Melbourne City Link Authority v Teford Pty Ltd [2001] VSCA 54

8. This is an appeal from a judgment given in the Trial Division on an appeal on a question of law from a determination by the Victorian Civil and Administrative Tribunal of a disputed claim for compensation under the Land Acquisition and Compensation Act 1986 consequent upon the compulsory acquisition by the appellant Authority of land in Port Melbourne of which the respondent, Teford Pty. Ltd., was the owner and lessor. The amount of compensation determined by the Tribunal, $4,728,992.30, was made up of a number of components, of which market value at $4,185,000 was by far the greatest. In the Trial Division the appellant sought the setting aside of the award of compensation in respect of four components, namely:

Added marriage value (to use the Tribunal's description) $25,000

Stamp duty relating to the third replacement property $90,750

Solatium, in so far as it exceeded the sum of $20,000 $80,000[1].

The appellant succeeded before the primary judge on the question of executive time, but otherwise the order of the Tribunal was confirmed. The appellant no longer pursues the question of solatium. Its appeal to this Court is confined to the components of marriage value and stamp duty.

16. The respondent is a company whose principal business is investment in land. The evidence showed it to be controlled by Dr. T.J. Beresford.

19. 4 It became the registered proprietor of the subject land on 3 March 1993. The Crown Grant of the land to it was expressly subject to a registered Crown Lease of the land to a company now called CC Container Services Pty. Ltd. for a term of 21 years commencing on 15 September 1992. The permitted use pursuant to that lease was that of transport, container storage and maintenance depot. The lessee stored containers on the land and continued in occupation to the date of acquisition, 28 March 1996.

22. The subject land has an area of 7.389 hectares. An electrical transmission line easement effectively severs it. As the judge said, it is convenient to regard it as divisible into three portions, namely:

Land east and south of the easement ("the rear portion") 37,586m2.

There are some minor improvements on the land, of negligible value.

30. The respondent's interest in the land had two elements. As lessor, it was entitled to the benefit of payments under the Crown lease. As owner it was entitled to the reversion upon the determination of the lease. The market value of $4,185,000 determined by the Tribunal was arrived at by assessing the present value of those two elements. The respondent also claimed, either as part of market value or as special value[2], "marriage value", being one-half of the amount by which the value of the unencumbered freehold interest in the land exceeded the combined value of the lessor's interest and the lessee's interest. As the claim made by the respondent shows, the basis for a claim for allowance for "marriage value" is that, in the normal case where there are two interests in a parcel of land, the value of the two interests, if merged, is greater than the sum of the values of the two if they continue to be separate. The earliest case in which the expression was considered that was drawn to our attention is the decision of the English Court of Appeal in Trocette Property Co. Ltd. v. Greater London Council[3]. The concept was explained by Megaw, L.J. as follows[4]:

"The claimants' case depended on what has been described as `the marriage value' of the two interests in the land: the claimants' leasehold interest with eleven-and-a-half years to run and the freehold interest of the landlords, the G.L.C. The `marriage value' arises because in the normal way it would sensibly be anticipated that the value of the two interests, merged, would be substantially greater than the sum of the values of the two if each had to be treated as continuing to be separate. ... The freehold owner ... or any purchaser from him, could not begin the conversion of the property to ... profitable use for eleven-and-a-half years unless he were to obtain the consent of the lessee, and the lessee, or anyone to whom he might sell his leasehold interest, would not undertake such a development so long as his right of occupation of the land was limited to eleven-and-a-half years. So in their common commercial interest the owners of the two interests, the freeholder and the leaseholder, or persons having purchased their respective interests, would be expected to make arrangements with one another to enable the combined interests, with the resultant `marriage value,' to be exploited in a commercially sensible way, with each of the two taking his appropriate share of the resulting added value. The transaction might take any one of various forms. The landlord might grant the lessee a fresh long lease. The lessee might surrender the remainder of the term of the lease to the landlord. In either case one would expect that the consideration would reflect commercially the extent of the financial benefit which would be likely to result. Either the landlord or the lessee might sell his interest in the open market where potential purchasers could be expected to offer a price for the respective interests which would reflect the value of the opportunity of achieving a `marriage' of the two interests in the land."

In Promenade Investments Pty. Ltd. v. State of New South Wales[5] Sheller, J.A. (with whom Meagher, J.A. agreed), after postulating the circumstance that the merged value of the two interests would be substantially greater than the sum of the values of the two interests if treated as continuing to be separate, went on[6]:

"... and where such difference is explained by the difference between the use of the land possible by the holder of either interest inhibited by the existence of the other and the best use of the land if the interests were merged, it is reasonable to suppose that a potential purchaser of the leasehold interest would be prepared to pay something to take account of the probability of such a merger brought about either by the lessee surrendering its lease for value or the freeholder extending its term of the lease. A valuation of the leasehold interest in such circumstances should reflect that probability of merger."

That case, like the previous case cited, concerned the valuation of the leasehold interest. I agree, however, with the primary judge in this case that the same observations can, with appropriate changes, be made of the valuation of the freehold interest in land which is leased, which is the case before the Court. The concept may be said to be a particular application of the principle embodied in s.5A(3)(a) of the Valuation of Land Act 1960, by which, when the value of any land is being determined, there is to be taken into account, where it is relevant, the use to which such land was being put at the relevant time, the highest and best use to which the land might reasonably have been expected to be put at the relevant time and any potential use.

37. Based on its findings as to the values of the unencumbered freehold interest, the lessor's interest and the lessee's interest, the Tribunal calculated what it called the "total marriage value" as follows:

Value of lessor's interest ($4,185,000) combined with value of

"There would therefore appear to have existed a considerable incentive for the lessor and the [lessee] to merge their interests to their mutual benefit. However it is clear from the evidence before the Tribunal that whilst they had had discussions, as at the date of acquisition these had been inconclusive and furthermore Mr K Chong, a director of the lessee company, gave evidence on behalf of the Authority to the effect that eventually he expected the lessee would require the use of the whole site and that the lessee's business was expanding. The Tribunal regards Mr Chong's evidence as most important in assessing the prospects of the potential for marriage value being realised in this case. The conclusion of the Tribunal on all of the evidence is that only a modest allowance should be made for the Claimant's prospects of sharing in the potential realisation of marriage value in this case and assess this at $25,000."

47. The trial judge, after considering various arguments put for the appellant, found no error of law in the Tribunal's assessment of the component of marriage value in the sum of $25,000.

50. In oral argument before us counsel for the appellant did not pursue submissions, foreshadowed in the notice of appeal and the written outline of argument, to the general effect that the component in question was not part of the market value as assessed by the Tribunal (since it had already awarded an amount for that) and fell outside the definition of "special value". In my view, he was correct to do so, for the reason which he stated and which the primary judge had given for rejecting the submissions, namely, that it was reasonable to infer from the Tribunal's tabulation of the components in its total award, including the expression "Added marriage value", that the Tribunal was adding the sum of $25,000 to its initial figure for market value to make an aggregate for market value.

53. The principal submission for the appellant, which was put in a number of ways, was in essence that there was no evidence, or no "probative" evidence, upon which the Tribunal was entitled to find marriage value and accordingly there was no basis on which the judge had been entitled to uphold the Tribunal's determination. It was submitted that the Tribunal and the judge had erred in that they assumed that marriage value existed. It was said that, on the evidence, at the relevant date a purchaser of the lessor's interest would have known in fact that the lessee was unwilling to "marry". Counsel submitted that the Tribunal had put the cart before the horse by assessing the total increment for marriage value first rather than asking first whether there was probative evidence of a real prospect of marriage. In any event it never asked itself that question. Even if the evidentiary test was lower, the evidence was at best speculative. Seizing on the fact that the sum awarded of $25,000 was only some 2.9 per cent of the total marriage value assessed by the Tribunal, counsel submitted that that fact, that is, the relative smallness of the amount, showed that the prospects of marriage were purely speculative or remote. It was further submitted that the Tribunal had proceeded on an assumed marriage of the interests in the whole of the land when discussions had been limited to the rear portion and that the judge had not been entitled to find an implicit recognition in the Tribunal's reasons that the marriage was only of part of the interest. The latter does not accurately state what the judge said, which was that there was an implicit recognition that the discussions related to the rear portion only in the Tribunal's reference to the lessee's requiring the use of the whole site.

56. In Trocette Property Megaw, L.J. said[7]:

"No buyer in the open market is going to offer to pay a price which takes into account the leaseholder's share of the potential `marriage value' if that buyer knows that in fact the freehold owner is either unable or unwilling to do that which it is necessary for him to do in order to create the `marriage value.'"

"... any prospective buyer would have made inquiries about the prospects of the freeholders cooperating. If no information was available, he might well have inferred that the freeholders would behave as most of them do who have tenants on tag ends of leases, that is, by being cooperative with developers who have attractive propositions to put forward. As against this, if a prospective buyer knew that the freeholders would not be co-operative because they wanted the site for their own purposes and had no intention of either accepting a surrender or granting a new lease at the end of the term then the price offered by the prospective buyer would be on the basis of the value of the premises or site for use for a limited period."

In Promenade Investments Sheller, J.A., immediately after the passage already quoted, stated[9]:

"But the probability and hence what should be reflected in the valuation depends upon whether all the parties to the potential merger would be able and willing, by joining in the merger of their interests, to achieve the best use of the land contemplated as the basis of the valuation."

His Honour continued that the ability to achieve the best use of the land depended amongst other things on zoning and the attitude of the planning authorities and also upon the attitude to merger of the freeholder. If the freeholder was the Crown and it was improbable that the Crown would agree to merge, a prudent purchaser would not be prepared to pay anything on that account.

65. Both parties to the present appeal accepted, correctly in my view, the decision of the majority in Trocette Property and of Meagher and Sheller, JJ.A. in Promenade Investments that in determining the probability of merger the valuer is to pay regard to whether the actual owner is able and willing to merge. For, as Sheller, J.A. said[10], where the exercise is to determine what a prudent purchaser would pay for a leasehold interest it would be artificial and wrong to ignore what such purchaser would clearly not ignore, that is to say what the actual freeholder was able and prepared to do. Here, of course, it is the valuation of the freehold interest that is in question and accordingly it is the ability and willingness of the actual leaseholder to which regard is to be had.

68. In my opinion, the primary judge did not err in concluding that there was no error law on the part of the Tribunal in relation to marriage value. I preface my reasons for that opinion with two preliminary observations. Counsel for the respondent was, I think, correct in his submission that in the passages quoted earlier from Promenade Investments Sheller, J.A. used the expression "the probability", in both places where it occurs, and the expression "that probability", in the mathematical sense and not as connoting likelihood. I agree too with counsel's submission that, in order to assign an amount (if any) for marriage value, the person or body valuing needs to ascertain both the amount by which the interest resulting from merger exceeds in value the sum of the two separate interests and also the strength of the prospect of merger, but the order in which that is done is immaterial, albeit that the latter element may be affected by the former element.

71. Having considered all the evidence before the Tribunal to which our attention was directed, I am of the opinion that it was open - or, if it matters, reasonably open - to the Tribunal on the evidence to hold that there was some prospect of a merger of the two interests. It is sufficient to refer specifically to certain of the evidence of Mr. Chong, a director of the lessee, given in cross-examination. The specific evidence to which I will refer was given against the following background. The lessee initially used only about half of the land. By the date of the acquisition it was using about two-thirds. Its business was continuing to expand and it expected to be using the whole of the land before the lease expired. In relation to the rent re-appraisal as at September 1995 the respondent as lessor proposed a markedly increased rent. That was unacceptable to the lessee. Some negotiations appear then to have occurred between the two companies as to the possible occupation by others or even (in effect) the surrender of the rear portion or of part of that portion. Agreement was not reached. The new rent for the whole of the land was determined by a valuer in default of agreement and thereafter no further negotiations as to the rear portion took place between the two companies. (Mr**.** Chong said in cross-examination that the discussions were left up in the air when the disagreement over rent occurred and that service of notice of acquisition to acquire effectively sounded the death knell for the discussions.) I come now to the specific evidence I have in mind. Despite the background I have summarised, Mr. Chong in cross-examination did agree that neither he nor his father, the managing director of the lessee, said to representatives of the respondent that they had no interest in having discussions as to some part of the land which was unoccupied being occupied by someone other than the lessee because they wanted the whole of the land. Mr. Chong said that they did not do that, "simply because we are businessmen ourselves - we look at any options or consider if there were any plans for the site". He further agreed that they were not closing their mind to some possible formulation, but would look at it. Finally, he agreed that it "could be possible" that after the rental determination had been made discussions could have resumed and his company could have been enticed by some lucrative proposal to deal with the back of the land in some way.

74. Whilst the cross-examiner did not put specifically to Mr. Chong the possibility of surrender by the lessee of the rear portion and whilst the discussions that were enquired about seem rather to have involved occupation by a third party (which would not have resulted in a merger), the answers of Mr. Chong to which I have referred do show that, as business people, the directors of the lessee would have considered any proposal put to them. Thus, there was in this case, unlike Promenade Investments and Trocette Property, a prospect of a change of mind. Accordingly, although the matter is finely balanced, I conclude that it was open to the Tribunal to consider it appropriate to make an allowance for an increment that the hypothetical purchaser of the freehold would have been prepared to pay for the possibility that the lessee would, no doubt in return for a payment equivalent to a substantial part of the total assessed marriage value[11], have been willing to surrender the rear portion or even the whole of the land. The Tribunal was not required, I think on balance, to disregard the prospect of merger as being speculative, fanciful or negligible. In particular, I do not agree that the smallness of the amount shows that the prospect was speculative or that the Tribunal was speculating. It is to be remembered that two of the three members of the Tribunal were experienced valuers. Exact exposition was not required.[12] Finally, in agreement with the primary judge I am not persuaded that the Tribunal overlooked the fact that the negotiations had related to the rear portion only, even assuming that the appellant's submission on this aspect was open on an appeal on questions of law only. The Tribunal, in my view, allowed for that fact in the very modest amount it awarded.

78. It was accepted[13] both below and on appeal that in general terms the respondent was entitled pursuant to s.41(1)(d) of the Land Acquisition and Compensation Act to an amount of compensation for stamp duty paid on the transfer to it of land purchased to replace the land acquired compulsorily, as being loss attributable to disturbance. The expression "loss attributable to disturbance" is defined in s.40 of the Act as meaning -

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

Provision is not made elsewhere in the Part, being Part 4, which is concerned with the measure of compensation. It was also agreed, correctly in my view, that the conjunction "and" between the two lettered paragraphs of the definition must be read as the disjunctive "or".[14]

83. The facts relating to the claim for stamp duty and the reasons and determination of the Tribunal appear from the following passage in its decision:

"The Claimant claims by way of disturbance the stamp duty payable on these properties which it purchased as replacements for the acquired property as follows: McNaughton Rd, Clayton purchased 2.96 for $2,950,000 $162,250 Winterton Rd, Clayton purchased 4.96 for $1,275,000 70,125 Abbotts Rd, Dandenong South purchased 1.97 for $1,650,000 90,750 $323,125 In its said Notice of Offer and Particulars of Offer the Authority offered the Claimant $188,100 as stamp duty on one replacement property calculated on a purchase price of $3,420,000 being its assessment of the value of the lessor's interest and in closing submissions on its behalf it was submitted that the Claimant in fact purchased replacement land for a total cost well in excess of the market value of the lessor's interest. In the circumstances that Mr Dudakov assessed the value of the lessor's interest acquired at $5,234,000 which was maintained until about December 1996 and then reduced it to $4,800,000 the Tribunal considers that after having expended a total of only $4,225,000 on the first two replacement purchases it was reasonably entitled to maintain its exposure to the property market by purchasing the third property for what became a total replacement expenditure of $5,875,000. The Tribunal is of the view that this is reasonably proximate to the value of the interest acquired as then understood by the Claimant on the basis of Mr Dudakov's advice to him and accordingly the claim of $323,125 for stamp duty should be allowed in full."

Mr. Dudakov was the respondent's valuer. Although negotiations for the purchase of the third property purchased may have commenced before he reduced his valuation, the contract for that purchase was not made until 20 January 1997.

88. Before the judge it was submitted for the present appellant that there was no objective justification for regarding the expenditure of $90,750 on stamp duty on the transfer to the present respondent of the third property as the "natural, direct and reasonable" consequence of the acquisition. In support of that overall submission counsel submitted to the judge, first, that the purchase of the third property was not a natural and direct consequence of the acquisition, but that the chain of causation was broken by the respondent's decision to purchase it, based on its assessment of the market value of the land. However, the judge did not consider that the decision to purchase a third property was notionally so different from the decisions to purchase the first two properties that the decision to purchase the third, unlike the decisions to purchase the first two, could be said to break the chain of causation.

91. The question whether the decision was "reasonable" was another matter, the judge said. As to that, counsel pointed out before the judge that the total market value of the land acquired by the appellant from the respondent was assessed by the Tribunal as $4,185,000 (excluding marriage value) and the total price paid for the three properties on which stamp duty was claimed as $5,875,000. The difference between the two was $1,690,000 or approximately 40 per cent of the assessed market value of the land acquired. (The total price paid for the first two properties was $4,225,000, only $40,000 more than the assessed market value of the land acquired, and the purchase of those two properties was, counsel accepted, as a reasonable consequence of the acquisition.) The Tribunal had applied, counsel submitted, a subjective test of reasonableness, but there was nothing in the legislation to suggest that the test ought to be other than objective. Counsel pointed out that the contract to purchase a third property was not entered into until after Mr. Dudakov had revised his valuation downwards.

94. Counsel for the respondent, on the other hand, whilst agreeing that the test of reasonableness was an objective one, pointed out that Mr. Dudakov's lower valuation of December 1996 provided the additional amount of $223,000 for the lessor's share of marriage value. He submitted that the natural desires of the respondent to replace its investment and continue investment in land and the preference of Dr. Beresford for land which met his investment criteria were properly to be taken into account. Further, Dr. Beresford was of opinion that for taxation reasons it was necessary that he replace the land within 12 months of the acquisition, so that it was not possible for him to wait until the value was determined by the Tribunal. Inevitably, counsel pointed out, the land acquired as replacement property could be expected to have a value either larger or smaller than that of the land compulsorily acquired.

97. The judge concluded that it was open to the Tribunal to find, on the basis of the material contained in the submissions of counsel for the respondent, that the purchase of the third property was a reasonable consequence of the acquisition. Its use of the expression "reasonably proximate" was, in the judge's view, an indication that it was applying the test of "reasonableness". Decisions of the Tribunal were not to be set aside by over-legalistic analyses of reasons stated, said the judge, citing Michaelis Bayley (Vic.) Pty. Ltd. v. Melbourne & Metropolitan Board of Works[15].

100. Amongst the grounds of appeal relating to stamp duty are grounds that the primary judge erred in finding that it was open to the Tribunal to assess the reasonableness of the purchase of the third property by reference to the first Dudakov valuation; in failing to find that that purchase constituted a novus actus interveniens (or, in other words, broke the chain of causation required by the definition); and in failing to find that the stamp duty costs associated with the purchase did not constitute loss attributable to disturbance that was "natural, direct and reasonable". (In the first ground mentioned the reference is to the first Dudakov valuation, but the appeal was also argued by reference to the revised Dudakov valuation of December 1996.) Although the six grounds relating to stamp duty do not say so precisely, the appeal was argued, at least implicitly, on the basis that the appellant asserted, and the respondent denied, that the judge erred in failing to hold that it was not open to the Tribunal to find that the disputed stamp duty was incurred "as the natural, direct and reasonable consequence" of the acquisition, in that it was neither a reasonable consequence nor a direct consequence.

103. The parties put to us substantially the same arguments as they had put to the judge, though the respondent in addition sought to draw support from the decision in Roads Corporation v. Dacakis[16] that the valuation expenses there under consideration had been reasonably incurred by the claimant and necessarily incurred by reason of the acquisition. It was again common ground that whether a pecuniary loss suffered by a claimant is, for the purpose of the definition of "loss attributable to disturbance", a "reasonable consequence" of an acquisition poses an objective, not a subjective, test. Nor was it in dispute that an investor in land such as the plaintiff, having been divested of its interest in a parcel of land, would naturally seek to make another, similar, investment in substitution, so that, whilst the purchase price of the substitute land would not be a pecuniary loss suffered, expenditure on items such as stamp duty would be. But the appellant submitted in essence that the third property was not a replacement property.

106. In Halwood Corporation Ltd. v. Roads Corporation[17] I considered the meaning of the expression "the natural, direct and reasonable consequence". That decision, including the conclusion that it was not possible to say that the loss in question was suffered as such a consequence of a refusal to grant a permit, was affirmed on appeal,[18] but without the need for any detailed consideration of the expression. I do not repeat the views I expressed in the case beyond noting the summary[19] that the three adjectives in combination connoted a very close and limited connection between the imposition or proposal of the reservation there in question and the financial loss suffered.

109. The question whether, in expressing the view that the total alleged replacement expenditure of $5,875,000 was "reasonably proximate to the value of the interest acquired as then understood by the Claimant on the basis of Mr. Dudakov's advice to him", the Tribunal was applying a subjective test or an objective test taking into account the circumstances in which the claimant found itself is reminiscent of issues that have arisen in areas of the criminal law such as provocation in relation to murder. But I consider that the question[20] does not in truth arise, for, in my view, it was not open to the Tribunal to assess the reasonableness of the purchase of the third property (and, consequentially, the stamp duty expense referable thereto) by reference to the first Dudakov valuation or the revised Dudakov valuation. Rather, what it was reasonable - and, indeed, natural - for the respondent to replace was its interest in land having at the relevant date the value agreed or authoritatively determined between the parties. That value was $4,210,000 (including marriage value). I recognise that that value had not been authoritatively determined by the time the respondent contracted to purchase the third property. One may sympathise with the respondent in its perceived need to "roll over" its investment within 12 months for income tax purposes. But the principle must be that what may be replaced at the expense, so far as incidental costs are concerned, of an acquiring authority is that of which the claimant has been deprived, namely, land of a certain value, and in the event of dispute that can only be ascertained by a valuation decision by which the authority and the claimant are bound. That a claimant cannot rely on a value ascribed by its valuer which is later determined, in a binding manner, to be excessive is made clear, I think, if one considers for a moment a manifestly excessive and quite erroneous valuation of, say, two or two and a half times the "proper" value. I accept, of course, that there is no one figure which alone is the correct value of any given piece of property: for there is always a range within which sound valuations may fall, though the person or body charged with determining the value must in the end adopt one particular figure. Because there is such a range and also, I am inclined to think, because no two parcels of land are the same and the attainment of exact monetary equivalence cannot be expected, questions of degree are involved and it will by no means necessarily be the case that stamp duty on replacement property costing somewhat more than the established value of acquired land will not be within the definition of loss attributable to disturbance.

112. The decision relating to valuation expenses in Dacakis is not analogous. There by statute one of the factors to which regard was to be had in assessing the amount of compensation was any valuation expenses necessarily incurred by the claimant by reason of the acquisition. One therefore of necessity had to have regard to the fee of the claimant's valuer even though, as happened in that case, that valuer's valuation might not have been accepted by the body determining the value of the land and might indeed have been very wide of the value determined. That case, then, does not require or permit one here to have regard to the claimant's valuer's valuation. It is true that a question of reasonableness was there considered and that it was held that there was nothing else that the claimant could do than to go to a registered valuer and that in incurring the particular valuer's fee, calculated as it was by reference to the value he assessed, the claimant had acted reasonably[21]; but in the present case the question of reasonableness calling for decision does not, for the reasons I have given earlier, fall for determination by reference to the claimant's valuer's valuation.

115. When one turns to measure the cost[22] of the land claimed as replacement land against the value of the land acquired in order to see whether the stamp duty so far as it relates to the third property answers the definition of "loss attributable to disturbance" it is manifest that it does not. The land acquired by the appellant had a market value (including marriage value) of $4,210,000. The two properties acquired by the respondent in February 1996 and April 1996 cost $4,225,000. That sum was only very slightly (in relative terms) in excess of the value of the land acquired and the stamp duty referable to those purchases was, therefore, a pecuniary loss suffered by the respondent as the natural, direct and reasonable consequence of the acquisition. It cannot, however, be said that a purchase of a further parcel, in particular a purchase at a cost of $1,650,000, was a reasonable consequence of the acquisition or that the stamp duty referable to that purchase was a pecuniary loss suffered by the respondent as the reasonable consequence of the acquisition, having regard both to the amount already expended and to the cost of the third property. More precisely, it was not open to the Tribunal to hold that the disputed stamp duty was such a pecuniary loss and the primary judge erred in not so concluding.

118. I am also of the opinion that, in the circumstances outlined in the immediately preceding paragraph, it was not open to the Tribunal to find that the purchase of the

third property was a direct consequence of the acquisition or, consequentially, that the stamp duty referable thereto was a pecuniary loss suffered as the direct consequence of the acquisition. It is true that the purchase had its genesis in the acquisition. But, in my view, the acquisition was no more than a necessary condition for the purchase: it was not the direct cause of it. Rather, the direct cause was the respondent's decision to make a further investment after having re-invested more than what was in fact the value of the land acquired from it. That was, to adapt the words of Gobbo, J. in Elense No.17 Pty. Ltd. v. Minister for Public Works[23], the independent act of the respondent in making, at its choice, an additional investment.

122. For these reasons I consider that the judge erred in not holding that it was not open to the Tribunal in law to find that the total replacement expenditure of $5,875,000 was "reasonably proximate to the value of the interest acquired as then understood by the Claimant on the basis of Mr. Dudakov's advice" or to find (as implicitly it must have done) that all of such expenditure was, to use the composite phrase, "the natural, direct and reasonable consequence of" the acquisition.

126. It follows that I am of the opinion that the appeal should be allowed so far as it relates to stamp duty, but otherwise fails.

131. In my view, for the reasons given by Batt, J.A., the appeal should be disposed of in the manner proposed by him.

[2] The alternative of special value was not relied on before the judge or in this Court.

[3] (1974) 28 P&CR 408; 72 LGR 701. The expression appears in the decision of the Lands Tribunal at first instance in that case: (1973) 27 P&CR 256 at 269, though the member made his valuation by another method.

[5] (1992) 26 N.S.W.L.R. 203; s.l.r. 176 C.L.R. 704n.

[8] At 421. His Lordship made like observations at 422.

[11] For the lessee, being unwilling, would have been in a strong negotiating position: cf: Robinson, Property Valuation and Investment Analysis: A Cash Flow Approach, 124.

[12] Secretary of State for Foreign Affairs v. Charlesworth, Pilling & Co. [1901] A.C. 373 at 391; and Yates Property Corporation Pty. Ltd. in liq.) v. Darling Harbour Authority (1991) 24 N.S.W.L.R. 156 at 182-183.

[13] In planning compensation cases stamp duty on replacement land was included in the award of compensation in, for instance, Yarn Traders Pty. Ltd. v. Melbourne and Metropolitan Board of Works [1970] VicRp 55; [1970] V.R. 427 and it was recognised that such an expense was in principle capable of recovery as financial loss in Mario Piraino Pty. Ltd. v. Roads Corporation [No.2] [1993] VicRp 9; [1993] 1 V.R. 130 at 145; Roads Corporation v. Melbourne Estates and Finance Co. Pty. Ltd. [1993] VicRp 93; [1993] 2 V.R. 602 at 616-617; and Equity Trustees Executors and Agency Co. Ltd. v. Melbourne and Metropolitan Board of Works [1994] VicRp 39; [1994] 1 V.R. 534 at 551.

[14] Compare Pearce & Geddes_, Statutory Interpretation of Australia,_ 4th ed., para.[2.15]. This does not seem to be a case where the words introducing the sub-paragraphs can be said to have a "dispersive" effect.

[15] (1980) 44 L.G.R.A. 65 at 67.

[16] [1995] VicRp 70; [1995] 2 V.R. 508 at 542-545.

[17] (1995) 89 L.G.E.R.A. 280 at 297-305.

[18] [1998] 2 V.R. 439 esp. at 451.

[20] There may also be a question whether reasonable proximity in value is all that is required for a reasonable consequence.

[21] Opinion as to extreme cases was reserved at 543.

[22] With purchases on the open market the cost may be taken as the value of the new land. But equivalence or near equivalence in value is not, I think, requisite. The theory is, rather, that a certain sum, being the value of the land acquired, has been released for reinvestment at the expense, so far as associated outgoings are concerned, of the acquiring authority. In other words the question is simply how much was spent, whether the purchase price was above or below the "true" value of the replacement land.

[23] (1990) 77 L.G.R.A. 46 at 61.