordered to pay the applicant's costs of the proceedings.

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

74. I am satisfied that the council would have paid an additional amount over and above the actual market value of the land in order to acquire it as an adjoining owner, but as the market value of the land has been agreed at $5,500, this would not be a considerable sum. I am satisfied that the council might have been persuaded to pay an additional $500 to take account of its interest in connecting the two extremities of the existing road.

75. The Court has decided that the applicant's objection to the amount of compensation to which they are entitled be determined by having regard to the following relevant matters pursuant to s 54 and s 55 of the Just Terms Act:

76. The amount of compensation is determined as $43,560.

77. Neither party has been wholly successful on all of the issues, but the applicants have persuaded the Court to determine the amount of compensation in an amount above that which the council was prepared to pay. The Court will reserve the question of costs for seven days to allow either party to make an application in respect of that issue. If no application is made, then the respondent is ordered to pay the applicant's costs of the proceedings.