Plaintiff v Defendants

Supreme Court of Victoria|2009-08-31|Before: OSBORN J

VALUATION AND COMPENSATION LAW - Application for leave to appeal heard with appeal from Victorian Civil and Administrative Tribunal - Appeal on questions of law - Claims for disturbance - Costs incidental to the purchase of replacement properties following compulsory acquisition - Loss due to failure by acquiring authority to make offer within the time period specified by statute - Opportunity cost claim - Whether findings open - Whether failure to have regard to relevant considerations - Application dismissed in respect of replacement property costs - Leave granted to appeal and appeal upheld with respect to opportunity cost claim as to quantum only - Sections 40 and 41 Land Acquisition and Compensation Act 1986; s 148 Victorian Civil and Administrative Tribunal Act 1998.

1 In May 2006 the plaintiff ('the Corporation') undertook the construction of a link between the Western Ring Road and the Western Freeway and compulsorily acquired a portion of a 42.64 hectare parcel of land owned by the defendants at Derrimut.

2 The defendants' land was originally purchased by them in 1980 at a time when it was zoned for rural purposes, but with a view to its future development.

3 The Corporation concedes the defendants were developers of land, including the Derrimut land. The Derrimut land had been rezoned for industrial use by the time of compulsory acquisition and the defendants were seeking to develop it by subdivision.

4 As a result of the acquisition, the defendants claimed compensation and the claim was referred to the Victorian Civil and Administrative Tribunal ('the Tribunal').

5 At the hearing of the claim the Tribunal was informed the market value of the acquired land had been agreed at $11 million. This amount had already been paid to the defendants.

(a) whether stamp duty and legal expenses incurred or proposed to be incurred by the defendants in purchasing other properties following the compulsory acquisition were 'losses attributable to disturbance' recoverable under s 41(1)(d) of the Land Acquisition and Compensation Act 1986 ('the LAC Act');

(b) whether the defendants were entitled, again under s 41(1)(d), as being 'loss attributable to disturbance' to an amount representing interest for loss of use of moneys as a result of the Corporation having been late in serving its offer of compensation in accordance with s 31 of the LAC Act;

7 The Tribunal awarded the defendants $586,918 in respect of the claim for costs associated with purchasing alternative properties.[1]

8 The Tribunal awarded the defendants $88,751 for loss of use of moneys during the period which ensued when the Corporation failed to make an offer of compensation as required by s 31 of the LAC Act and the defendants as a consequence suffered delay in receiving compensation moneys.[2]

9 The Corporation now contends the Tribunal erred in law with respect to both these issues.

10 The matter comes before this Court by way of application for leave to appeal on questions of law from a decision of the Tribunal.[3]

11 In the course of the application and with the consent of the parties, the Court determined to hear the application for leave to appeal together with an appeal on the grounds set out in the amended draft notice of appeal relied on by the Corporation.

12 The Tribunal was required by s 41 of the LAC Act to have regard to any loss attributable to disturbance.

13 Section 40 of the LAC Act defines loss attributable to disturbance as meaning:

... any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of - ...

(b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part;

14 In Brewarrana Pty Ltd v Commissioner of Highways (No 2),[4] Bray CJ explained the manner in which valuation law has historically used the concept of disturbance:

It seems to me that disturbance has always been understood to relate to the disruption of or interference with some business or process of living or other activity carried on or proposed to be carried on on the subject land, not to loss consequent on the owner not being able to realise in due time the land considered simply as an investment. There is, I think, what may be an exception to this proposition, to which I refer later, with regard money thrown away in developing the land for sale or otherwise realising it as an investment. [5]

15 By reference to Cripps Compulsory Acquisition of Land,[6] and consistently with this view, his Honour stated the types of loss compensated under the head of disturbance:

...include such matters as the cost of purchasing a comparable property, increased rent, removal expenses, diminution in value of fixtures on a forced sale, loss of goodwill in relation to a trade conducted on the subject land, loss of profits during the re-establishment of a business on another site and the like.[7]

16 The notion of compensation for disturbance developed not from a statutory provision enabling compensation under this specific head, but from the application of the principle that the basis on which compensation for lands taken should be calculated was the value of the lands to the owner.[8]

17 In City of Brighton v Roads Constructions Authority,[9] Gobbo J stated:[10]

As Harris J pointed out in James v Swan Hill Sewerage Authority:

"The concept of 'value to the owner' is one which has been developed by a long process of judicial interpretation of statutes providing for the assessment of compensation for the compulsory acquisition of land. It is a gloss upon the somewhat limited words in such statutes".[11]

This process is important when one comes to the interpretation of relatively recent provisions like s11B of the Lands Compensation Act 1958 [12] for it is not to be expected that the legislation was intended to deny those factors that in some cases took the value of the land beyond market value.

18 In Redwood Court Pty Ltd v Roads Corp,[13] Gobbo J allowed a claim for legal fees and stamp duty in respect of the purchase of replacement land, on the basis that the land was equivalent to stock in trade that had to be replaced. [14] His Honour referred to the decisions in Kennedy Street Pty Ltd v the Minister[15] and Chapman v the Minister[16] and stated:

Those cases are illustrations of a principle that in my view supports an award of compensation to an owner developer who is in effective deprived of his stock in trade and incurs expense and costs of delay in securing replacement land to develop. The award of market value does not meet the situation as the developer owner cannot simply buy replacement land by entering the market. He has to search and investigate and incur cost and delay before he is again in substance in the position he was in at the time of the refusal or the acquisition.

19 In Melbourne Citylink Authority v Teford Pty Ltd,[17] the Court of Appeal considered a claim with respect to the incidental costs claimed in respect of the purchase of three properties. The aggregate price paid substantially exceeded the cost of the compulsorily acquired land. The land compulsorily acquired by the appellant had a market value of $4,210,000. Two replacement properties were acquired by the respondent for a total cost of $4,225,000 and a third property also said to comprise replacement land was purchased at a cost of $1,650,000.

20 Batt JA (with whom Tadgell and Chernov JJA agreed) noted that it was common ground that the question 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.[18] He also noted:

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.[19]

21 In the present case the defendants claim the incidental costs of purchase of replacement properties, but the Corporation submits that properties which the defendants contend were purchased as replacement properties were not 'similar' to that compulsorily acquired by it and hence were not in the relevant sense 'replacement' properties.

22 In Teford the Court concluded that the purchase of the third parcel of land could not be said to be a reasonable consequence of the acquisition. In turn it could not be said that the stamp duty referrable to that purchase was a pecuniary loss suffered by the respondent as a reasonable consequence of the acquisition, having regard both to the amount already expended and the cost of the third property.[20]

23 The Court further held that the purchase of the third property could not be regarded as a direct consequence of the acquisition or, consequentially, that the stamp duty referrable to this purchase 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 reinvested 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, the independent act of the respondent in making, at his choice, an additional investment.[21]

24 In Teford Batt J repeated the view expressed by him in Halwood Corporation Ltd v Roads Corporation[22] that the expression 'the natural, direct and reasonable consequence' by the use of three adjectives in combination, connotes a very close and limited connection between the event giving rise to a right to compensation and the financial loss suffered. Halwood was concerned with the use of the same phrase in s 98(1) of the Planning and Environment Act 1987 ('the P&E Act'), which provides for compensation to an owner or occupier of land for financial loss suffered as 'the natural, direct and reasonable consequence' of the reservation or proposed reservation of land for public purposes pursuant to a planning scheme (and other specified analogous circumstances).

25 In Halwood his Honour examined relevant authority[23] and concluded that the word 'natural' in this context means arising according to the usual course of things. The word 'direct' connotes an immediate and substantial causal connection. The word 'reasonable' connotes a reasonable response to the event triggering the right to compensation.[24]

26 The decision of Batt J at first instance in Halwood was upheld on appeal, but Tadgell JA (with whom Brooking and Ormiston JJA agreed) relevantly expressed his conclusion in the following terms:[25]

In my opinion the reasoning which led his Honour to his conclusion betrayed no misunderstanding, as the appellant contends, of the nature of the reservation affecting the land. It is an inevitable conclusion on the assumed facts that any loss suffered by the owner was a consequence at least of the combined effect of the reservation and the owner's decision to purchase reserved land. The ground assigned for refusal of a development permit was that the land was subject to the reservation for a public purpose. It is therefore not possible to say, according to an ordinary use of the English language, that any loss was suffered "as the natural, direct and reasonable consequence" of a refusal to grant a permit.

27 It follows that the fundamental question arising for this Court on appeal in respect of the application of the statutory test, is whether it is possible to say according to the ordinary use of the English language, that the loss claimed was suffered 'as the natural, direct and reasonable consequence' of the compulsory acquisition.

28 This said the reasoning of Batt J at first instance in Halwood may properly be regarded as illuminating that ordinary meaning in the context in which it is found.

29 In the present case, the Tribunal set out the underlying facts as follows:

Joseph and Denise Schembri have purchased two properties, one on 12 August 2007 at 665 Arthurs Seat Road, Arthurs Seat for $4.25m (stamp duty and legal expenses $238,334.89), and on 26 November 2007 they bought out Peter and Carmen Schembri's interest in a property they jointly owned at 425 Point Cook Road, Point Cook for $367,950 (stamp duty and legal expenses $42,515.89). Joseph Schembri indicated they intended to purchase a third property with the remaining $882,050 (expected stamp duty and legal expenses $50,339.00). The stamp duty and legal expenses in relation to the purchase of each of these replacement properties totals $331,189.78.
Peter and Carmen Schembri have purchased two properties, one on 12 April 2007 at 52 Sargood Street, Altona for $620,000 (stamp duty and legal expenses $35,019.16). This property has since been sold. They also bought out their son Charles' interest in a property they jointly owned at Fitzgerald Road, Laverton on 5 June 2008 for $5.28m (stamp duty and legal expenses $271,048.90). They have therefore expended a total of $306,068.06 in stamp duty and legal expenses.[26]

30 The Tribunal further recorded the submissions of senior counsel for the Corporation as follows:

Mr Wren in opposing the payment of any replacement costs submitted that all of the land that has been purchased has not been purchased with a view to going on and developing land in an industrial subdivision, similar to the land it is replacing. Rather, he submitted, lifestyle choices have been made. Lifestyle in respect of the settlement of the family home by the Schembris' junior; the acquisition of farming property on Arthurs Seat Road; the acquisition of a vacant home site for Mr and Mrs Schembri senior and the purchase out of the existing property in which they had a joint interest...
Mr Wren submitted the acquisitions were highly speculative, in this respect he referred to the evidence of Mr Kensley and stated that the land at Arthurs Seat Road which contains a substantial residence and is used as an equestrian centre is currently zoned Green Wedge and is impacted upon by a number of overlays. It is therefore unlikely to be developed, as Mr Schembri intends into a retirement village, as given the current zoning and overlays there is minimal opportunity for developing this land.
In relation to the land at Point Cook Road this is outside the urban growth boundary and although close is unlikely to be a residential development opportunity until after 2030. It is also affected by the flight path of the nearby airport, although there are no overlays that indicate how this land is presently impacted. Any future development is therefore highly speculative.
The Sargood Street land which was vacant had the potential for development for residential purposes, although in a Residential 1 zone, it was Mr Kensley's view, it did not necessarily have subdivisional potential. This land has since been sold.
The only replacement land that is said to be comparable is the land at Fitzgerald Road which is zoned Industrial 2 and is used as a display yard for a company that auctions plant, machinery and vehicles. Although it is lesser in size at 5.526ha than the acquired land Mr Kensley considered this was a potential redevelopment site, it could be subdivided, developed with factories and leased out.
Mr Kensley did conclude that Sargood Street, and Fitzgerald Road are comparable, in that they had development potential. Point Cook is not directly comparable and Arthur's Seat is 'not comparable'. His comparisons were based on July 2008 figures. [27]

31 As against the submissions founded on the evidence of Mr Kensley, the Tribunal summarised the key evidence for the defendants as follows:

Mr Joseph Schembri had a different view of the replacement lands' potential. In evidence he submitted, if there was industrial land that he could have purchased he would have done so, but the prices were out of his scope. He rejected the claim that his purchases were lifestyle choices, rather his view was that the purchases, particularly the Arthurs Seat Road property was not dissimilar to his originally purchasing the Mt Derrimut land, it has good position and potential, even if at present, the planning scheme does not allow some developments.
In relation to the land at Fitzgerald Road where his parents had bought out his brothers' share, Mr Schembri referred to its position next to One-Steel and indicated they were interested in buying the land. In each case, he submitted the land they have purchased is land purchased in their own name and which is land for development.[28]

32 After referring to the submissions made on behalf of the defendants, the Tribunal returned to the further submissions made on behalf of the Corporation including the following:

Mr Wren submitted the replacement land costs claimed cannot be said to be a foreseeable pecuniary loss incurred by the claimants as a natural, reasonable and direct consequence of the acquisition. He referred to the claimants as speculators, that is someone who purchases land with the hope that at some stage in the future something may change. A proposition strongly contested by Mr Delany.[29]

33 There was as Mr Batt conceded in argument before me, some tension between the initial submission made on behalf of the Corporation that the purchases of replacement land were principally motivated by lifestyle choices, and the ultimate submission that the defendants were speculators. Further in my view the latter submission reflected an implicit acceptance that the purchases were made at least in substantial part for a commercial purpose.

34 After setting out further submissions made on behalf of the Corporation the Tribunal identified the issue which is now the principal one agitated before this Court:

Mr Wren submitted that having the cash in hand had resulted in a benefit to the Schembris' in being able to get their house in order regarding ownership of the other properties, not for the purpose of investing in equivalent land from which they could derive an income, or which had the development potential of the land that they had just been divested of by reason of the acquisition.
In this respect he referred to the judgment of Batt J on behalf of the Court of Appeal in Tefords case where it was concluded that the purchase of a further parcel of land over and above the amount of market value, other than two replacement properties, was not a "reasonable consequence of the acquisition or that stamp duty referrable 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". Whilst Batt J concluded that "the purchase of this third property had its genesis in the acquisition, the acquisition was no more than a necessary condition for the purchase: it was not the direct cause of it".[30]

35 The Tribunal went on to directly address this submission in the following paragraphs which it is necessary to set out in full:

The replacement land purchased by the Schembris' may not have an immediate redevelopment potential, although I accept that the Sargood Street property (putting aside it has since been sold) and the Fitzgerald Road property do have such potential. I am not as sure of the other two properties, although there is the potential that they could be rezoned in the future, allowing for some future redevelopment that is at present not permitted. I however accept that the purchases as replacement land are the choice of the claimants and whether the development potential of each parcel comes to fruition or not that is a matter for the claimants.
As a result of the acquisition of 12ha of their land the claimants have used the market value given as compensation for the land to purchase other land. They have not exceeded the amount given to them by way of compensation and still retain an amount that could be used in the future to purchase additional land. Each of the pieces of land purchased are considered by the claimants to have some development potential and in this respect they consider that as the land that was acquired was held by them for the purpose of development, each piece of land they have purchased can also be held by them for development whether now or sometime in the future.
I am not sure that the criticism of the replacement land is a matter that should weigh upon my consideration as to whether the Schembris' are entitled, as they have requested to the stamp duty and legal expenses, expended in the purchase of these properties. The purchase of replacement land, whatever it may be, necessarily results in the claimants incurring stamp duty and legal expenses in relation to such purchases. Certainly it has been accepted in Tefords case and other earlier decisions that there is an entitlement to an amount of compensation for 'stamp duty paid on the transfer of it of land to replace the land acquired compulsorily, as being 'loss attributable to disturbance'. Whether such loss is a reasonable consequence of an acquisition poses an objective, not subjective test.
Whether the claimants have made lifestyle choices or more particularly put their house in order, the purchases they have made are to replace the land that has been acquired. I do not consider the claimants are speculators, particularly given the long association they have had with the acquired land and the land purchased does not fall in my view as speculative land purchases.
The land purchased is within the amount given as compensation, an amount the claimants would not have had to enable the purchases to occur, but for the acquisition. Whilst the land is not an in globo purchase, is not all zoned Industrial as the acquired land, it is land nevertheless that can be developed. I do not accept that these purchases must be 'comparable' as the Authority instructed Mr Kensley to consider. There is nothing within the legislation that leads me to conclude that this was a necessary assessment of replacement land.
Whether replacement land purchased is in one piece or several pieces it is foreseeable that such purchases will incur stamp duty and legal expenses. Stamp duty and legal expenses incurred in the purchase of replacement land is a consequence of the purchase of land and in my view an expense that was foreseeable by the Authority.
I accept the claimants suffered loss because they had land which was taken and they incurred costs and expenses in the form of stamp duty and legal costs to replace it. The amount for stamp duty and legal expenses expended in the transfer of the four parcels of land I consider amounts to a pecuniary loss which has been incurred as a natural, direct and reasonable consequence of the claimants' interest in land that has been acquired having been divested. I consider the claimants are entitled to the amount claimed.[31]

36 A fair reading of these paragraphs as a whole reflects conclusions:

(a) the replacement land was in fact purchased by the defendants for its redevelopment potential (whatever that may ultimately prove to be);

(b) it was in this sense replacement land for land which had itself originally been purchased by the defendants for its long term development potential;

(c) whilst the land purchased was not directly comparable to that compulsorily acquired (in that it was not an in globo parcel zoned industrial) it was nevertheless purchased for the purpose of future development;

(d) the purchases of such replacement land were not to be characterised as 'speculative';

(e) it was not necessary for all of the replacement land to be directly comparable in its characteristics (in the sense of characteristics affecting value and in particular readiness for development) for it to be properly characterisable as replacement land in the relevant sense;

(f) the expenses incurred in the purchase of the replacement land were an expense foreseeable by the authority; and

(g) a pecuniary loss was consequentially incurred as a natural, direct and reasonable consequence of the compulsory acquisition.

37 The Corporation now contends the Tribunal reasoning was vitiated by three errors of law:

(a) the Tribunal erred in holding on the facts fully found by it that it could be satisfied the defendants' claim met the statutory definition of disturbance;[32]

(b) the Tribunal failed to have regard to a relevant consideration namely the nature of the replacement land;[33] and

(c) it was not open to conclude the expenses incurred and claimed were the natural, direct and reasonable consequence of the compulsory acquisition.[34]

38 It is convenient to analyse these contentions within the framework stated by JD Phillips JA in S v Crimes Compensation Tribunal[35]. In that case his Honour stated three propositions of law by reference to authority. The first proposition is that what is the proper meaning, as a matter of construction, of the statutory description which is relevant to a claimant's success or failure is a question of law.

What any statutory provision means will be more or less clear, depending upon what words are used, how they are put together and in what context. If the meaning of the relevant statutory description is clear (at least so far as relevant to the claim), no question arises; if the meaning is unclear, what is the proper meaning must be decided, as a matter of construction, and the first question is whether the words are used otherwise than with their ordinary and natural meaning. That is a question of law.

If the words are used with their natural and ordinary meaning, no further question of construction arises; for "[t]he common understanding of [the] words is not a question of law but of fact". On the other hand, if the words are used in some special or unusual sense or, though used in their natural and ordinary sense, give rise to uncertainty because of, say, the grammar or the context, then the resolution of that problem of construction is a question of law, not fact. Further, the words, though otherwise clear as to meaning, may import some legal criterion (such as the relationship between master and servant), and the ascertainment of what is involved in that criterion is obviously a question of law. Indeed, these tasks of construing the relevant statutory description are surely nothing other than settling the legal criteria (in the sense of the criteria fixed by statute) for the claimant's success or failure in his or her claim, and as such a question of law.[36]

39 In the present case it is not submitted that the Tribunal's reasons demonstrate a misstatement of the relevant statutory description. It is rather submitted that the facts inferred from the evidence by the Tribunal are necessarily to be regarded as outside the statutory description.

40 The second proposition stated in S v Crimes Compensation Tribunal by JD Phillips JA is that once the task of construction is over, the question whether the claimant's particular circumstances fall within the relevant statutory description is essentially a question of fact:

Where an appeal may be brought to the court only on a question of law, the question just identified is peculiarly the province of the tribunal below, not the court.

The determination of that question of fact may depend upon the acceptance or rejection of evidence that is led; it may depend upon a choice between witnesses, and an assessment of their credibility or reliability; or it may depend more directly upon the sufficiency or insufficiency of the evidence that is given. All these things are committed to the tribunal, and not to the court; and although I speak of evidence, the same is true where the tribunal is authorised to obtain information otherwise than from witnesses on oath or to act upon its own expertise. Essentially, the question whether the particular circumstances of the claimant are such as to bring his or her case within the statutory description is a question of fact, not law.

It is in this context that it is sometimes said that where the question is one of degree, involving some element of value judgment, the question is one of fact, not law. Thus if the question whether the claimant's circumstances fall within the statutory description is one on which minds can legitimately differ, involving a value judgment on the evidence (or other material), it is a matter for the tribunal. In that category one can put most questions of a causal link, or (in a case like this) whether some identified expense was the result of the relevant injury, or whether the claimant suffered "total or partial incapacity for work". Involving questions of degree and evaluation, on the facts as otherwise established, these are essentially questions of fact which are committed to the tribunal, and not to the court.[37]

41 I respectfully agree with the above passage including the observation that most questions of causal link are within the category discussed.

42 The present case is one of a particular type of causal link, and involved questions of fact which are committed to the Tribunal and not to the Court.

43 The decision of Batt J in Halwood, also records that the plaintiff started from the 'accepted proposition that whether a loss was suffered was a question of fact ...'.[38]

44 The third proposition stated by JD Phillips JA in S v Crimes Compensation Tribunal was that nevertheless if, in determining whether the particular circumstances of the claimant are such as to fall within the relevant statutory description, the fact finding tribunal arrives at a conclusion which was simply not open to it, that is an error of law; and the question whether it arrived at a conclusion which was not open to it is a question of law.

The result below may have been the product of the tribunal's misapplying the statutory description in a case where the facts that were found could have led only to the conclusion opposite to that reached by the tribunal (and the error in that regard may be exposed in the reasons given for the decision or it may lie hidden). Or it may have been that the tribunal's conclusion depended upon a finding of fact which was simply not open to it on the evidence (or other material, if relevant) in which case that conclusion was not open to it. It is this last that shows how something which is otherwise a finding of fact may become relevant on an appeal which can be brought only on a question of law.

It cannot be said as a matter of legal principle that a determination of fact can never give rise to an error of law, but ordinarily it will not be so unless it is shown that the fact-finding tribunal arrived at a finding that was simply not open to it. In so referring to a "finding" I use the term not only to include a finding of a fact derived from the acceptance of direct evidence to that effect; I include also an inference of fact drawn by the tribunal from other facts found by it. If the finding (be it a finding on direct evidence or inference) was not open to the tribunal, that may bespeak a relevant error of law.[39]

45 In my view it cannot be said in the present case that it was not open to the Tribunal to conclude that the defendants incurred expenses with respect to the purchase of replacement land as a natural, direct and reasonable consequence of the compulsory acquisition.

46 It was common ground that the defendants had purchased the compulsorily acquired land many years earlier and in effect banked it, intending ultimately when circumstances permitted to develop it. The defendants had over the years made a series of applications seeking rezoning and subdivisional approvals. Prior to the compulsory acquisition the land was rezoned from a rural zone to enable industrial use. The defendants sought approval for and intended to subdivide the land for urban use and to further develop part of it by erecting warehouses. In terms of the authorities to which I have earlier referred the land may be described as the defendant's 'stock in trade'.

47 In turn it was open to the Tribunal to accept the evidence of Joseph Schembri (which is summarised above)[40] that the replacement land was purchased with a view to its future development.

48 The fact that the four parcels were of varied character in terms of current readiness for development, does not to my mind preclude such a conclusion. It was open to the Tribunal to conclude that the land was purchased for the same real and substantial purpose for which the compulsorily acquired land had been held for many years. That purpose may be described as long term development by the owner-developers.

49 Conversely it was open to conclude that the purchase of the replacement land was not 'speculative' in the sense of an independent speculative investment decision not continuing the commercial purpose for which the defendants had held the compulsorily acquired land.

50 These conclusions were open first because the Corporation's own valuer, Mr Kensley, concluded that the Sargood Street and Fitzgerald Road properties were directly comparable to the compulsorily acquired land in that they had development potential. The Point Cook Road property by contrast had long term and uncertain future development potential and in Mr Kensley's view the Arthur's Seat land was not comparable at all because of the planning constraints upon it.

51 On the other hand the evidence of Mr Schembri was that the purchases including particularly the Arthur's Seat property were not dissimilar to the original purchase of the Derrimut land. The Arthur's Seat land had a good position and potential, even if at present the planning scheme provisions constrained development.

52 Mr Joseph Schembri stated at one point during cross-examination:

Well, you put me in the position that I can't buy industrial land that I could develop. I went to the next best thing and restarted myself similar to what I bought many years ago at Mount Derrimut. So I bought good positions and the potential is there and if the valuer can't see the potential well I must come from a different planet because - firstly, down the road from Arthur's Seat Lookout, houses across the road, the state forest is across the road, you know what I mean? Fifty-one acres and also too - how can I say it, looking into [trying] a retirement village and seeing in the future if it can be obtained up there.

53 The Tribunal's conclusions demonstrate that it accepted this evidence as it was entitled to do. In consequence it accepted that all the replacement land was land which could in the future be developed.

54 Once it be concluded that the properties purchased by the defendants were true replacements in the sense that they were replacement of stock held by them as property developers for the purpose of future development, then it also follows that it was open to conclude that incidental expenses resulted in a natural, direct and reasonable consequential loss flowing from the compulsory acquisition.

55 I turn then to the proposition that the Tribunal failed to have regard to the nature of the replacement properties. The Tribunal's reasons demonstrate that it did directly consider the Corporation's evidence and submissions as to the nature of the replacement properties. The Tribunal further formed its own views as to the significance of such differences from the compulsorily acquired land. It identified the critical characteristic as being that of use for the purpose of continuing the development business conducted by the defendants. Its conclusions in respect of each of these matters were open to it.

56 The conclusion stated at [32] expressly adverts to the critical differences in nature upon which the Corporation relies:

The land purchased is within the amount given as compensation, an amount the claimants would not have had to enable the purchases to occur, but for the acquisition. Whilst the land is not an in globo purchase, is not all zoned Industrial as the acquired land, it is land nevertheless that can be developed. I do not accept that these purchases must be 'comparable' as the Authority instructed Mr Kensley to consider. There is nothing within the legislation that leads me to conclude that this was a necessary assessment of replacement land.[41]

57 It cannot be said the Tribunal failed to have regard to these matters.

58 It follows that the Corporation's challenge to the Tribunal's findings with respect to replacement land expenses must fail:

(a) it was open to the Tribunal to conclude that the incurring of such expenses was a natural, direct and reasonable consequence of the compulsory acquisition;

(b) it cannot be said that the facts as found are necessarily to be regarded as requiring the conclusion that the expenses did not fall within the statutory provision; and

(c) the Tribunal did have regard to the differences in nature between the land compulsorily acquired (as at the date of acquisition) and the replacement properties, upon which the Corporation relied.

59 I turn then to the claim for loss of use of money. A landowner may have a claim for loss of use of money where a compulsory acquisition renders holding costs and other expenses associated with land wholly abortive.[42]

60 In the present case however the claim made is one for loss suffered as a result of the failure of the authority to comply with procedures prescribed under the LAC Act and consequential delay in the receipt by the defendants of an advance of compensation.

61 The scheme of the LAC Act is to provide that compensation must be offered by the Corporation within 14 days of the date of compulsory acquisition, unless a further period is agreed in writing between the authority and the claimant. Sections 31(1), (2) and (3) provide that the authority 'must' make an offer within 14 days, setting out the amount the authority, on the information available to it, has assessed as a fair and reasonable estimate for the amount of compensation payable.

62 The requirement in s 31 for the making of the offer is part of a scheme which gives the dispossessed owner the right to immediately request an advance of compensation pursuant to s 51(1) upon receipt of the statutory offer.

63 Section 51(2) provides that in the event of a request for an advance, the authority must make an advance within one month.

64 Section 51(4) provides that if an advance is not made within the specified period, interest is payable on the unpaid amount until the advance is made.

65 Section 31 also requires that the authority have available to it a certificate of valuation to which the authority has had regard in making its offer. It requires that the offer must be accompanied by such a certificate.[43] It also requires that the authority must have regard to a valuation of the land carried out by a qualified valuer.[44]

66 In this case the offer was required to be made on 18 May 2006. The Corporation did not obtain a valuation certificate from a qualified valuer until 26 May 2006. The valuation was in the sum of $7.4 million.

67 The defendants' solicitors wrote to the Corporation on 15 June, 7 July and 27 July 2006 requesting an offer be made. The offer was not made until 2 August 2006 and once it was made the defendants immediately sought an advance of compensation.

68 The defendants' case before the Tribunal was that if an offer had been made within 14 days of acquisition, then a request for an advance pursuant to s 51 of the Act, would have been made, in the same time frame as actually happened - that is, within two days of the offer and by 20 May 2006. In turn the actual advance would have been made 14 days later as in fact happened, when an advance was requested in August.

69 In final written outline of submission the defendants submitted to the Tribunal that the critical facts were straightforward:

(a) on 4 May 2006, the acquired land vested in the Corporation;

(b) the defendants therefore no longer had an interest in the land;

(d) in recognition of that entitlement, the Corporation had an obligation to make an offer of compensation within 14 days. Upon compliance with that obligation, the defendants had an entitlement to call for an advance;

(e) because the Corporation did not comply with the obligation to make an offer:

(ii) the defendants did not receive the advance money;

(iii) the defendants suffered pecuniary loss for which provision is not otherwise made;

(iv) that pecuniary loss continued until the offer and advance were belatedly made.

70 The defendants claim 76 days' interest on $7.4 million being first interest they would not have had to pay if they had been able to pay out existing loans held by them and secondly interest they would have received at the interest rates payable in the accounts into which they would have deposited the balance of the advance had it been offered and advanced as required by the Act. They claim a total of $88,751.34 calculated as follows:

(a) in the case of Peter and Carmen Schembri, interest at the rate of 4.75% on the amount of $3.7 million for 76 days from 20 May 2006 to 4 August 2006, $36,594.52;

(b) in the case of Joseph and Denise Schembri, interest at the rate of 6.77% (being the rate paid on an existing loan) on the amount of $3.7 million from 20 May 2006 to 4 August 2006, $52,156.82.

71 The Corporation submitted to the Tribunal that the claim for bank interest was not a claim for a loss suffered as natural, direct and reasonable consequence of the compulsory acquisition. It further submitted that the consequences of non-compliance with the provisions of the LAC Act requiring an offer were governed by the LAC Act itself. There was no statutory basis for the defendants' claim.

72 The defendants submitted that as a matter of common sense they had suffered a loss. More particularly they had suffered a loss in one of the senses contemplated in Hungerfords & Ors v Walker & Ors.[45] In that case, Mason CJ and Wilson J referred to the fundamental principle that a plaintiff entitled to damages for breach of contract is entitled to restitutio in integrum (restitution to his or her former position).

According to that principle, the plaintiff is entitled to full compensation for the loss which he sustains in consequence of the defendant's wrong, subject to the rules as to remoteness of damage and to the plaintiff's duty to mitigate his loss. In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant's breach of contract or negligence. Judged from a commercial viewpoint, the plaintiff sustains an economic loss if his damages are not paid promptly, just as he sustains such a loss when his debt is not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost, ie, interest payable on borrowed money or interest foregone because an existing investment is realized or reduced.

The requirement of foreseeability is no obstacle to the award of damages, calculated by reference to the appropriate interest rates, for loss of the use of money. Opportunity cost, more so than incurred expense, is a plainly foreseeable loss because, according to common understanding, it represents the market price of obtaining money. But, even in the case of incurred expense, it is at least strongly arguable that a plaintiff's loss or damage represented by this expense is not too remote on the score of foreseeability. In truth, it is an expense which represents loss or damage flowing naturally and directly from the defendant's wrongful act or omission, particularly when that act or omission results in the withholding of money from a plaintiff or causes the plaintiff to pay away money. [46]

73 The defendants submit that in the present case the loss arose in the form of the incurred expenses in respect of existing loans and investment cost caused by being deprived of money which could and would have been invested at interest if the authority had complied with the statute. It is submitted that the defendants have suffered an opportunity cost which was plainly foreseeable.

74 In Hungerfords' case, moneys were paid away by the respondents by way of overpayment of tax, as a result breach of contract and negligence by the appellant accountants. By the time the overpayment was discovered its recovery in respect of the first three years was statute barred. The evidence showed the respondents would have applied the moneys which they had paid away as a result of the appellant's conduct, first towards paying off loans bearing interest at a high rate and then secondly towards the conduct of a profitable business. It was in the reasonable contemplation of the parties that they would suffer losses in each of these respects.

75 The Corporation submits that the principles elucidated in Hungerfords' case do not assist in the present context. In my view however a closer examination of the joint judgment of the Chief Justice and Wilson J is of assistance for the purpose of clarifying the issues in the present case.

76 Their Honours went on in their judgment to contrast opportunity cost and the late payment of damages:

Incurred expense and opportunity cost arising from paying money away or the withholding of moneys due to the defendant's wrong are something more than the late payment of damages. They are pecuniary losses suffered by the plaintiff as a result of the defendant's wrong and therefore constitute an integral element of the loss for which he is entitled to be compensated by an award of damages. Fitzgerald J made this very point in Sanrod v Dainford when he said:

"[W]hatever may be the position otherwise in respect of damages under the [Trade Practices] Act, I can myself perceive no difficulty in accepting that, when money is paid in consequence of misleading conduct, the loss suffered by that conduct includes not only the money paid but also the cost of borrowing that money or the loss from its investment, as the case may be... Interest awarded as a component of damages in such circumstances is not for loss of the use of the money awarded as damages, but for loss of the use of the money paid over in consequence of the misleading conduct and is directly related to the misleading conduct."

Notwithstanding that these remarks were made in relation to the payment of money in consequence of misleading conduct, the underlying principle is one of wider application. The point is that the loss of the use of the money paid away is so directly related to the wrong that the loss cannot be classified simply as due to the late payment of damages ...[47]

Although the admiralty model has obvious attractions,[48] the common law has steadfastly declined over a very long time to adopt the admiralty approach in awarding compensation for late payment of damages in the general run of cases. But we see no reason for allowing the reluctance of the common law to extend to cases where the defendant's breach of contract or negligence has caused the plaintiff to pay away or the defendant to withhold money and, as a result, the plaintiff has been deprived of the use of the money so paid away or withheld. The recovery of compensation for the loss may be ascribed to the operation of the second limb in Hadley v Baxendale. However, we would prefer to put it on the footing that it is a foreseeable loss, necessarily within the contemplation of the parties, which is directly related to the defendant's breach of contract or tort.[49]

78 Brennan and Deane JJ also referred to the critical distinction between interest as compensation for late payment of damages and compensation assessed by reference to interest which would have been earned or which was in fact paid. They referred to the 'direct and foreseeable effect' of the overpayment of specific sums of money which would otherwise have been utilised in the respondent's business.[50]

79 Opportunity costs in the sense contemplated by their Honours will be incurred, if as a direct result of the act founding the cause of action, expenses are incurred or income which would otherwise have been derived is lost.

80 In Hungerfords' case itself both of these categories of loss were in issue.

81 In the Melbourne Estates case Gobbo J ultimately refused a claim made pursuant to s 98 of the P & E Act, for a loss postulated on a Hungerfords' basis. As his Honour recorded, the claimant maintained that in spite of the way in which the claim was formulated before the Board, namely, as essentially a claim for interest on compensation for reduction in land value, it was able to characterise the land value figure of $1.795 million as money withheld from the date of refusal of the relevant permit. The claimant contended it was therefore entitled to interest as the opportunity cost of that money from that date.

82 First, his Honour found that the case before him was not one of money withheld.

I am of the view that the reduction in market value because of the refusal of permit did not result in money being withheld from the date of refusal. It is true that s98 speaks of liability to pay, arising upon the refusal, but until the sum in question was determined or otherwise ascertained, it could not properly be said that the money equivalent of value reduction was withheld.[51]

83 In the present case the sum withheld was capable of ascertainment by the Corporation itself. Indeed it had available to it from 26 May 2006 a valuation supporting the sum ultimately offered. Accordingly, there was in my view a withholding in the relevant sense of the amount ultimately offered.

Secondly, the evidence was incapable of sustaining a finding that the loss of a possible alternative investment up to the date of the determination of compensation was a component of value to the claimant owner within s104. Assuming that the owner had a measure of foresight in relation to land and its use or restriction, it is in my opinion not open to treat the owner as though it would take a specific time to arrange a new investment and then, in the interval, it would lose investment interest.

One might assume a delay period of, say, three months equivalent to the settlement period but one could not, save possibly for special circumstances, be able to assume a delay of many months. In any event, there was no evidence on this matter at all. The case was presented on the basis that non payment while litigation continued was the only necessary evidence.[52]

85 In the present case, there was evidence first as to payment of interest on existing loans up until the receipt of the advance, and secondly of the application of the advance first in reduction of such loans and secondly by way of investment. The case was thus not one of the hypothetical loss of the use of the equity acquired but of loss resulting from the inability to apply the money withheld for specific commercial purposes to which it would have been applied if the Corporation had acted in accordance with the LAC Act.

86 Further, s 104 of the P&E Act limits the amount of pecuniary loss recoverable under the provisions of that Act by reference to the value of the land. No parallel limitation applies in the present case.

87 It follows that the reasons given for rejecting a Hungerfords' claim in the Melbourne Estates case do not apply in the present case.

88 In the present case, the defendants lost their equity in the land at the date of compulsory acquisition. As at that date they were entitled to expect that in accordance with the provisions of the LAC Act, and as a direct and necessary consequence of the acquisition, that in accordance with the provisions of the LAC Act, they would receive an advance offsetting this loss and reflecting an assessment of the market value of the land. Conversely it could reasonably be foreseen that if the Corporation breached its obligations to make an offer in accordance with the LAC Act and no advance was available to the defendants, they would lose completely the use of their equity in the land for commercial purposes during the period of breach.

89 In turn it was open to the Tribunal to conclude that the loss claimed in the present case was a natural, direct and reasonable consequence of the acquisition.

90 The Corporation cannot rely on the unreasonableness of its own conduct to avoid this conclusion. 'Reasonable' in this context is directed to the consequence for the defendants.

91 Likewise this is not one of those cases where a plaintiff or disadvantaged owner does a subsequent act in full and free choice and thereby relieves the defendant or authority of liability for what follows.[53]

92 What is in issue in the consequences of the Corporation's own action taken in connection with the acquisition.

93 The Corporation's case is that the consequences of the failure to make an offer and the resulting late payment of the advance were governed by provisions of the LAC Act other than the right to claim compensation for disturbance.

94 The Corporation submits that the statutory consequence of the Corporation's failure to make an offer was that the defendants were entitled to claim compensation pursuant to s 37(1) of the LAC Act.[54]

95 I do not accept that this is the intent of the LAC Act read as a whole:

(a) The Act presumes the acquiring authority will comply with its obligation to make an offer 'to each claimant of whose entitlement to compensation it is aware' pursuant to s 31(1). If however some other person has a claim to compensation then that person may claim pursuant to s 37(1).

(b) If it were otherwise the authority could by deliberate breach of its obligation pursuant to s 31 postpone its obligations to make an offer within 14 days, to the date three months after a claim provided for in s 37(4) and (5). Such a construction would render nugatory the word 'must' in s 31(1). 'Must' would become 'may' for a period potentially extending through the two years provided for a claim under s 37(2) and the further three months provided for a response by s 37(4).

(c) The construction put forward on behalf of the Corporation would result in the anomalous outcome, that if an authority made an offer but then delayed in making an advance, interest would be payable under s 51(4) but conversely if an authority simply failed, refused or neglected to make an offer no compensation would be payable by way of interest or otherwise in respect of the resultant delay.

(d) The structure of the Act does not compel the conclusion for which the Corporation contends. Part 3 provides the fundamental framework for compensation following a compulsory acquisition. Section 30 provides:

Subject to this Act, every person who, immediately before the publication of a notice of acquisition, had an interest in land that is divested or diminished by the acquisition of the interest to which that notice relates has a claim for compensation.

Section 31 then immediately provides for the offer procedure which is here in issue and the LAC Act then provides for consequential claim procedures.

In turn Part 4 which governs the measure of compensation falls to be applied within the framework of Part 3. In the present case, the offer contemplated and required by s 31 was not made as it was required to be, in aid of the right to compensation granted by s 30. If on the facts this circumstance resulted in pecuniary loss which had crystallised at the time of claim, then such a loss is potentially one falling within the definition of loss attributable to disturbance. It may constitute a pecuniary loss suffered by a claimant as a natural, direct and reasonable consequence of the fact that an interest of the claimant in land has been divested, being a pecuniary loss for which provision is not otherwise made by Part 4 of the Act.

(e) Conversely Part 6 of the Act relevantly provides for payment of interest on compensation. It does not purport to limit the concept of loss attributable to disturbance. Further, the fundamental provision for interest on compensation for acquisition, turns upon the ascertainment of the disputed claim generated by the claim process.[55] The loss in the present case was anterior to this process of the ascertainment of the disputed claim. The offer which was required pursuant to s 31(1) was both the trigger for a right to request an advance of compensation and the basis of the claim process contemplated by s 33.[56]

96 Accordingly, it was open in principle to the Tribunal to conclude as it did.

The failure by the Authority to comply with section 31 is a direct consequence of the acquisition of the claimants' land. The failure to comply with section 31 results in a loss to the claimants which in my view is foreseeable by the Authority.

I consider the loss of the ability to use the compensation offered is a pecuniary loss that is a natural, direct and foreseeable consequence of the Authority's failure to make an offer within the time required and falls within the definition of 'disturbance loss' in section 40 being a pecuniary loss for which provision is not otherwise made. The amount claimed, based on the actual interest being paid by the claimants is I consider to be reasonable. I consider the claimants are entitled to the amount claimed of $88,751.34.

97 The Corporation further contends however that because s 51(2) provides that in the event of a request for an advance, the authority must make an advance within one month, the loss which may be regarded as directly consequential upon the failure to make an offer, is limited to that occurring one month after the date upon which the request for an advance might reasonably be expected to have been made.

98 I accept this submission. In my view, the evidence compelled the conclusion that the earliest the Corporation would have been required by the LAC Act to pay an advance to the defendants was 20 June 2006. It was loss in the event of non-payment by that date which was a natural, direct and reasonable consequence of the breach of the Act complained of and in turn of the acquisition itself.

99 The loss allowed by the Tribunal should have related to a period of 59 days not 91 days and the correctly calculated amount is $67,731.

100 The Corporation should be granted leave to appeal with respect to the Tribunal's decision in relation to the quantum of the claim for loss of use of money, on the ground that it was not open to conclude the quantum of such claim was greater than $67,731.

101 The appeal should be allowed and the decision of the Tribunal in this respect set aside.

[1] It refused a claim for prospective costs in respect of a transaction proposed but not yet undertaken.

[2] The claim for solatium was resolved during the course of the hearing.

[8] Horn v Sunderland Corporation [1941] 2 KB 26 CA, 42.

[12] The predecessor to the statutory provisions with which I am concerned.

[14] See also Kerry v State Transport Authority (1985) 38 SASR 502, with respect to the incidental costs of purchase of a replacement residential property.

[19] Ibid, [23]. See also Equity Trustees Executors and Agency Co Ltd & Ors v Melbourne & Metropolitan Board of Works [1994] VicRp 39; [1994] 1 VR 534, 551 and the cases there cited.

[24] In that case a refusal falling within the terms of s 98 of the P&E Act. In this case an acquisition.

[25] Halwood Corporation Ltd v Roads Corporation Ltd [1998] 2 VR 439, 451.

[26] Schembri v Roads Corporation [2009] VCAT 691, [11]-[12].

[27] Ibid, [13]-[19]; Mr Kensley was a valuer called to give opinion evidence for the Corporation.

[30] Ibid, [26]-[27]; citation omitted.

[32] Vetter v Lake Macquarie City Council (2001) 202 CLR 439, 450, [24] per Gleeson CJ, Gummow and Callinan JJ.

[33] Bell Corp Victoria Pty Ltd v Stephenson [2003] VSC 255; Medical Practitioners Board of Victoria v McGoldrick [1999] VSCA 215.

[34] S v Crimes Compensation Tribunal [1998] 1 VR 83; Catch the Fire Ministries Inc. v Islamic Council of Victoria Inc. [2006] VSCA 284; (2006) 15 VR 207, 261, [193].

[35] [1998] 1 VR 83. See also Myers v Medical Practitioners Board of Victoria [2007] VSCA 163; (2007) 18 VR 48.

[37] Ibid, 89. Citations omitted. Emphasis added.

[38] (1995) 89 LGERA 280, 306. Cf Harvey v Crawley Development Corporation [1957] 1 QB 485, 496 per Romer LJ '...on those principles ... it becomes in any given case a question of fact for the tribunal whether any particular item of expenditure does come within their terms.' The case involved in part a claim for incidental costs of the purchase of a replacement house.

[41] Schembri v Roads Corporation [2009] VCAT 691, [32]. Emphasis added.

[42] See the discussion in Roads Corporation v Melbourne Estates [1993] VicRp 93; [1993] 2 VR 602, 607-9; Mario Piraino No 2 [1993] VicRp 9; [1993] 1 VR 130, 146-7.

[48] In admirality the Court adopted the principle that interest was always due to the obligee when payment was not made whether the obligation arose from contract or in tort.

[49] Hungerfords & Ors v Walker & Ors [1989] HCA 8; (1988) 171 CLR 125, 149. Citations omitted.

[51] Roads Corporation v Melbourne Estates [1993] VicRp 93; [1993] 2 VR 602, 614.

[53] Halwood Corporation Ltd v Roads Corporation (1995) 89 LGERA 280, 304.

If a person is entitled to claim compensation under this Part, and the Authority has not made an offer to that person under section 31, that person may make a claim for compensation under this section.

[55] Section 53 of the LAC Act provides for the payment of interest in the following terms:

(1) If an amount of compensation is awarded by the Court or the Tribunal under this Act, the amount that represents the difference between the amount of compensation awarded and the amount of compensation offered by the Authority immediately before the claimant's claim became a disputed claim bears interest at the rate for the time being determined under section 52 from -

(a) the date of acquisition of the claimant's interest; or

(b) the date on which the Authority entered into possession of the land in which that interest subsists -

whichever is the earlier, until the date that the compensation is paid by the Authority.

(1) Subject to section 106(1), before the expiration of three months after the date of service on a claimant of an offer under section 31, the claimant must -

(a) serve a notice of acceptance on the Authority stating that the claimant accepts the amount of compensation offered in respect of the acquisition; or

(2) If the claimant fails to serve on the Authority a notice under subsection (1)(a) or (b), the matter becomes a disputed claim for the purposes of this Act.

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