All circumstances subsequently arising are to be ignored. Whether the land becomes more valuable or less valuable afterwards is immaterial. Its value is fixed by Statute on that day. Prosperity unexpected, or depression which no man would ever have anticipated, if happening after the date named, must be alike disregarded. The facts existing on 1st January 1905 are the only relevant facts, and the all important fact on that day is the opinion regarding the fair price of the land, which a hypothetical prudent purchaser would entertain, if he desired to purchase it for the most advantageous purpose for which it was adapted."
160 Marks v GIO Australia Holdings Ltd (1998) 196 CLR 494 at 514 refers to "fully informed parties" but that does not mean informed of matters not available to be known to either vendor or purchaser at the critical time, without hindsight. That is consistent with Kenny & Good Pty Limited v MGICA (1992) Ltd (1999) 199 CLR 413 where McHugh J after referring to the earlier quoted passage of Isaacs J's judgment in Spencer said (at 436, [80]): "The market for the property is, therefore assumed to be an efficient market in which buyers and sellers have access to all currently available information that affects the property" [emphasis added].
161 Here the valuation question pertains to loss and damages following the tort of trespass, which must be determined at the date of the tort. That in turn directs attention to the principal trespasses in August 1991, though not disregarding the trespasses later in December of that year. For reasons which I develop later, consistent with the decision of Callinan J in Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 at [286] I would apply as the accepted method of valuation for this land the "hypothetical development method", bearing in mind that the Tellamist land was not yet developed to its highest and best use.
162 There are then two questions. Looking at the position strictly at the time of the tort and without impermissible hindsight,
(a) was the Council then legally entitled to remove the trees; and
(b) what would the hypothetical purchaser then know of its intentions to remove the trees for an 8 metre dish drain?
Each answer is clear. Council was not then so entitled as it did not yet own the relevant land, whatever be the constraints upon it once it did own the land following dedication. The answer to the second question is equally clear. The hypothetical purchaser, based on "currently available" information pre-trespass, would not know of Council's intention to enter upon the land to clear the trees from the clearly intended buffer zone and construct a drain, removing the screening it had gone to such trouble to require of Tellamist. Nor could it have expected that Council would have disclosed to the hypothetical purchaser, in advance of the tree-removal, of its plans to do so for purposes of constructing the drain, just as it had kept this information from the hypothetical vendor Tellamist. The secrecy which attended Council's actions gives the lie to that. Knowledge by hindsight is not available to the hypothetical purchaser in such a case.
163 Thus it would be wholly unreal to assume that the hypothetical purchaser, if it had enquired of Council about the dedication, would have been informed by the Council that it intended in a week or so's time to trespass on to Tellamist's land and remove the trees. Given that Tellamist as the hypothetical purchaser was kept in the dark till at least 23 August 1991, after the trespasses why would Council tip off a potential purchaser and risk an injunction from Tellamist or the purchaser? To know of the intended dedication would give no hint to the hypothetical purchaser that a Council which had not disclosed its drainage plans to Tellamist before trespassing, and who had imposed conditions for a buffer zone with landscaped play and barbecue area within, would but a week later render it nugatory, along with the Tree Preservation Order by simply knocking the trees down for its own commercial benefit in putting in a drain for its industrial estate and to remove the ponding which Council had itself caused. Enquiry by the hypothetical purchaser of either Tellamist or the Council prior to the trespass would therefore have yielded nothing, remembering that what one is valuing is the Tellamist land just before the August trespasses whereby the trees were removed.
164 Equally it is wholly unreal to suppose that the hypothetical purchaser's knowledge of dedication of the public reserve, even if it included knowledge of earlier mistake and delay in its vesting in Council, would in any way lead it to assume that Council, upon acquiring that land, would set about removing trees from the dedicated public reserve, giving its prior consent under the Tree Preservation Order to do so, thereby negating the effect of screening and the landscaped enhancement, with an 8 metre dish drain.
165 I here need to deal with an argument to the contrary pressed by Council on appeal. That argument relies on the evidence of the valuation expert Mr Howes who says in his valuation "Thus, the market was aware that the Reserve had to be dedicated prior to any residential development taking place. It was also aware that the Reserve was to be used for drainage purposes (see Annexure C) of Mr Glover's 19 December 2001 affidavit)" (Blue, 624).
166 Mr Glover's affidavit referred in paragraph 11 to "a copy of Council's engineering plans Sheet No. 1 in the light industrial subdivision. The plan identifies the construction of a drain within the land known as the 'buffer zone' and part of Tellamist's land" (Blue, 286, and for the plan 292).
167 Council contended that because this plan was in Council's development file it necessarily followed that it would have been both available to, and been searched by, the hypothetical purchaser. Mr Inatey, SC conceded that there was no direct evidence about whether the file would in fact have been open to inspection by the person enquiring; Appeal Transcript, 18 February 2004, 62.10-.24.
168 But apart from the lack of any evidence on that matter, a fundamental difficulty with that proposition is that there was nothing to prompt such a purchaser to ask for the file or to search it in order to come upon the engineering drawing. In particular, as Mr McMahon conceded (T, 335), there was nothing in the consent of Council to the subdivision of its light industrial zone granted on 6 April 1990 granting consent to the subdivision and its light industrial zone that disclosed any drainage plan. Nor was there any application by council on its own behalf, as again Mr McMahon conceded, to amend the consent by way of a s102 application to enable such a drain to be constructed on the Public Reserve to be dedicated to Council. Council's consent to such an amendment would have been clearly necessary, as again Mr McMahon conceded; T, 334-5.
169 Therefore all the hypothetical purchaser could know or infer from the public facts was
(a) the Council's earlier development consent to its own light industrial development made no provision for the drain on the land to be dedicated and had never been amended to provide otherwise as would have been legally necessary, as Council conceded,
(b) Council's consent to Tellamist's cluster development on 7 August 1991
(i) made no mention of a drain,
(ii) referred instead to the Public Reserve as a "buffer zone", part of which was to be used for a landscaped barbecue and play area (Condition 6) so replacing any trees removed and itself hardly compatible with an 8 metre open dish drain,
(iii) required the dedication of that reserve,
(iv) imposed a Tree Preservation Order applying to the whole site.
170 One would therefore hardly expect the hypothetical purchaser to be prompted to look behind these conditions and ask for whatever file existed, if any, pertaining to the Council's industrial development so as then, if given the file, to chance upon the engineering drawing referred to by Mr Glover in the Council's files. Nor would one expect Council, with its impending incursion on Tellamist's land in mind, to have revealed its own unapproved drainage plans in that way when it had kept them from Tellamist. It gave no evidence to indicate it would have made the file available to the hypothetical purchaser and I would if necessary draw an inference to the contrary.
171 Moreover, Mr McMahon also had this to say about the compatibility of the proposed open drain with Tellamist's Condition 6 which required the landscaped barbecue and play area. Mr McMahon first refers to the Public Reserve as a "buffer zone" and then responds as follows (T, 347.51-.55)":
"Q. Once you put a drain down the certainty of it, where it is only 14 metres wide and you have a drain up to ten metres wide in that zone there is almost no available land for use by the public, is there?
A. If it was to be a ten metre wide open drain, yes."
172 Indeed Mr McMahon said that when he first saw the plans of the Public Reserve he did not direct his mind to the Public Reserve being considered a drainage reserve (T, 348.3-.11). That answer gives a pretty good indication of what the hypothetical purchaser would have similarly expected.
173 There is a further point which reinforces that conclusion. Under valuation principles as, for example, applicable to the purchase of shares in a company, one does not assume that a discount of value should be placed by reason of the possibility of an adverse board action, if that action would be illegal; a fortiori where the prospect of such action with its illegality could not be reasonably foreseen by the hypothetical purchaser of shares. By parity of reasoning one does not assume an illegal trespass as part of the expectation of the hypothetical purchaser of land. As I said in Holt v Cox (1994) 15 ACSR 313 at 334-5:
"10. In the context of mitigating or eliminating any discount, to be placed on minority interests in companies by reason either of restrictions on transfer without board approval ( Abrahams v Federal Commissioner of Taxation 15 ACSR 313 at 335 (1944) 70 CLR 23), or of articles which give governing directors complete control to the exclusion of shareholders ( Abrahams , supra, and Kent & Martin v Federal Commissioner of Taxation (Williams J, unreported), it has been recognised that these are fiduciary powers of the board, whose exercise is thus constrained. So they must be exercised by the board of directors bona fide for the benefit of the company and not oppressively. Furthermore, the possibilities of redress in the courts against misuse of such fiduciary powers, though not a substitute for articles without them, is not to be disregarded; Gregory , supra, at 569 per Gibbs CJ.
In the present circumstances, by parity of reasoning, the court should not assume that directors of F P Leonard would have rendered nugatory or diminished the value of the shares on winding up, by first stripping the company of its profits, thereby quite possibly behaving oppressively to the holder of the shares. They would also quite possibly be breaching their fiduciary duties, particularly if the dividends were discriminatory, as this amount would reduce the 20% on subsequent winding up."
174 Thus suppose that the hypothetical purchaser were taken to be aware not only of the dedication but also, contrary to the principle enunciated by Isaacs J in Spencer of the prospective drain and the tree removal required in consequence. Suppose further that the tree removal for the drain had been effected after the dedication contrary to the fact, and by Council consenting to its own application under the Tree Preservation Order. The latter is again contrary to the fact, as Council never went through that step having achieved what it wanted by the illegal trespasses. Suppose all this were part of what the hypothetical purchaser is deemed to know. Even accepting that artificial state of assumed knowledge, it still begs the question, whether Council would indeed have been legally entitled, post dedication and for its own benefit, to consent to the removal of the tree buffer for an 8 metre dish drain given the town planning principles invoked in imposing the conditions in the first place.
175 It is strongly arguable that Council would not have been entitled to do this, in the absence of any consent from Tellamist. The earlier conclusions I have reached spell out how the location of the drain was the direct result of Council adding fill on its adjoining lots, thereby causing ponding on Tellamist's land. As the trial judge pointed out, had Council disclosed its drainage plans in that regard, there would undoubtedly have been objection from Tellamist.
176 Moreover, while the Tree Preservation Order gave Council power to consent to the removal of trees, that was a power which, like any other power vested in Council, had to be exercised for its proper purpose as identified in the relevant order and its legislative underpinning, to the extent disclosed; see for example Allen Commercial Constructions Pty Ltd v North Sydney Municipal Council (1970) 123 CLR 490 at 499-500 per Walsh J who said:
"In accordance with a well-recognized rule, s.40(1) [power to grant an application to erect or use a building or to use land, etc subject to conditions] ought to be understood (quite apart from the limitation contained in its opening words) not as giving an unlimited discretion as to the conditions which may be imposed, but as conferring a power to impose conditions which are reasonably capable of being regarded as related to the purpose for which the function of the authority is being exercised, as ascertained from a consideration of the scheme and of the Act under which it is made. This purpose may be conveniently described, in accordance with the expression used by Lord Jenkins in Fawcett Properties Ltd v Buckingham County Council, as being "the implementation of planning policy", provided that it is borne in mind that it is from the Act and from any relevant provisions of the Ordinance, and not from some preconceived general notion of what constitutes planning, that the scope of planning policy is to be ascertained."
177 That purpose here was announced in the Tree Preservation Order itself, namely "Council's desire to retain a bushland atmosphere throughout the shire and to obtain a harmony between development and the natural beauty of the area". In relation to subdivisions, it is only trees which "must" be removed for essential services such as the reticulation of water that "may be removed"; see under the heading "Subdivisions" in the Tree Preservation Order at Blue, 213.
178 The earlier conduct of Council in effecting to put fill on its adjoining lots to the public reserve could not render the trees removed, trees which "must" be removed. Rather it was Council's own voluntary decisions which led to the ponding and then to location of the 8 metre drain in the public reserve and enhanced buffer zone, whose maintenance as a treed buffer zone was incompatible with it.
179 As Stein J said in Clifford and Anor v Wyong Shire Council (1996) 89 LGERA 240 at 251 when sitting as a judge of the Land and Environment Court of New South Wales, in an analogous context,
"Unfortunately, I think the Council had difficulty in resolving its conflicting duties as applicant and decision-maker notwithstanding its employment of Mr Andrews as a consultant. The portion of its decision which involved satisfaction as to the permissibility of the project is one which was not reasonably open to the Council (Taylor v Hornsby Shire Council (1990) 69 LGRA 281). I am also mindful of the exposition of Wednesbury unreasonableness by Brennan J in The Attorney-General v Quin (1990) 170 CLR 1 at 35 - 36. Properly applied, Wednesbury unreasonableness leaves the merits of the decision to the decision-maker. But that power must be exercised reasonably - thus the courts, in appropriate situations, may hold invalid a purported exercise of power where it is so unreasonable that no reasonable decision-maker could have taken it. See also CCSU v Minister for the Civil Service [1985] AC 374 at 410. A more recent example of the doctrine's application in the Australian context is NSW Aboriginal Land Council v ATSIC (Hill J, Federal Court, unreported, 30 August 1995)."
180 The express representations to which I have earlier referred, or simply the fact of the consent conditions of 7 August 1991 as to the land being a buffer between its land and the plaintiff's land, coupled with knowledge that Tellamist must have relied upon the maintenance of that buffer in deciding to proceed with the cluster development when self-evidently its removal would leave an unsightly industrial landscape, would be arguments strongly in favour of characterising any Council decision to remove it as unreasonable in the Wednesbury sense. That is so, whether or not the land was dedicated in the Council. The whole thrust of the conditions applicable to and relied on by Tellamist in its cluster development approved on 7 August 1991 was consistent only with the maintenance of a buffer zone public reserve with retained trees, landscaped as necessary for the barbecue and play area. Removal by the Council of the trees in question in order to substitute an 8 metre drain for its private benefit, would, it is strongly arguable, have fallen outside the proper exercise of the Council's powers for proper town planning purposes so to consent pursuant to the Tree Preservation Order and be challengeable on Wednesbury grounds. In saying this, I do not of course suggest that such representations, express or implied, run with the land for the benefit of the hypothetical purchaser. But they do bear upon the propriety of any exercise by Council of its power to consent to tree removal. They also bear upon the lack of likelihood of candour on Council's part, had enquiry been made of Council by the hypothetical purchaser in advance of the August trespasses, given the risk of injunction from Tellamist as the hypothetical vendor.
181 I should here note that decisions such as Selangor United Rubber Estates Ltd v Craddock (No 3) [1968] 1 WLR 1555 at 1606-7 could not be called in aid by Council to presume correct answers to any questions from the hypothetical purchaser. That case is authority for the proposition that in determining whether negligence has occurred (in that case on the part of a banker in paying on a cheque), the enquiries which the banker ought to have made bearing on its own negligence, when not actually made, are assumed to have been made and to have elicited truthful answers. That reasoning used against the negligent bank can have no application to this valuation context for purposes of protecting a trespassing council from damage, by presuming truthful answers on its part when events including the unheralded illegal trespasses, demonstrated the opposite was far more likely.
182 Thus if the hypothetical purchaser, contrary to my earlier conclusion, were to have imputed to it retrospective knowledge of Council's true intention of removing the trees for an 8 metre drain, then that knowledge must be taken to extend to those serious legal doubts as to Council's entitlement to do so after dedication. Council would clearly have faced the prospect of successful legal challenge if under its Tree Preservation Order it purported to consent to the tree removal so setting at nought, for its own private benefit, the town-planning considerations that had led in the first place to the conditions of a buffer zone with landscaped facilities within. Indeed Council proceeding by trespass and surprise, rather than proper process suggests as I would infer, no great confidence in resisting an injunction, were advance notice instead given of its intent. That suggests, not a complete negation of the buffer zone's value to the Tellamist land, but at most some modest discount for the likely risks of legal challenge. However, as I have earlier concluded, well settled principle precludes any such retrospective knowledge being imputed.