Monti v Roads and Maritime Services

The Proposed Further Amendments to the Amended Points of Claim

1. The proposed further amendments to the Montis's amended points of claim are as follows: Special Value 77. The market value of the Quarry Land has been determined by using discounted cashflow. 78. The use of the discounted cashflow to determine market value has assumed a sale to a hypothetical purchaser. 79. The hypothetical purchaser will incur operating costs to operate the quarry. Those operating costs include labour costs. 80. The inclusion of labour, as an operating cost, in the discounted cashflow model has the effect of reducing the market value. 81. In their operation of the quarry, the Applicants do not have labour costs. 82. The Applicants were able to produce 32,524 tonnes without the need to incur labour costs. 83. The ability of the Applicants to produce 35,524 tonnes per annum from the quarry without incurring labour costs is an advantage held by the Applicants. 84. That advantage of the Applicants, to not incur labour costs to produce 32,524 tonnes per annum, has a financial value. 85. The financial value is assessed by means of a discounted cashflow model. Particulars The relevant inputs for the discounted cash flow model are: (i) The labour cost saving only applies to 35.524 tonnes per annum; (ii) The labour cost saving is assumed to last for only 11 years; (iii) The labour costs are agreed to be 28% of the agreed operating costs; (iv) Those labour costs are discounted to determine a net present value at. The discount rate is derived from the agreed post tax discount rate of 14.9%, which is grossed up to a pre tax discount rate of 21.29% and then adjusted for the personal tax rate of the Montis). 86. The financial value of the advantage is in addition to the market value of the Quarry Land. 87. The Applicants' claim $510,473 pursuant to s 55(b) of the Just Terms Act for special value (as defined in s 57).

The NSWCA Hands Down Moloney and Melino

1. In order to understand the unusual circumstances giving rise to what would otherwise be a courageous application by the Montis given the stage at which the proceedings are at, it is necessary to provide context by reference to two very recent decisions by the New South Wales Court of Appeal in Moloney v Roads and Maritime Services [2018] NSWCA 252 and Melino v Roads and Maritime Services [2018] NSWCA 251. Both decisions were handed down on 2 November 2018, that is, the last working day before final submissions in these proceedings were due to commence on 5 November 2018. This largely explains the urgency of the application.
2. In Moloney the NSWCA upheld a decision of Pain J in this Court (Moloney v Roads and Maritime Services (No 2) [2017] NSWLEC 68) that relevantly held that the anticipated lost profits could not additionally be claimed as a head of compensation under s 59(1)(f) of the Just Terms Act (loss attributable to disturbance), where that loss had been compensated in the claim for market value under s 55(a), (b) or (f) of that Act (at [100]). This was the conclusion that her Honour came to in Moloney (No 2).
3. In Melino the NSWCA overturned a decision of Moore J of this Court (Michele Melino and three others in their capacity as Executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118; (2017) 226 LGERA 337), but relevantly affirmed his Honour's conclusion that the applicants in that case could not additionally claim compensation for the right to the potential profits arising from renting a dwelling on the land after the date of acquisition, again, because the applicants had already received compensation for the market value of the dwelling which included those profits. In this, and many other respects, the reasoning of Moore J was left untrammelled by the NSWCA's judgment.
4. Melino concerned the compulsory acquisition of part of a farm used for sugar cane production and cattle grazing for the construction of an upgrade to the Pacific Highway. There was a dwelling on the land that was occupied and rented out as at the date of acquisition, as well as various fixtures relating to the farming operation. Moore J awarded the applicants compensation in relation to the market value of the acquired land and some disturbance claims, but he declined to award compensation for disturbance in relation to the replacement costs of the construction of a new dwelling, new cattle yards, a new shed and garage, and other infrastructure relating to the continuation of the cattle grazing business.
5. The Court of Appeal held that Moore J erred in holding that the replacement costs of new farm structures in place of those situated on the acquired land fell into the same category as the replacement house, namely, that compensation had already been awarded as part of the calculation of the market value of the acquired land. Rather, the farm structures on the acquired land had "special value" under s 55(b) and 57 of the Just Terms Act. How that value should be assessed was a matter for expert evidence.
6. Basten JA said (at [20]): 20. As a matter of statutory construction, the correct exercise is to assess the loss of the farm structures as special value of the land to the person entitled to compensation, on the date of acquisition, pursuant to s 55(b). Because the valuers did not approach their valuations on that basis, the trial judge did not allow any amount for the loss of the farm structures, beyond their value to the hypothetical purchaser of the acquired land. On one view if the evidence did not support a claim for special value, the appellants, who bore the onus of proof, fail. However, because the case law has provided no clear answer to the statutory construction issue, the better view is that the issue will have to go back for redetermination in the Land and Environment Court. Whether the costs of the rehearing should be borne by the appellants in any event is a matter for that Court.
7. Similarly, Payne JA stated (at [80]-[82] and [86]): 80. I agree with Basten JA at [14] that on the approach accepted by Spigelman CJ in Mir Bros the farm structures on the acquired land had "special value" to the owners. It would have been far preferable if the expert valuation evidence had approached the question in this way. 81. As I have said, on the assumption that s 59(1)(f) was capable of applying in this case, the correct approach to the section was to apply the words of the section, without putting any gloss on those words. The focus of s 59(1)(f) is the costs incurred or which might be incurred by the landholder relating to the actual use of the land, being the acquired land: Mir Bros at [88] per Spigelman CJ. Those costs must be reasonably incurred (either now or in the future) as a direct and natural consequence of the acquisition. 82. The Just Terms Act does not expressly or implicitly provide that the value paid for land compulsorily acquired necessarily includes "the full compensatory value for all fixtures included in the acquisition". It was an error on a question of law for the primary judge so to conclude. … 86. As to the second question, relating to the cattle yards and farm machinery shed, despite the reservations I have about the construction given to s 59(1)(f) by earlier authority in this Court, I have concluded that the primary judge was bound to consider the separate claim for disturbance. That question was not addressed by the primary judge. It was an error on a question of law for him to fail to do so. The matter must be remitted. Upon the remitter, as I have said it would be far preferable if this question is addressed as being whether the farm structures on the acquired land had "special value" to the owners. The appellants, however are not bound to adopt that approach and on the existing authority of this Court are entitled to rely on s 59(1)(f). If this was to occur findings would need to be made about the actual use of the acquired land at the time the land was acquired, whether the appellants had reasonably incurred costs or might reasonably incur such costs in constructing the cattle yards and farm machinery shed and whether those costs were incurred or might reasonably be incurred as a direct and natural consequence of the acquisition.
8. Accordingly, the matter was remitted to Moore J for redetermination.

"Special Value" Under the Just Terms Act

1. Section 55(b) of the Just Terms Act states: 55 Relevant matters to be considered in determining amount of compensation In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division): … (b) any special value of the land to the person on the date of its acquisition,
2. The term "special value" is defined in s 57 of the Act to mean: 57 Special value In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land.

Effect of Moloney and Melino on the Montis's Claim

1. The effect of Moloney and Melino on the Montis's claim for compensation for lost profits under s 59(1)(f) of the Just Terms Act is, as Mr Ian Hemmings SC, senior counsel for the Montis, correctly conceded, "devastating" (T362.22). In short, there is nothing left of this claim as pleaded.
2. Having said this, the handing down of those two decisions by the Court of Appeal did nothing more than confirm the existing state of the law in this State. This is because those decisions affirmed and upheld the reasoning of this Court at first instance. In other words, nothing has changed as a result of Moloney and Melino; it was always the case that, as a result of Moloney (No 2) and Melino at first instance, future lost profits could not be claimed both as part of the market value of the acquired land under s 55(a) and again under s 59(1)(f) of the Just Terms Act as disturbance. Until overturned, I was obliged to follow and apply Moloney (No 2) and Melino as a matter of comity unless persuaded that they were plainly wrong, a conclusion a court does not come to lightly.
3. To the extent that Mr Hemmings SC submitted that Moloney and Melino were contrary to earlier appellate authority such as Health Administration Corporation v George D Angus Pty Ltd [2014] NSWCA 352; (2014) 88 NSWLR 752, in Melino Payne JA expressly dealt with, and rejected, this argument noting that (at [74]): 74. Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352, relied upon by the appellants, gives rise to no different conclusion. It does not stand for the proposition that a cost claimed as compensation for disturbance, and falling within the statutory requirements in s 59(1)(f), could never overlap with an amount claimed as compensation for market value of the acquired land or the residue land. In the passage relied upon by the appellants at [47], Tobias JA (with whom Emmett and Leeming JJA agreed) said: "[47] In my view the appellant's submissions are contrary to authority. Whereas prior to the commencement of the Just Terms Act, it was true that loss due to disturbance was not a separate head of compensation, it now is. As Spigelman CJ, with whom Beazley, Bryson and Basten JJA as well as Campbell J agreed, observed in Leichhardt Council v Roads and Traffic Authority (NSW) [2006] NSWCA 353; (2006) 149 LGERA 439 at [29], whereas in the prior case law under s 124 of the Public Works Act, the relevant formulation was 'value of the land', that is not the formulation that falls to be interpreted under the Just Terms Act. …"
4. Thus, from the outset, the Montis were never entitled to a claim for compensation for anticipated lost profits under s 59(1)(f) of the Just Terms Act. Accordingly, it was always open for the Montis to characterise their labour as a loss compensable under s 55(b) of the Just Terms Act, as they now belatedly seek to do.
5. Were it not for the fact that the RMS does not seek its costs thrown away occasioned by the amendment, the Montis may have been at risk of incurring an adverse costs order in relation to their application to amend (Monti v Roads and Maritime Services [2018] NSWLEC 34 at [39]).
6. But having said this, it was expressly acknowledged by the Court of Appeal that the earlier cases on this issue are not easy to reconcile and that "it may be that those earlier cases are able to be distinguished" (Melino at [77] per Payne JA). And, that "to decide this issue this Court would need to give consideration to whether those cases were correctly decided" (Melino at [77] per Payne JA).

Applicable Legal Principles for Applications for Leave to Amend

1. Sections 56 to 60 of the CPA relevantly provide as follows: 56 Overriding purpose (1) The overriding purpose of this Act and of rules of court, in their application to civil proceedings, is to facilitate the just, quick and cheap resolution of the real issues in the proceedings. (2) The court must seek to give effect to the overriding purpose when it exercises any power given to it by this Act or by rules of court and when it interprets any provision of this Act or of any such rule… 57 Objects of case management (1) For the purpose of furthering the overriding purpose referred to in section 56 (1), proceedings in any court are to be managed having regard to the following objects: (a) the just determination of the proceedings, (b) the efficient disposal of the business of the court, (c) the efficient use of available judicial and administrative resources, (d) the timely disposal of the proceedings, and all other proceedings in the court, at a cost affordable by the respective parties. (2) This Act and any rules of court are to be so construed and applied, and the practice and procedure of the courts are to be so regulated, as best to ensure the attainment of the objects referred to in subsection (1). 58 Court to follow dictates of justice (1) In deciding: (a) whether to make any order or direction for the management of proceedings, including: (i) any order for the amendment of a document, and (ii) any order granting an adjournment or stay of proceedings, and (iii) any other order of a procedural nature, and (iv) any direction under Division 2, and (b) the terms in which any such order or direction is to be made, the court must seek to act in accordance with the dictates of justice. (2) For the purpose of determining what are the dictates of justice in a particular case, the court: (a) must have regard to the provisions of sections 56 and 57, and (b) may have regard to the following matters to the extent to which it considers them relevant: (i) the degree of difficulty or complexity to which the issues in the proceedings give rise, (ii) the degree of expedition with which the respective parties have approached the proceedings, including the degree to which they have been timely in their interlocutory activities, (iii) the degree to which any lack of expedition in approaching the proceedings has arisen from circumstances beyond the control of the respective parties, (iv) the degree to which the respective parties have fulfilled their duties under section 56 (3), (v) the use that any party has made, or could have made, of any opportunity that has been available to the party in the course of the proceedings, whether under rules of court, the practice of the court or any direction of a procedural nature given in the proceedings, (vi) the degree of injustice that would be suffered by the respective parties as a consequence of any order or direction, (vii) such other matters as the court considers relevant in the circumstances of the case. 59 Elimination of delay In any proceedings, the practice and procedure of the court should be implemented with the object of eliminating any lapse of time between the commencement of the proceedings and their final determination beyond that reasonably required for the interlocutory activities necessary for the fair and just determination of the issues in dispute between the parties and the preparation of the case for trial. 60 Proportionality of costs In any proceedings, the practice and procedure of the court should be implemented with the object of resolving the issues between the parties in such a way that the cost to the parties is proportionate to the importance and complexity of the subject-matter in dispute.
2. Section 64(1) and (2) of the CPA state: 64 Amendment of documents generally (1) At any stage of proceedings, the court may order: (a) that any document in the proceedings be amended, or (b) that leave be granted to a party to amend any document in the proceedings. (2) Subject to section 58, all necessary amendments are to be made for the purpose of determining the real questions raised by or otherwise depending on the proceedings, correcting any defect or error in the proceedings and avoiding multiplicity of proceedings.
3. In Kelly v Mina [2014] NSWCA 9 Barrett JA opined as to the operation of these provisions (at [47]-[48]): 47. Particularly in light of the opening words of s 64(2), it is not controversial that the provisions in Part 6 Division 1 of the Civil Procedure Act were binding on the primary judge and that, in accordance with s 58, his Honour was bound to seek to act in accordance with the dictates of justice and, in so doing, to have regard to s 56 concerning the "overriding purpose" of the Act and rules of court in their application to civil proceedings; also that, in addressing the amendment application in the particular statutory context, his Honour was required to take into account a combination of factors identified by the High Court in Aon Risk Services Pty Ltd v Australian National University (2009) HCA 29: (2009) 239 CLR 175 and usefully summarised by Vickery J in Namberry Craft Pty Ltd v Watson [2011] VSC 136 (at [38]) as follows: (a) Whether there will be substantial delay caused by the amendment; (b) The extent of wasted costs that will be incurred; (c) Whether there is an irreparable element of unfair prejudice caused by the amendment, arising, for example, by inconvenience and stress caused to individuals or inordinate pressures placed upon corporations, which cannot be adequately compensated for, whatever costs may be awarded; (d) Concerns of case management arising from the stage in the proceeding when the amendment is sought, including the fact that the time of the court is a publicly funded resource, and whether the grant of the amendment will result in inefficiencies arising from the vacation or adjournment of trials; (e) Whether the grant of the amendment will lessen public confidence in the judicial system; and (f) Whether a satisfactory explanation has been given for seeking the amendment at the stage when it is sought. 48. As this Court has emphasised more than once, Part 6 Division 1 of the Civil Procedure Act made substantive and important changes to the law so that considerations of promptness and efficiency in the conduct of civil litigation are afforded a new and special importance which may sometimes provoke a sense of injustice in a party who has failed to proceed with despatch: see, for example, Dennis v Australian Broadcasting Corporation [2008] NSWCA 37; Baulderstone Hornibrook Engineering Pty Ltd v Gordian Runoff Ltd [2008] NSWCA 243 at [160]-[161]; Hans Pet Constructions Pty Ltd v Cassar [2009] NSWCA 230; Halpin v Lumley General Insurance Ltd [2009] NSWCA 372; Bi v Mourad [2010] NSWCA 17; Richards v Cornford (No 3) [2010] NSWCA 134.
4. Parties do not have an entitlement with respect to amendment of their pleadings. Accordingly, in Aon Risk Services Australia Ltd v Australian National University [2009] HCA 27; (2009) 239 CLR 175 the High Court said (at [111]-[112], footnotes omitted): 111. An application for leave to amend a pleading should not be approached on the basis that a party is entitled to raise an arguable claim, subject to payment of costs by way of compensation. There is no such entitlement. All matters relevant to the exercise of the power to permit amendment should be weighed. The fact of substantial delay and wasted costs, the concerns of case management, will assume importance on an application for leave to amend. Statements in J L Holdings which suggest only a limited application for case management do not rest upon a principle which has been carefully worked out in a significant succession of cases. On the contrary, the statements are not consonant with this Court's earlier recognition of the effects of delay, not only upon the parties to the proceedings in question, but upon the court and other litigants. Such statements should not be applied in the future. 112. A party has the right to bring proceedings. Parties have choices as to what claims are to be made and how they are to be framed. But limits will be placed upon their ability to effect changes to their pleadings, particularly if litigation is advanced. That is why, in seeking the just resolution of the dispute, reference is made to parties having a sufficient opportunity to identify the issues they seek to agitate.
5. The factors that a court will have regard to in determining whether or not to exercise its discretion to allow the amendment include: 1. the nature and importance of the amendment to the party applying for it (Aon at [102]); 2. the extent of the delay and the costs associated with amendment (Aon at [102]); 3. the explanation for the delay (Aon at [108]); 4. the prejudice to the parties (Aon at [5], [93]-[95], [100]-[102] and [114]); 5. the parties' choices to date in the litigation and the consequences of those choices (Aon at [112]); 6. the strength of the proposed amendment in the sense of whether or not it is futile; and 7. the potential loss of public confidence in the legal system which can arise where a court is seen to have acceded to applications made absent sufficient justification or explanation (Aon at [5], [24] and [30]).
6. The onus is on the party seeking leave to amend to persuade the court that such leave should be granted.
7. And, the weight to be given to the factors identified in Aon and the outcome of that balancing exercise will vary with the circumstances of each case.

On Balance Leave to Amend should be Granted to the Montis

1. Applying the factors outlined above, and although very finely balanced given the late stage of the proceedings at which the amendment application was made, in my opinion, the Montis should be permitted to amend their claim to include compensation for loss of the special value of the land to them as at the date of acquisition.
2. First, if the amendment is not permitted the Montis will be unable to make a claim for loss worth $510,473. This is a considerable amount. It must be recalled that the acquisition has totally extinguished the Montis's quarrying business. While they may ultimately not be successful in this claim, they should nevertheless, given the prejudice that will flow to them if leave is refused, be permitted to plead it.
3. Second, as soon as the "devastating" effect of Moloney and Melino on their case became apparent, the Montis acted with appropriate haste to make the application to amend. I find this notwithstanding my remarks above regarding the precedential value of the first instance decisions and the state of the law in relation to claiming lost profits under s 59(1)(f) of the Just Terms Act prior to the Court of Appeal handing down the two decisions.
4. Third, although the lost profits claim was not as a matter of law available to the Montis at the time it was made given the first instance decisions in Moloney (No 2) and Melino, I accept that Mr Hemmings SC was confident in his belief that those decisions would be overturned on appeal given his understanding of pre-existing Court of Appeal authority such as George D Angus. As the Court of Appeal has expressly recognised, the authorities arguably conflict with each other in this area. Accordingly, the Montis's explanation for the delay in seeking to make their application to amend is reasonable in all the circumstances.
5. Fourth, although the Montis have changed their claim for compensation repeatedly during the course of the hearing, especially with respect to disturbance (an alternative disturbance claim was raised early during the hearing, adding approximately $10 million to their total compensation claim, only to be abandoned upon the close of evidence), the RMS have also engaged in less than optimal conduct by raising an alternative 'after' case which caused the initial hearing dates to be vacated, only to abandon it prior to the hearing finally commencing (see Monti).
6. Fifth, the RMS argued that the special value claim was "fundamentally flawed and bound to fail" because: 1. first, the free labour provided by the Montis was not an "advantage" that was in addition to the market value or that was "incidental to" the use by them of their land as required by s 57 of the Just Terms Act; 2. second, the quantification of the special value claim is tethered to the ability of the Montis to produce 32,524 tonnes of material without the need to incur labour costs, which is the post-acquisition date production level for the quarry in the 'before' scenario. However, the relevant date for assessment of special value is as at the date of acquisition, not any later date. Moreover, the tonnage and other elements of the Montis's special value claim are derived from assessing the market value of the whole of the quarry, not just the acquired land, as required by the words of s 57; 3. third, the claim is based on the assumption that the Montis would have worked for a further 11 years, whereas there is no evidence to support that assumption; and 4. fourth, in relation the asserted "advantage" held by the Montis, namely, of production absent labour costs, this advantage is not incidental to the use of the land because the fact that wages were not paid had nothing to do with the use of the land, but was the result of a decision by the Montis to structure their affairs in this manner. Moreover, there is no net "advantage" to the Montis because of the 'disadvantage' that they suffer from being required to give their labour for free.
7. But notwithstanding the apparent cogency of these contentions at this juncture (that is, absent the benefit of argument from the Montis), I am not required to assess to finality the success or otherwise of the Montis's claim on this application. In my view, the special value claim is arguable, and this is sufficient.
8. Sixth, what is apparent, however, is that further expert valuation evidence will be required to calculate the special value claim, especially from the specialist quarry valuation experts. This will necessitate further conferral by the experts and further joint reporting. This means that the hearing will not conclude in the allocated four weeks to hear it. It also means that the litigation costs of all parties will increase. In a compulsory acquisition matter in Class 3 of the Court's jurisdiction where usually the respondent pays the applicant's costs, or each party pays their own costs, this represents real prejudice to the RMS.
9. However, this is not a prejudice that cannot be dealt with, upon application by the RMS, by an appropriate costs order. In other words, it is not irremediable, unlike the prejudice that would be suffered by the Montis if leave were not granted.
10. Similarly, while justice delayed is justice denied, to accommodate the entirely understandable concern of the RMS that if the amendment were permitted, the hearing would not conclude until March or April 2019 having regard to the state of the Court's current listings, the Court was able to use allocated judgment writing time for this matter to set it down for further hearing from 19 to 22 November 2018, thereby ensuring that it concludes this year.
11. Finally, although mindful of any loss of public confidence in the rule of law occasioned by the conduct of the Montis in these proceedings, I am confident that the unusual circumstances of this case will more than assuage any (unlikely) public approbation occasioned by permitting the amendment.

Costs

1. The RMS indicated that it would not be seeking the costs thrown away occasioned by the amendment by the Montis to their points of claim. In these circumstances, it is neither appropriate nor necessary for me to consider the issue further.

Conclusion and Orders

1. It was for these reasons that the Montis were granted leave to amend their compensation claim to include a claim for "special value" pursuant to s 55(b) of the Just Terms Act.
2. A further order was made setting the matter down part-heard for an additional four days from 19 to 22 November 2018, together with consequential timetabling orders permitting the matter to resume, and conclude, on those dates.

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. Decision last updated: 08 November 2018