Port Stephens Shire Council & Anor v Tellamist P/L

25 The first appellant and the respondent owned relevantly from December 1988 parcels of land adjacent to each other (Judgment at [2-3]). In 1990 both parcels of land were undeveloped bushland. The Council parcel (Lot 596 of DP27382 and Lot 1 of DP561040 fronting Soldiers Point Road, Salamander Bay) was to the south of the Tellamist land (Lot 2 DP561040). To the south of that Council land was an already existing industrial estate. In September 1990 the Tellamist land was cleared except along its southern boundary adjacent to the Council land where trees were retained so forming a treed buffer zone. In or about April 1991 the Council land was cleared (Judgment at [56]). That left only that band of trees on the southern boundary of the Tellamist land in an area known as the public reserve lands. It is in respect of that public reserve land containing the band of trees that the trespasses, the subject of the damages claim, principally occurred.

The extent of the original screen and replantingThe extent of the original screen and replanting 26 The appellants and the respondent disagreed on the extent to which the original buffer zone provided a screen between the two parcels of land. Relevant matters include: (a) the replanting by the respondent which did take place, only to be removed in the last trespass; and (b) the Council's subsequent lack of response to a letter from Tellamist in March 1992 requesting details of proposed planting (Judgment at [98]; and (c) replanting would not have restored the natural bushland setting with mature trees (Judgment at [100]). 27 The appellants on appeal did however accept (T, 11.51) the trial judge's finding that, though the screen provided something less than an impenetrable barrier "there were sufficient trees, plants and undergrowth to provide at least a pleasant bushland setting and a limited screen against the Council's light industrial estate …". The trial judge's findings follow a review of the expert evidence relied upon and is important: "82 On the state of the evidence, it is difficult to know just how many trees were felled by the Council during its trespasses. However, I am satisfied that prior to the trespasses there were sufficient trees, plants and undergrowth to provide at least a pleasant bushland setting and a limited screen against the Council's light industrial estate in the area between the proposed cluster development on the plaintiff's land and the Council's land." (at [82]) 28 That position emerges sufficiently clearly from the plaintiff's Exhibit 5 (Blue, 1097), an aerial photo taken in approximately 1989. It can be compared to the post-trespass position in the aerial photo taken in approximately 1992 (plaintiff's Exhibit 6 Blue, 1098). These were before us on appeal. 29 The appellants have contended that there was no photographic evidence put at trial of the buffer zone between the time that the Council and Tellamist cleared their lands but prior to the date of the main trespass in August 1991 (Orange, 53P-V). 30 The respondent disagreed with these submissions and demonstrated that it had produced photographic evidence of the zone at that time (Orange, 75F-76Y). I would accept that. 31 The trial judge had earlier commented on photos produced by the appellants that were supposedly taken at the end of July 1991. These photos were not produced until the trial (Red, 57F): "A copy of the photographs was provided to the plaintiff on 18 February 2003. When Mr Neal was shown some of these photographs in cross-examination, he accepted that there were sections in the photographs that indicated that there was not an effective "screen" between the Council's land and the plaintiff's land." 32 The trial judge also earlier quoted a report by Mr Castor, an expert arborist called by the appellants, noting (at [75]) that the defendant had relied upon his expert evidence and his expert qualifications as an arborist. 33 The trial judge continued: "77 Mr Castor's report also dealt with the 'visual screening potential of former vegetation' as follows: 'The relatively open shrub layer in this Woodland vegetation community means that there would be limited screening of industrial buildings when viewed from residences. Prior to the clearing of over 200 metres of vegetation on the light industrial land, industrial buildings on the southern side of George Road were visible from the rear of No. 7 Gilchrist Road (this was a reference to the photos annexed to Mr Neal's affidavit). The width of the subject land at the same viewing angle is only 20 metres. Industrial buildings at Lots 143 and 145 in the Light Industrial Subdivision would have been visible through the former vegetation from the rear of No. 17 Gilchrist Road. Another indication of the screening potential of the former vegetation was provided by Annexure D of John Edward Neal's Affidavit of 31 August, 1995. This is a south-easterly view from the rear of No. 17 Gilchrist Road, through to a dwelling three Lots north of the Bushfire Brigade Station on Soldiers Point Road. This dwelling is clearly visible over a distance the 100 metres through the vegetation within the Tellamist land. Although this view is not through vegetation within the subject land, we believe it is typical of this vegetation.' " 34 The appellants stated that Mr Castor came to a similar conclusion as the trial judge in regard to how effective a screen the buffer zone was. Importantly, the appellants also stated that the evidence of Mr Castor was significant because his conclusion was ultimately that, whilst there were trees on this property, the visual screen came not from the large trees - the canopies of which existed high above the line of sight - but from the lower growth, grass and other shrubs beneath that larger canopy. This shrubbery Mr Carson described as the limited screening. The appellants believed that when the trial judge was discussing the limited screening, she was speaking of that about which Mr Castor gave evidence. Mr Castor's evidence was that within 12 months enough greenery could have been planted to create a visual screen within the line of sight sufficient to screen the areas from each other (T, 79.42 to 80.4). It was not the evidence of Mr Castor that the large trees could be easily replanted and provide a screen within a short period of time. The trial judge summarised her evidence at [78] as follows: "[78] Mr Castor estimated that it would cost approximately $44,000 to prepare the land and plant tube stock of local canopy and mid canopy trees and under storey seed and provide a watering system. That estimate relates only to plantings that would take some years to grow to a reasonable height to create a visual screen. Mr Castor also gave evidence that it is possible to buy more mature trees at a greater cost. The smaller of these at a height of about 3 to 4 metres can be purchased for approximately $100 per tree, however to replace the mature aged trees that were destroyed could cost up to $10,000 per tree. Mr Castor also noted the 90% mortality rate of these trees when replanted." 35 The main conclusion that the appellants wished to draw from this evidence was that Mr Fagan, a valuer for the respondent, who came to a different and higher final value for damages than that of Mr Howes, had based his figures on there being an impenetrable screen between the properties. The appellants argued that, given the trial judge had not come to this conclusion, therefore the report of Mr Howes should have been preferred by the trial judge to that of Mr Fagan. 36 In response, the respondent pointed out, correctly, that Mr Fagan had not described the screen as impenetrable (Blue, 2/426F-I); he described it as "an effective arboreal screen" so the industrial development was camouflaged from the proposed cluster homes. The trial judge noted that passage from Mr Fagan in her judgment: "The proposed Public Reserve consisted of natural bush land and possessed a stand of mature trees together with general undergrowth. The trees were generally of at least 15 metres in heights and together with the undergrowth provided an effective arboreal screen thereby camouflaging the industrial development being undertaken by the Council from the proposed "cluster home" development to be undertaken by Tellamist Pty Limited." (at [79]) 37 The respondent in its oral submissions submitted that camouflage meant something that "obscures something so that one can't discern it" (T, 130.41-.44), that is, not something that is impenetrable. 38 Mr Ellicott, QC, counsel for Tellamist, brought to the Court's attention two photos of the buffer zone in question from the backyard of the house of Mr Neal's daughter, Sharon Neal. The photos show the stark nature of the zone after the trees were removed. The photos do not however attempt to show with any precision how the trees were effective in providing a screen between Tellamist land and Council land. However, that does not mean that the trial judge's findings depended on that. The trial judge was well aware of the relative deficiencies in the photographic evidence. While acknowledging that it was difficult to know just how many trees were felled, the trial judge was able to reach the conclusion she did at [82] quoted earlier. 39 Importantly, the trial judge also substantially rejected Mr Castor's evidence concerning the cost and feasibility of reinstating the buffer zone screening, having carefully reviewed these (at [75] and following). The trial judge did not accept, for reasons which I consider were well open to her, that "tube stock" could have provided a comparable screening in 12 months at a fraction of the cost. She thus concluded: "[98] The defendants claimed that the plaintiff failed to mitigate its loss by refusing to replant the buffer area. The plaintiff did replant the buffer area but was subjected to a further trespass in December 1991 when saplings were destroyed. The ambush together with the damage done to the saplings that were planted in December 1991 and Mr McMahon's refusal to respond to Mr Neal's letter in March 1992 requesting details of the proposed plantings are matters that seems to me to explain the plaintiff's attitude in relation to replanting the buffer area, however they are not matters that support the claim made by the plaintiff for the total loss of profits. I am satisfied that the plaintiff took a reasonable course in testing the market with the duplex before it proceeded with further development of the site. On Mr Neal's evidence, it appears that the plaintiff sought an extension of the consent for the cluster development and that the Council refused that extension. It ultimately sought a return to the original consent and the development of the 12 lots remaining in that subdivision.

[100] These trespasses converted the outlook from the site of the cluster development, proposed to be marketed to retirees, from a pleasant bushland environment into a harsh and barren industrial environment . The aim in assessing the damages is to place the plaintiff into the position it would have been in 1991 if the trespasses had not occurred. In my view that could not have been done by planting the small trees and plants referred to by Mr Castor. They would have taken years to reach a state that the felled trees and vegetation were in at the time of the trespasses. Mr Castor agreed that some of the trees were 20 years old and some were 60 years old. It was a natural bushland setting or, as the Council had called it, a "koala corridor" (tr 156 and 191). I think it is too simplistic to claim that all that was needed was some replanting. Certainly, when the plaintiff attempted to replant the area its efforts were thwarted by a further trespass and destruction of saplings.

[101] Mr Neal's unchallenged evidence was that he replanted 300 saplings prior to the further trespasses in December 1991. Having regard to the photographic evidence, it is not unreasonable to conclude that there were at least 20 to 25 trees of between 20 to 60 years of age on the proposed public reserve to the south of the cluster development site. If one applies Mr Castor's figure of $10,000 per tree, a total of between $200,000 and $250,000 is reached. That figure would need to be increased by reason of the very high mortality rate to say $300,000 to $350,000. There is then the extra cost of plants and shrubs for undergrowth and the watering system and labour. This would bring the cost to approximately $315,000 to $365,000. The uncertainty of survival of the mature trees that are replanted is also an unsatisfactory aspect of assessing the damages on this basis.

[102] In all the circumstances, I regard the most reasonable process of assessment as the diminution in value of the plaintiff's land at the time of the trespasses. I am of the view that I should proceed with the assessment on the basis that the buffer would be replanted, but not at a cost to the plaintiff, and that the development would have had a more limited screen than was there at the time of the trespasses. ……" [emphasis added] 40 I should add that the drain of 8 metre width would have precluded much of any replanting, just as it led to the removal of the trees in the first place. The trial judge found at [99] that the respondent had not consented to the drain when consenting to the Council's subdivision, being unaware of it, having "been led to believe that the buffer was to remain and be enhanced by works in the area, with the construction of the playground and landscaped barbeque area …" 41 Finally, as to Mr Castor's evidence, the respondent in its written submissions fairly deals with it in these terms as also the failure to mitigate: 6.2 Two aspects of Mr Castor's evidence require note. Firstly, Mr Castor did not give evidence as to the effectiveness of the screen as at August 1991 as asserted by the Appellant (Orange 55 U-W). Under cross examination Mr Castor conceded that he attended the site on 7.5.2002 (Black Vol. 2: 289 Y-Z) and that the photograph A7 (Blue Vol. 5: 1193) was an attempt to indicate the quality and effectiveness of the vegetative screen existing as at August 1991. (Black Vol. 2: 290 R-291 G). The photograph relied upon by Mr Castor was however a photograph of Council's reserve adjacent to Soldiers Point Road, not the "buffer zone" the subject of the proceedings (Black Vol. 2: 290 M). Mr Castor was also unaware that a significant proportion of the "buffer zone" (60-80%) was required for the drain itself, thereby "significantly limiting the number of trees that could be planted" (Black Vol. 2: 292 D-J). 6.3 In order to assess the effectiveness of the proposed replanting as proposed by Mr Castor the Trial Judge enquired of Mr Castor the age of the trees in JN-AF to which Mr Castor responded that they were between 30 and 60 years of age (Black Vol. 2: 398 M-V) and that the cost to replace trees of equivalent size and age would be approximately $10,000 per tree (Black Vol. 2: 401 O-P). Mr Castor conceded that replanted trees using "tube stock" would take 20 years to reach an equivalent state of maturity (Black Vol. 2: 400 O-P). 6.4 Mr Castor also conceded that large trees when transplanted suffered a mortality rate of 90% (Black Vol. 2: 403 C). Based on the above evidence the Trial Judge was entitled to and correctly rejected the replanting proposal advanced by the Appellant as it would have taken take at least 20 years to establish trees of equivalent size to that removed (Red 72 B-L). 6.5 The onus to establish a failure to mitigate rests on the Appellant (see TCN Channel 9 Ltd v Hayden Enterprises Pty Ltd (1989) 16 NSWLR 130 at 158). To mitigate one's loss only requires the undertaking of reasonable steps (TCN Channel 9 p.158). 6.6 The Trial Judge correctly held (Red 70 N-71 M and 72 B-L) that Tellamist had undertaken all reasonable steps to mitigate its loss by: (i) replanting 200-300 trees in December 1991; (ii) constructing two duplexes to "test the market"; (iii) Tellamist's request to Council regarding the replanting of the "buffer zone" by Council as contained in its letter dated 3.3.1992 (Blue Vol. 5: 1065). (iv) the "ambush" (Red 70T) by Council combined with its continued threat to enter upon the land and complete the works following dedication (Black Vol. 2: 347 H-M); and (v) Tellamist attempting to extend the time to construct the 35 cluster homes the subject of DA 5163/91 (Blue Vol. 5: 1068 O-P)."

Conclusion Conclusion 42 There is no basis for concluding that it was other than well open to the trial judge to conclude as she did, that (a) there was an effective, though not impenetrable, screen before the trespasses and tree removal occurred; (b) the tree removals converted the outlook from the respondent's site for its proposed cluster development from a pleasing bushland environment into a harsh and barren industrial development, and (c) reinstatement could not properly occur merely by planting small trees and plants, given the native trees felled from the buffer zone, and (d) likewise the size and position of the drain would have precluded an effective screening by way of replanting so that the appeal grounds based on failure to mitigate (grounds 10 and 15) should not succeed.

Nature of "Buffer Zone" or "Public Reserve" and representations Nature of 'Buffer Zone' or 'Public Reserve' and representations 43 A further issue is the nature of the buffer zone or public reserve. The appellants submitted that there was no mention or agreement that it was to contain trees or a visual screen (T, 62): "It was merely a convenient description of the public reserve area as being a point of separation between the light industrial development and the residential development." 44 However, first Condition 6 of Council's consent of 9 August 1991 to what was described as the 36-lot cluster development of Tellamist (Judgment at [23]) provided that the buffer area (or public reserve) was to incorporate: "6. An area within the adjoining buffer area shown is to be facilitated as a communal area for the residents and public in lieu of facilities that cannot be provided on site and is to provide the following:- i. A children's play area including facilities; ii. A BBQ and seating facilities; iii. Landscaping." 45 Moreover, Condition 6 needs to be read with Condition 10. It, importantly in the context refers to "contribution toward the provision of open space and/or community facilities". There is no mention at all of use of the Public Reserve for an 8 metre drainage facility for the commercial purpose of Council's industrial development. After dealing with other s94 contributions Clause 10 provides: "The Public Reserve at the rear of proposed development shown on the approved survey plan (file No. 89/025) shall be dedicated to Council prior to release of Building Application."

Indeed an earlier Condition 9 requires of Tellamist that " Details of stormwater drainage shall be provided ". That confirms that any such drainage was not intended for their mutual benefit. 46 Finally, under the heading "Reasons for Conditions" the consent states that "Conditions to comply with the requirements of …. Council's Tree Preservation Order". Then under the heading "Advices" it is provided "a Consent for the removal of any trees should be obtained from the Council's Environmental Health Department under the provision of the Tree Preservation Order applying to this land" and attaching a copy of the Order. That Order is introduced with these words: "1. A Tree Preservation Order applies to the whole of the land within the shire of Port Stephens. This Order prohibits the ringbarking, cutting down, topping, lopping, removing, injuring or wilful destruction of any tree or trees, except with the written consent of the Council. …." 47 Then follows an explanation for and of the order in these terms: "Pursuant to its powers under clause 41 Interim Development Order No. 2 Shire of Port Stephens, Council has made a Tree Preservation Order which applies to all land situated within the Shire of Port Stephens.

Such Order applies to all species of trees and it prohibits the ringbarking, cutting down, topping, lopping, removing, injuring or wilful destruction of trees except with the prior consent of Council.

It is 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 the planning stage of all development projects, thought should be given to the retention and/or replanting of trees. If this is not done we will surely lose our unique natural heritage which is one of the areas' greatest attractions.

Council's Adopted policy for the Preservation of Trees :

3. Subdivisions - At the subdivision stage of development, Council requires all trees to be retained with the exception of the following cases which may be removed:

2. Trees of the specified girth measurement as set out in Paragraph 2.

3. Trees which must be removed for essential services such as roads, kerb and guttering, footpaths and the reticulation of water , sewerage, power and communication services." [emphasis added] 48 As the evidence later shows (see [80] to [82] it was only because Council placed fill up to 1 metre in depth on its lots adjoining the buffer zone that water from Tellamist's land no longer drained into a natural depression. Otherwise such a drain need not have been required on what was still Tellamist's land, being the intended Public Reserve, thereby denying its community use as also intended. Mr Glover, Tellamist's expert clearly supports that conclusion; the drain could have been placed elsewhere. 49 A fair inference is that this communal area as set out in the consent would not have been compatible with the August 1991 clearing of the land of "all of the trees, saplings and shrubs treated upon the proposed public reserve" (para 21 of Mr Neal's affidavit of 19 December 2001), and the construction in that proposed public reserve during the period from 10 to 14 August 1991 of a drain approximately 8 metres in width (para 23 of above affidavit). 50 There is no sufficient basis in the evidence for assuming that the removal of the trees would in any event have occurred in order to create the barbecue area or children's play area. Indeed it was instead required to be landscaped and was only an area within the much larger buffer area. More importantly, the requirement of landscaping would have necessitated replacement of trees removed. 51 Mr Howes states in his report, by way of something "reasonable to assume" "that the works required by Condition 6 could not have been undertaken without removing some or all of the trees removed by Council" (Blue, 3/624). In fact, given the size of the buffer zone relative to what would be entailed by a modest landscaped barbecue and play area within it (see for example Blue, 5/1080) there is no reason to assume all trees, or even substantially all trees, would have had to be removed, quite apart from the landscaping requirement. But in any event he goes on to refer to the requirement for landscaping in Condition 3 (he overlooks the landscape requirement specifically in Condition 6), and recognises that "the tree removal would be minimised or replaced" by the developer. I mention these matters noting that Ipp JA in part relies on removal of trees for the barbecue/play area, in concluding against there being any damage. I respectfully reach a different view. 52 The respondent produced a letter from Mr Walsh, of Council, to Mr Neal, a director of Castor, dated 6 September 1984, mentioning a "complimentary [sic] buffer strip out of Lot 2" which would "serve to further separate the light industrial and residential if considered necessary" (Blue, 4/940). 53 The trial judge noted a passage from the affidavit of Mr Neal (Blue, 1/192N) where Mr Neal discussed the proposed buffer zone with Mr Rennie, a consultant surveyor retained by the respondent, and Mr Davies, the Council's Assistant Engineer (Red, 26Q): "Davies: I've got some things in mind, I'll prepare a plan and we could meet again next week. Rennie: What about this buffer zone?

Davies: There is a lot of growth and trees on the land and it would be silly to knock it down. A Public Reserve could be provided in John's development and this would constitute a buffer zone." 54 According to Mr Neal, there was a second meeting contained a conversation which was in the following terms (Blue, 1/193Q-194T): Stanton: It's not hard and fast but we suggest is an equitable way to adjust the boundaries so that we can get what we need.

Davies: The shaded area [on the plan] is the buffer zone and that would be dedicated as a Public Reserve.

Rennie: This bottom area (indicating the western section of the shades strip) is low lying and the trees should be kept there.

Davies: All of the trees in the reserve will be retained.

Stanton: Besides being a buffer zone for the residence it will have a two fold purpose, it will act as a koala corridor. It will match up with a corridor on the other side of the road and it will be another one which will tie up in the Shire.

Davies: We'll give you land and (indicating the shaded area on the plan) this will act as a buffer zone between the two subdivisions and one won't be able to see the other.

Stanton: The residents will be able to walk through the trees and have a barbecue, they will be able to enjoy it, its nice bush.

Neal: What about compensation? You're taking more of my land than you're giving me.

Stanton: This is what we propose. We'll give you Lot 1, Lots 8 to 11 and Lot 28 plus part of the public reserve which you will dedicate. We'll pay you an amount of money, market price, for the land you sell us. You donate this land to the residents (indicating the shaded area in Tellamist's proposed land holding after boundary adjustment) and it will complement both developments. It will be a barrier between the two and it will be hard for one person to see the other. The residents will be able to walk between the trees and have a barbecue and enjoy the bushland. 55 This part of the affidavit was read into evidence subject to an indulgence to Mr Henskens (for the Council) not further relevant for present purposes (T, 6Y-7B). 56 Mr Neal was cross-examined at some length on the contents of his affidavit of 29 January 2003 (T, 116-123, 156-157), including this and the previous conversation with the Development Assessment Panel to which he deposed. Mr Neal adhered to the substance of the evidence given, stating that although it was hard to remember the specific detail of the conversations which occurred 14 years ago and that he might have got the dates wrong he was confident that the record was "pretty exact" (T, 121H). Mr Neal specifically denied the suggestion that the affidavit was an ex post facto concoction of himself and Mr Rennie and that the statements attributed to Stanton and Davies were not true, although he could not be sure whether it was Stanton or Davies who talked about the 'koala corridor'. Mr Neal did, however, accept that the affidavit was based upon earlier unsigned affidavits, and perhaps also contemporaneous notes made by Mr Rennie or by himself. 57 Mr Rennie gave no affidavit evidence as to the conversation referred to above, and he was not cross-examined upon it. Mr Davies was not called as a witness and no affidavit evidence was adduced from him. 58 Mr Stanton swore an affidavit on 19 February 2003 (Blue, 4/820). In it he deposed that he could find no record of a Panel meeting on 26 January 1989, but that there was a meeting on 27 January 1989 at which he was not present as he was on leave. The meeting was chaired by Mr Lindsay and attended by Mr Blackmore, Mr Davies and Mr Alexander. The minutes to that meeting, which are annexures, record merely that a meeting with Mr Neal and Mr Rennie was scheduled for Thursday 2 February 1989 at 12.30 pm. 59 Mr Stanton deposed that there was a meeting on 2 February 1989, which he chaired. The minutes of the meeting were annexed to the affidavit, and record that the Panel was comprised of Mr Stanton (chairman), Mr Davies, Mr Blackmore and Mr Alexander. The Minutes record only this with respect to the Tellamist land (Blue, 4/830): 2 February 1989 12.55 pm - 1.20 pm v) John Neal & John Rennie Residential Subdivision Gilchrist Road, Salamander Bay

Advice DCP required. Process explained. Area includes whole of 2(d) land including Council land. Approach Council to prepare DCP. Indicate interest in joint development of industrial estate extension and residential with separation buffer. 60 Mr Stanton deposed that he doubted that the conversation took place on 2 February, but more likely took place at the Panel meeting on 6 April 1989. Mr Stanton denied absolutely the statements attributed to him in the conversation, and deposed that he had never seen the site and "had no idea what the bushland was like". Mr Stanton was not cross-examined on this matter. I draw no inferences from that fact, beyond noting that this meant he was not tested on these matters. 61 Mr Blackmore gave no evidence in affidavit or oral form relating to this alleged meeting and conversation, although in cross-examination he did deny other conversations with Mr Neal (as set out in Neal's affidavit of 20 January 1995, 16 April 1991) (T, 494F-R). Mr Drummond on behalf of Tellamist appeared to be trying to put to Mr Blackmore that the conversations did take place, but the question was only clearly put with regards to the conversation of 16 April 1991. In any case, Mr Blackmore stated that he did not believe the conversation to have occurred as reported by Mr Neal. 62 The trial judge (at [97]) observed that: "If the Council had informed the plaintiff that it wished to construct a drain on the proposed public reserve, negotiations could have taken place in relation to its dimensions and/or alternative means by which to drain the lands. The problem was that the plaintiff was ambushed . Firstly, it did not know that the trees were to be felled and secondly, it did not know that there was to be a drain of such significant proportions on the proposed public reserve where it understood, reasonably in my view, that a buffer of trees and vegetation was to be maintained in which it was to construct a landscaped playground and barbeque area ." [emphasis added] 63 At [115] the trial judge concluded: "115 At the very least, it is evident that the Council understood that there was to be a buffer consisting of trees to provide a visual screen. Just how that was going to be achieved in the jaws of the batters of the proposed drain is not made out in the evidence. It was high-handed to knock down the trees on the reserve and then suggest to the plaintiff that the drain would be to its benefit without giving it the opportunity to make that decision for itself." 64 The trial judge also observed at [96] that the Council had represented this area as a "koala corridor": "… the Council had represented to the plaintiff that there would be a buffer between its land and the plaintiff's land with reference to the public reserve as both open space and also a "koala corridor"; (at [96])

The trial judge repeated the reference to "koala corridor" attributing it to Council at [100], here citing the evidence of Mr Neal (T, 156S) and Mr Skelton (T, 191Q-R) and no doubt taking account of Mr Neal's earlier quoted affidavit: "It was a natural bushland setting or, as the Council had called it, a "koala corridor"

Conclusion Conclusion 65 There is no basis for disturbing any of the trial judge's findings quoted above, as to the representations made to Mr Neal on behalf of Council and the respondent's understanding so based as to there being a treed buffer zone; it is entirely consistent with the conditions later imposed on August 1991 and the earlier minutes of 2 February 1989. Likewise, I agree that the respondent was "ambushed" by the actions of Council in trespassing without prior warning on Tellamist's land in August 1991 and removing the trees on successive occasions.

What was the agreement between the parties?What was the agreement between the parties? 66 Casmer & Associates Pty Ltd was the original owner of Lot 2 DP 561040 prior to its sale on 15 December 1988 to Tellamist. On 9 December 1988 Council issued to Casmer a s149 Certificate for the land which contained a Tree Preservation Order. The order prohibited the felling of any trees without the prior consent of Council (Blue, 1/213). Each successive Development application was subject to that same Tree Preservation Order; in particular that to be lodged by Tellamist on 23 May 1989 for a subdivision into 27 residential lots (see below). 67 Earlier between 29 August 1984 and 1988 Council and Casmer had corresponded regarding the creation of a "buffer zone" to protect the proposed residential development by Casmer from the adverse effects of the light industrial estate to be developed by Council. Casmer received such assurance by letter dated 6 September 1984 (Judgment at [5]). 68 To facilitate the development of its land, in February 1989 Council approached Tellamist seeking an adjustment of the common boundary to enable the construction of an extension of George Road to service the proposed light industrial lots to be created on Council's land. In the absence of that boundary adjustment the Council would not have been able to construct the extension to George Road nor maximise the development of Council's land. Tellamist also needed this adjustment to effect its own development. 69 On 23 May 1989 Tellamist lodged with Council DA 4370/89 for the subdivision of Lot 2 DP 561040 into 27 individual lots. On 3 July 1989 Council gave its consent. That consent was subject to the Tree Preservation Order (Condition 2) so that any removal was subject to Council approval. It was also subject to payment of a monetary contribution pursuant to s94 of the Environmental Planning and Assessment Act 1979 (NSW) (Judgment at [6]). 70 Part of the Tellamist land which was the subject of the proposed 27-lot subdivision was then still owned by Council (lots 1, 9, 10, 11 and 12). The development application was lodged in contemplation of two matters occurring in the future, the first a land swap and the second a re-zoning in pursuance of that land swap, as follows: (a) the actual transfer of some of Tellamist's land to Council and the transfer by Council to Tellamist of some of Council's land (as identified on Ex 1, Blue, 5/1080; Blue, 3/555); and (b) the rezoning of that part of the Tellamist land which was to be transferred to the Council as industrial land (at that time it was zoned residential) and the rezoning of that part of the Council land to be transferred to Tellamist from industrial to residential. 71 The respondent stated in its submissions that the consent did not contain any condition requiring the dedication of any "buffer zone" (Orange, 64G). Council in its submissions stated that a linen plan registered with the Registrar General contained an area marked as "public reserve" which would upon registration vest title in that land in fee simple to Council under the provisions of s340D(1) of the Local Government Act 1919 (Orange, 37G - J). A plan drawn for Tellamist by Rennie & Associates was included in the evidence (Blue, 5/1080). This plan appears to outline the proposed new arrangement between Council and Tellamist. That plan included a section titled "Public Reserve" which was included in the part of the Tellamist land that was to be transferred to Council. 72 That plan also however included a section described as "Public Reserve: land which was included in that parcel to be transferred to Tellamist from Council". The appellants' counsel, Mr Inatey, SC, explained that this was rectified by the letter from Mr Neal to Council on 16 October 1989 (quoted in the Judgment at [8]). This letter was consequent upon discussions regarding the land swap. It outlined that the land including the public reserve that was to be transferred to Council from Tellamist was to go ahead. However, the section of Council land, under the original boundaries, that was deemed public reserve was to remain in the hands of Council, thus deeming the whole of the public reserve Council land. The trial judge referred to this letter in her judgment (at [8]). However, earlier the trial judge recorded that the discussions which led to that agreement included the following conversation between Mr Noel, principal of the respondent, Mr Rennie, the respondent's consultant surveyor, and Mr Davies, the Council's Assistant Engineer: "Davies: I've got some things in mind, I'll prepare a plan and we could meet again next week. Rennie: What about this buffer zone?

Davies: There is a lot of growth and trees on the land and it would be silly to knock it down. A Public Reserve could be provided in John's development and this would constitute a buffer zone."

(Neal's affidavit 29 January 2003; para 9) 73 Council sent a letter to Mr Neal accepting the land swap proposal on 21 November 1989 (Blue, 5/1107). Council and Tellamist had thereby agreed upon a land swap to adjust their common boundary as contemplated in the plans submitted in support of DA 4370/89 and on monetary compensation for that land swap (Judgment at [9]). Council agreed to pay Tellamist $250,000 and agreed to waive the s94 monetary contribution (Blue, 3/555). The letter from Council on 21 November 1989 offered the $250,000 in "full compensation for the transfer of land as indicated on the plan the subject of Development Consent No 4370/89" (Blue, 5/1107). 74 Mr Neal agreed in cross-examination that no further negotiations took place after the letter of 21 November 1989 was sent (Black, 1/T, 108). The appellants' position is that this was where the discussions stayed - with the agreement of both sides that the public reserve land would become the property of Council. 75 However, on 15 June 1990 the respondent and the Council executed a document entitled "Heads of Agreement". Clause 1 provided that in consideration of the sum of $250,000 "the Council will transfer to the company" land referred to in appendix 1 (Blue, 1/30) while clause 2 provided that "the Company will transfer to the Council the land hatched in black biro on appendix 1". The land so identified in the appendix did not include the public reserve land as part of the land to be transferred to Council. The Council public reserve land that was (pursuant to the earlier letters) supposed to remain with Council was actually given over to Tellamist. According to the appellants, this allocation of the land was contrary to the agreement that was reached by the two letters of 16 August and 21 November 1989. 76 The appellants submitted that Mr Neal admitted that the failure to allocate the public reserve to Council in the original linen plan was a mistake that would be rectified (T, 25). 77 In essence the appellants contend that two errors were made when the plan for the heads of agreement was drawn up. The first was that the land that should have been allocated by Tellamist to the Council as "public reserve", pursuant to the exchange of letters, was not so allocated in the plan attached in appendix 1 to the heads of agreement. Further the public reserve land that was to remain part of the land of Council (under the exchange of letters) was actually transferred to Tellamist. 78 However, Council never sought rectification. No argument was put to the contrary of the proposition that consonant with Tellamist's continued ownership of the public reserve buffer zone under the Heads of agreement, the trespasses did take place. This "mistake" was rather put as necessary background to a submission that exemplary damages should not have been awarded in such circumstances, meaning presumably circumstances where Council had a prospective right to the buffer zone land crystallising prior to release of the Building Application (see below for that condition). 79 The respondent says that when the development consent was approved on 7 August 1991 there was still no requirement for a public reserve to be dedicated until such time as the Building Application had not only gone in, but was ready for release. That is correct, as is clear from the following in condition 10: "the Public Reserve at the rear of the proposed development shown on the approved survey plan …. shall be dedicated to Council prior to release of Building Application " [emphasis added]

The respondent submits that at no stage when the trespasses occurred did Council have any claim of right in relation to that land. 80 On 27 November 1989, Mr Rennie, the surveyor engaged by Tellamist, sought Council's approval for the 27-lot subdivision set out in Exhibit 1 (Blue, 5/1080) to proceed in two stages, namely Stage 1 to include lots 1 and 17-27 and Stage 2 to include lots 2-16 (Ex 11, Blue, 5/1106; Judgment at [10]). 81 In November 1989 Tellamist cleared its land up to the edge of the proposed "buffer zone".

The adjustment of the boundaries The adjustment of the boundaries 82 On 24 January 1990 Council filed a development application DA 4697/90 to implement the adjustment of boundaries contemplated by the plans submitted under DA 4370/89 and which was the subject of agreement between Council and Tellamist. On 5 February 1990, Council granted its consent (with conditions) to this development application; Judgment at [11]. 83 On 21 March 1990, Atkinson & Tattersall Pty Limited, surveyors retained by Council, lodged a development application DA 4760/90 on behalf of the Council for 18 industrial lots on the Council land adjacent to the Tellamist land. On 6 April 1990 development consent was granted by Council to itself subject to an adjustment of boundaries with Tellamist (Judgment at [12]). On 23 April 1990 and following the granting of that consent Council forwarded to Tellamist a letter requesting Tellamist's consent to the 18-lot subdivision. An examination of the letter of Council dated 23 April 1990 and the plan attached seeking the consent of Tellamist to the proposed works makes no mention of the drain to be constructed on the buffer zone. No drainage plans were received by Council from Atkins and Tattersall until at least August 1990 with Council then granting consent to the engineering plans on 9 August 1990. Messrs McMahon and Douglas both agreed under cross-examination that the consent of Council of 6 April 1990 did not include the works proposed in the buffer zone. Tellamist by letter dated 23 April 1990 gave its consent, uninformed of any drainage works in contemplation in the buffer zone and having no reason to suppose it would cease to be a buffer zone with tree screening. This was necessary because at this time the land swap had still not taken place (Judgment at [14 - 15]). On 24 April 1990 building approval was granted to Council to subdivide its proposed industrial estate adjacent to the Tellamist land (annexure F to the affidavit of Mr Douglas sworn 20 December 2002, Blue, 2/394-396). 84 On 15 June 1990, Council and Tellamist entered into the Heads of Agreement earlier referred to. That Agreement, inter alia, formalised the land swap, confirmed the consideration of $250,000 and noted Council's consent to DA 4370/89 being accomplished in stages (as requested in the letter of 27 November 1989 by Mr Rennie to Council) (Judgment at [16]). 85 Following execution of the Heads of Agreement, a plan altering the common boundaries to effect the land swap the subject of development consent 4697/90 (and which was necessary to give effect to development consent 4370/89) was registered with the Land Titles Office (on 2 July 1990). Council's land with the adjusted boundary became known as lot 20 in DP 803568 and Tellamist's land with the adjusted boundary became known at lot 21 in DP 803568 (Judgment at [17]). 86 The parties disagreed as to how the agreement impacted on the proposed "buffer zone" or "public reserve". The appellants in their written submissions stated that 'Tellamist under the adjustment of boundaries had ownership of all of the land to be dedicated as public reserve' (Orange, 38U) whilst the respondent argued that 'The adjustment of boundaries did not include the proposed "buffer zone" or "public reserve" (Orange, 64R). 87 The appellants contended in their written submissions that the 27-lot subdivision should have included an area delineated on the plan for public reserve as required by Development Consent 4370/89 and clause 9 and appendix 5 of the Heads of Agreement: 12. On 6 November 1990 the first stage of the 27 residential lot subdivision pursuant to DA 4370/89 was created by the lodgement of a linen plan which created 13 residential lots in DP plan 806230. A further lot 14 in DP 806230 was also created which was the balance of the Tellamist land including the area for lots 2-16 and the public reserve marked on exhibit 1 at Blue Book Vol 5 p1080 (plan of subdivision the subject of DA 4370/89). The lots which were created are set out in exhibit J to Mr Neal's affidavit sworn 20 January 1995 and paragraph 10 thereto deposes to the dates that this occurred (Blue Book Vol 1 p3 [10], 65). 13. At the time that the plan creating the first stage of the 27-lot subdivision was registered (lots 1 to 14 in DP 806230), no area was delineated on the plan for public reserve as required by development consent 4370/89 and clause 9 and appendix 5 of the Heads of Agreement (see annexure G to Mr Neal's affidavit of 20 January 1995 at Blue Book Vol 1 pp 27-62 esp pp28 [9], 62). 14. Her Honour appears to have mistakenly held that lots 1 to 14 of DP 806230 were created pursuant to a new DA 1591/90: Red Book p33 [18]. There is no evidence of another development application or consent in 1990 concerning the Tellamist land or with the number DA 1591/90. 15. The evidence was that the first stage of the 27-lot subdivision created on 6 November 1990 was pursuant to development consent 4370/89. In 2000, Mr Rennie on behalf of Tellamist, lodged applications to modify development consent DA 4370/89 in order to permit Tellamist to complete the second stage of the 27-lot subdivision within lot 14 DP 806230: Red Book p49 [51]. This evidence is included in Mr Rennie's affidavit sworn 11 February 2003, Mr Douglas' affidavit sworn 25 July 2002, and the affidavit of 20 December 2002 by Mr Douglas, Blue Book Vol 2 pp255 [1-2], 260-267, 342, 344-345 [15-17], 364-380, 383 [7], (PWD 2 of 20/12/02 affidavit was unintentionally omitted from the appeal books). The second stage of the 27-lot subdivision the subject of applications by Tellamist to PSSC in 2000, had an area marked public reserve on the approved plan and included a reconfiguration of the original plan (Ex 1) so that Stage 2 comprised a reduced number of 12 further lots (Ex 18, Blue Book Vol 5 pp1080, 1116)." [emphasis added] 88 On 14 March 1991 Tellamist lodged with Council DA 5163/91 to construct upon that part of Tellamist's Land immediately adjacent to the "buffer zone" 35 cluster homes. This was an alternate proposal to Stage 2 of the 27-lot subdivision (Judgment at [19]). On 7 August 1991 consent was granted to the 35-lot cluster subdivision. The appellants correctly stated in their written submissions that this consent was: "…subject to conditions which included dedication of the public reserve prior to the release of any building approval for the 35-lots : Red Book pp 35-36 [23]. The conditions of consent noted that it was operative for a period of only 2 years and unless the development was substantially commenced within that period or Council granted a further 12-month extension, the approval would lapse (see annexure "F" to the affidavit of Mr Neal, sworn 20 January 1995, Blue Book Vol 1 pp 21-24). Due to a legislative change to the then s99 of the Environmental Planning and Assessment Act 1979 (NSW) ("EPA Act") by the Local Government (Consequential Provisions) Act 1993 (NSW) s4 of Schedule 2 (assented to 8 June 1993) the period of time during which development consents were current, was extended so that they did not lapse until 5 years after the consent. This extended the time of the Tellamist consent to 7 August 1996: Red Book p66J [91] (Mr Neal's evidence in cross-examination at Black Book Vol 1 p43): Red Book p71 [98] and to Mr Douglas' affidavit of 25 July 2002, Blue Book Vol 2 p344 [13]. The 35-lot cluster development was not physically commenced within that 5-year period and so the consent lapsed: s99(4) of the EPA Act. PSSC had no power to extend the consent beyond the statutory 5-year limit." [emphasis added] 89 The consent contained Condition 10 which I have earlier quoted. 90 The consent also required that a contribution under s94 of the Environmental Planning and Assessment Act 1979 be made. This required contribution totalled $39,560. 91 Mr Inatey, SC submitted in argument that Council thought the best way forward (in regard to getting the public reserve dedicated to them by Tellamist) was to impose this condition upon the 35-lot cluster development, requiring that the public reserve land be dedicated to the Council before any subdivision or development proceed. 92 The appellants thus contended that if the land had instead been dedicated to public reserve pursuant to the original agreement then Council would have gone forward with its plan for the tree clearing and subsequent drainage work. The trial judge discussed this point at [96] of the judgment observing that "There are some real questions about Council's entitlement to proceed with the construction of the drain when: (1) no notice to or consent from the plaintiff had been sought; (2) the land was subject to a tree preservation order; (3) the Council had represented to the plaintiff that there would be a buffer between its land and the plaintiff's land with reference to the public reserve as both open space and also a "koala corridor"; and (4) that it had actual knowledge that the plaintiff had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that the plaintiff enhance the buffer area with the establishment of the playground and landscaped barbeque area." 93 Mr Inatey, SC took issue with those concerns being any real constraint on what the Council would have actually done: "The evidence at the trial from Council's officers elicited in cross-examination of Council officers was to the effect that upon dedication of the area of the public reserve council would have proceeded with the works, the drainage works, and the removal of the trees." (T, 49.55-50.9) 94 However, even if that were so, it does not answer the trial judge's "real questions" about the Council's entitlement so to act. I would not accept that in determining damages it should be assumed that the Council would have been entitled, unilaterally, and without the respondent's consent, to proceed with the drainage works and removal of trees, given particularly the representations the trial judge found Council had made and Council's knowledge of the respondent's reliance thereon, quite apart from what effect should be given to the Tree Preservation Order. I mention this, in view of the valuation issue. Mr Howes, the valuer retained by Council stated (Blue, 3/624-5) that the market - and thus the hypothetical purchaser - would be aware of condition 10 and conclude that the drainage work would take place in any event, so that the earlier removal of trees could not give rise to any loss, in valuing on a "diminution in value" basis. A loss of profits basis, on the other hand, done on the basis described by Mr Fagan (Blue, 2/423) may not be susceptible to that argument. I shall return to these issues under "Disposition of Appeal and Cross-appeal" later. 95 Prior to 12 April 1991 Council had completed the clearing of its land. At that time there remained standing in the "buffer zone" a large number of trees of substantial height (20m), girth and age (30-60 years).

Dedication of the public reserveDedication of the Public Reserve 96 It is convenient that I elaborate on the sequence of events earlier touched upon, in dealing with how the public reserve was in fact never dedicated. 97 In or about March and April 1991, Mr McMahon of Council discovered that the public reserve land had not been dedicated at the time that the linen plan creating the first stage of the Tellamist subdivision was registered (in late 1990). Mr McMahon had discussions with Mr Neal of Tellamist. According to the Council, Mr Neal made statements to the Council development assessment panel in May 1991 consistent with his understanding that Tellamist had an obligation to dedicate the public reserve (Judgment at [20-22]). The trial judge refers to these statements and the cross-examination of Mr Neal at trial. Mr Neal appeared to state that he would not transfer the public reserve (which he was prima facie obligated to do) unless the s94 contribution levied on the new 35 lot development was waived. Quoting from the Judgment: "22 In cross-examination, Mr Neal agreed that it was "possible" that these conversations had occurred. Mr Neal gave affidavit evidence of a meeting with the Council's Development Assessment Panel on 16 May 1991 at which he had a conversation with a Council representative, Keith Blackmore, that included the following: Blackmore: When do you propose to dedicate the public open space land. Neal: I am prepared to keep my word. I'm just waiting to see what you do with your word (to waive the s 94 contribution). Blackmore: Yes, but when do you propose to dedicate it - at what stage? At the moment we are giving you … Neal: It can be done in about five minutes - as soon as we find out about the DA. I'll dedicate it - sorry, not the DA - the Section 94 contribution. Blackmore: That's what we are trying to work out. You have been telling us to put it off until this DA is approved. Neal: Yes, this DA was promised to us about four weeks ago. You wipe the Section 94 contribution - you agree on that and I will dedicate the land across - all finished in five minutes. Blackmore: I'll follow it through." 98 Mr McMahon confirmed his concern about Tellamist's failure to dedicate the public reserve (which he described in the letter as "open space") in writing (Ex 14, Blue, 5/1110). 99 Mr Walsh from the Council sent a letter dated 23 April 1991 to Rennie & Associates Pty Ltd, the surveyors retained by Tellamist, discussing the amendment to consent 4370/89, and the condition contained in that consent to create an open space reservation as a buffer zone. The letter contained a request that the respondent: "Please submit a further application for an amendment under s102 of the EP&A Act which will reinstate and dedicate the open space reservation." (Blue, 3/589) 100 On 17 May 1991, Mr Walsh sent a further letter to Round Associates, the architects acting for Tellamist. This letter deals with the amended 35 lot development. On the second page of the letter under the heading "s94 contributions" the Council says: "It is Council's opinion that the dedication of the adjacent open space corridor would fulfil the Section 94 requirements of the 27 lot subdivision approved under Development Consent 4370. In this respect the land being developed for the cluster houses has a credit of 12 lots and a contribution for a further 24 lots would be required. This, however is dependent on the dedication of the open space corridor to Council." (Blue, 591Q) 101 Tellamist believed that the s94 concession given in exchange for the dedication by Tellamist of the public reserve land would stand, regardless of the level of development undertaken by them on the land. Council, on the other hand, argued that s94 contribution concession was for DA 4370/89 only. Any development above this original level of 27 lots would be suitably levied (Blue, 4/776 - letter from John Walsh to John Neal). They thus pursued Tellamist for the s94 contribution for the excess lots in the new 36-lot cluster development. Credit was given by Council for the original waiver of s94 contribution.

Construction of the Drain and removal of trees Construction of the Drain and removal of trees 102 In August 1990 Council received from its surveyors, Atkinson & Tattersall, plans to construct within the "buffer zone" a drain. (Orange, 64V). The appellants stated that the purpose of the drain was 'to catch water which would otherwise swamp at the adjusted boundary between the residential subdivision and the industrial estate' (Orange, 41S-V). According to the respondent the construction of the drain arose due to Council having placed fill up to 1 metre in depth on its lots adjacent to the "buffer zone". This was denied by the appellants but only, it appears, as to timing. The appellants stated that earthworks did not commence until July 1991, when Mr Palmer of Daracon came onto the site (Orange, 101 at para 1.9). However, a closer reading of Mr Glover's affidavit (Blue, 2/284) makes clear that his inspection was in February 1992 when the fill had already raised the level of the Council land causing ponding on Tellamist's land. Mr Glover explains that the effect of the fill meant that water from Tellamist's land no longer drained into a natural depression and led Mr Glover to conclude as follows: "9. This raising of the level of the northern boundary of Council's land therefore had the effect […..] of impounding the surface water on Tellamist's land adjacent to that boundary.

10. The incorporation of the fill along the northern boundary of Council's land and in particular lots 12, 13 and 14 caused the need for measures to eradicate and eliminate the ponding of surface water on Tellamist's land. If such fill had not been introduced, the need for the construction of a drain on Tellamist's land would not have arisen.

14. Had a private developer submitted such a proposed plan of subdivision to any Council which included the placement of fill on land such as to require drainage relief on the adjoining land, council would not in my experience have approved such a proposal without having first obtained the consent of the adjoining land owner (in this case Tellamist) .

15. Without such consent Council would in my opinion require a private developer to construct on its own land a drain sufficient to control the surface run-off for a 1:100 year storm." [emphasis added] 103 Mr Glover points out that "[H]ad the drain been created wholly within Council's land, it would have allowed for the retention of all of the trees and vegetation previously created upon the 'buffer zone'" so that "[H]ad the drain been constructed on Council's land there would have been no reason for Council or its agents to enter onto or to remove any trees or vegetation from Tellamist's land" whose retention was plainly the object, in planning terms, of the Tree Preservation Order. That was never refuted nor was the earlier evidence of Mr Glover. 104 The respondent said in its submissions that to construct the drain in accordance with the design of Atkinson & Tattersall required the removal of all trees from the "buffer zone" (Orange, 64X). The appellants contended otherwise, but quite clearly the size of the drain shown on the plan meant that at the least a large proportion had to go (Blue, 2/292). 105 In September 1990, Mr Atkinson of Atkinson & Tattersall, who was project managing the development on the Council industrial estate, prepared subdivision works drawings that included drawings of a drain on the proposed public reserve. They were lodged with Council on 5 October 1990 and purportedly approved by Council on 28 November 1990 (Judgment at [25]). Mr Atkinson believed after a conversation with Mr McMahon at or about this time, that the public reserve land would be transferred to Council prior to the drainage works commencing (Judgment at [26]). 106 Mr McMahon who was property officer of the Council failed to notify Mr Atkinson, its project manager (who had the task of effecting the industrial subdivision liaising with Daracon), prior to August 1991, that the title to the public reserve land had not been transferred by Tellamist to Council. The appellants argued that this failure was based on a lack of knowledge on Mr McMahon's part prior to the trespass that the drainage works were to occur (T, 88.43). Mr Atkinson did know earlier in the year from a title search that the buffer zone land was still in Tellamist's ownership but was told by Mr McMahon there had been an error which was going to be rectified. Thus in August 1991 he did not know that the land had still not been dedicated. Mr Atkinson then did not communicate to Mr McMahon that he (via Daracon) was intending to move onto the buffer and create the drainage works (T, 88.54). The appellants contended that this absolved them of exemplary damages because, contrary to the finding of the trial judge, they did not "consciously and contumeliously" disregard the rights of the respondent. Thus it is said that their failure was one of inadvertence, not one of malice. Mr Atkinson was relying on Mr McMahon to ensure that the land was properly that of the Council at the time of the works (T, 87-9).

Subsequent events leading to the trespasses. Subsequent events leading to the trespasses 107 In May 1991 Mr J Rennie of Rennie & Associates approached Mr Atkinson of Atkinson & Tattersall Pty Ltd, the surveyors retained by Council to ascertain whether Council had prepared any plans for the "buffer zone". The respondent said in its submissions that Mr Atkinson had "denied that any plans had been prepared" (Affidavit of J Rennie 19 December 2001, para 13; Blue, 1/247D-N). 108 On 2 July 1991 Council entered into a Contract with Daracon to: (a) Undertake certain earth works to create the 18 lots in Council's subdivision; (b) Construct the extension to George Road; and (c) Remove from the "buffer zone" the trees and construct the proposed drain. 109 John Neal, in his affidavit dated 19 December 2001, stated that at no time prior to either 14 or 16 April did Council inform Tellamist of its proposed plans for the "buffer zone" nor did it obtain its consent to those works being undertaken (Orange, 65V; Blue, 1/96P). The respondent further contended that Council had deliberately withheld the plans from them. The trial judge concluded that the plans were not made known to Tellamist until after the trespass in October 1991 and outlined a note made by Mr Atkinson in a 16 August 1991 meeting with Mr Hale of Daracon: "109 Whatever was said between Mr Atkinson and Mr Rennie in May 1991, it is clear that the Council did not provide copies of the drawings of the drain to the plaintiff until October 1991, well after the trespasses had occurred. The note made by Mr Atkinson at the time of his meeting on 16 August 1991 with Mr Hale of Daracon is in the following terms: I also advised David H that Rex (ie Mr Palmer) was not to discuss any details of the project with anyone who asked - particularly Neal and to refer him to us if he had any questions." 110 However, while the plans were not made known to Tellamist until after the August 1991 trespass, this being the salient point to my mind, as Ipp JA points out, Tellamist via Mr Neal had earlier obtained the drawings and specifications on 23 August 1991, though not from Council but from Daracon's on-site workmen (Blue, 1/97V). There is nothing in the evidence to indicate this was with Council's concurrence. It is possible that the extent of the tree removal now successfully accomplished may by then have removed or reduced Council's perceived need for continued secrecy. But the salient point is that Council's need for secrecy had by then ceased - the August 1991 trespass and tree removal had already occurred. It is to those events that I now turn.

The August 1991 trespasses The August 1991 trespasses 111 On or about 30 or 31 July 1991, Daracon, pursuant to a contract with Council, entered onto the industrial subdivision to commence works which was to include construction of the drain on the public reserve land. Between either 8 - 10 August 1991 (Appellants - Orange, 43S; T, 33.17 or 10 - 14 August 1991 (Respondent - Orange, 66F; Trial Judge at [35]; Ross Sinclair affidavit (Daracon employee who knocked down the trees) at Blue, 4/915) Daracon felled all of the trees previously located in the "buffer zone". In addition Daracon partially excavated the proposed drain (Judgment at [35]). On 11 August 1991 Mr Neal of Tellamist instructed Daracon to get off its land, which they did. According to the trial judge, on 12 August 1991, Daracon notwithstanding re-entered the land and continued with the extension of the trench that it had commenced to excavate which was 150 metres long, 7 metres wide and 2.5 metres deep. As previously mentioned the consent to the DA 5163/91 for Tellamist's 35-lot cluster development contained Condition 6 (enhancement of an area within the buffer area for communal purposes with landscaping) and Condition 10 (requiring the dedication of the public reserve). That consent so conditioned was granted on 7 August 1991 (Judgment at [23]). The cutting down of the trees later in August 1991 occurred just after this. 112 On 16 August 1991 Atkins and Jones, the solicitors acting for Tellamist forwarded to Council a letter instructing Council not to trespass on Tellamist's land. The appellants stated in their submissions that Mr Palmer of Daracon immediately complied with this direction. A formal direction dated 21 August 1991 was also given by Mr Atkinson on behalf of the Council to Daracon to stop construction of the drain (Annexure C of Mr Palmer's 26 February 2003 affidavit, Blue, 4/904). 113 However, notwithstanding that letter, on 16 August 1991, following a meeting that day, Mr McMahon of Council forwarded to Daracon a letter signed by the General Manager, Mr Walsh, instructing Daracon to complete the works in the buffer zone. In that letter Council agreed to indemnify Daracon (Judgment at [38]. That is the letter referred to in the cross-examination of Mr McMahon at T, 312 and following. After conceding that earlier on 12 August 1991 he knew that an instruction had been given to Daracon not to go on the land, he thereby "gave a further instruction to Daracon to continue the works" (T, 313.20) Then at T, 313.25-.42 appears the following question and answer, directly relevant to whether the trespass was conscious and contumelious: "Q. You didn't care one jot about the rights of Tellamist when you gave that instruction to Daracon, did you? A. I took into account council's rights as well as Mr Neal's rights. To say I didn't care one jot probably is not correct.

Q. May I suggest you didn't do that at all. You favoured entirely council's position by directing the work to go on rather than leaving matters as they were until, hopefully, some form of resolution could be effected. That would have been a more appropriate way to deal with it, wouldn't it? A. Perhaps, yes.

Q. But you didn't do that, did you? A. No." 114 To this should be added what was conceded at T, 314.1-.35: "Q. and it was always known to you that council wanted a, and had represented to Tellamist that there would be a buffer zone between the residential development of Tellamist and the light industry of the council, correct? A. In the interests of the residential development.

Q. And you knew that fact, didn't you? A. That it was intended that the buffer zone be there, yes. Public reserve.

Q. When you gave instructions to knock down the trees you knew that there wouldn't be a buffer zone there for some considerable time, didn't you? A. I know the intention was once the drain had been constructed, which was part of the approved engineering plans, that that area would be replanted and mounded and form a more realistic buffer zone than what was there at that particular time.

Q. What enquiries had you made as at August 1991 as to what form the replanting would take and, more importantly, how long it would take to grow to a height sufficient to provide an effective screen between the two developments? A. I hadn't made any specific enquiries.

Q. I didn't think so. You just took a guess, is that right? A. I did, yes." 115 This evidence was important, as also the concealment of Council's true intention with respect to the drain [112-3], the trial judge concluding (at [114-5] that Council's conduct in August 1991 was in contumelious disregard of the plaintiff's rights, having earlier (at [104]) carefully stated the principles applicable to exemplary damages. I quote what the trial judge said in these passages: "[112] Mr McMahon's evidence of his conversations with Mr Neal in March and April 1991 when he found that the public reserve had not been included in the linen plan demonstrates the approach that he took thereafter. What Mr McMahon said in response to Mr Neal's suggestion that he would dedicate the public reserve at the end of the development was: "we'll see about that".

[113] What was required was an open and fair approach, with the Council informing the plaintiff of its intentions in relation to the construction of the drain at that time. On 7 August 1991, the Council approved the plaintiff's cluster development application with the condition in relation to the enhancement of the public reserve when it knew it was about to fell all the trees and remove the vegetation on the reserve and construct this very wide drain. The evidence is overwhelming that the plaintiff was not aware of the dimensions of the proposed drain at the time of the trespasses and did not have a copy of the drawings until after the trespasses had been committed.

[114] Mr McMahon's evidence, at tr 312-313 extracted earlier, in which he admitted instructing Daracon to recommence the works with indemnity after the trespasses had been committed, is quite extraordinary. If on the other hand the letter to Daracon was drafted before the trespasses and the request to desist, it is clear from its terms that Mr McMahon expected complaint and thus advised Daracon that it was indemnified. It is clear from Mr McMahon's affidavit evidence, also extracted earlier, that he did not seek Mr Neal's consent until 16 August 1991. His own evidence was that he informed Mr Neal on that day that the "drainage works will benefit everybody's land" and that "all" the Council was seeking was the plaintiff's "approval to continue with the drainage works" with a promise that the Council "will replant trees on the reserve to provide a visual screen between the two developments". This was of course after the trespasses and after the trees had been felled and at a time when the plaintiff had not been informed of the dimensions of the drain.

[115] At the very least, it is evident that the Council understood that there was to be a buffer consisting of trees to provide a visual screen. Just how that was going to be achieved in the jaws of the batters of the proposed drain is not made out in the evidence. It was high-handed to knock down the trees on the reserve and then suggest to the plaintiff that the drain would be to its benefit without giving it the opportunity to make that decision for itself. I am satisfied that Mr McMahon, who had the delegated authority to grant the plaintiff's cluster development consent, was frustrated with the lack of progress of the dedication of the proposed public reserve. However, he had achieved a process for that dedication by the insertion of the condition in the consent. He knew that it had not yet happened and I am satisfied that the Council's conduct in August 1991 was in contumelious disregard of the plaintiff's rights." 116 On 21 August 1991 Mr Atkinson (Blue, 5/1052) wrote to Daracon instructing it not to disclose to Tellamist any confidential information regarding the proposed works to the "buffer zone", being cogent evidence of the lack of any open and fair approach. 117 On 3 September 1991 Mr McMahon of Council wrote to Tellamist (Blue, 4/932) notifying Tellamist that unless it dedicated to Council the land comprising the "buffer zone" Tellamist would not be granted any building consents. 118 On 3 October 1991 Tellamist received from Council a copy of the plans for the construction of the drain in the "buffer zone" (Affidavit J Rennie 19 December 2001, para 20; Blue, 1/249 and Blue, 2/253). (He had, as earlier explained obtained after the August 1991 trespasses a copy of the plans from Daracon's on-site workmen, doing so on 23 August 1991). 119 On 21 November 1991 Council in full knowledge of Tellamist's earlier protests, instructed Daracon to enter upon Tellamist's land and to complete the works, being construction of the batters along the northern boundary of Council's land. On 27 November 1991 Daracon again entered upon Tellamist's land to remove fallen timber and to complete the batters. The appellants stated in their submissions that this re-entry upon the land was for the purpose of retrieving trees that had fallen onto the Tellamist land (Orange, 43D). 120 On 5 December 1991 and following further complaint by Tellamist, Council issued to Tellamist a written undertaking that it would not enter upon Tellamist's Land. According to the appellants, following complaint by Tellamist in November 1991, Daracon placed red and white ribbon on the boundary of the Council and Tellamist lands and an instruction was given that Daracon workers were not to go on the Tellamist land side of the ribbon (Affidavit of Palmer 26 February 2003, Blue, 4/901 para 7). 121 During early December 1991 Tellamist replanted 200-300 trees in the "buffer zone". 122 Between 23 December 1991 and 10 January 1992 and notwithstanding the earlier Council undertaking and Tellamist's earlier protests Daracon again entered onto Tellamist's Land and destroyed the replanted trees. The appellants accepted that this re-entry occurred and attempted to explain it thus: "26. Daracon again re-entered the land and damaged a number of small eucalypts which had been planted by Tellamist in the public reserve land: Red Book pp 46-47 [45]. This was contrary to Mr Palmer's directions (Blue Book Vol 4 p 901 [7]). Council wrote to Tellamist's solicitors that a new Daracon employee may have driven the excavator in error over the boundary: Red Book p 47 [46]." 123 The trial judge said as to that at[116]: "[116] The Council gave an undertaking not to trespass further onto the plaintiff's land and then failed to honour the undertaking. Daracon committed a further trespass in December 1991 and damaged the replanted trees. This was claimed to be "inadvertent". That may have been so on the part of Daracon's employee but the Council had given the plaintiff a formal undertaking that it would not trespass again and, in my view, had an obligation to ensure that such an undertaking was honoured. However, its failure to do so seems to have been due to a lack of care rather than contumelious disregard for the plaintiff's rights." 124 On 17 February 1992 Council wrote to Tellamist indicating that Council desired to replant the "buffer zone". Tellamist responded in writing seeking particulars of the trees to be planted and when the works were to be undertaken. Council did not respond. It could hardly be said that this demonstrated any attempt to rectify the damage now repeated. 125 In March 2000 Mr Hansen an engineer employed by Council instructed Tellamist to perform certain earth works and to grass seed the "buffer zone". No trees have to date been replanted in the "buffer zone". 126 Tellamist stated that it was unable to proceed with the 35 cluster homes due to it becoming "financially unviable" as a consequence of the loss of protective screen previously located in the "buffer zone". 127 On 7 August 1996 and despite Tellamist seeking an extension DA 5763/91 lapsed. 128 In 2000 Council granted consent for the subdivision of Tellamist's Land into 12 residential lots in place of the 35 cluster homes. That consent was not subject to any condition requiring the dedication of the "public reserve" or "buffer zone".

Conclusions Conclusion 129 (a) Council and Daracon did not just trespass once but repeatedly; a further major trespass following the August 1991 trespasses was to remove the replanting in December 1991 when the position was in no doubt and when this was in breach of undertaking by Council on 5 December 1991; (b) Council did, through its officer Mr McMahon know of the title position in any event, when the first trespass occurred; (c) Mr Atkinson, acting as he did for the Council on its industrial subdivision had the ready means of finding that position out, having been earlier alerted to the problem and told it was being rectified but did not re-check the position in August 1991 but instead caused Daracon to trespass on Tellamist's land and remove the trees for the drain; and (d) the reason for the location of the drain on what had been intended and represented as a buffer zone and actually so called in Condition 6, between Council's industrial estate and Tellamist's land for the proposed residential cluster development was the direct result of Council's own actions in raising the level of Council's land with fill, so causing ponding on Tellamist's land, instead of the water draining into a natural depression; (e) Council (i) never disclosed to Tellamist its drainage plans until October 1991 (Judgment at [109]) and Mr Neal did not know of them before the August 1991 trespasses, but only from Daracon's on-site workmen on 23 August 1991, there being no evidence that this was with Council's concurrence, (ii) consciously held back that information from Daracon on 16 August 1991 when that major August trespass was taking place (Judgment at [109]), and (iii) imposed development consent conditions which required only an enhancement of the buffer area with replacement of lost trees by landscaping (Condition 6) and reinforced by the Tree Preservation Order, (iv) by this required dedication of the public reserve (Condition 10) in no way signalled the destruction of the buffer area for a drain but rather with its landscaped enhancement strongly reinforced its continuance at the time as it earlier represented to Mr Neal either expressly as I, like the trial judge would find, or at the least by clear implication, by imposing those very conditions just a week before the August trespasses.

Tree Preservation OrderTree Preservation Order 130 The respondent argued that had the land been transferred to Council, Council would have still been bound by the Tree Preservation Order not to cut down the trees in the buffer zone. The trial judge mentioned the real question about Council's entitlement to remove the trees at [96], quoted below: "[96] If the plaintiff had proceeded with the cluster development, a condition of the consent was that it was required to dedicate the public reserve area to the Council prior to the release of the building application. The defendant submitted that had such a dedication occurred, the Council would probably have continued with the construction of the drain and that would have required the removal of the trees in any event. There are some real questions about the Council's entitlement to proceed with the construction of the drain when: (1) no notice to or consent from the plaintiff had been sought; (2) the land was subject to a tree preservation order; (3) the Council had represented to the plaintiff that there would be a buffer between its land and the plaintiff's land with reference to the public reserve as both open space and also a "koala corridor"; and (4) that it had actual knowledge that the plaintiff had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that the plaintiff enhance the buffer area with the establishment of the playground and landscaped barbeque area." 131 The Council submitted that the Tree Preservation Order was not a matter that had any bearing on whether it was allowed to cut down the trees in the clearing or not. This was because the Tree Preservation Order was (Orange, 46R): "41 only operative in respect of felling trees without the consent of PSSC [the Council]. As PSSC was the relevant consent authority, the tree preservation orders were not likely to be an impediment to actions by PSSC on its own land." 132 The Tree Preservation Order (Blue, 1/213) also allowed for the felling of trees at Part 3 for "Essential services such as roads, kerb and guttering, footpaths and the reticulation of water, sewerage, power and communication services" (Blue, 1/213). [emphasis added]. 133 The respondent argued that the Tree Preservation Order had a strong conservation element to it (T, 100). Thus there had to be a harmony "between development and the natural beauty of the area" (Blue, 1/213). The respondent contended that Council had necessarily to consider the public interest and reasonableness and should have, at the least, to consult neighbouring residents. But in any event, it is contended that if the tree removal occurred on what was still Tellamist land, albeit subject to later dedication, then the breach must be exacerbated.

ConclusionConclusion 134 The trial judge correctly concluded [96] that there were "real questions" concerning Council's entitlement to remove the trees, had an effective dedication occurred. In particular the appellants have not established any such entitlement. Nor have the appellants established that Council could, in the circumstances have consented to its own removal of the trees, in disregard of the Tree Preservation Order it itself imposed. It would have had to exercise that power of consent, not simply to benefit its own industrial development but in accordance with Council's own announced planning purposes attending such orders and it is strongly arguable Council could not properly do so, more especially as the location of the drain on the public reserve (a) was contrary to representations made concerning "open space", (b) was the result of Council placing fill on its adjoining industrial land so as to cause ponding on Tellamist's land, when otherwise it would have had a natural runoff.

The intense development of the 35-lot cluster development would have acted as a screen to the houses at the back of the development The intense development of the 35-lot cluster development would have acted as a screen to the houses at the back of the development 135 The appellants contended that the intense nature of the 35 cluster development would have provided an effective screen at least to the houses at the back of the development, even in the absence of the public reserve. Mr Inatey, SC for the appellants, submitted: "…any houses above those right on the border of the public reserve are going to have their vision obstructed in any event by the intense use which is to occur on the border of the public reserve. The intense development. There are to be houses cheek to jowl all the way along the border of the public reserve and house to the north of that looking across to the supposed light industrial to the south would gain no benefit from the visual screen in the public reserve because there screening is going to be affected by the houses constructed to the south of them (Transcript - p42 [36] - [40].) 136 Mr Ellicott, QC, for the respondent, put before the Court plans of the land that showed that the Tellamist land sloped down towards the Council land, meaning that even the houses at the back of the development would have had a view of the trees. The screen was thus, according to this view, valuable even to those houses further back in the development.

Conclusion Conclusion 137 The respondent's submission should be accepted that the tree screening was of value to its proposed cluster housing development for all the houses, in any consideration of damages, noting that the trial judge did not diminish damages by reference to that factor.

Appreciation in value of the respondent's land Appreciation in value of the respondent's land 138 The appellants contend that due to the appreciation in the value of Tellamist land, the respondent should receive neither damages nor interest. This is said because it is in a better position now by retaining the land at its appreciated December 2002 value of $3,100,000 than it would have been had the development of cluster homes gone ahead and the land disposed of in 1991 for its pre-trespass base of $556,650, giving a capital gain of approximately $2.4 million. That amount well exceeds the damage assessment of $365,000 or with interest following the 16 April 2003 an aggregate loss of 4661,942 (Judgment at [24]). Thus the appellants put the following in their written submissions: "88. It was uncontentious that Tellamist had retained all of its land from 1991 until the date of the trial. The plaintiff, at the time of judgment, was in a position to enjoy capital gains on the property which could exceed any alleged diminution to the value of the property in 1991 by reason of the trespass. The evidence of Mr Howes was that the unaffected land value in 1991 of the land as a 35-lot cluster development was $556,650 and as a 12-lot development was $177,486 (annexure A to Mr Howes' affidavit sworn 20 December 2002, Blue Book Vol 3 p 662). 89. Mr Howes' unchallenged evidence at trial was that after the trespass, the December 2002 value of the land was $3,100,000 (Mr Howes' affidavit 20 December 2002, Blue Book Vol 3 p 658 [18]). Tellamist paid Mr Rumble approximately $100,000 in 2000 to create the road works and drainage works necessary to create the second stage of the 27-lot subdivision (Mr Neal's affidavit sworn 19 December 2001, Blue Book Vol 1 p 105 [51]-[52]). 90. Tellamist's capital gain on the land in question is therefore derived from the increase from 1991 pre-trespass base of $556,650 to $3 million (after Mr Rumble's costs). That gives a $2,443,350 capital gain from 1991 to the end of 2002. That capital gain well exceeds the loss assessed by her Honour of $365,000: Red Book p 73 [103], even allowing for Court interest assessed on that sum which her Honour did in her 16 April 2003 judgment taking the total loss to $661,942: Red Book p 89 [24]." 139 The trial judge dealt with this matter in her judgment on interest. Her Honour evidently adopted the respondent's submission, that in determining damages for trespass, diminution in the value of the land is generally to be assessed at the time of trespass citing Samuels JA in his dissent in Rentokil Pty Ltd v Channon (1990) 19 NSWLR 417. At [11-14] of her interest judgment of 16 April 2003 she concludes that: "[11] In my reasons for judgment I said: I am not assessing the damages in this case as an actual loss of profits. I am assessing the diminution in value of the plaintiff's land at the time of the trespasses by reference to the impact of the removal of the buffer upon the land as it was then which included the consent to the cluster-development. (para [102])

[12] Mr Drummond submitted that the defendants' contention that it is appropriate to take the value of the land in 1991 and compare it to the value in December 2002 is contrary to the general proposition that damages for trespass, diminution of value of the land, are generally to be assessed at the time of the trespass. He submitted that the issue of valuing land at different times was "soundly" rejected by Samuels JA in his dissenting judgment in Rentokil Pty Ltd v Channon (1990) 19 NSWLR 417.

[13] If the defendants' submission is correct it would mean that parties who are entitled to judgment by reason of damage to an asset incurred by tortious conduct by other parties should not be awarded interest on the judgment if they have made a decision to retain the asset, the subject of the tort, and that asset increases in value. It seems to me that as a matter of principle that is not correct. If a party is entitled to a judgment and there is a delay in payment between the date upon which the money was "due", that is, the date of the commission of the tort, and the date the judgment takes effect, that party is entitled to interest on that amount irrespective of the maintenance of the asset and its increase in value." 140 The appellants cite Malec v J C Hutton Pty Limited (1990) 169 CLR 638 as suggesting to the contrary. 141 The appellants also cite Malec with Johnson v Perez (1988) 166 CLR 351 at 368-70 and Willis v the Commonwealth (1946) 73 CLR 105 at 109 per Latham CJ as authority for the proposition that they press, namely, that when the development consent finally lapsed, for the 35 lot cluster development, the probability of the land being so developed became zero, thus obviating the scope for any damages. 142 I shall return to these issues later.

Tellamist's ClaimTellamist's Claim 143 Tellamist as a consequence of the destruction of the buffer zone claimed: (i) Diminution in the value of its Land based upon a 35 cluster home development ($150,000-$115,000 = $35,000) $1,942,101 Less 12 Residential Lots - 121,347 = 1,820,754 (ii) Consequential losses and ongoing costs + 77,454 = 1,898,208 (iii) Exemplary damages

Interest Costs 144 These claimed damages were for four trespasses occurring between 9 and 16 April 1991 (para 21 of the Statement of Claim), between 8 and 10 August 1991 (para 28 of the Statement of Claim and the most significant trespass alleged), on 27 November 1991 (para 31 of the Statement of Claim) and on 23 December 1991 (para 34 of the Statement of Claim at Red, 5-8). Tellamist submitted in its closing address at trial on the question of damages (at para 1.18 of its written submission) that: "Accordingly, the most appropriate method to value the plaintiff's loss is by reference to the diminution in its (the Tellamist land's) value. The plaintiff has elected this method of assessment and not the costs of repairs."

The loss was also submitted to be a loss of profits claim (para 1.2.8 of the plaintiff's written submissions). The loss of profit claimed was on the basis of a hypothetical 35 cluster home development on lot 14 DP 806230. 145 The judgment given by Bergin J in favour of Tellamist was as follows: (i) Damages (Red, 73K-P) $365,000 (ii) Exemplary Damages (Red, 78L-N) 25,000 Total $390,000 (i) Interest: 10 August 1991-1997 2002-16 April 2003 (Red, 86D-L) $462,057 (ii) Appellants to pay Respondent's costs thrown away by abandonment of Defences and Cross Claims on an indemnity basis, otherwise Appellants to pay Respondents Costs. (Red, 89H-K).

AppealAppeal 146 The appellants withdrew all their defences and cross claims on the fifth day of the original trial. The trial then proceeded as a contested assessment of damages only. There was no question of liability on appeal.

Issues Issues 147 The principal issues of the appeal, some of which I have earlier determined, are as follows: (a) Was there a condition of the 35-lot subdivision development consent that, before a building approval permitting construction of the 35 cluster houses could issue, the public reserve land the subject of the trespass had to be dedicated and title thereby transferred to Council? (b) If yes, so that the public reserve land had to be transferred prior to any development, would Council have been able to go ahead then with the drainage works, so leaving the respondents in the same position as they were when the appellants trespassed on their land to institute the drainage works? (c) If the appellants had undertaken the drainage works, after having the public reserve land dedicated to them by the respondents, would that work have been lawful having regard to the following: (i) No notice to or consent from the respondents was sought; (ii) The land was subject to a tree preservation order; (iii) The Council had represented to the respondent that there would be a buffer between its land and the respondent's land with reference to the public reserve as both open space and also a "koala corridor"; (iv) That Council had actual knowledge that the respondent had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that the respondent enhance the buffer area with the establishment of the playground and landscaped barbeque area? (d) Was any assessment of damages based upon a 35-lot subdivision untenable because the loss had wholly been abated by reason of the fact that the development consent was to lapse five years after it was initiated? (e) What was the extent of the screen prior to the trespass? To what extent could the screen be restored in the short to medium term? (f) Would restoration of the screen have led to no diminution in value of the respondent's land? (g) To what extent did the tree coverage on the public reserve land provide a visual screen between the Tellamist land and Council land prior to the August 1991 trespass? (h) Should the interest have been allowed upon the damages by the trial judge, given that the respondent owned the land and had the benefit of a greater capital gain? Should further interest have been given for the period from late 1997 to early 2002? (i) Did the respondent fail to mitigate its losses by not replanting the buffer zone? (j) Should the valuation have been based on assessing the loss of profits to the respondent, or on the diminution in value that occurred to the respondent's land? And in particular when calculating damages should the report of Mr Howes or Mr Fagan have been preferred? (k) On the basis of Mr Howes' evidence that the Tellamist land had appreciated significantly in value since the August 1991 trespass, should the court not have awarded damages, as this capital gain exceeded the losses complained of? (l) Should damages have allowed a lower amount for proper restoration of the screen? (m) Should there have been an award to the respondent for exemplary damages and, if so, for a greater amount?

DISPOSITION OF THE APPEAL and CROSS-APPEALDISPOSITION OF THE APPEAL and CROSS-APPEAL 148 Before dealing with damages more generally, I need to return to a consideration fundamental to whether Tellamist has any basis to recover more than nominal damages for the trespasses it suffered. That requires me to consider the matters raised by Ipp JA in his draft judgment, in concluding against Tellamist, which I have had the advantage of reading. Necessarily it involves first a brief recapitulation of earlier conclusions so far as presently relevant.

Recapitulation Recapitulation 149 (a) Council and Daracon did not just trespass once but repeatedly; a further major trespass following the August 1991 trespasses was to remove the replanting in December 1991 when the position was in no doubt and when this was in breach of undertaking by Council on 5 December 1991; (b) Council did, through its officer Mr McMahon know of the title position in any event, when the first trespass occurred; (c) Mr Atkinson, acting as he did for the Council on its industrial subdivision had the ready means of finding that position out, having been earlier alerted to the problem and told it was being rectified but did not re-check the position in August 1991 but instead caused Daracon to trespass on Tellamist's land and remove the trees for the drain; and (d) the reason for the location of the drain on what had been intended and represented as a buffer zone and actually so called in Condition 6, between Council's industrial estate and Tellamist's land for the proposed residential cluster development was the direct result of Council's own actions in raising the level of Council's land with fill, so causing ponding on Tellamist's land, instead of the water draining into a natural depression; (e) Council (i) never disclosed to Tellamist its drainage plans until October 1991 (Judgment at [109]) and Mr Neal did not know of them before the August 1991 trespasses, but only from Daracon's on-site workmen on 23 August 1991, there being no evidence that this was with Council's concurrence, (ii) consciously held back that information from Daracon on 16 August 1991 when that major August trespass was taking place (Judgment at [109]), and (iii) imposed development consent conditions which required only an enhancement of the buffer area with replacement of lost trees by landscaping (Condition 6) and reinforced by the Tree Preservation Order, (iv) by this required dedication of the public reserve (Condition 10) in no way signalled the destruction of the buffer area for a drain but rather with its landscaped enhancement strongly reinforced its continuance at the time as it earlier represented to Mr Neal either expressly as I, like the trial judge would find, or at the least by clear implication, by imposing those very conditions just a week before the August trespasses. (f) The trial judge correctly concluded [96] that there were "real questions" concerning Council's entitlement to remove the trees, had an effective dedication occurred. In particular the appellants have not established any such entitlement. Nor have the appellants established that Council could, in the circumstances have consented to its own removal of the trees, in disregard of the Tree Preservation Order it itself imposed. It would have had to exercise that power of consent, not simply to benefit its own industrial development but in accordance with Council's own announced planning purposes attending such orders and it is strongly arguable Council could not properly do so, more especially as the location of the drain on the public reserve (a) was contrary to representations made concerning "open space", (b) was the result of Council placing fill on its adjoining industrial land so as to cause ponding on Tellamist's land.

Was any damage suffered? Was any damage suffered? 150 The appellants nonetheless attempted to refute there being any damage suffered, by presenting a case essentially as follows. The intention was always that the public reserve was to be dedicated to Council, as evinced by Condition 10, attaching to the relevant application for the cluster housing DA 5163/91. Though that dedication was delayed, with the result that a technical trespass occurred, this only forestalled what Tellamist knew it had to do before its building plans were released. Once dedication occurred the appellants contend that Council would then have been able, for the benefit of its own commercial development, to consent to the removal of trees pursuant to its power in that behalf under the relevant Tree Preservation Order. The appellants contend that any buyer of Tellamist's property, properly informed, must be taken to know that so that such a buyer would take this into account in the value it attributed to Tellamist's land at the time of valuation, namely when the trespasses occurred. 151 Thus Council submitted that, in truth, there was no loss in value from removal of the screen. As Ipp JA puts it in his draft judgment, this contention rested on the following propositions: "(a) no building on the cluster development could take place without the Public Reserve Land being dedicated to the Council; (b) upon dedication, the Council would construct the drain on the public reserve land and would remove the trees (the Council's evidence was to this effect); (c) in any event (as was stated in evidence by Mr Howes) the tree removal by the Council in August 1991 "would have been substantially required" by the condition in the Cluster Development Consent that provided for the establishment of a children's play area including facilities, a barbecue and landscaping; (d) a willing buyer of the land in question would have known of the matters in (a), (b) and (c); (e) thus, a willing buyer would only offer to pay a price for the land on the assumption that, before building development took place, the screen of trees would be removed." 152 As to (c) above concerning the enhancement of the buffer area, though not essential to the argument, I should indicate that in my respectful view that does not accord with the evidence, for reasons I have earlier explained; in particular there was the requirement for landscaping to replace any trees removed, as Mr Howes acknowledged. 153 As to (d), for reasons developed below, I do not consider a willing buyer of the land making proper enquiries at the relevant time would have known of Council's intention to construct the drain and remove the trees immediately before the August 1991 trespasses took place, being the relevant time for valuation purposes, save by impermissible hindsight. 154 The Council however argued that the removal of the trees simply put into effect what a willing buyer would believe would inevitably happen prior to any building on the cluster development. Hence, it is contended that the value contributed to the land by the screen of trees could play no part in establishing the market value of the land. On this basis, there would be no loss or other than nominal damage. 155 A further question posed is whether Council, post-dedication, would indeed have been entitled so to proceed with the construction of the drain, by removing the tree screening on the buffer area of Public Reserve, once it was vested in Council. That question is of course hypothetical, because Council did not wait to do so. That question turns both on power and the propriety of its exercise, in the case of a local authority exercising a statutory power such as a Tree Preservation Order, calling for application of proper town-planning principles; compare Noroton Holdings Pty Limited v Friends of Katoomba Falls Creek Valley Incorporated (NSWCA, 18 October, 1996, unreported). I have earlier quoted what the trial judge concluded on that matter at [96] and for convenience quote it here again: "[96] If the plaintiff had proceeded with the cluster development, a condition of the consent was that it was required to dedicate the public reserve area to the Council prior to the release of the building application. The defendant submitted that had such a dedication occurred, the Council would probably have continued with the construction of the drain and that would have required the removal of the trees in any event. There are some real questions about the Council's entitlement to proceed with the construction of the drain when: (1) no notice to or consent from the plaintiff had been sought; (2) the land was subject to a tree preservation order; (3) the Council had represented to the plaintiff that there would be a buffer between its land and the plaintiff's land with reference to the public reserve as both open space and also a "koala corridor"; and (4) that it had actual knowledge that the plaintiff had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that the plaintiff enhance the buffer area with the establishment of the playground and landscaped barbeque area." 156 I shall return to that question. The starting point, however, is the knowledge to be imputed to the hypothetical purchaser, as relevantly bearing on the price that such a willing but not anxious purchaser would be prepared to pay for the Tellamist land at the date of the trespasses. The principles enunciated in Spencer v the Commonwealth (supra) cited by Ipp JA in his judgment, remain authoritative as a statement of the knowledge to be imputed to the hypothetical seller and purchaser. It is clear from those statements that the hypothetical purchaser is not required to be a seer or omniscient. 157 Subsequent cases have looked at the issue of knowledge based on hindsight and whether subsequent events can be taken into account at all. I refer in particular in this kind of context to Gosford Shire Council v Green (1980) 26 The Valuer 425, a case concerning valuation for purposes of land resumption. There the NSW Court of Appeal held that the knowledge of the hypothetical parties to an assumed sale of retained land was limited to the knowledge of a prudent purchaser at the date of acquisition, denying access to hindsight. Thus Reynolds JA said at 428: "In my opinion, as a matter of principle, what in fact happened can have no logical probative relationship to what a reasonable purchaser would at an earlier date have expected to happen"; and see Mahoney JA at 430 to similar effect: "For the purpose of s124 of the Public Works Act 1912 (NSW) and s536c of the Local Government Act 1919 (NSW), I think that the knowledge to be attributed to a notional purchaser is that which as a prudent purchaser making all proper enquiries, he would have at the date of resumption: compare Lynall v Inland Revenue Commissioners [1972] AC 680. If Howard v The Minister (1939) 14 LGR (NSW) 74 to be to the contrary, I do not think it should be followed." 158 Mahoney JA took a similar position in Housing Commission of NSW v Falconer [1981] 1 NSWLR 547 at 576. 159 In Spencer itself, Griffiths CJ (at 432) referred to: "The necessary mental processes to put yourself as far as possible in the position of persons conversant with the subject at the relevant time."

Isaacs J required circumstances subsequently arising to be ignored; in that sense precluding the wisdom of hindsight or treating the hypothetical purchaser as some kind of seer. He said (at 440): "In the first place the ultimate question is, what was the value of the land on 1st January 1905?

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.

ConclusionConclusion 183 The fundamental points are: (a) valuation is to be made of the pre-trespass value, at the date of the wrongdoing and thus immediately prior to the August trespasses, (b) knowledge of the putative purchaser is therefore of the pre-trespass position on the day of the wrongdoing, but including the certainty of later dedication, (c) the Tellamist consent conditions of a week or so earlier and Council secrecy would have given no indication to a prudent purchaser making enquiry of Council or the vendor of the likelihood of destruction of the buffer zone and the location of an 8 metre drain, at the relevant time of valuation but rather would give reassurance to the contrary, (d) foresight of future events after that relevant time or knowledge in retrospect is not available to add to the hypothetical purchaser's imputed knowledge, on the principles in Spencer, (e) there is at the least substantial legal doubt as to Council's entitlement to achieve legally after dedication what it did illegally before, including consenting to removal of the trees under the Tree Preservation Order so setting at nought the evident purpose of the enhanced buffer zone as a screen and pleasant landscaped play and barbecue area, (f) that reinforces the conclusion that the hypothetical purchaser would have neither foreseen or be told of such a contingency nor taken it into account. 184 I turn now to the principles applicable to determining damages for tort and more particularly those concerned with valuation as they bear on the respondent's loss, following the appellants' trespasses.

A. Damages as Compensation A. Damages as Compensation 185 It is trite law that the overall purpose of an award of damages in tort is to compensate the plaintiff for the loss he or she has suffered by reason of the tort. As Lord Blackburn stated in Livingstone v Rawyards Coal Co (1880) 5 App.Cas. 25 (at 39), the measure of damages is: "that sum of money which will put the party who has been injured, or who has suffered, in the same position as he would have been in if he had not sustained the wrong for which he is now getting his compensation or reparation." 186 This was affirmed by the High Court of Australia in State of South Australia v Johnson (1982) 42 ALR 161 at 169- 170 per Gibbs CJ, Mason, Murphy, Wilson and Brennan JJ and in Gates v City Mutual Life Assurance Society Ltd (1986) 160 CLR 1 at 12-13. It is unquestionably the grundnorm underpinning compensation for tortious injury. In applying it to the multifarious situations of tortious compensation, the Court must not be constrained by rigid or inflexible rules. In Evans v Balog [1976] 1 NSWLR 36, Samuels JA (with whom Moffit P and Hutley J agreed) stated (at 39): "I have quoted the words of Lord Blackburn in Livingstone v Rawyards Coal Co (1880) 5 AppCas 25 at p.39. I need not multiply citations in support of this principle. But I observe in addition that in Admiralty Commissioners v S.S. Susquehanna [1926] AC 655, at p.661 Lord Dunedin said that the purpose of an award of damages is to give the injured party, so far as money can, reparation for the wrongful act. But that object may be achieved in different ways, and a proper assessment is determined by the circumstances of the case and by the overriding requirements of what is reasonable." 187 Such rules and principles as the common law has developed to assess the damages of an injured party are not inflexible, and must always be applied with the overriding goal of compensation. In Johnson v Perez (supra), Mason J emphasised this point when speaking about the general rule regarding the time at which damages are assessed: "[General rules for the assessment of damages] must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered." (at 355-56) 188 In determining whether the trial judge erred in her assessment of damages in this case, and in any re-assessment, that overriding principle of fair and just compensation is paramount. I shall return to this.

B. The Nature of Damages for TrespassB. The Nature of Damages for Trespass 189 The substantial issues on appeal involve determination of the appropriate measure of damages for the trespass by the appellant Council onto the land of Tellamist. Unlike causes of action in negligence, damage is not the gist of the cause of action in trespass. Instead the action exists to protect and vindicate the right of a person in possession of land to his or her exclusive and peaceful enjoyment of that land. The modern action of trespass to land with which we are here concerned descends from the common law writ. That writ, as Blackstone's Commentaries (III.209) explains, commanded the defendant to show cause quare clausum querentis fregit, that is, to show why he broke the 'close' of the plaintiff. The gist of the action of trespass quare clausum fregit was merely the breaking and entering by force and arms (vi et armis) the plaintiff's land. The slightest incursion constitutes a trespass, so long as it is not wholly involuntary: see Public Transport Commission of NSW v Perry (1977) 14 ALR 273. The policy of the law seems to have been that acts of direct interference with the possessory interest of another was likely to lead to breaches of the peace, and must be punished strictly See J.G. Fleming, The Law of Torts (9th ed), LBC Information Services 1998 p45. . 190 From this emanates both the statement (which is trite law) that 'trespass is actionable per se', and the distinction between trespass and actions on the case such as nuisance, and later negligence: see Scott v Shepherd (1773) 96 ER 525. Nuisance protects against unreasonable interference with the plaintiff's use and enjoyment of his land rather than with his possession, that interference stemming from conduct of the defendant outside the plaintiff's land. In such circumstances, the absence of force and arms interfering with possession did not merit making the conduct actionable without proof of damage. Hence nuisance was brought as an action on the case, in which the plaintiff set out in his writ the damages allegedly suffered and the circumstances in which they were suffered, with the Court to determine whether in fact the conduct was tortious. In cases of trespass, by contrast, the disturbance of the plaintiff's right to exclusive possession was ipso facto tortious and the plaintiff was therefore entitled to recover damages even though he had sustained no actual loss: see Plenty v Dillon (1990-1) 171 CLR 635. Were nothing more shown than that the Council trespassed on Tellamist's land, nominal damages would be available. 191 Although the distinction between actions in trespass and actions on the case has been rendered largely obsolete by the abolition of the old forms of action under the Judicature Act 1973, the available remedies for trespass are still to some extent conditioned by the old distinction. Traditionally a trespasser was strictly liable for all damage "directly and immediately" resulting from his presence on the land, regardless of whether his presence was intentional, reckless or even negligent: Wormald v Cole [1954] 1 QB 614. In Palmer Bruyn & Parker Pty Ltd v Parsons (2001) 185 ALR 280 at 284, 295-6 and 307, the High Court held that damages can be recovered for harm that is intended or that is the natural and probable consequence of the tortious act or within the presumed intent of the actor. Although the Court was there dealing with the tort of injurious falsehood, the New South Wales Court of Appeal has held that this statement is of general application to intentional torts, including trespass to land which was at issue before them: TCN Channel Nine Pty Ltd v Anning (2002) 54 NSWLR 333 per Spigelman CJ at 352 (with whom on this point both Mason P and Grove J agreed). Liability for damage occasioned by trespass was thus not subject to the same standards of foreseeability and remoteness as that governing other tortious conduct. The fault still lay in the act of unlawfully interfering with the exclusive possessory rights of the plaintiff. Thus, in addition to vindicating the plaintiff's right to exclusive possession, the action for trespass also came to provide the ordinary remedies for material damage. The basis for assessment of material damage has naturally varied depending upon the variety of ways in which the exclusive possession of the plaintiff has been violated. 192 Broadly three categories of trespass have been identified as requiring substantial damages. See for example, Clerk & Lindsell on Torts (18th ed), Sweet & Maxwell, London 2000, 18-65-72. I shall deal with the first two briefly only, as they are not of direct relevance to the facts of this case.

(i) Trespass giving benefit to the defendant without actual loss to the plaintiff (i) Trespass giving benefit to the defendant without actual loss to the plaintiff 193 The first, which is not strictly relevant here, occurs where the trespass has consisted solely of temporarily using and occupying the land. This measure of damages (for mesne profits) on one view serves to deprive the defendant of the benefit of his or her tortious conduct. Into this category falls the case of a tenant unlawfully holding over, who may be compelled to pay the reasonable letting value of the property: Swordheath Properties Ltd v Tabet [1979] 1 WLR 285. In that sense, damages are awarded on a quasi-restitutionary basis, awarding to the plaintiff the value of the benefit wrongfully appropriated by the defendant. As Hoffmann LJ pithily stated in Ministry for Defence v Ashman (1993) 25 HLR 513 at 519: "It is true that in earlier cases it has not been expressly stated that a claim for mesne profit for a trespass can be a claim for restitution. Nowadays I do not see why we should not call a spade a spade." 194 In a similar vein are the wayleave cases where the defendant wrongfully uses a right of way over the plaintiff's land. The measure of damage awarded is the usual reasonable charge for the user of the right of way: Jegon v Vivian (1871) LR 6 Ch. 742. Damages for trespass by staghounds was similarly compensated in League against Cruel Sports Ltd v Scott [1986] QB 240. It has been noted that such damages are an anomalous measure in the law of torts, apparently resting on a presumption that the plaintiff has incurred loss and the defendant has benefited from the trespass: see Roberts v Rodney District Council [2001] 2 NZLR 402 at 409.

(ii) Trespass involving benefit to the defendant and correlative actual loss to the plaintiff (ii) Trespass involving benefit to the defendant and correlative actual loss to the plaintiff 195 The second category of trespass involves the severance and removal of things attached to the land, such as minerals or timber. According to the authors of Clerk and Lindsell on Torts (at 18-70), the old common law rule in such cases was that the plaintiff could elect to bring an action either in trespass for the damage to the land or in trover for the value of the things severed as chattels. Naturally, depending upon the circumstances, the value of the chattel might be greater or less than the resulting diminution in the value of the land. If the action was brought in trover for conversion of the chattels, action could be brought also in trespass, but damages would be restricted to prevent double recovery. 196 Even where the action was brought in trespass, some qualification was added by the line of coal trespass cases beginning in the mid-nineteenth century. These reveal that in cases of severance of minerals, the measure of damages may depend upon whether the wrongdoing was wilful or not. R.F.V Heuston & R. A. Buckley, Salmond and Heuston on the Law of Torts (21st ed.), London, Sweet & Maxwell, 1996, pp.50 to 51. See the discussion by Lord Macnaghten in Peruvian Guano Co v Dreyfus Bros [1892] AC 166 at 175-176 as to the origin of the various rules. Where the trespass was wilful and clandestine (with intent to defraud the rightful owner) the measure of damages would be the market value of the coal at the pit-head (that is, as a chattel): see Livingstone v Rawyards Coal Co (1880) 5 AppCas 25; cf Minter v Eacott (1952) 69 WN(NSW) 93. In cases, however where the trespass was not a deliberate wrongdoing, but done, say, in mistake of the boundaries, a deduction would be allowed for the cost of working the coal: Re United Merthyr Collieries Co (1872) LR 15 Eq 46. On considering the converse of this latter rule it becomes apparent that in these cases, the plaintiff was being restricted in damages to the value of the coal in situ, which prima facie is equivalent to the diminution in value of the seam or land. 197 Clerk and Lindsell (supra) at 18-72 states that in principle the same principles should apply to the tortious severance of other valuable parts of the land, such as crops and log-timber from the land: see Wasson v California Standard Co (1964) 47 DLR (2d) 71. It is however clear that these principles are only really of relevance where the trespass appropriates the value of the minerals or timber as commodities. In a sense, damages assessed on this basis equally serve to prevent a defendant's gain as to compensate a plaintiff's loss. These principles can therefore be seen to be of no application to a case such as the present where the loss claimed by Tellamist due to the trespass by the Council lay in the loss of essentially ornamental trees as a natural bushland buffer-zone.

(iii) Trespass involving loss to the plaintiff and no correlative gain to the defendant (iii) Trespass involving loss to the plaintiff and no correlative gain to the defendant 198 The third category, and the one into which the facts of this case most readily fit is where the trespass involves actual physical damage to the land. In these cases, it is said by Professor Fleming that the measure of damages is equivalent to that for negligence. Fleming, The Law of Torts, p53. Two alternative bases for assessment have been established to compensate a plaintiff whose land has been physically damaged: (1) the diminution in value, or (2) the reasonable cost of re-instatement. As a matter of principle, these cannot be said to be the only methods of assessing damage in trespass cases. In fact, counsel for the Council conceded on appeal that a claim for loss of profits was in principle open to a plaintiff in the position of Tellamist. That would seem to flow from the general law of damages, but, whatever the case, diminution in value and reinstatement certainly appear to be the most commonly employed bases for assessment. Although Tellamist pressed its claim on the former basis of diminution in value, it is instructive to consider the ways in which Courts have determined damages cases in either category. 199 Jones v Gooday (1841) 8 M & W 146 was once said to be authority for the proposition that the normal measure of damages was the amount of the diminution of the value of the land. This has a strong element of commonsense about it as a prima facie measure of the plaintiff's loss. However, the correctness of this maxim is questionable, and in modern cases it is certainly accurate to say that the reasonable costs of re-instatement will be allowed in appropriate cases as long as they are not disproportionate to the injury of the plaintiff. In Evans v Balog (supra), Samuels JA stated as follows (at 39-40): "… As the learned author of McGregor on Damages says at p. 713, the case [ Hutchinson v Davidson (1945) S.C. 395] sustains what I take to be the true criterion of the selection between diminution of value and the cost of reinstatement. What he says is this: " The test which appears to be the appropriate one is the reasonableness of the plaintiffs' desire to reinstate the property; this will be judged in part by the advantages to him of reinstatement in relation to the extra cost to the defendant in having to pay damages for reinstatement rather than damages calculated by the diminution in value of the land ."

… The question is whether it was reasonable for the plaintiffs to desire to reinstate their property. In my opinion, there is only one answer. It undoubtedly was. They had, in effect, lost their family home. That is the nature of their damage, and not some diminution in the value of their land. Fair compensation requires that they be given back what they had before; and the only way in which that purpose can be achieved is to award them the sum reasonably necessary to restore their property to the condition in which it was before the defendants effectively destroyed it. This the learned judge did; and, in my opinion, he was right. It is not to the point that the diminution in value basis might on one view produce no damages, while the reinstatement basis produces a substantial sum. The disproportion in question in cases of this kind are not always to be revealed by arithmetical comparison. The cost to a defendant of competing measures is a significant factor. But it is but one ingredient in the calculation of whether the plaintiffs' claim is reasonable or not. There are cases, and this, in my opinion, is one, where the nature of the plaintiffs' loss is such that there is only one mode of fairly repairing it. If that turns out to be more expensive than another, the wrongdoer has no one but himself to blame." 200 I note that Samuels JA particularly rejected a purely "arithmetical comparison", and that the passage cited has as its primary object the task of fairly compensating the plaintiff for his or her true loss. See further Parramatta City Council v Lutz [1988] 12 NSWLR 293, where the majority allowed the plaintiff's cross-appeal and awarded her reasonable reinstatement costs (Kirby P at 312, McHugh JA at 335, Mahoney JA dissenting). I observe that in Keddell v Regarose Pty Ltd [1995] 1 Qd R. 172, White J held (at 180) that the test of reasonableness laid down by Samuels JA in Evans v Balog involves consideration of reasonableness from the point of view of both the plaintiff and the defendant. 201 There is some support for the proposition that the plaintiff has an election as to the basis for assessment. In Minter v Eacott (supra), the defendant trespassed onto the plaintiff's land and removed sand from it for the purpose of sale, thereby causing subsidence to the land. The Full Court of the Supreme Court of NSW held that the plaintiff was entitled to damages based on the market price of the sand as it was on the land (i.e. not including cartage and delivery), and also to damages in respect of the physical subsidence of the land. In so concluding, Street CJ adopted passages from the "American Restatement of the Law" (vol 4, Law of Torts) and said: "According to the learned authors of that publication, the plaintiff has an election to claim as compensation the difference between the value of the land before the harm and the value after the harm, or he may claim the cost of restoration which has been or may be reasonably incurred … If, however, the cost of replacing the land in its original condition is disproportionate to the diminution in the value of the land caused by the trespass … damages are measured only by the difference between the value of the land before and after the harm." 202 This decision was applied by Isaacs J in Public Trustee v Hermann (1968) 88 WN(Pt.1) NSW 442, where damage by subsidence was caused to the plaintiff's land by the defendant excavating on his block of land, thereby undermining the retaining wall separating the two properties. 203 It is wrong to say that the plaintiff has an untrammelled election between the alternative bases for assessment. As shown in Minter v Eacott, a plaintiff will be denied the cost of re-instatement if it is disproportionate either to the injury suffered or to the diminution in value. It seems that in such cases, the Court will refuse to overcompensate the plaintiff, and will reject re-instatement cost if it is not in accordance with the compensatory principle. This does not mean that re-instatement will be refused merely because it exceeds diminution in value. The plaintiff may recover reinstatement cost in excess of diminution in value where there is evidence of special value, such as the need of the plaintiff and his family to occupy their home: Hollebone v Midhurst and Fernhurst Builders Ltd [1968] 1 Lloyd's Rep. 38. In such cases, there is clearly no over-compensation. But it is true that if re-instatement is disproportionate, it will not be awarded even despite the plaintiff's desire for it. 204 There does not appear to be, however, any authority to the converse; namely that the diminution in value will not be awarded if it grossly exceeds the cost of repair or reinstatement. This may be due to the fact that for a long time diminution in value was considered the prima facie measure of damages, with reinstatement something to be awarded only if sought by a plaintiff and necessary fairly to compensate his loss. There would not, however, seem to be any rule precluding the Court from determining that in all the circumstances, the injury is reparable and the reasonable cost of re-instatement was the most appropriate measure of damages, notwithstanding a plaintiff's seeking assessment on the basis of diminution in value. In fact, such a rule would run counter to the overriding principle that the Court must give the plaintiff such damages as to put him or her as far as money can in the position as if the tort had not occurred. The Court would of course give credence to the preference of the plaintiff as a guide to what he considers his real loss to be, but I would not consider the Court ultimately bound to follow it. United States authorities have espoused the following principle: where the injury to realty is only temporary in the sense that the land can be restored to its original condition at a reasonable expense which is less than the diminution in value (and, I would add within a reasonable time), the Court should award that amount, making allowance for the loss of use or income for the time pending restoration. See for example Washington State: Colella v King Cy 72 Wn.2d 386, 433 P.2d 154 (1967), Olson v King Cy 14 ALR (3d) 950 (1967). 205 I think that the true position and certainly the one which best takes into account the overriding purpose of the law of damages (supra) was that set out in C.R. Taylor (Wholesale) Ltd v Hepworths Ltd [1977] 1 WLR 659. In that case a fire caused by the defendant gutted a billiard hall on his neighbour's land, a site held by the plaintiff solely for its potential redevelopment value. The cost of re-instating the billiard hall (which the plaintiff had no intention of using) exceeded £28,000 whereas the diminution in the market value of the site was about £2,500. In the course of his judgment, May J said (at 667): "The various decided cases on each side of the line [diminution versus reinstatement] to which my attention has been drawn, and to some of which I have referred in this judgment, show in my opinion merely the application in them of two basic principles of law to the facts of those various cases. These two basic principles are, first, that whenever damages are to be awarded against a tortfeasor or against a man who has broken a contract, then those damages shall be such as will, so far as money can, put the plaintiff in the same position as he would have been had the tort or breach of contract not occurred. But secondly, the damages to be awarded are to be reasonable, reasonable that is as between the plaintiff on the one hand and the defendant on the other . That these are the underlying principles is I think quite clear, for instance, from the judgments in Jones v Gooday , 8 M & W 146 and in particular from the judgment of Alderson B. [emphasis added] 206 The ultimate result in the case is illustrative. May J held that prima facie the plaintiffs were entitled to the £2,500 diminution of value of their premises, but he refused to award damages in that sum on the basis that it did not reflect their true loss, which was nil, since the fire had saved the plaintiffs about £3,000 being the cost of clearing the site for redevelopment. Instead, he held the plaintiffs were entitled only to the cost of the immediate remedial and clean-up work necessary to make the site safe and remove debris. May J held (at 669) that the general rule regarding the prima facie measures of damages "is not in my opinion really the statement of any legal principle, it is merely the factual result in the majority of cases of the application of the two basic rules to which I have referred to cases of torts affecting land." I agree. 207 I would therefore conclude that in cases of physical damage to land, the measure of damages may be either the diminution in value of the land or the reasonable cost of reinstatement, subject always to the overriding requirement that damages be a fair and reasonable compensation to the plaintiff for the injury he has suffered: see the comments of Purchas LJ in Farmer Giles Ltd v Wessex Water Authority [1990] 1 EGLR 177 (CA). In that case, Russell LJ also made the following statement, which I adopt: "The judge must stand back, when he has done his arithmetic, and ask himself whether the figure achieved by his findings is fair both to the plaintiffs and the defendants." 208 I should add, although it is not strictly necessary to decide, that given the overriding principle is proper compensation, the Court may not be confined to the two established bases of diminution and re-instatement cost. See D. Elvin & J. Karas, "Unlawful Interference with Land" (Sweet & Maxwell, London), 1995, p112-113. I think that conclusion is implicit in the reasoning of Samuel JA in Evans v Balog, of Street CJ in Minter v Eacott and in the other cases which I have cited. Furthermore, I do not consider that the Court is bound by a plaintiff's so-called election as to the basis for assessment of damages. I am in no way suggesting that this substitutes an unguided, free-wheeling inquiry in which the Court is freed from all principles and left to do arbitrary 'justice'. Rather, if it appears that the amount claimed by the plaintiff is disproportionate to the true loss suffered, it may award damages on an alternative basis to that claimed, where the evidentiary basis for doing so can be found. 209 A brief survey of certain cases involving destruction of trees supports this approach. Carr v Sourlos (1994) 6 BPR 13,626 was a case in which the defendant trespassed onto the land of their neighbour with the intention of removing certain trees. This deprived the plaintiff of the aesthetic effect of the trees and their shade and the privacy from the adjoining property that they had provided. Expert evidence was tendered of diminution in value of between $10,000 and $20,000. Apart from exemplary and consequential damages, Cooper DCJ awarded compensatory damages of $7,500 on a diminution in value basis, expressly taking into account the potential for reinstatement of the aesthetic effects over time by planting of further trees. The judge therefore seems to have judged that the total diminution in value did not accurately reflect the plaintiff's loss and discounted it accordingly. 210 In Gazzard v Hutchinson (1995) AustTortsRep 81-337, the Supreme Court of South Australia dealt with an appeal from a decision of magistrate awarding damages for damage to trees in similar circumstances to that in Carr v Sourlos. The Magistrate had assessed damage on the basis of diminution of the plaintiff's enjoyment of the trees, awarding $100 per tree, taking into account that the trees were capable of growing back to their former glory. Bollen J declined to interfere in the award, holding it was neither manifestly excessive or manifestly inadequate. 211 The Full Court of the Supreme Court of South Australia also considered the matter in Lonie v Perugini & Perugini [1977] 77 ATC 4,318. There, a fire lit by the defendant on his property had escaped and caused considerable damage to the plaintiff's adjoining orchards, damaging 167 trees to varying extents. Bray CJ (at 4,320) considered the nature of the plaintiff's interest in the orchard as a continuing income-generating enterprise. He held that diminution in value may not be an appropriate measure of damages if the trees (and the land) were devoted to a profitable purpose which the damage had frustrated, interrupted or made less profitable. The trial judge had awarded damages on the basis of loss of profits on fruit sales for ten years, based on evidence of the plaintiff's actual loss prior to the hearing (these damages appear to be by way of loss of use of that part of the land). The Full Court held he was entitled to do so, based on the evidence of loss that had been tendered before him; and that although the ten years loss of use damages were very high this was offset by the absence of compensation for re-instatement cost of those trees that had been (or would be) rendered useless by the tort. 212 Finally, in a recent English case, Scutt v Lomax [2000] EWJ 350, the Court of Appeal dealt with facts where the defendant's contractor had bulldozed the plaintiff's rural retreat, destroying all buildings on it and 20 mature willow trees, and 4 mature cypresses. The diminution in value was found to be minimal and damages were awarded based on the cost of re-instatement. The plaintiffs claimed £18,500 to put in trees of the same type and maturity; the defendants argued for a much lower amount for trees of a modest height. The judge adopted the lower figure, but adjusted it upwards to £2,000 to take into account that those trees would not be the same as the ones lost. Clarke and Evans LLJ held that this figure did not appropriately compensate the plaintiff's loss and substituted the sum of £8,000 for reasonably mature new trees and transportation of those trees to the property plus £3,000 for loss of amenity in the meantime. 213 In my view, if these variegated cases show anything, it is that Courts have not and should not take too rigid a view in assessing damages in cases of this kind. It is always necessary to look to the plaintiff's real interest in the land (and the trees) and his or her actual loss, then to adopt a sum which fairly compensates for that loss as far as money can.

C. Principles of ValuationC. Principles of Valuation 214 It is appropriate now to deal in some detail with principles regarding valuation, because in all cases the Court must base its award on a considered valuation methodology and on the evidence properly bearing on that valuation. The assessment of damages on a re-instatement basis is not problematic, being based upon evidence called by the parties on the facts of the case. Assessment of diminution in value is, however, a more complex undertaking. Given that Tellamist has pressed its claim for damages on this basis, it is desirable for me to outline briefly some of the principles pertaining to valuing land.

(i) General principles of valuation (i) General principles of valuation 215 Broadly speaking, the test is: what would a person desiring to buy the land have had to pay for it on the relevant date to a vendor willing, but not desirous, to sell it for a fair price. The leading authority in Australia is the High Court decision of Spencer v The Commonwealth of Australia. Griffiths CJ said (at 432): "In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, i.e., whether there was, in fact, on that day a willing buyer, but by inquiring: What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell? It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons acquainted with the land at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling seller would come together." [emphasis added] 216 Isaacs J elaborated on this test (at 440-441): "[T]he 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 …To arrive at the value of the land at that date we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by a voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the land." [emphasis added]

However, earlier (at 440) Isaacs J precludes knowledge of circumstances subsequently arising, as I have said. 217 Spencer and most of the other authorities in this area deal with valuation of land in the context of expropriation of the plaintiff's land by governmental authorities under a statutory regime. There is nothing to suggest, however, that the principles for determining the market or exchange value of land are inapplicable to valuing lands in other situations. The Spencer test was affirmed as correct by the High Court in the context of valuation for land tax purposes: Commissioner of Land Tax v Nathan (1913) 16 CLR 654 (at 661 per curiam). It has recently been affirmed by the High Court in the context of stamp duties: Commissioner of State Revenue v Pioneer Concrete (Vic) Pty Ltd (2002) 192 ALR 56 (at 67 per Gleeson CJ, Kirby, Gummow and Hayne JJ). The test is of wide application, and is generally taken to be the correct legal test for determining market value in all circumstances. See for example its application in torts: Kenny & Good Pty Ltd v MGICA (1992) Ltd (supra) (at 627 per McHugh J) and in valuing for insurance purposes: Fire & All Risks Insurance Co Ltd v Rousianos (1989) 19 NSWLR 57 (at 65 per Gleeson CJ with whom Kirby P and Clarke JA agreed). The variety of situation in which the Spencer formulation has been applied strongly supports its application here. 218 At least in cases of compulsory acquisition, the valuation is to take into account the special value of the land to the owner as distinct from merely its saleable value. For example, if a landowner is being permanently deprived of his or her land and home, fair compensation must take into account the fact that it is his home which is being expropriated. This emerges from Pastoral Finance Association Ltd v The Minister (1914) AC 1083 (PC) and later cases. In Minister for Public Works v Thistlethwayte (1954) AC 475, Lord Tucker said (at 491): "It must not be forgotten that it is the value of the land to the owner that has to be ascertained, and that the willing seller and purchaser is merely a useful and conventional method of arriving at a basic figure to which must be added in appropriate cases further sums for disturbance, severance, special value to the owner and the like." 219 Similar principles are found in Australian decisions, such as the comments of Dixon CJ in Turner v The Minister for Public Instruction (1956) 95 CLR 245 at 265. It might be thought that the compensatory principle would require a similar adjustment in appropriate cases of permanent impairment to the land arising out of trespass. That may well be, but the occasion for determining it does not arise in this case. The High Court has recently considered special value collaterally in Boland v Yates Property Corp Pty Ltd (supra). There Gleeson CJ emphasised that whether or not there is a special value to the owner which exceeds market value, is a matter for factual judgment (at 596). I consider that no question of special value arises in this case, as a matter of fact, just as it did not strictly arise in Boland v Yates. The value of the land in Tellamist's hands was the same as its value to any prospective purchaser of the land, and the pleadings and submissions proceeded on that basis. 220 It is accepted from Spencer's case that the valuation must be a 'valuation for highest and best use'. Isaacs J cited The Queen v Brown (1867) LR 2 QB 630, in which Cockburn CJ stated (at 631): "A jury … in assessing the amount to which the landowner is entitled, have to consider the real value of the land, and may take into account not only the present purpose to which the land is applied, but also any more beneficial purpose, to which, in the course of events at no remote period it may be applied, just as an owner might do if he were bargaining with a purchaser in the market. This is the mode in which the land would be valued." 221 In taking into account highest and best use, it is necessary to have regard only to uses which are legally possible, and to the probability of consent being given for such potential uses and any 'potential utility' of the land, such as a latent beneficial use existing as a possibility only. 222 Comparable sales data are obviously important in making such a valuation. Such data should be weighted to sales of land with similar physical characteristics, and similar potential utility at or about the relevant date. It is permissible valuation practice See R. O. Rost & H. G. Collins, Land Valuation and Compensation in Australia (3rd ed), 1984, p.88-90, 99-100. to take a general average of prices paid at or about the same time for lands of comparable utility and value, but those sales which diverge strongly from the general price level should be excluded as 'out of line'. The average should be weighted by reference to land units (Aggregate sum/total units of land). However, averaging is not permissible as between a number of sales of land which, although comparable, have sufficient points of difference as between themselves and the property being valued. The basic idea is that the assessor should not be comparing apples and oranges.

(ii) Methods and techniques of valuation (ii) Methods and techniques of valuation 223 There is no one single method or technique of valuation which should be applied to the exclusion of all others though methods of valuation have come to form recognised categories. If support is needed for such a proposition, it can be found in the judgment of Callinan J in Boland v Yates Property Corp Pty Ltd. There, though obiter, he sets out the position with admirable lucidity (at 652-654). 224 The valuation issue in Boland necessitated (like the present case) valuation of an area of land for which development of a market-place had been approved, but had not yet been commenced. Unlike Tellamist's position, valuation was required as the site was to be resumed by the Government, but that expropriation context does not distinguish it from this present case. I respectfully adopt Callinan J's analysis, quoted below with footnotes omitted: "[280] …The approach of the Court of Appeal would seem to exclude altogether the possibility of a sound valuation based upon, or having regard to, the profits that the property if developed might yield. There is no legal principle that purports to, or could, close for all times the categories of methods of valuation which might be acceptable in a particular case. Rodbertus observed that in its early stage almost every civilisation was marked by two factors, agriculture and slavery. These, Seligman wrote, lead to a fundamental distinction between ancient and modern economic theory. The former was a simple one, and, taken with a general community knowledge of the productivity of land and the fact that valuations were usually required only for the purpose of levying taxation, meant that early valuations were simple and relatively unsophisticated exercises. Valuation practice is, however, like legal practice an evolving discipline.

[281] As time has passed different types of businesses, different uses to which property may be put, changing financial markets, and more sophisticated and different methods of obtaining financial information and applying financial criteria call for flexibility, resourcefulness and different methods of making valuations. Two typical examples should suffice. Large "drive-in" shopping malls containing discount department stores, speciality shops, municipal libraries, restaurants, cafes, department stores, large supermarkets and numerous picture theatres were unknown when Spencer's case was decided. To value one, either when fully developed or in prospect, requires that the closest consideration be given to the income stream that such an establishment could be expected to generate and for how long it might do so. Similarly sophisticated techniques may be involved in the valuation of large city buildings or sites approved for their erection taking account of incentives offered to tenants and the incidence of tax payable by both parties. Often the owner of land which has been approved for a development will not undertake the development but will sell it to an investor or developer. The point is that the land with the approval attached to it becomes the prize and it would be unthinkable that the price for the prize would not be fixed in such a way as to reflect the return that the development when completed would yield. There is no reason to suppose that the price for the site of an approved but as yet undeveloped market should be very differently calculated.

[282] It is not as if the valuation of a notional capital asset by reference to its expected income-generating capacity is by any means a novel concept in the courts. Daily, courts in this country and elsewhere value what has been described as something in the nature of a capital asset, a person's capacity to earn income, by reference to his or her likely earnings over a period in the future taking account, subject to discount for contingencies, of that person's as yet unrealised but realisable prospects in life.

[283] Wells J recognised the availability of different methods of valuation in Bronzel v State Planning Authority : I am not disposed to reject any method of valuation adopted by either valuer on the ground that it is not worth considering; it seems to me that if Spencer's case … is to keep its practical worth in this jurisdiction, this court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.

[284] It is unlikely that in 1907 courts would have encountered a discounted cash flow method of valuation, another method which looks to, among other things, net proceeds receivable in the future from a development not as yet undertaken. Its availability was acknowledged by Jacobs J in this court in Albany v Commonwealth .

[285] If a court is prepared to entertain, as this court did in Eastaway v Commonwealth , a claim for compensation on the basis of increased hypothetical profits from a proposed modernisation and enlargement of the claimant's business, there is no reason why a claim based upon the likely net returns from a proposed but as yet unconstructed development should not similarly be entertained.

[286] This court itself has in any event clearly accepted what has been described as the hypothetical development method of valuation. The method was described by Starke J in Australian Provincial Assurance Association Ltd v Commissioner of Land Tax : In the present case the valuation has been made on what has been variously described as the hypothetical building or development basis. The parties agree that the building upon the land does not return the rental that might reasonably be expected from it. So the rental from that building is discarded, and it is assumed that the land is vacant. The erection of a new building on the land is envisaged, providing office accommodation, which is the best method of obtaining the advantages that the land possesses. Accordingly a building is planned to obtain the full benefit of those advantages. Its cost is estimated, the gross annual rentals or receipts from it are estimated, and from these rentals or receipts are deducted various annual outgoings and interest charges which are also estimated to obtain the net receipts. The capital value of the land is then ascertained by capitalising the net receipts at some given rate of interest, and in this case, I may add, the parties were content to work upon a 4.5% basis. The unimproved value of the land is then deduced by deducting from the capital value so obtained the cost of the erection of the building. Adopting this method of ascertaining the unimproved value of the assessed land, I find as a fact that its unimproved value on 30 June 1939, was the sum of £76,154. [287] The method is neither novel nor especially difficult, and, as with all methods, requires the making of value judgments.

[288] In Turner v Minister of Public Instruction all the members of the court (Dixon CJ, Williams, Fullagar, Kitto and Taylor JJ) accepted the appropriateness of a like method in the case of resumed subdivisible, but as yet unsubdivided, land.

(iii) The Hypothetical Development Model See generally R. O. Rost & H. G. Collins, Land Valuation and Compensation in Australia (3rd ed), 1984, pp.105-112, 146-164. (iii) The Hypothetical Development Model 225 In Boland at [286], Callinan J refers to the 'hypothetical development method' as an accepted method of valuation in cases where the land is not yet developed to its highest and best use. It was the methodology apparently adopted by Mr Howes, the Council's valuer, if his opinion that there was no disadvantage from removing the trees was not accepted by the Court (Blue 3/627-8 661-2), as indeed it is not. In cross-examination, Mr Fagan (valuer for Tellamist) agreed that Mr Howes' basis was the most straightforward and simple approach to be adopted (T, 251M, R-T). The methodology was explained by Roper J (as he then was) in Closer Settlement Ltd v The Minister (1942) 17 LGR (NSW) 62 (at 65): "In arriving at the value of land which is suitable for subdivision a familiar and appropriate method … is to estimate from whatever comparable sales of land in subdivision are available the price which would be realized by the land when sold; then to estimate the costs involved in the subdivision and the length of time that the realization would take, making provision for the payment of rates and for interest on money outstanding; and an estimated net return on the subdivision is obtained. It is of course clear that a person purchasing land in globo for the purpose of subdividing it would not pay the sum of money which is the present equivalent of that estimated return. Many factors in the calculation are speculative: the land in subdivision may not realize the prices which are at present expected, and the subdivision may take longer to realize than is at present anticipated. To compensate for the risk involved in the venture the purchaser would certainly discount the estimated returns." 226 As Callinan J comments, this method was adopted by the High Court in Turner v The Minister for Public Instruction (supra), where the Court clarified the discounting required by the formula. It is necessary to make a deduction for developer's risk of realisation and deduction of an amount equal to the amount of profit which a purchaser buying the land at the date would expect to make by reselling it in subdivided allotments. Kitto J stated (at 291): "Even apart from evidence, it seems obvious that no one is going to buy an area of land to sell it in subdivision if he has to pay as much for it as he thinks he can prudently count on getting back … In a case where land has no special value to any particular person, how is it possible to say in one breath that the land is not worth more than £x to a purchaser who is likely to get £x + y if he resells in subdivision, and to say in the next breath that it is worth the full £x + y to the existing owner on that date? If a purchaser would not pay the £y because that is the profit which he would need to see in the venture before he would put his money into it and go to all the trouble and expense it requires, why should not the existing owner, who is envisaged as considering what the land is worth to him, reflect that he needs a like inducement to leave his money in the land and go to the same trouble and expense?" 227 The following formula is used to find the value of land which is not yet developed to its highest and best use by notionally improving the land for its most beneficial use or in valuing land suitable for subdivision which is not yet subdivided.

VALUE OF LAND IN GLOBO = GROSS REALISATION - (DEVELOPMENT COSTS + DEVELOPER'S PROFIT) Where: Gross realisation = Aggregate of the prices assigned to each lot in the hypothetical subdivision; Development Costs = Reasonable costs incurred by the hypothetical subdivider in order to obtain the gross realisation (survey fees, clearing, road construction, kerbing, rates & land tax, legal expenses, selling & administrative costs, interest on capital for the period in which the land is held) Developer's Profit = The margin of profit necessary to induce a prudent subdivider to risk his capital. It comprises both a sum to cover risk (a form of insurance against error in estimates of costs and gross realisation) AND a sum representing profit." 228 Valuation by the hypothetical development model is clearly based on a number of assumptions as to: (1) the estimated cost of effecting the improvements necessary to make the best and highest use of the land; (2) the estimated gross rentals obtainable and the probable annual outgoings to be deducted therefrom in order to arrive at the probable net annual return. (3) the rate percent of return which a hypothetical investor could be expected to require from such an investment. 229 In cases of sectional development (where a complete project is planned, but will be sold in sections over a longer period of time), it may be necessary to calculate the formula separately for each section. Thus, if part of the land is not saleable for 5 years, it may be treated separately, allowing interest on the value in globo for a correspondingly longer period and deferring amounts expected from sale of allotments at the appropriate interest rate.

(iv) 'Before-and-after method' (iv) 'Before-and-after method' 230 An alternative methodology of valuation, which is often used when part of the land has been severed is the 'before-and-after method'. Rost & Collins, Land Valuation and Compensation in Australia (3rd ed), 1984, p.495ff. A before-and-after valuation involves two separate valuations on the following basis: (1) A valuation of the owner's property as it was immediately before the compulsory taking (or, by analogy, disposition by sale), but excluding any increase or decrease in its value due to the execution or proposed execution of the public work or purpose; (2) A valuation of the owner's property immediately after the date on which part of that property had been taken (or disposed of) - in order to reflect any diminution in value due to severance and injurious affectation in the value of the remaining property. 231 This method of valuation is apposite in road-widening cases or other partial expropriation cases. There the strip of land along the frontage of a vacant building block is often considered the more valuable part of the land, because closest to the street. Where the strip of land is taken for road-widening, however, the practical effect is merely to reduce the depth of the block (unless some damage to the residue is caused), so an appropriate measure of compensation is the difference between the value of the original block and the block with reduced depth. The method is also used, for similar reasons, in valuing the quantum of impairment to goodwill of a business transferred to a new location. 232 I mention the before and after method because it appears that what Mr Fagan (Tellamist's valuer) did was as follows. In his first report ('the 1992 report') he basically used the hypothetical development method to calculate the value before and after the trespass based on a 35-lot cluster development. Then in his second report ('the 2001 report'), primarily relied on by Tellamist, he used what appears to be a version of this 'before and after method' (Blue, 2/429). Apparently Mr Fagan understood his initial instructions regarding the 2001 report to involve this before and after method (T, 252U). However there are deficiencies with this report to which I will return. In any event, I do not consider that the 'before-and-after' method (if it was used by Mr Fagan) is suitable to the kind of case we are here dealing with, especially given both Mr Howes and (later) Mr Fagan's preferment of the hypothetical development model (T, 251-3).

D. What is the appropriate method of valuing the Plaintiff's loss? D. What is the appropriate method of valuing the Plaintiff's loss? 233 Having gone through the legal principles and valuation methodology applicable in such cases, it is necessary to turn to the facts of this case. What was the loss suffered by Tellamist by reason of the Council's trespass? I find it convenient first to set out the evidence which was before the trial judge, bearing on the established bases for assessment of damages, noting that this is not necessarily determinative of Tellamist's actual loss.

(i) Reinstatement cost? (i) Reinstatement cost? 234 Firstly, the cost of re-instatement of the land was a point of some contention on appeal. The trial judge had relevantly found: "[100] These trespasses converted the outlook from the site of the cluster development, proposed to be marketed to retirees, from a pleasant bushland environment into a harsh and barren industrial environment. The aim in assessing the damages is to place the plaintiff into the position it would have been in 1991 if the trespasses had not occurred. In my view that could not have been done by planting the small trees and plants referred to by Mr Castor. They would have taken years to reach a state that the felled trees and vegetation were in at the time of the trespasses. Mr Castor agreed that some of the trees were 20 years old and some were 60 years old. It was a natural bushland setting or, as the Council had called it, a "koala corridor" (tr. 156 and 191). I think it is too simplistic to claim that all that was needed was some replanting. Certainly, when the plaintiff attempted to replant the area its efforts were thwarted by a further trespass and destruction of saplings.

[101] Mr Neal's unchallenged evidence was that he replanted 300 saplings prior to the further trespasses in December 1991. Having regard to the photographic evidence, it is not unreasonable to conclude that there were at least 20 to 25 trees of between 20 to 60 years of age on the proposed public reserve to the south of the cluster development site. If one applies Mr Castor's figure of $10,000 per tree, a total of between $200,000 and $250,000 is reached. That figure would need to be increased by reason of the very high mortality rate to say $300,000 to $350,000. There is then the extra cost of plants and shrubs for undergrowth and the watering system and labour. This would bring the cost to approximately $315,000 to $365,000. The uncertainty of survival of the mature trees that are replanted is also an unsatisfactory aspect of assessing the damages on this basis. 235 The Council submitted that the reasonable cost of restoration was the maximum damages the Court should have awarded. Tellamist, on the other hand, maintained that diminution in value was the appropriate basis, but that if restoration cost was to be awarded, the trial judge underestimated the cost of replanting (Orange, 80). 236 I consider the Council's estimate (Orange, 60) of $37,000 to be unreasonably low given Tellamist's loss, and the fact that this estimate was based upon Mr Castor's opinion which her Honour rightly rejected that tube stock could adequately recreate the visual screen. Equally, I consider Tellamist's estimate (Orange, 80) of over $2,000,000 to be excessive in the extreme. 237 In the circumstances, I think that her Honour's assessment of the re-instatement cost ($315,000 to $365,000) was a reasonable one given the evidence before her, with which she had dealt at [77] to [78]. Tube stock was not sufficient to recreate "the natural bushland setting" which had been lost, and Mr Castor's evidence (T, 400-403) was that transplanting mature trees was an expensive and risky procedure given the age of the trees and the sandy nature of the soil. If her Honour had awarded re-instatement costs of the trees as she had indicated, I do not think her conclusion would be open to question. I note for completeness that her Honour's finding of the maximum probable cost of reinstatement was identical to the figure which she in fact awarded in damages, but being simply for diminution in value ($365,000); see below. 238 Ultimately, Bergin J declined to award damages based on re-instatement cost. Her Honour implicitly made a comparison between the available evidence regarding reinstatement and the available evidence on the value of the land with its development potential, while drawing on but not ultimately accepting in their entirety either of the two valuers. Although I have said that her Honour's ultimate assessment of the range of reinstatement costs was a reasonable one, and one well available to her on the evidence, it was in my opinion similarly open to her to decline to award damages on that basis for the reasons she did.

(ii) Loss of profits? (ii) Loss of profits? 239 The method of valuation suggested by Tellamist on appeal (as set out in the notice of appeal), seems to involve assessment of damages based upon a loss of profits basis. I have already set out the amount of damages sought by Tellamist. It proceeds on the basis of calculating what is essentially a revenue loss, by deducting from the expected net profit on the 35 lot cluster development the net profit obtained on sale of the land as 12 residential lots, making allowance for necessary costs. In oral submissions on appeal, the Council argued that this is not in truth a valuation of the land, being merely a valuation of the shortfall of income streams which would arise from a diminution in value of the land. Rather, what should have been valued was the diminution in the residual value of the land. 240 Considerable time on appeal was devoted to argument as to whether Tellamist had in fact conducted its case entirely on the basis of a loss of profits, although framed as a claim for diminution of value. The Council conceded that a loss of profits claim was in principle open in such a case, but that Tellamist was precluded from raising it on appeal. Written submissions on damages which were handed up by counsel for Tellamist at trial explicitly stated that it preferred diminution in value as the most appropriate means of valuing its loss. Tellamist, for its part, denied that it had ever pursued its claim on a true loss of profits basis, but seemed reluctant squarely to set itself behind either a loss of profits (opportunity to make profits) claim or a diminution in value claim, pursuing a somewhat confusing and unhappy amalgam of the two. 241 There are obvious similarities between loss of profits and loss or diminution in value, given that the same data can form the basis of both values. But they are not the same thing; the latter is a much more complex and sophisticated exercise designed to show in real terms what the residual value of the land was at a particular date. On appeal, Tellamist appeared at times to be arguing that they were almost two sides to the one coin. The way in which Tellamist framed its claim and in particular the formula it has adhered to for calculating diminution in value has unfortunately allowed considerable confusion to creep into the matter. What the trial judge considered the claim to involve is set out at [90]: "The plaintiff claims that by reason of the defendants' trespasses it was no longer viable to proceed with the cluster development and that it should have by way of damages an amount equivalent to the loss of profits it would have made from that proposed development. The plaintiff claims $1,898,208 as its loss calculated as a net profit from the sale of the cluster homes at $1,942,101 plus $77,454 for consequential loss for costs in preparing for the cluster development, less an estimated profit from the twelve residential lot development of $121,347." [emphasis added] 242 I do not think that this means that the trial judge understood the plaintiffs to be making a pure loss of profits claim. The word 'equivalent' is telling. What the plaintiff was arguing was that the diminution in the value of the land was equivalent to a loss of profits. That argument is wrong. It is far too simplistic as it does not address the question of what a desirous purchaser would offer to a not unwilling vendor in order to secure the land. The argument was correctly rejected implicitly by the trial judge in the manner in which she ultimately assessed damages (see below). 243 It is not open to Tellamist now to formulate its claim on a pure loss of profits basis. A basic principle of fairness militates against such a course. The evidence required to meet such a claim would be distinct from the evidence required to meet a claim based on diminution in value. Tellamist simply cannot revive a pure loss of profits claim on appeal. I am of the opinion that its claim was not run as a loss of profits case but merely a claim for diminution in value which failed to appreciate (and continues to fail to appreciate) certain fundamental tenets of proper valuation methodologies. The trial judge correctly approached the claim, stating at [102]: "I am not assessing the damages in this case as an actual loss of profits. I am assessing the diminution in value of the plaintiff's land at the time of the trespasses by reference to the impact of the removal of the buffer upon the land as it was then which included the consent to the cluster development." 244 Her Honour made no error in this approach; any perceived admixture in her reasoning between concepts of diminution in value and loss of profits can only be said to have stemmed from the opacity of the submissions in that behalf made by Tellamist.

(iii) Diminution in value? (iii) Diminution in value? 245 Ultimately, Bergin J came to award damages based on diminution in value ([102]). However the approach her Honour took was not a 'pure' approach, a point to which I shall return. In the light of the principles I have referred to above, I am not satisfied that a diminution in value methodology of assessing damages was in the circumstances erroneous. This does not however mean that the actual assessment undertaken by her Honour was free from appellable error, as I shall now proceed to consider in more detail.

E. The valuation evidenceE. The valuation evidence 246 A preliminary matter is the question of whether or not it is proper in this valuation to deduct a component for interest on the value of the land. The trial judge felt that it should not be deducted (Red, 64G-I). The nature of the interest component is derived from the hypothetical development formula. The figure obtained once developer's costs and profits are deducted from the gross realisation does not accurately represent the residual value of the land. The reason that it does not is that the sum obtained must comprise a sum representing land value and a sum representing interest on capital tied up in the land, accruing during the development period. Interest on land is a fixed cost, representing the opportunity cost for the developer in having funds tied up in the land during the development period. It is proper for the interest component to be deducted, since obviously a new developer taking over the project in its gestation should not have to pay the interest of its predecessor. It is the equivalent, for the land component, of the interest on development costs which is also deducted. Together they make up the interest on capital component which should be deducted in order as accurately as possible to reflect the true residual value of the land at the date of valuation. Mr Howes and Mr Fagan were split on this issue, the former contending that it should be deducted and the latter arguing the opposite. It appears at [87] that Bergin J refused the deduction, with a somewhat cryptic reference implying that it was necessary to add back into Mr Howes' value the amount deducted for interest on the land "because the plaintiff owns the land" (Red, 64G). What her Honour meant by this is not at all clear, and to my mind was with respect here in error.

(i) Diminution in value based on a 35 lot cluster development before and after trespass (i) Diminution in value based on a 35 lot cluster development before and after trespass 247 The competing valuation evidence was presented by Mr Fagan (for Tellamist) and Mr Howes (for the Council). I consider Mr Fagan's evidence first. As presaged above, Mr Fagan had initially proceeded on a different basis in coming to his valuation, and was afflicted with the confusion between loss of profits and diminution in value that flowed through Tellamist's case. Indeed there is much to be said for the argument made by the Council that Mr Fagan's valuation was not in truth a valuation of the land per se. Mr Fagan did not deduct an allowance for developer's profit or 'interest on land'. In cross-examination (T, 252P-Q), however, Mr Fagan agreed that not only was the hypothetical development model the most appropriate model but that it was correct to make a deduction for developer's profit in making such a valuation. Mr Fagan had made a report in 1992 (Blue, 2/457) in which he valued the pre-trespass average value of each of the 35 lots in the proposed subdivision at $130,000 and the post-trespass value at $115,000, a difference per lot of $15,000 (11.5%). In his 2001 report (Blue, 2/420), Mr Fagan concluded that in fact the true pre-trespass average value was more accurately $150,000 per lot, but, as the trial judge correctly points out at [85], he conceded in cross-examination that he had not accordingly increased the post-trespass value. Thus his 2001 report erroneously suggested a difference in value of $35,000 (23%), which was thus overstated. The trial judge, appropriately in my view, therefore adjusted the post-trespass value in the 2001 report upwards to $132,750, so that the percentage difference remained 11.5% as in the earlier report. 248 Turning to Mr Howes' evidence, the most significant difference was his opinion that the diminution in value was nil because any purchaser of the land in globo at the relevant time would have been aware of Condition 10 (that the Reserve had to be dedicated before Council would approve any Building Application made under DA 5163/91). 249 As I have already indicated, this opinion, and the submissions made by Council based on it should not be accepted. The fundamental problem is that they ignore the fact that the diminution in value arises from the destruction of the trees, regardless of on whose land they stand. Council failed to establish an entitlement to do so, in evident disregard of its own Tree Preservation Order, proper planning principles and in order to suit its own interests in terms of the location of the drain, where the trees were, in the circumstances described in [98] above recounting Mr Glover's unrefuted evidence. It should not be overlooked that Council had imposed development conditions which suggested an enhancement of the public reserve, as any hypothetical purchaser would appreciate. What the submission amounts to in these circumstances is an opinion that the pre-trespass value of the land (with trees) is the same as the post-trespass value (without trees). That can only mean that a hypothetical purchaser looking at the land before the trespass would consider there to be no value in the trees as standing, when they had clear value as a screen against the visual impact of Council's own industrial development. I have already stated that I share the real doubts of the trial judge as to whether the trees could have been removed, even if the land was dedicated to Council. A hypothetical Spencer purchaser prior to the trespass, who was aware of Condition 10 may well have known that what was described as a "public reserve" would have to be dedicated to Council before the Building Application would be released. But it does not follow that such a purchaser would know that the trees would be destroyed or that a drain would be constructed on that "public reserve". Thus, how can it be said that the Spencer purchaser would not pay for the land on the basis that, at that time, there was little or nothing to suggest that the trees would be destroyed? 250 In written submissions, the Council sought support from the evidence of Mr Fagan given under cross-examination. According to the Council Mr Fagan agreed that a hypothetical purchaser would inform himself about the conditions of consent (T, 247E-H) and would be aware that those conditions run with the land (T, 247I-248J). Furthermore, it was said that Mr Fagan agreed a prudent purchaser would make inquiries of the Council to find out what would be located on the public reserve after it was dedicated to Council (T, 248E-J). Finally it was said that Mr Fagan agreed that on the assumption that the Council told the hypothetical purchaser that it intended to clear the public reserve and construct a drainage swale then the value of the land before the trespass would be the same as the value of the land after the trespass (T, 248K-249P). This last assumption creates a problem to my mind, namely that there is no evidence whatsoever that the Council would have been so forthcoming as to tell a hypothetical purchaser its plans, when the evidence shows it had not informed Tellamist of them until after the trespass. It is a large stretch to assume that a hypothetical pre-trespass purchaser would have been any more fortunate. 251 A reasonable Spencer purchaser after the trespass, who had made inquiries not only of Council but of the vendor's understanding of the situation, could reasonably have concluded that though title could or even would pass to the Council, that did not negative the value in the trees at the time or justify any expectation of other than their continuance as a buffer. Once this is recognised, and it is remembered that at the time of the trespass, the trees were on Tellamist's land over which the Council had no claim of right, the argument that the trespass and ensuing destruction had no effect on value cannot be accepted. 252 Mr Howes' alternative opinion suggested that the damage was less than that claimed by Tellamist, and he undertook a valuation based on the hypothetical development model to show this. In his Report (Blue, 3/607), Mr Howes accepted Mr Fagan's 2001 opinion that the unaffected average value of each lot was $150,000. But unlike, Mr Fagan, Mr Howes assessed the post-trespass affected values as being $136,500, with a difference in value of $13,500 (9%). Tellamist correctly points out in its written submissions that Mr Howes subsequently revised this opinion in the light of further consideration of comparable sales data, reducing the affected value to $133,500, being a difference in value per lot of $16,500 (11%) (Blue, 3/656-661). This had the natural effect of generally increasing his assessment of the diminution in value (and reducing the margin of difference between he and Mr Fagan, so as to be negligible, 0.5%). Tellamist points out in its written submissions that the learned trial judge did not take this revision by Mr Howes into account. That submission has a good deal of force in it, and her Honour's judgment must be regarded as being in error to the extent that her Honour relied on Mr Howes unrevised report. I return to this later. 253 Another important fact when considering Mr Howes report is that the assumption on which he proceeded was that "the trees along the boundary between the Tellamist land and the Council land would have been relatively few and provided only a minimal buffer" (Blue, 3/616I). Mr Howes was cross-examined at length (T, 357Y-365) on whether this assumption was justified, and he finally agreed that his initial assumption may have been wrong (T, 365F-I): "Q. In essence and shortly, Mr Howes, on the material you have been provided in the witness box here today, you would agree that the differential between the before and after was much greater than what you assessed it to be, correct? A. I think the difference may be greater, can't say it is much greater because I haven't done an analysis on that basis." 254 Mr Howes was not prepared to specify any precise figure that reflected the diminution in value if his assumption in his report was incorrect. It should be noted that the concession made applies equally to Mr Howes' revised report, as found in his affidavit of 20 December 2002 (Blue, 3/655ff). I have already held that the trial judge was entitled to find that there was an effective, though not impenetrable arboreal screen prior to the removal of the trees. The effect of Mr Howes' concession must ultimately be considered in the light of this finding. 255 Despite this, when considering Mr Howes' revised report it is clear, as I have said, that the difference with Mr Fagan's report in percentage terms is negligible (0.5%). The real difference lies in Mr Howes' deductions of both a sum for developer's profit and for interest on land. As I have already found, both of these were properly deducted by Mr Howes in accordance with orthodox valuation methodology according to the hypothetical development method. Mr Howes calculated developer's profit using a discount rate of 30% on the net realisation (being the gross realisation less marketing, advertising and legal expenses). The net result of Mr Howes' evidence suggested a diminution in value, post-trespass based on a 35 lot cluster development, of $376,994.69. 256 In order to provide some parity and comparability between the 2001 report of Mr Fagan (Blue, 2/420) and the revised report of Mr Howes (Blue, 3/607, 661), I have had to make some adjustments. These are set out in the attached Schedule A, and the succeeding paragraphs. 257 Some general explanatory comments precede the analysis. First, I have used an interest rate of 15% uniformly throughout, as did both Mr Fagan and Mr Howes in their respective reports. I have applied the rate for the same period of time as did Mr Howes in his report. Second, I have used the figure of $2,906,000 to represent development costs, in line with both valuers, Mr Howes adopting Mr Fagan's figure as expressed in his 1992 report in this respect (Blue, 2/472U, 3/627T). I note that the Schedule of Estimated Costs forming Annexure J to Mr Neal's affidavit of 19 December, 2001 (Blue, 1/117) sets out development costs for a 35 lot cluster development as being $3,307,899. It is readily apparent that once the components in that schedule representing cost of land, legal fees, real estate agent and advertising fees are deducted, that figure comes down to $2,918,124, which is approximate to the figure ultimately adopted by both Mr Fagan and Mr Howes. Third, in calculating developers' profit I have followed the same formula as Mr Howes and have discounted the net realisation by 30% in order to arrive at a figure representing discounted net present value (discounted net present value + developer's profit = net realisation). Fourth, I have also consistently added a line item of deductions to Mr Fagan's figures, namely $4,000 representing rates and land tax, which in my view were properly deducted by Mr Howes. Since this item is deducted from both the affected and unaffected values, it actually makes no difference in the ultimate event, but it is appropriate to include it nonetheless. Lastly, and crucially, I have used the figures for marketing and legal expenses as used by each expert respectively. This makes a large difference in the end result, as I show below. 258 Basically, I adjust both reports to deduct both developer's profit and interest on land. Schedule A. Obviously Mr Howes' report as revised remains unchanged. The unaffected (pre-trespass) value of the land is $556,650.29 and the affected (post-trespass) value is $179,626.04, resulting in a diminution in value of $377,024.04. Since Mr Fagan's 2001 report does not employ the hypothetical development model, it is necessary to make substantial adjustments. Firstly in order to determine net realisation, I have turned to Mr Fagan's 1992 report for the figures for marketing and legal costs (Blue, 2/472). I then calculate and deduct developer's profit using the same formula (hypothetical development model - see earlier) adopted by Mr Howes. I deal then with developers' costs, and interest on capital in the way outlined above. Calculated in this way, the adjusted unaffected value of the land on Mr Fagan's figures is $573,748.87 and the affected value is $186,834.90. Thus, on Mr Fagan's figures, the diminution in value is $386,913.46 (exceeding Mr Howes' valuation by just under $10,000.00). 259 The real difference between Mr Fagan and Mr Howes on diminution in value is therefore ultimately insignificant. Despite operating on somewhat different assumptions, the ultimate difference in their assessments of the diminution in value is only about $10,000 once the adjustments are made (although Mr Fagan's valuation is consistently higher). This difference is attributable to the differing assessments they made of comparable sales data and their differing initial assessments of the sales potential of the affected lots in the subdivision, and to their differing assessment of advertising expenses. Given this slight difference, it is difficult to see how the trial judge could have erred if in fact she had awarded damages for diminution in value basing her judgment on a preference of the figures of one valuer over the other (once differences in methodology are negated). It is said, however, that her Honour did not do this.

(ii) Valuation based on a 35 lot cluster development pre-trespass, and a 12 lot subdivision post-trespass (ii) Valuation based on a 35 lot cluster development pre-trespass, and a 12 lot subdivision post-trespass 260 A live issue is whether even if diminution in value were adopted, the appropriate post trespass measure was in fact one based upon a 35-lot cluster development without the screen provided by the trees in the buffer zone, as the trial judge apparently used. The other option is that the appropriate post-trespass measure involved a valuation of the land as a 12 lot residential subdivision. It was in fact just such a subdivision for which the Council ultimately granted Tellamist consent in 2000, the 35 cluster development DA having expired in 1996. As I have already noted, that consent was not subject to any condition requiring dedication of the buffer zone to Council. It was submitted by counsel for Tellamist that a hypothetical purchaser in the Spencer sense who was considering purchasing the land immediately after the trespass would have regarded the 35-lot cluster development (for which the DA had been granted) as a questionable enterprise. Such a purchaser may indeed have looked at the vacant block in the light of the trespass and said to him or herself that the highest and best use of the land post-trespass was a 12 lot residential subdivision (without development) of the kind valued by Mr Fagan (Blue, 2/432). Reliance was placed upon the report of Mr Fagan, who was said to have proceeded on the basis that the correct measure of assessing the post-trespass value of the land may not in fact have been a 35-lot cluster development. Instead the highest and best use of the land may have been a 12 lot residential subdivision. 261 Although Mr Fagan's 2001 report is bedevilled by the difficulties mentioned earlier regarding failure to deduct developers' profits and interest, Mr Fagan valued each of the 12 residential developments lots at $40,000 after the trespass (Blue, 2/432). In his report, he analysed comparable sales data and appears to have been significantly influenced by a sale at 399 Soldiers Point Rd on 20/6/91 of a similarly located allotment which adjoins the Bush Fire Station but has frontage onto Soldiers Point Rd. His earlier 1992 report instances 3 further sales of vacant land in the areas at around the same value (Blue 2/478). It is significant to note that in his 1992 report, Mr Fagan assessed the value of each of the 12 lots at $45,000 per lot after the trespass (Blue 2/475. No explanation is provided by Mr Fagan as to why he revised this opinion downwards in his 2001 report (Blue 2/431). 262 In response to Mr Fagan, Mr Howes also undertook a valuation of the land based upon a 12-lot residential subdivision (Blue 3/626), valuing each lot at $47,000, which he later reduced to $46,000 in his revised report (Blue, 3/662). Mr Howes' approach seems to have been to calculate the unaffected value of 12 lots ($52,000 each) based on sales data and apply the same 9% diminution figure used consistently by him. Mr Howes made several criticisms in his report of the sales data utilised by Mr Fagan in his 1992 report to arrive at the figure of $40,000, arguing that a number of them suffered from the inherent disadvantage (not applicable to the Tellamist land) of fronting onto a main road. In his report, Mr Howes undertakes an adjustment of the valuation of the sales data used by Mr Fagan, and concludes that all should be increased to the vicinity of $47,000 (Blue 3/620-621I). As I have said, Mr Howes revised this opinion (Blue 3/656I-657E) reducing the post-trespass value of the land to $46,000. On this figure, he calculated according to the hypothetical development model that the value of the land post-trespass based on such a development would be $129,807.12. Mr Howes made all the usual deductions in coming to this figure (marketing and legal expenses, developers' profit, developers' costs and interest on capital components). 263 Since Mr Fagan did not in his 2001 report, primarily relied on by Tellamist, make appropriate deductions for developers' profit and for interest on land, adjustment is again necessary. I have made the appropriate calculations in order to make Mr Fagan's report comparable with that of Mr Howes. Schedule B. As before, I have used a 15% interest rate and added a line item for rates and land tax. The figures for marketing and legal expenses are taken from the respective reports of the two valuers. In his 1992 report, Mr Fagan calculated marketing costs based on 3.5% of gross realisation and legal costs of approximately $600 per lot. Mr Howes, on the other hand, estimated marketing expenses at 3% and legal costs as somewhat less. The figure for developers' costs of $240,000 is that of Mr Fagan, whose estimate Mr Howes adopted (Blue 2/475P, 3/626T, 662L). Again, I note that it correlates with the figure appearing in the Schedule of Estimated Costs annexed to Mr Neal's 19 December 2001 affidavit (Blue, 1/119), once cost of land and legal and marketing expenses are deducted (that is, $236,654.40). Once the adjustments are carried out, it is apparent that if the 12-lot subdivision is the true highest and best post-trespass use of the land, the value of the land after the trespass is $77,622.12 on Mr Fagan's figures and $129,807.12 on Mr Howes' figures. Thus the respective diminution in value is on Mr Fagan's figures $496,126.25 and on Mr Howes' figures is $426,843.17. 264 There is clearly, on the basis of assessing a 35-lot cluster development before the trespass and a 12-lot subdivision afterwards, a greater discrepancy between the two valuers than in assessing the diminution in value based upon a 35-lot cluster development before and after the trespass. Which valuer is to be preferred in these circumstances? 265 On the one hand, a cursory mathematical comparison would suggest that the true value of the land as assessed on this basis is likely to be closer to the $46,000 per lot as suggested by Mr Howes than to the $40,000 as suggested by Mr Fagan. Firstly, Mr Fagan in his 1992 report which used an appropriate valuation methodology had assessed the affected value of the 12 lots as $45,000 each, which approximates to the $46,000 adopted by Mr Howes in his revised report. Secondly, it is illustrative to consider the comparison undertaken by both experts of the 12-lot subdivision before and after the trespass. Mr Howes after revising his opinion assessed the value before trespass at $52,000 and the value after as $46,000 - a diminution per lot of about 11.5% (Blue, 3/662). By contrast, in his 1992 report Mr Fagan thought that the value of each of the 12 lots prior to removal of the trees would be $55,000 and the value after would be $45,000 - a diminution per lot of about 18% (Blue, 2/474-5). When he assessed the affected value at $40,000 in his 2001 report, the diminution on a 12-lot subdivision before and after was blown out to a staggering 28%. Clearly, both of Mr Fagan's assessments bring the diminution far outside the general range of 9% to 11.5% that has been discussed previously. I have considerable trouble in accepting that the removal of trees would have such an extraordinarily larger effect if the land was intended for residential subdivision at all times, than if it had been intended for a cluster development in which potential buyers are buying into a lifestyle as much as anything else. Furthermore, Mr Fagan's entire methodology of valuation (especially in the 2001 report) has been revealed throughout this case to be open to significant question. Prima facie these factors suggest that if the assessment of the comparable sales data of one valuer is to be preferred, that valuer should be Mr Howes. On the other hand, as I have said, Mr Howes conceded in cross-examination that he may have based his valuation upon an incorrect assumption as to the extent of the visual screen provided by the trees, with the result that the difference in value may be greater than his reports suggest. That may suggest that Mr Howes' report cannot safely be relied on as a true gauge of the diminution in value. I return to this problem below, as necessary.

F. The Trial Judge's approach F. The Trial Judge's approach 266 Ultimately, the trial judge came to assess damages based on diminution in value. The passages in the trial judge's judgment (which I have already cited above) are set out below before convenience: "[102] In all the circumstances, I regard the most reasonable process of assessment as the diminution in value of the plaintiff's land at the time of the trespasses. I am of the view that I should proceed with the assessment on the basis that the buffer would be replanted, but not at a cost to the plaintiff, and that the development would have had a more limited screen than was there at the time of the trespasses. In reliance upon Bellingham v Dhillon [1973] 1 QB 304, the defendants submitted that the diminution in value should be discounted because the plaintiff retained the land the subject of the 12 lot subdivision. That case involved a claim for loss of profits in a driving school as a result of personal injuries suffered by the plaintiff. I am not assessing the damages in this case as an actual loss of profits. I am assessing the diminution in value of the plaintiff's land at the time of the trespasses by reference to the impact of the removal of the buffer upon the land as it was then which included the consent to the cluster development.

[103] Assisted by the evidence of both experts and with reference to my finding that the visual screen was "limited" at the time of the trespasses, I am satisfied that an appropriate measure of damages for the diminution in value of the plaintiff's land at the time of the trespasses is one approximating the 9% adopted by Mr Howes rounded to $365,000. The approach that I have adopted to the assessment of the diminution in value precludes the plaintiff's claim for "consequential" losses." [emphasis added] 267 The trial judge did not make an explicit finding that the 35 lot cluster development was still viable, nor that it would still be viable only if some form of limited screen had been re-established. However, the stated approach she took seems to suggest that that is what she had in mind. The trial judge appears to have impliedly rejected the other approach, ultimately assessing damages on the basis of a diminution in value based on a 35 lot cluster development with a limited screen restored [103]. Her Honour's reasons for doing so are not altogether clear, although much of this is probably due to the fact that the case was not clearly pressed before her as Tellamist was adhering to its abovementioned problematic methodology. 268 Her Honour appears to have derived her preferred basis for assessing diminution of value from a line of cross-examination of Mr Fagan pursued by Mr Henskens (T, 260R-261O) in which Mr Fagan was asked to assume a number of hypotheticals: that an effective visual screen could be reinstated in 12 months at a cost of $40,000, and that affectation was less than he had previously assumed. Although Mr Fagan protested at so assuming, his answer was that on that assumption the valuation post-trespass would be close to Mr Howes' original valuation of a gross realisation of $136,500. This line of cross-examination was obviously of importance to her Honour's methodology. Another passage which appears to have been important to her Honour was the following where Mr Neal was cross-examined and apparently admitted that the cluster development was not totally unviable post-trespass ([90] to [92]). In particular, I note the following exchange in cross-examination (T, 148Q-149H): "Q. You agree with me that it was not until the end of January this year [2003] that you have first suggested in your affidavits that it was the destruction of the trees in the public reserve area that caused you not to proceed with your 36 cluster home development? A. Yes

Q. I suggest to you that by the time you came to swear your affidavit on 29 January 2003 you were aware that an argument would be mounted in the proceedings to say that the real reason the cluster development did not proceed was that your development application expired in 1996, weren't you? A. Yes. I was trying to get something done before that.

Q. And so to meet that argument, I suggest you, for the first time, have suggested that it was the destruction of the buffer zone which prevented you from proceeding with your cluster development. A. Yes.

Q. If you truly wanted to go ahead with your cluster development there was nothing preventing you from planting the visual screen with matured plants quickly in 1991, was there? A. No; it could have been done

Q. And if you were so keen to proceed with your 36 cluster development, I suggest to you that that would have been the reasonable response to the problem and you could have worried about compensation from the Council later; couldn't you? A. I tried that and they, council, wouldn't be in it.

HER HONOUR: Q. You mean you tried to get them to plant them? A. Yes." 269 It is this which seems to be at the heart of her Honour's opinion that the assessment of damages should proceed "on the basis that the buffer would be replanted, but not at a cost to the plaintiff, and that the development would have had a more limited screen than was there at the time of the trespasses." Even if that approach to assessing diminution in value is acceptable in the circumstances (a matter of considerable doubt), the link between that statement and her Honour's ultimate assessment of damages of $365,000 is not readily discernible. 270 I have mentioned that the trial judge is said not to have adopted a pure approach to awarding damages for diminution in value. The key passages in the trial judge's judgment have been set out above. Both parties find fault with those passages, and base their respective appeal and cross-appeal on this. The Council claims that the figure arrived at of $365,000 is unsupported by evidence and that her Honour impermissibly drew her own conclusions in the absence of expert evidence contrary to Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 (Orange 50N-51Q). According to the Council's written submissions (para 57): "Her Honour proceeded on the basis of a limited screen to start, removal of that screen, the replacement by way of replanting (at no cost to Tellamist) thereby restoring a screen of a more limited nature than the already limited screen which existed. Neither valuer proceeded on the basis of those assumptions. Mr Howes, upon whom her Honour relied, arrived at the post-trespass value adopted by her Honour on the basis of the absence of the pre-existing screen. He did not consider nor was he asked to consider whether, upon the assumptions made by her Honour, there would be any diminution in value. Mr Fagan did not address this point although he was cross-examined about the likely effect on value assuming a screen had been replanted. His evidence was on that assumption there would be no diminution in value." 271 Tellamist agrees that the trial judge proceeded on a wrong basis and that the figure is unsupported by appropriate findings of fact, and fails to take into account all of the evidence in the trial judge's preference of Mr Howes over Mr Fagan (Orange, 80S-86T). That is the core of the cross-appeal. According to Tellamist's written submissions (paras 8.20-21): "The Trial Judge indicates a preference for an assessment based upon the "buffer being replanted" to produce a more limited screen than that which was present at the time of the trespass. That methodology appears to involve a hybrid approach being one partly based upon reinstatement and partly diminution in the value of the land. The reports of Mr Howes were however based upon a screen substantially less effective than that actually present. The Trial Judge in fact rejected the effectiveness of the screen as assumed by Mr Howes, yet adopts Mr Howes' assessment of a 9% diminution in the value of the land once the screen had been replanted.

There are a number of significant difficulties with the above approach … First and foremost it combines concepts of costs of reinstatement and loss in value without clearly delineating the first and identifying how that delineation permits calculation of the second." 272 This Court is justified in reassessing damages if it is satisfied that the judge has acted on a wrong principle of law, or has misapprehended the facts, or has for these or other reasons made a wholly erroneous estimate of the damage suffered: Davies v Powell Duffryn Associated Collieries Ltd [1942] AC 601 at 616-17; Miller v Jennings (1954) 92 CLR 190 at 194-5). Although I have said there is no necessary evil in adopting a holistic approach to damages, I have come to the view that the trial judge's approach fell into error insofar as the compression in her conclusion does not disclose an adequate process of reasoning. That, when combined with her Honour's failure to take into account the revised opinion of Mr Howes and the error of 'adding back in' a sum for interest on land, is sufficient to justify this Court in reassessing damages. Similar problems affect the trial judge's denial of damages for consequential losses. 273 I should say in fairness to the trial judge, considering the valuation evidence placed before her, was in this case confronted with a Gordian Knot. On the one hand, Mr Fagan had adopted a wholly inappropriate methodology for assessing diminution in value (see above) but had based his report upon an assessment of the effectiveness of the screen which accorded with other evidence before the Court. On the other hand, Mr Howes, while adopting an appropriate methodology had, it appears, proceeded upon a wrong assumption as to the effectiveness of the screen. Furthermore, Mr Neal had admitted on cross-examination that the cluster development was not unviable after the trespass, if a more limited visual screen had been replanted in 1991, and that it was only at the hearing that he had suggested that it was the destruction of the buffer zone which prevented him from proceeding with it, and that he still would have made a profit had he proceeded with the cluster development after the trespass (T, 148X-149C, 151-2). If this was not enough, the situation was compounded by what can most kindly be called a lack of clarity in the basis of the claim as originally formulated and argued by Tellamist. None of this could have assisted the trial judge.

G. Reassessment of Compensatory Damages G. Reassessment of Compensatory Damages 274 I now proceed to reassess damages in light of the reasons and principles outlined above.

(i) Approach to damages (i) Approach to damages 275 As I have previously suggested, I am of opinion that if damages are to be assessed on the basis of diminution in value, the correct approach is to utilise the hypothetical development model set out above in its entirety, deducting both developers' profits and a component for interest of land. Furthermore, I have found that the trial judge was not wrong on the evidence before her in refusing to award damages based on re-instatement cost. Once it is accepted that the appropriate measure of damages is diminution in market value, the answer to the question of when damages are to be assessed is immediately apparent. I am of opinion that damages are properly to be assessed as of the date of the trespasses in 1991. Any assessment of diminution in value as at any later date would involve seriously distorting the true loss, due to the impact of inflation and changes in market sentiment. I do not think that the Council ever seriously suggested that any other date was more appropriate. Certainly no evidence upon which the Court could base an assessment as at any other time was placed before the Court by either party. 276 In any case, the general rule is that damages in tort are to be assessed as at the date when the cause of action in tort arose: Johnson v Perez (supra) at 355 per Mason CJ. An appropriate award of interest on damages will compensate the plaintiff for the damage it suffers in the interim between the cause of action arising and the hearing. The question of interest awarded by the trial judge here is disputed, and I will return to it later. The general rule will only be displaced where an alternative date is required more fairly to compensate the plaintiff for its loss. For example, in Rentokil Pty Limited v Channon (supra), Mahoney and Meagher JJA (Samuels JA dissenting) held that the assessment should be made as at the date of the hearing. It is apparent from the respective judgments of their Honours that the decision was very much predicated upon the particular facts of the case. This was a case where the plaintiff sued a pest inspector for negligent misstatement that a house was free from termites. In reliance on the report, the plaintiff bought the house later discovering it was so infested as to require demolition. Mahoney JA concluded (at 430) that an interest award would not provide a true reflex of the loss actually suffered on demolition of the home and resale of the land (which naturally took place at a later date than the original negligent misstatement). Meagher JA expressed a similar view (at 432). Although the rule was therefore not applied in Rentokil by the majority, and, like other rules governing awards of compensation, is flexible in its application, it is still the general rule and there is no good reason for not applying it.

(ii) Assessment of diminution in value (ii) Assessment of diminution in value 277 What remains to be resolved is whether the diminution is to be assessed on the basis that the highest and best use of the land after the trespass was a 35 lot cluster development, or alternatively, a 12 lot residential subdivision. The figures which would prima facie seem to be relevant are either those set out in Schedule A (based on the 35 lot cluster development before and after), or those set out in Schedule B (based on the 35 lot cluster development before and a 12 lot subdivision after). As I have found previously on the review I have undertaken of both experts' evidence, if the Schedule A approach is to be adopted, the value of the land after the trespass is either $186,934.90 (Mr Fagan as adjusted) or $179,626.25 (Mr Howes as revised). It does not matter a great deal which expert is preferred (even taking into account Mr Howes' concession). If, on the other hand, the Schedule B approach is more appropriate, which expert is preferred takes on a larger significance, since the figures are $77,622.12 (Mr Fagan as adjusted) or $129,807.12 (Mr Howes as revised). 278 The question, then, is which of the two bases of assessing the value of the land after the trespass is to be preferred. This depends upon whether the Court accepts that by reason of the trespass and destruction of the trees the 35 lot cluster development was no longer the highest and best use of the land. One might proceed by making a simple arithmetical comparison between the two calculations. On the figures of both Mr Fagan and Mr Howes, the residual value of the land was higher on the basis of a 35 lot cluster development after the trespass than on the basis of a 12 lot residential subdivision, with a greater allowance for developers' profit also (see Schedules A and B). However, to say that the calculation which results in the lesser diminution is the true highest and best use of the land after the trespass is too simplistic and begs the question. A Spencer purchaser may well have looked at the land as it stood post-trespass and concluded that the absence of the trees in the buffer zone increased the risk inherent in the development beyond the point where the increased potential for profit was worth it. This is what I take Mr Neal to have meant in the following exchange in cross-examination (T, 152B): "Q. You didn't really think that the development was unviable then, did you? A. It wasn't unviable. It was the fact if you could sell them. That's the whole thing. Would they sell?" 279 In oral submissions on appeal, despite a continued confusion between diminution in value and loss of profits terminology which has beleaguered these whole proceedings, Mr Ellicott QC pressed for valuation on the basis of a 12 lot subdivision after the trespass. 280 In the circumstances, I am of opinion that the appropriate basis upon which to proceed is that the trespass did render the 35 lot cluster development commercially unviable. Thus the assessment of damages should be based upon the highest and best use of the land post-trespass being a 12 lot residential subdivision. In my view, that is the net effect of Mr Neal's evidence. I do not consider that the passage from cross-examination set out above (T, 148-149) in which Mr Neal appears to concede that he had only lately decided to argue that the 35 lot cluster development was unviable post-trespass to preclude with this conclusion. The distinction that must be drawn is between whether the 35-lot cluster development was viable in the sense of possible, and whether it was viable in the sense of a likely business investment. Mr Neal freely admits that it was possible to proceed with the development, but the inference from the evidence must be that a prudent developer would have reason to hesitate before doing so. That is the inference I would draw. 281 The evidence, to my mind, supports this inference. Mr Neal in his affidavit of 20 January 1995 (Blue, 1/10) states that by reason of the trespass: "the protection previously afforded by the screen of trees was thereby lost with the result that the proposed subdivision of Tellamist's 'third land" has now been substantially reduced in value as the proposed development looks directly upon the light industrial area being developed by the Council" 282 The reference to the proposed development can only mean that the 35-lot cluster development for which the current DA 5163/91 was substantially reduced in value. In his affidavit 19 December 2001 (Blue, 1/99), Mr Neal further deposed that the decision to develop the land as a 35 lot cluster development was intended to attract retirees and other persons seeking to leave the metropolitan areas. He stated (para 31) that: "the existence of the trees, saplings and shrubs upon the Proposed Public Reserve created a peaceful and quiet environment possessing a pleasant outlook." 283 He then stated that the change in use increased the potential return to Tellamist, notwithstanding the significant additional expense involved in the 35 lot cluster development (para 32). Obviously, prior to the trespass, the developer felt that the additional risk involved in increased expenditure was justified by the potential for increased return. Then in his affidavit of 29 January 2003 (Blue, 1/201), Mr Neal explicitly states (at para 36) that after the trees were destroyed it was no longer viable for Tellamist to proceed with the cluster development. 284 In cross-examination directed to the viability of replanting, Mr Henskens for the Council elicited the apparent acceptance from Mr Neal that it was not until his affidavit of 29 January 2003 that he first made the suggestion that the trespass and loss of trees was the cause for not proceeding with the cluster development. I do not think that this vitiates the inference drawn above that a prudent hypothetical developer as at the date of the trespass would not have paid for the land on the basis of a 35-lot cluster development. Even if it be accepted as a concession, the question of what a prudent hypothetical developer would have done is not necessarily determined by what Mr Neal actually did. In any event, on one interpretation of the evidence Mr Neal did attempt to replant the buffer in order to leave his options open, but that attempt was frustrated by the Council. Mr Neal also sought an extension of the development application before it expired in 1996. 285 On this view, a hypothetical developer purchaser with complete knowledge as in Spencer would consider the diminished potential profits to be reaped by the cluster development and the increased risk attending to those profits. Any such purchaser fully acquainted with the actions of the Council could not reasonably be confident in assuming that the adverse affectation would soon, if ever, be remedied. The risk was increased by at least four factors: firstly because the deforested outlook on an industrial estate made the whole of the development a less secure or attractive investment by reference to the market for which it was planned, secondly because the ratio of the capital outlay required to the potential capital returns was significantly higher, when compared to other investments available, thirdly by virtue of the impossibility of having any confidence that the public reserve area (in whoever its title was vested) would be replanted without interference by the Council or as attractively; fourthly by the associated increased difficulties in marketing. Obviously it is a vastly different thing to market a cluster home community with an existing pleasant ambience than it is to market a cluster home community with a prospect sometime in the future of attaining a pleasant ambience. Further, business decisions are not made with the benefit of prophetic insight, but on the facts as they appear at the time the opportunity arises.

(iii) Conclusion on approach to assessing diminution in value (iii) Conclusion on approach to assessing diminution in value 286 In this case, I conclude on the balance of probabilities that a reasonable and prudent developer considering purchasing the land appearing post-trespass as it did with a stark industrial outlook, would not have paid for it on the basis of a 35-lot cluster development. 287 The only other evidence presented to the Court of potential use of the land was, as I have said, of a 12 lot residential subdivision. In assessing diminution of value I proceed on the basis that this was the highest and best use of the land that a Spencer purchaser would have seen. According to Schedule B, Mr Fagan's adjusted figures compute to a value after the trespass of $79,342.50 and Mr Howes' figures compute to a value of $129,807.12. 288 As I have said, it is difficult to determine whose figures to prefer in circumstances where there are problems with both reports. Nonetheless, I consider that the true value post-trespass is likely to be closer to the value as propounded by Mr Howes. Although he may well have underestimated the effectiveness of the visual screen before trespass, this does not in my view vitiate his assessment of the value of the land after the trespass, given that that valuation rests ultimately upon an analysis of sales data, as demonstrated by his critical deconstruction of Mr Fagan's report. Mr Howes' incorrect assumption may affect his valuation of the land before the trespass, but it is crucial to note that both he and Mr Fagan (who correctly appreciated the extent of the screen) came to the same conclusion that a 35 lot cluster development would be valued on the basis that each lot was worth $150,000. Given that Tellamist relies heavily on Mr Fagan, it is difficult to see how Mr Howes' incorrect assumption could have made a material difference. Such a finding also gives effect to the factors I have previously referred to and to what I consider to be the generally more appropriate methodology adopted by Mr Howes, when compared to Mr Fagan. The value of the land after the trespass must be taken as $129,807.12. 289 I would also accept Mr Howes' revised valuation of the land as a 35 lot cluster development prior to removal of the trees. The only significant difference between Mr Howes and Mr Fagan in this respect (once appropriate adjustments are made) is that Mr Howes has deducted a sum of $155,000 for marketing and advertising expenses, whereas Mr Fagan has only deducted a sum of $129,500. That difference accounts almost entirely for the difference between their respective valuations of the land pre-trespass. In my view, Mr Howes' assessment of advertising and marketing expenses best accords with the other evidence in the case. Firstly, Mr Howes explicitly adopted the figures found in the affidavit of John Way (Blue 1/306-309), an expert real estate agent with relevant local experience whose affidavit was filed in Court by Tellamist. Mr Way was not cross-examined by the Council, and so the contents of his affidavit are for this purpose uncontested. Secondly, the Schedule of Estimated Costs in Annexure J to the affidavit of Mr Neal of 19 December 2001 sets out real estate agent fees of $105,000 and advertising fees of $50,000. Taken together, Tellamist's own estimate of the costs of this item is $155,000 - identical to Mr Way's figure and to Mr Howes' figure. Thirdly, it is not clear whether Mr Fagan's figure of $129,500 is inclusive of advertising costs anyway. If it is not, then a further sum should be added to it since advertising costs is a deduction which should be made. In all the circumstances therefore, I find Mr Howes' estimate of marketing and advertising costs of $155,000 to be appropriate. 290 I therefore conclude that an appropriate sum to be awarded to Tellamist as based on diminution in value of the land after the trespasses and destruction of the trees should be based upon a valuation of a 35 lot cluster development pre-trespass and a 12 lot residential subdivision post-trespass, according to the figures adopted by Mr Howes (and set out in the second column of Schedule B).

H. Consequential Losses H. Consequential Losses 291 Before setting out my conclusions on compensatory damages, it is necessary to consider Tellamist's claim for consequential losses. Tellamist claims that it has suffered consequential losses of $77,454 being costs of development ultimately wasted because of the trespass which made the development unviable. These comprised certain survey and architectural expenses, DA fees on cluster homes, land tax and Council rates paid on the buffer zone and certain drainage works. What is claimed is set out in Tellamist's written submissions on the cross-appeal as follows: 1. Survey $ 9,023.00 2. Architect's fees 10,300.00 3. DA lodgement fees 2,340.00 4. Land tax on buffer zone 25,165.00 5. Council rates on buffer zone 8,826.00 6. Drainage works (Rumbel & Co) 21,800.00 $77,454.00 292 The trial judge dealt with this matter rather summarily at [103]: "The approach that I have adopted to the assessment of the diminution in value precludes the plaintiff's claim for 'consequential' losses." 293 What her Honour meant by this is uncertain, but it may be that she considered that the award of compensatory damages on the basis of a 35 lot cluster development before and after meant that these items of expenditure had not in fact been thrown away. 294 It is necessary to consider items 1 to 3 together, since it is clear that all these items were paid. Since I have found for valuation purposes that the highest and best use of the land after the trespass and removal of trees was not a 35 lot cluster development but a 12 lot residential subdivision, it might be thought that necessarily costs already incurred in developing a 35 lot cluster development had been thrown away. The Council, however, claims that to award such costs would be to overcompensate Tellamist. However, the way I consider such costs should be treated is set out below. 295 The amount calculated above for diminution in value on the approach I have taken reflects the amount for which a hypothetical developer would pay for the land as if it were an empty canvas, with all costs yet to be incurred. That is, it assumes that Tellamist has not incurred any costs and that all such costs will be borne by the incoming developer. If this is so, the fact that items 1 to 3 above had already been incurred as at the date of the trespass reduces the development costs the incoming developer will have to pay. It is not sufficient merely to add them back at the end, since developers' costs forms an important part of the entire model discussed earlier. An adjustment is therefore required. Since I have already given my reasons for preferring Mr Howes' figures in Schedule B, I can dispense with adjusting the other column. The adjustment is shown in Schedule C. I have deducted from the developers' costs item the sum of items 1 to 3 above, reducing developers' costs to $2,884,337. Interest on those costs is also reduced, with the net result that the pre-trespass value of the land is increased to $577,135.36. No adjustment is required to the post-trespass value. Thus, after this adjustment, the total diminution in value is increased to $447,328.25. 296 I now turn to items 4 to 6. As far as the claim for land tax and Council rates paid on the buffer zone is concerned, I do not think a claim for reimbursement can succeed. It is not at all clear on the evidence whether the sums claimed related to the period before the trespass, after the trespass or both. I can find no evidence of the breakdown of these figures, or any reference to them in Mr Neal's affidavit, thus there is to my mind no proper basis upon which to award them, even if I were minded to do so. In any event, the fact that Tellamist has retained the land since the tort and had to pay certain outgoings in respect of it cannot properly, in my view, be sheeted home as a consequence of the tort. The diminution in value compensates Tellamist as at the time of the trespass and destruction of the trees. On Tellamist's own argument, the land was only fit for a 12-lot residential subdivision thereafter. The fact that Tellamist has not sold the land as such or yet developed it as such and continues to retain it is not sufficient to allow recovery of items 4 and 5 from the Council as consequential losses. They are, if allowable at all, too remote to be recovered under a claim for consequential losses. 297 Lastly I consider the claim for the drainage works performed by Rumbel & Co after the trespass in 1991. According to Mr Neal, Rumbel & Co were engaged to clean and reshape the drain after the incursion by Daracon and the partial construction of the drainage swale. This involved removal of a stockpile of logs and other waste and general cleaning-up of the site severely devastated by the Council (Blue, 2/104P-V, 172). Prima facie this kind of work falls squarely as a claim for consequential loss arising out of the trespass. At trial, however, the Council cross-examined Mr Neal on the basis of documents subpoenaed from Mr Rumbel to the effect that the $21,800 was not the true cost of performing this work, but represented monies owing from the previous invoice as well (T, 148-9). The Council tendered Exhibit 22, which was Rumbel & Co's copy of the invoice, and which showed handwriting 'summary of costs only' adjacent to the figure of $21,800. Mr Neal denied these allegations. The Council has not put on any evidence to the contrary, apart from Exhibit 22 which to my mind does not on the balance of probabilities support the assertion sought to be made by Council. The handwriting could equally be a notation by Mr Rumbel that the bill was not itemised. I am of the view that on balance, the evidence supports the conclusion that the works performed by Rumbel & Co to the buffer zone after the trespass totalled $21,800. This amount can be recovered as consequential loss.

Conclusion on compensatory damages Conclusion on compensatory damages 298 I therefore conclude that on a diminution in value basis as specified, the appropriate measure of compensatory damages is calculated as follows (see Schedule C): (+) (-) Subtotal Value of 35-lot cluster development before trespasses $577,135.36 Value of land as 12 lot residential subdivision after trespasses $129,807.12 Diminution in value $447,328.25 Consequential losses $21,800.00 TOTAL $469,128.25

299 Having done my arithmetic I stand back from the calculation as recommended by Purchas LJ in Farmer Giles Ltd v Wessex Water Authority (supra), and consider whether in all the circumstances, this figure represents a fair and reasonable sum to compensate Tellamist for its loss. In my view, subject to what follows on consequential losses it is a proper award. It is not so disproportionate to the range of figures identified as being the likely cost of reinstatement ($315,000 to $365,000), such that I should refuse to award it in the circumstances.

I. Interest on Compensatory Damages I. Interest on Compensatory Damages 300 I can now deal with the separate ground raised by Tellamist in its cross-appeal as to whether interest should have been awarded for the whole of the period from the date when the cause of action arose. It is appropriate to deal with this question before turning to exemplary damages since interest is not awarded on exemplary damages; Murray v Commonwealth (1986) 5 NSWLR 83. 301 Prima facie, a principle of compensation would require that interest be awarded for the whole of the period to reflect the fact that the plaintiff has been kept out of his money and the defendant has retained and had the use of the same money. This principle would seem to have particular force in a case such as this where diminution in value is assessed as at the date of the trespass. Nevertheless, a trial judge has discretion in awarding interest, as provided by s94(1) of the Supreme Court Act 1970, which states "In any proceedings for the recovery of any money (including any debt or damages or the value of any goods), the Court may order that there shall be included, in the sum for which judgment is given, interest at such rate as it thinks fit on the whole or any part of the money for the whole or any part of the period between the date when the cause of action arose and the date when the judgment takes effect." 302 In her separate interest judgment, the trial judge, after acknowledging that it is only in rare cases that interest will be excluded, purported to use her discretion under s94 and excluded interest for the period from 1 September 1997 to 28 February 2002 on the basis that Tellamist had failed to provide any "proper explanation for the delay" during this period. (Red, 86G-L). The delay identified by her Honour was that between when the parties concluded interlocutory proceedings in late 1997, and early 2002. Her Honour does not specify any particular event in 2002 marking an end to this 'delay' but states (Red, 84B-C): 303 Between 1997 and 2002 little was done in these proceedings. In 2002 the plaintiff changed solicitors and a Notice pursuant to the Rules was filed in July 2002. 304 Tellamist claims that the trial judge's discretion miscarried in excluding interest on damages for the so-called period of delay. 305 Appellate intervention with the discretion of a trial judge must be undertaken with the usual caution and restraint mandated by House v The King (1936) 55 CLR 499 at 505, Lovell v Lovell (1950) 81 CLR 513 at 532-4; Micallef v ICI Australia Operations Ltd [2001] NSWCA 274. These cases make clear that before an appellate court intervenes, it must be satisfied that the trial judge acted on a wrong principle or a material error of fact, took into account some irrelevant matter or failed to take into account some relevant matter, or arrived at a result so unreasonable or unjust as to suggest that one of the foregoing categories of error had occurred, even though the error in question did not explicitly appear on the face of the reasoning. 306 I am of the view that in making her s94 determination, the trial judge's discretion miscarried in failing to have regard to the central compensatory principle underlying s94. The discretion conferred by s94 is not unfettered - its purpose is to ensure a successful party is properly compensated for the loss it has suffered: Ruby v Marsh (1975) 132 CLR 642 at 652f, 664; Bennett v Jones [1977] 2 NSWLR 355 (CA); Falkner v Bourke (1990) 19 NSWLR 574 (CA); Perri v Flavell (No 2) (NSWCA Kirby P and Powell JA, 20 September 1995, unreported). In Bennett v Jones, Moffitt P stated (at 367): "A number of questions [regarding s94] arise. Is the power to award interest such that it should be used punitively, so a plaintiff or defendant is penalised for delay or failure to observe court procedures; or is it entirely compensatory, so as to do no more than that which is fair in a pecuniary sense between the parties? Is the jurisdiction to be exercised, or not exercised, simply by inquiry whether the defendant ought to have paid money to the plaintiff at some earlier date; or is it to be awarded on some more neutral basis, as that, for some reason, the money has been outstanding for a period, in which the defendant had the benefit of not paying it and the plaintiff the detriment of not having it, and that delay and the conduct of a party is relevant, only so far as by reason of it, there is, or may be, economic disadvantage to the opposing party by an award of interest being, or not being, made? For reasons I will indicate, in my view the approach last mentioned in each of the two foregoing queries is that which is in conformity with the statute." 307 It is clear from Bennett v Jones that interest should not be refused merely for the purpose of penalising delay. Unfortunately, the reasoning of the trial judge does not make clear upon what principle her Honour acted in refusing interest due to the so-called delay, and leaves open a punitive interpretation. Her Honour does not analyse the delay to consider whether it was reasonable or unreasonable in the circumstances or whether there was any satisfactory explanation for it, merely concluding that "it is not appropriate" to award interest for the period of so-called delay. 308 In Perri v Flavell, Kirby P referred to the principle that the circumstances in which a claim for interest can be refused are rare, and commented: "It is our experience that this principle has been applied regularly since 1990. It draws back from an earlier view that parties who did not prosecute their appeals with diligence were in some sense to be punished by the use of the discretion to withhold the award of interest. That view is not now applied. The discretion remains. But ordinarily the fact that the lay client behind the legal process has been kept out of the money found to be due is a powerful reason for providing interest on the court-ordered 'investment'." 309 Kirby P went on to analyse the facts before him (which in a number of respects are mirrored by the facts of this case), and said: "Whilst in the present case it can fairly be said by the respondent that the appellant did not proceed with due diligence in the appeal, a similar charge can be made against the respondent. It did not move the Court (as surely it could have done in the eight and a half years wait for the hearing) either to order that the appeal be set down or struck out for want of prosecution. Instead, the respondent, doubtless evaluating the prospects of success did nothing. A factor in the approach might have been consideration of the fact that it had the use of any moneys which the appellant might recover to supplement his judgment." 310 In this case, the Council took no steps in the face of a delay much shorter than in Perri v Flavell to have the proceedings struck out for want of prosecution. Furthermore, the Council maintained its defences and denied liability right up to the hearing. In these circumstances the comments of Kirby P extracted above are apposite. Accordingly, the discretion of the trial judge as to the award of interest miscarried and must be set aside. I further note that in Perri v Flavell, Kirby P (with whom Powell JA agreed) decided it would not be consistent with the approach of the Court since Falkner v Bourke (supra) to deduct some period from the award of interest to reflect the fact that the true reason of the delay was the dilatoriness of the plaintiff's solicitor. In my view, the modern approach is that if mere unsatisfactory delay is to be the basis for penalising a plaintiff, the only appropriate area for it to work in is in the award of costs. 311 I conclude that interest must be awarded on the sum awarded for compensatory damages of $469,128.25 for the full period from the time when the cause of action arose, according to the rates in Schedule J of the Supreme Court Rules 1970.

J. Reassessment of Exemplary Damages? J. Reassessment of Exemplary Damages 312 I turn now to the question of exemplary damages which were awarded by the trial judge and assessed at $25,000. Both the Council and Tellamist appeal against this award. The Council claims that the trial judge should not have awarded exemplary damages at all in the unusual circumstances of this case since there was no evidence of contumelious disregard for the rights of Tellamist and no danger that the conduct would be repeated (Orange, 60W-61M). Tellamist claims in its submissions on cross-appeal that the exemplary damages awarded were manifestly inadequate and there were no adequate reasons disclosed in the judgment for assessing the sum of $25,000 (Orange, 89L-Y). Tellamist claims that the conduct of Council warrants an award of exemplary damages of no less than $500,000 (Orange, 97L). I deal with the two arguments separately.

(i) Should exemplary damages have been awarded? (i) Should exemplary damages have been awarded? 313 I have already stated that I do not think that the trial judge was in error in holding at [115] that Council's conduct in August 1991 was in contumelious disregard of the plaintiff's rights, and that it was open to her Honour to conclude that the trespass was one that warranted an award of exemplary damages. The Council, however, claims that the trial judge applied an incorrect test and failed to have regard to the fact that the conduct must be both conscious and in contumelious disregard for the plaintiff's rights. The Council points to the joint judgment of Gleeson CJ, McHugh, Gummow and Hayne JJ in Gray v Motor Accident Commission (1998) 196 CLR 1 (at 9-10) where their Honours stated: "20. If, as we have earlier suggested, the remedy is exceptional in the sense that it arises (chiefly if not exclusively) in cases of conscious wrongdoing in contumelious disregard of the plaintiff's rights, at least two further questions arise: are exemplary damages available where the plaintiff's claim is for damages for negligence rather than some intentional wrong?

22. … No question arises here of an intentional wrong being committed by inadvertence. For present purposes it is enough to note two things. First exemplary damages could not properly be awarded in a case of alleged negligence in which there was no conscious wrongdoing by the defendant. Ordinarily, then, questions of exemplary damages will not arise in most negligence cases be they motor accident or other kinds of cases. But there can be cases, framed in negligence, in which the defendant can be shown to have acted consciously in contumelious disregard of the rights of the plaintiff or persons in the position of the plaintiff. 314 The Council claims that insofar as its conduct was not "conscious", exemplary damages could not be awarded. Section 220 of the Local Government Act 1993 (NSW) provides that a council is a body corporate. The central plank of the Council's submission seems to be that since the trial judge did not make express findings that the persons who were the 'directing minds' of the body corporate had a conscious and contumelious disregard for Tellamist's rights, any award of exemplary damages was in error. According to the Council, rather than a conscious disregard, the minds behind the Council at the relevant time before the first trespass had no unity and were confused with a different state of mind of both Mr McMahon (the general manager) and Mr Atkinson (who was said to be the guiding mind for the purposes of instructing Daracon to trespass). The Council then says that since Mr McMahon did not know what Mr Atkinson was doing, and Mr Atkinson did not know what Mr McMahon was doing with regards to Mr Neal and Tellamist, there could be no evidence of a conscious and contumelious disregard. The net result of all this, according to the Council, is that it was simply impossible for the Council to have had a conscious disregard in the sense required by Gray. 315 This submission is in my view far too simplistic. As Brennan, Deane, Gaudron and McHugh JJ stated in Krakowski v Eurolynx Properties Ltd (supra) (at 583): "A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them." 316 The fraudulent representation in Eurolynx required consciousness on its part. That consciousness was found by combining the knowledge of those sufficiently closely and relevantly connected to the corporation. That must include in the present case Mr McMahon and Mr Atkinson, the latter indubitably its agent in the exercise. There is no basis for doing otherwise when it comes to the conscious wrongdoing required for exemplary damages in tort; indeed a fortiori, especially as it is fraud not tortious wrongdoing that requires strict proof. The Council cannot escape the consequences of its actions simply by pleading ignorance where the necessary knowledge can be attributed on such a basis, as here. A corporation, including a Council, can be liable in tort on the basis of conduct and knowledge (where it is relevant) of several persons who are sufficiently closely and relevantly connected to the Council as to attribute responsibility to the Council; compare Bright J in Brambles Holdings Ltd v Carey (1976) 15 SASR 279 cited with approval in Eurolynx at 582. Furthermore, this may be so even where the Court recognises that the disparate conduct or states of mind of various persons who constituted the directing mind will only constitute the elements of the wrong when viewed in combination. Ford, H.A.J., Austin, R. P. & Ramsay, I.M., Ford's Principles of Corporations Law, Butterworths, 2000, at [16.080], p. 16,088. 317 I do not think it can be denied that in combination the relevant Council officers and agents who were involved with the decision to go on to the buffer zone and fell the trees had knowledge sufficient for the Council to be found to have trespassed consciously and in contumelious disregard for Tellamist's rights. The following exchange in the cross-examination of Mr McMahon bears this out: "DRUMMOND (Q): Are you seriously suggesting that at no stage in all of these activities, you didn't become aware at any time before August 1991 that Council was proposing to go onto the buffer zone and construct a drain; is that what you are honestly telling her Honour? McMAHON (A): Yes, I didn't know they were going to construct a drain in the public reserve. I am not a technical person and I didn't have cause to know.

DRUMMOND (Q): There is no doubt council knew about it, in the form of they have approved the plans:

OBJECTION HER HONOUR: Are you pressing that? DRUMMOND: Yes, your Honour.

HER HONOUR: Is it really in issue, Mr Henskens, that council didn't know that it was going to take itself on to the plaintiff's land to dig a drain. HENSKENS: No, your Honour.

HER HONOUR(Q): Did you know that council knew? McMAHON: Council's engineers would have known, council's technical staff, I personally -

HER HONOUR: Didn't know." [emphasis added] 318 The above concession by the appellant's then counsel does not leave much room for denial of consciousness on the part of Council of the relevant acts of trespass. 319 Mr McMahon in his capacity as property manager of the Council had the carriage of the industrial subdivision the Council was planning on the land adjoining Tellamist's land, and he thus also had the responsibility of dealing with Tellamist (T, 313T-Z). Mr McMahon certainly knew the buffer zone was important to Tellamist (T, 324J-K), and was responsible for the appointment of Atkinson & Tattersall as project managers for the site (T, 333B-C). Then according to his evidence, he stood back and let matters take their course. Yet he claimed strenuously not to have known that Daracon planned to go onto the buffer zone and construct the drainage works. I do not think this is enough to support the Council's case on appeal that the trespass was not conscious since Mr Atkinson as project manager was unaware that the land did not belong to Council. If indeed Mr Atkinson did not know, then Council allowed that situation of ignorance to arise by their own failure to have in place a comprehensive and systematic flow of information to all relevant officers and agents. The Council cannot now plead ignorance because they did not tell Mr Atkinson that the land had not been dedicated to Tellamist. 320 Given the manifold available evidence of Council officers' state of knowledge and Mr Henskens explicit concession that the Council's knowledge was not in issue, I find the conclusion is inescapable that Council knew that the buffer zone had not been dedicated to it, that it had engaged Daracon to go onto the buffer zone to perform drainage works, that Tellamist had not consented to such works, and that Daracon was going to perform the works in August 1991. In these circumstances, the August 1991 trespass was most certainly "conscious". 321 With those trespasses having just taken place, it is significant that on 16 August 1991 Mr McMahon, having by then been fully apprised of the situation, nevertheless instructed Daracon by letter to re-commence the works in full knowledge of Tellamist's protests (T, 348G-I) but first providing Daracon with an indemnity. As the trial judge points out at [114] whether the letter was drafted before or after the trespasses does not improve the position for Council. It appears that no further incursions took place until the subsequent trespasses in November 1991 (more precisely 18, 27 and 29 November 1991) and 23 December 1991, the latter occurred in breach of the Council's written undertaking to Tellamist of 5 December 1991 not to further trespass on its land. The Council claimed the latter trespass was due to inadvertence on the part of Daracon's employee and the trial judge found that the failure to honour the undertaking was due to a lack of care rather than contumelious disregard (Red, 78B-C). In my view the trial judge was correct in stating that the Council had given the plaintiff a formal undertaking and had an obligation to ensure that such an undertaking was honoured (Red, 77X). In particular, I do not think the Council can hide behind the negligence of its agents and employees in this respect so far as damages are concerned. However, though close to the line, I would not conclude that these latter trespasses constituted cases "framed in negligence, in which the defendant can be shown to have acted in contumelious disregard of the rights of the plaintiff" (Gray (supra) at [22]). By that I mean the degree of negligence of the Council came close to being reckless, so as to approach high-handedness; compare State of New South Wales v Riley (2003) 57 NSWLR 496 per Hodgson JA at 530 and Kirby J in Gray at [p86], the latter concluding: "Punishment for deliberate wrongdoing is certainly a consideration in deciding the applicability of exemplary damages. But it is not the sole reason for the award of such damages. The more recent cases on the subject, including in this court, have accepted that such damages may be recovered whatever the subjective intention of the tortfeasor if, objectively, the conduct involved was high-handed, calling for curial disapprobation addressed not only to the tortfeasor but to the world."

(ii) Amount of exemplary damages (ii) Amount of exemplary damages 322 Having so concluded as to the August 1991 trespasses, the only thing which could affect whether exemplary damages are awarded is the principle identified by this Court in Amalgamated Television Services Pty Ltd v Marsden (No. 2) (2003) 57 NSWLR 338. In that case, the Court (of which two of the present appeal bench were members) held, though expressing some reservations, that an order for exemplary damages should not be made until compensatory damages have been assessed, and that such an order should only be made "if, but only if, the sum awarded for compensation is inadequate to punish the defendant" (at 345). Although that case concerned damages for defamation, the comments of the Court suggest that the principle is of more general application. It is not permissible for the Court to fix a sum for compensatory damages and a sum for exemplary damages and merely add them together. It is always necessary for the Court to ask itself "whether the sum which it has already fixed as compensatory damages is or is not adequate to serve the second purpose of punishment or deterrence": Cassell & Broome Co Ltd v Broome [1972] AC 1027 (at 1089 per Lord Reid), Amalgamated Television Services Pty Ltd v Marsden (No. 2) (supra) at 345. Thus the question to be answered is whether, although this was a proper case for exemplary damages, the sum which has already been fixed by way of compensatory damages itself is or is not adequate to serve the second purpose of punishment and deterrence. Another way of framing the question is to consider whether, although exemplary damages were able to be awarded, the quantum of those damages should be nil because the compensatory damages are punishment enough. 323 As I have previously found, compensatory damages in the circumstances of this case should be assessed at $469,128.25 (with interest). The question, then, is whether this sum is sufficient to inflict a proper punishment on the Council in view of the nature and extent of its multiple trespasses onto Tellamist's land. I note firstly that this sum represents the diminution in the value of Tellamist's land as at the date of the first series of trespasses in 1991. What followed thereafter was a bald assertion of right by Council, an indemnity given to Daracon, and further trespasses in the face of requests by Tellamist not to do so and later in breach of a written undertaking given by the Council. Furthermore, the trial judge rightly found that Council did not adopt "an open and fair approach" in its dealings with Tellamist. In my view, this type of behaviour by local government authorities towards their constituent ratepayers deserves a significant degree of censure. 324 Section 7 of the Local Government Act 1993 provides that the objects of that Act include providing a legal framework for an effective, efficient, environmentally responsible and open system of local government in New South Wales. Although this case did not involve detailed consideration of the Act, it is in my view clear from its tenor that the legislature holds up a standard of openness and accountability as a principle of paramount importance. The Council charter, as enacted by s8(1) makes this explicit (although it may not provide the basis for any civil cause of action). A council must "keep the local community and the State Government (and through it, the wider community) informed about its activities" and "ensure that, in the exercise of its regulatory functions, it acts consistently and without bias, particularly where an activity of the Council is affected". Even apart from this, principles of accountability and responsible government are central to a developed democratic system of government. In its dealings with Tellamist, the Council, in my view, fell well short of an acceptable standard of conduct. 325 For the foregoing reasons, I am not convinced that the award of compensatory damages is in the circumstances sufficient to fulfil the objects of exemplary damages, namely to "punish and deter" the wrongdoer for the conduct constituting the tort. I am satisfied that in the circumstances, there was no error in the trial judge's decision to award a further monetary sum by way of exemplary damages. The trial judge found "something more" in the conduct of the Council's repeated and unapologetic incursions onto Tellamist's land and its hard-nosed determination to continue with its works no matter what, as displayed in the instruction and indemnity it gave to Daracon after it had been expressly warned off the land by Mr Neal. 326 The final question to be considered is Tellamist's submission that that award of $25,000 is manifestly inadequate in the circumstances. It should be clear from the foregoing that there is no necessary proportionality between an award of compensatory damages and an award of exemplary damages: XL Petroleum (NSW) Pty Ltd v Caltex Oil (Aust) Pty Ltd (1985) 155 CLR 448 at 471 per Brennan J. In some cases in which exemplary damages are open, the award of compensatory damages will have sufficient punitive effect to negate the need for a further monetary award. In other cases, a considerable sum may be required to adequately punish and deter the defendant from its tortious conduct. It cannot be said that the fact that the trial judge awarded $25,000 in comparison to a compensatory damages award of $365,000 (or even $469,128.25 as I have found) renders it "manifestly inadequate". 327 An appellate court should be reluctant to intervene in awards of damages since they are akin to discretionary decisions in which well-known constraints apply: House v The King (supra); Smiths Newspapers Ltd v Becker (1932) 47 CLR 279. Every assessment of damages involves a normative evaluation, although the norms differ between assessment of exemplary damages and assessment of compensatory damages. Thus respect is due to the judgment of the trial judge. As this Court said in Amalgamated Television Services Pty Ltd v Marsden [2002] NSWCA 419: "[The trial judge] had the advantages of the evidence unfolding in a more or less sensible way, of seeing and hearing the witnesses, and of the opportunity for reflecting on what seeing and hearing the witnesses contributed to his conclusions over the course of a lengthy trial. If not truly a discretionary judgment, whether the conduct of the appellant as found warranted an award of exemplary damages certainly involved a normative evaluation, one usually sufficiently summarised in the language of contumelious disregard of the respondent's rights but also involving whether curial disapprobation is called for. That is why it is appropriate that we give respect to the conclusion of the trial judge, and do not simply substitute for that conclusion any preference we may have for a different conclusion. Where different views are legitimately available and the trial judge's view was one of those available, that a different view is also available does not show error." 328 Although the figure of $25,000 as assessed by the trial judge seems low in the circumstances, it is not, having regard to the above principles, so low as to be manifestly inadequate. The trial judge awarded the sum of $25,000 as a mark of curial disapprobation of the conduct of the Council. That sum has not been demonstrated to be outside the reasonable bounds of a trial judge's discretion, although it may be on the low side of the range. Accordingly, the trial judge's award of $25,000 by way of exemplary damages should not be disturbed.

GENERAL CONCLUSIONSGENERAL CONCLUSIONS 329 The principal issues of the appeal, and my conclusion on them as determined above are as follows: (a) The screen prior to the trespass was an "effective arboreal screen" of the Council's light industrial area, as opposed to something more limited. Full reinstatement was not a feasible option given the extent and maturity of the trees and undergrowth and the construction of the drain by Council. Even if it could have been restored in the short to medium term, a fact of which I am not satisfied, it does not follow that no diminution in value of Tellamist's lands would have resulted from the trespass. (b) It was a condition of the 35 lot subdivision development consent that before a building approval permitting construction of the 35 lot cluster houses could issue, the public reserve land the subject of the trespass had to be dedicated and title thereby transferred to Council. Despite this, Council would not necessarily have been able lawfully to go ahead with the drainage works once the land had been dedicated, having regard to the facts that no notice to or consent from Tellamist was sought, the land was subject to a tree preservation order, the Council had represented to Tellamist that there would be a buffer between its land and Tellamist's land with reference to the public reserve as both open space and also a "koala corridor". Moreover, the Council had actual knowledge that Tellamist had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that Tellamist enhance the buffer area with the establishment of the playground and landscaped barbecue area. Tellamist would not necessarily have been left in the same position as it was when Council trespassed on its land to institute the drainage works. A Spencer purchaser of the land prior to the trespass would not have concluded that Council would inevitably or likely destroy the trees removing the visual screen and have paid less for the land on that basis. (c) The valuation should not have been based upon any loss of profits measure. A diminution in value measure based upon the hypothetical development model is the appropriate method of valuing losses of this kind. The valuation should have proceeded on the basis of a 35 lot cluster development being the highest and best use of the land before the trespass and a 12 lot residential subdivision being the highest and best use after the trespass. The reason for this is that, on the balance of probabilities, the trespass made the 35 lot cluster development unviable as a business enterprise, and a hypothetical purchaser would not have paid for the lands on that basis after the trespass. There are problems with the reports of both valuers, but on balance once appropriate adjustments are made, the figures adopted by Mr Howes are to be preferred to those adopted by Mr Fagan. It is not relevant that Tellamist retains the land and has thus had the benefit of significant capital appreciation in the interim between the trespass and the judgment. Damages based on diminution in value are to be assessed as at the date of the trespass - appreciation of the land thereafter which exceeds the diminution in value is not a factor relevant to the assessment of damages; (d) Tellamist did not fail to mitigate its losses by not replanting the buffer zone. In fact it did attempt to plant new seedlings, but this was frustrated by the Council's later trespasses which destroyed a large number of those replanted seedlings. It could not be said that replanting tube stock would have restored an effective visual screen consisting of large mature trees, smaller trees, shrubs and other vegetation within a reasonable time, especially given the Council's attitude. (e) This case was one in which the conduct of the Council was in conscious and contumelious disregard for Tellamist's rights, and was thus an appropriate case for an award of exemplary damages. It was not wrong to award exemplary damages in the circumstances. The amount of the award, though on the low side, was not such as to warrant appellate intervention. (f) Tellamist has been substantially though not wholly successful in relation to both appeal and cross-appeal. 330 For these and the above reasons, I propose the following orders: (1) The appeal is allowed in part; (2) The cross-appeal is allowed in part; (3) Save and except the award of $25,000 by way of exemplary damages against the first appellant and the orders concerning costs, the judgments of Bergin J of 3 and 16 April 2003 be set aside; (4) In lieu thereof judgment be substituted in the sum of $469,128.25 together with interest pursuant to s94 of the Supreme Court Act 1970 calculated as from the date when the cause of action arose; (5) The parties are to file within 14 days short minutes of order having regard to the fact that judgment has been executed against the appellants in the sum of $686,942.00 in accordance with the orders made by Bergin J; 331 As to costs, unless agreed, and recognising the consequences of (f) above, I would direct that each party file written submissions on costs, commencing with the appellants, followed by the respondent, with the appellants having a right of reply, such to be received within 28 days so that the Court should be in a position to make any order for costs thereafter based on such submissions, unless it determines to have brief oral hearing.

332 IPP JA: The appeal and cross-appeal This appeal concerns a claim for damages, including exemplary damages, for four sets of trespasses. The first appellant ("the Council") admits the trespasses but denies that the respondent ("Tellamist") sustained damage in consequence of them. 333 The principal trespass involved the Council entering land owned by Tellamist and knocking down a large number of trees on it. The trees in question had been growing along a band of land along the southern boundary of the Tellamist land. 334 The Council owned the land immediately to the south of the Tellamist land. The Council intended to subdivide and develop its land for industrial use. Tellamist also intended to subdivide its land and, on one large subdivided lot, create 35 further subdivided lots for cluster residential development. 335 The trees that the Council knocked down formed an effective screen between Tellamist's land intended for residential use and the Council's land intended for industrial development. 336 Tellamist contended that the knocking down of the trees, and the resulting destruction of the screen, had a seriously detrimental effect on the value of its land. 337 The Council's answer to this contention was based on the following propositions. The cluster development could not have taken place without the land on which the trees were growing being transferred to it (this being a condition of the consent to the cluster development subdivision). The Council intended to construct a drain on that land once it was transferred to it. To build the drain it was necessary to knock down the trees. The Council, as owner of the land in question, would have been entitled to knock down the trees. Thus, at the date the trees were knocked down, a willing but not anxious buyer would not have paid more for the Tellamist land had the trees still been there. That is because, to the presumed knowledge of the hypothetical willing but not anxious buyer, the screen of trees would inevitably have been destroyed before any building for the purposes of cluster development could have taken place. 338 Tellamist disputed this argument and contended that, because of the removal of the trees, cluster development on the land was no longer economically viable. It asserts that for that reason, it did not proceed with the cluster development. Tellamist had spent money in preparing for that development, and that money was wasted. It claimed the wasted costs as consequential damages. 339 Tellamist argued that the Council's trespasses, or some of them, were in contumelious disregard of its rights and claimed exemplary damages. 340 The trial judge, Bergin J, upheld Tellamist's claims, save for the claim for consequential damages. Her Honour awarded Tellamist compensatory damages of $365,000 and exemplary damages of $25,000. 341 The Council appeals on several grounds. Principally, it maintains the argument it advanced at the trial, namely, there was no diminution in the value of the land. The Council also contends that her Honour erred in finding that Tellamist was entitled to exemplary damages. 342 Tellamist cross appeals and argues that the awards of compensatory and exemplary damages were too low. Tellamist also contends that her Honour erred in failing to award consequential damages and interest on the judgment amount for the period from 1 July 1987 to 8 February 2002. 343 I have read the draft reasons of Santow JA. His Honour would dismiss the appeal and uphold the cross appeal to a partial extent. I have come to a different conclusion.

The land swap 344 On 23 May 1989 Tellamist lodged a development application (DA 4370/89) to subdivide land owned by it into 27 residential lots. An area on the plan of subdivision submitted with this development application was delineated as a public reserve ("the Public Reserve Land"). The Public Reserve Land was on the southern boundary of the Tellamist land and was adjacent to the northern boundary of the land owned by the Council. 345 At that time, the Council land included part of the land the subject of DA 4370/89. Tellamist hoped to effect a land swap with the Council whereby it would acquire the Council land it needed for DA 4370/89. Tellamist believed that the Council wished to acquire other land from it and to incorporate that land into the land owned by the Council to the south of the Tellamist land. Were that to occur, the Council would thereby become the owner of the Public Reserve Land. The plan was to effect a swap of the two parcels of land. 346 On 3 July 1989 the Council granted consent to DA 4370/89 which, as I have said, involved the subdivision of the Tellamist land into 27 residential lots. The consent was subject to certain conditions. These conditions included a condition that all trees on the land to be subdivided were subject to a Tree Preservation Order and that any removal, lopping or topping of trees was subject to Council approval. A further condition required Tellamist, pursuant to s 94 of the Environmental Planning and Assessment Act 1979 (NSW), to pay a contribution of $28,262 for the purpose of provision of amenities in the area. 347 The Council and Tellamist continued negotiations for the land swap. On 16 October 1989 Tellamist wrote to the Council confirming that "settlement" had been achieved. The letter set out the terms of the agreement between the parties. One of the terms was that Tellamist would "provide" to the Council: "The subject parcel of land referred to in the previous negotiations between Council and Tellamist Pty Limited, having an approximate area of 1.45 hectares (subject to survey), which forms part of Lot 2 in Deposited Plan No 561040."

At the trial Mr Neal, described as the "principal" of Tellamist, testified that that area of 1.45 hectares was a hatched area on a certain plan. That hatched area formed part of land that the parties intended to become the Public Reserve Land. Thus, Tellamist, by its letter of 16 October 1989, confirmed the agreement that it would transfer to the Council that part of its land that was intended to become part of the Public Reserve Land. 348 The agreement so arrived at was a consensual reflection of the effect that s 340D(1) of the Local Government Act 1919 (NSW) would have upon registration of a linen plan of the subdivision approved by DA 4370/89, namely, title to the area marked on that plan as public reserve would vest in fee simple in the Council. 349 Another term recorded in the letter of 16 October 1989 was that the "total concession of all s 94 contribution fees associated with the approved 27 lot subdivision" was agreed to "total approximately $30,000". 350 Finally, by that letter, the Council agreed to transfer to Tellamist the Council land, the subject of DA 4370/89, and to pay Tellamist $250,000. 351 By letter dated 21 November 1989 the Council wrote to Tellamist confirming in effect the agreement arrived at. 352 On 15 June 1990 the Council and Tellamist executed a document termed a "Heads of Agreement". The Heads of Agreement attempted to formalise what had previously been agreed. The plan attached to it, and which recorded the land swap, did not, however, reflect the earlier agreement. In particular it did not show that the Public Reserve Land was to be transferred to the Council. 353 The Council did not realise that the Heads of Agreement differed in this respect and, despite its terms, continued to believe that Tellamist would transfer the Public Reserve Land to it.

The steps taken to subdivide the Tellamist land and the Council land 354 On 27 November 1989 Mr Rennie, a surveyor engaged by Tellamist, sought the Council's approval for the 27 lot subdivision to be carried out in 2 stages. Mr Rennnie proposed that stage 1 comprise lot 1 and lots 17 to 27, and stage 2 comprise lots 2 to 16. 355 Early in 1990, Atkinson and Tattersall Pty Limited, surveyors retained by the Council, lodged development application DA 4697/90 for industrial lots on the Council land adjacent to the Tellamist land. Mr Atkinson, of Atkinson and Tattersall, was retained by Council to manage the development on the proposed industrial estate. 356 On 6 April 1990, the Council granted development consent subject to conditions. Condition 2 provided: "All trees within the proposed subdivision are subject to the provisions of Council's Tree Preservation Order. In this regard the removal, lopping or topping of any tree will be subject to the approval of Council." 357 Later that month Tellamist consented to DA 4697/90. Its consent was necessary because the land swap had not yet taken place. 358 Following the execution of the Heads of Agreement on 15 June 1990, that part of the Council's land the subject of DA 4370/89, was transferred to Tellamist. But the land owned by Tellamist that, by the letter of 16 October 1989, was to be transferred to the Council remained in the hands of Tellamist. Tellamist, therefore, remained the owner of the Public Reserve Land. This was not, then, appreciated by the Council. 359 In September 1990 Tellamist cleared its land save for the trees along its southern boundary. The area where the trees were left was the Public Reserve Land. 360 On 6 November 1990 the first stage of the 27 residential lot subdivision pursuant to DA 4370/89 was implemented by the registration of a subdivision which created residential lots 1 to 13 in Deposited Plan 806230. In addition, a new lot 14 (constituting the balance of the Tellamist land) was created. Lot 14 included the area intended for lots 2 to 16 (stage 2 of the subdivision) and the land that was to be the Public Reserve Land. Deposited Plan 806230 did not, however, delineate any area for public reserve. This was contrary to the Council's expectation but the Council did not initially realise that this had occurred. 361 On 14 March 1991 Tellamist lodged a separate development application, DA 5163/91, to develop lot 14 (as reflected in DP 806230) into a 35 lot cluster housing subdivision. This was an alternate proposal to stage 2 of the 27 lot subdivision as it was originally contemplated. 362 By 16 April 1991 the Council had cleared its land of trees and undergrowth. The only trees left on the Council land and the Tellamist land were those on the Public Reserve Land. 363 On 7 August 1991 the Council granted consent to the 35 lot cluster subdivision subject to conditions. Certain of these conditions need to be specifically noted. 364 Condition 6 provided: "An area within the adjoining buffer area shown is to be facilitated as a communal area for the residents and public in lieu of facilities that cannot be provided on site and is to provide the following:- (i) A children's' play area including facilities; (ii) A BBQ and seating facilities; (iii) Landscaping. All details to be provided with the Building Application."

The "buffer area shown" was the Public Reserve Land. 365 Condition 10 required Tellamist to make s 94 contributions totalling $39,560 "prior to release of relevant building approvals". Condition 10 provided: "These Contributions are to be paid to Council as a contribution toward the provision of open space and/or community facilities in the area in accordance with the requirements of Development Control Plan No 27 - Port Stephens Shire. Payment of these contributions shall be made at a rate of $1,720 per unit prior to release of relevant building approvals." 366 Condition 10 also required the dedication of the Public Reserve Land to the Council prior to the release of any building approval for the 35 lots. 367 The Council's development consent further provided that "consent for the removal of any trees should be obtained from Council's Environmental Health Department under the provision of the Tree Preservation Order applying to the land". 368 The consent to the 35 lot subdivision was "for a period for two years". This meant that unless the development was substantially commenced within that period, or the Council granted a further 12 month extension, the approval would lapse. Later, by legislative change, the operative period of the development consent was extended to 7 August 1996. Tellamist did not commence the 35 lot cluster development prior to 7 August 1996 and the Council's consent to the 35 lot cluster subdivision therefore lapsed.

The Council discovers that the Public Reserve Land has not been dedicated to it and attempts to persuade Tellamist to transfer it 369 After the Council had retained Atkinson and Tattersall, Mr Atkinson identified the Public Reserve Land as a place in which a drain could be placed to catch water that would otherwise swamp at the adjusted boundary between Tellamist's residential subdivision and the Council's industrial estate. 370 In September 1990, Mr Atkinson prepared subdivision works drawings that included drawings of a drain on the proposed Public Reserve Land. In the same month, Mr Atkinson had a conversation with Mr McMahon, a property officer employed by the Council, as a result of which Mr Atkinson believed that the Public Reserve Land would be transferred to the Council prior to the drainage works commencing. 371 On 5 October 1990 the drain drawings were lodged with the Council. On 6 November 1990, as I have noted, the first stage of the 27 residential lot subdivision pursuant to DA 4370/89 was registered. The Council then believed (erroneously) that the Public Reserve Land had been transferred to it. On 28 November 1990 the Council purportedly approved the drain drawings (apparently in the belief that it owned the Public Reserve Land and could give that approval). In fact, the Council's approval was not valid as it did not own the Public Reserve Land. 372 The Public Reserve Land varied in width from 16 to 33 metres. The drain Mr Atkinson designed was a dish shaped drain known as a swale. About 8 to 25 metres, in width, of the Public Reserve Land was not to be covered by the swale. It was the Council's intention to landscape and revegetate the Public Reserve Land after the swale was put in. 373 In March 1991, Mr McMahon discovered that, the Public Reserve Land had not been dedicated to the Council. He did not, however, then notify Mr Atkinson of this fact. That month Mr McMahon had a telephone conversation with Mr Neal, the principal of Tellamist, in which he said to Mr Neal: "I have recently looked at the linen plan lodged for Stage 1 of your development. I notice that the linen plan prepared by your surveyor did not include the dedication of public reserve. What's going on?"

Mr Neal replied: "That wasn't done intentionally. I will get my surveyor to prepare a plan to reinstate the public reserve." 374 Mr McMahon also testified that in April 1991 he pointed out to Mr Neal that the plan to dedicate the Public Reserve Land had still not been lodged with Council. He asked Mr Neal to instruct Mr Rennie to prepare the plan. Mr Neal replied: "I will have the public reserve dedicated, but I don't have to do that right now. I will dedicate it at the end of the development."

Mr McMahon answered: "We'll see about that." 375 In cross-examination, Mr Neal agreed that it was "possible" that these conversations had occurred. 376 Mr Neal testified that on 16 May 1991 he had a conversation with a Council representative, Mr Keith Blackmore, that included the following: "Blackmore: When do you propose to dedicate the public open space land? Neal: I am prepared to keep my word. I'm just waiting to see what you do with your word [to waive the s 94 contribution]. Blackmore: Yes, but when do you propose to dedicate it - at what stage? At the moment we are giving you … Neal: It can be done in about five minutes - as soon as we find out about the DA. I'll dedicate it - sorry, not the DA - the s 94 contribution. Blackmore: That's what we are trying to work out. You have been telling us to put it off until this DA is approved. Neal: Yes, this DA was promised to us about four weeks ago. Neal: You wipe the s 94 contribution - you agree on that and I will dedicate the land across - all finished in five minutes. Blackmore: I'll follow it through." 377 According to Mr McMahon, Mr Neal asserted to him, in connection with the s 94 contributions, that "the public reserve is technically ours". 378 On 23 April 1991, the Council, by letter drafted by Mr McMahon, wrote to Mr Rennie pointing out that Tellamist had not complied with its obligation to dedicate "the open space reservation". 379 Notwithstanding the Council's efforts, Tellamist did not transfer the Public Reserve Land to it.

The separate trespasses 380 Tellamist relied on four separate sets of trespasses, in April 1991, August 1991, November 1991 and December 1991. 381 The April 1991 trespass was pleaded as one of "small incursions onto [Tellamist's] land". Tellamist did not complain to the Council about this trespass and Mr McMahon was not cross-examined about it. Mr Atkinson testified that he had not observed any trees that had been knocked down on the Public Reserve Land between April and August 1991. This was not challenged. 382 The trial judge did not find that the April 1991 trespass involved a contumelious disregard of Tellamist's rights. It played no part in the award of exemplary damages. It was not relevant to the claim for compensatory damages as it had no effect on the value of the Tellamist land. 383 At the end of July 1991, the second appellant, Daracon, pursuant to a contract with the Council, entered the Council's land to commence works. These works included the construction of the drain on the Public Reserve Land. 384 On 10 August 1991, Daracon, at Mr Atkinson's direction, entered Tellamist's land in the area of the public reserve at the southern end of the proposed cluster home subdivision and commenced clearing the trees and digging a trench preparatory to constructing the drain. 385 On 11 August 1991 Mr Neal requested Council to stay off Tellamist's land. 386 On 12 August 1991 Daracon re-entered the land and continued with the extension of the trench. Mr Neal asked Mr Palmer of Daracon to stop working on Tellamist's land and to remove all Daracon's machinery. According to a note written by Mr Neal to Mr Palmer, Mr Palmer abided by that request "immediately". By then, in the words of Bergin J, Daracon had "knocked down all the trees and shrubs and commenced excavation of a trench in that area". 387 On 21 August 1991 Mr Atkinson directed Daracon to stop construction of the drain "pending resolution of dispute with Tellamist". 388 The August trespasses gave rise to the award for exemplary damages and were said to have caused the diminution in value of Tellamist's land. 389 On 25 November 1991 Mr Atkinson instructed Daracon to remove logs from within the Council property and to "delete all items from contract within the adjoining property owned by Mr Neal". Despite this instruction, on 27 and 28 November 1991, Daracon re-entered Tellamist's land and removed large quantities of fallen trees. Daracon then, also pushed about two metres of earth onto the south eastern corner of Tellamist's land constituting the public reserve. 390 Bergin J made no finding of any contumelious behaviour with regard to the November trespasses. Further, there was no evidence that Mr McMahon knew that the November trespasses were to take place or was involved in them in any way. In the circumstances, it cannot be said that the November trespasses constituted a contumelious disregard of Tellamist's rights on the part of Mr McMahon or Mr Atkinson. 391 On the evidence, it seems that the November trespasses were the result of a mistake on the part of Daracon in complying with the instructions it had received from Mr Atkinson. There is no suggestion of any contumelious behaviour in this regard on Daracon's part. 392 The November trespasses are not relevant to the exemplary damages and did not play a material part in the compensatory damage claimed. 393 Over a two day period in December 1991, Tellamist caused approximately 300 seedling trees to be planted in the proposed public reserve area in which the trees had been felled. On 23 December 1991, Daracon again re-entered the land and damaged a number of the small eucalypts. The trial judge found that the December 1991 trespass "seems to have been due to a lack of care rather than contumelious disregard for [Tellamist's] rights". 394 There was no evidence that either Mr McMahon or Mr Atkinson was aware that the December 1991 trespasses would be committed. Mr Palmer, the Daracon foreman who, effectively, was in charge of the works carried out by Daracon on the site, said that any trespass on the Tellamist land in December 1991 by Daracon workers occurred contrary to his instruction. He explained that after the November 1991 trespasses he caused a hazard tape of red and white plastic ribbon to be erected along the boundary between the Council land and the Public Reserve Land. He told Daracon workers not to go on the other side of the tape "for any reason". He did not change his direction to his workers after that. 395 Following the trespasses in December 1991, the Council informed Tellamist that a Daracon employee unfamiliar with the site boundaries may have driven the excavator outside the existing boundary. 396 There is no basis for the December 1991 trespasses leading to an award of exemplary damages. Those trespasses did not materially affect the value of the Tellamist land.

Exemplary damages: the legal principles 397 The following statement by Knox CJ (with whom Rich J agreed) in Whitfeld v De Lauret and Company Limited (1920) 29 CLR 71 (at 77) was long regarded as authoritative: "Exemplary damages are given only in cases of conscious wrongdoing in contumelious disregard of another's rights." 398 It is sufficient to refer, for example, to XL Petroleum (NSW) Pty Ltd v Caltex Oil (Australia) Pty Ltd (1985) 155 CLR 448 and Lamb v Cotagno (1987) 164 CLR 1. In XL Petroleum Brennan J said (at 471): "[A]n award of exemplary damages is intended to punish the defendant for conduct showing a conscious and contumelious disregard for the plaintiff's rights … "

Brennan J dissented as to the amount of the verdict in that case but that does not detract from the force of his Honour's observation. 399 In Lamb v Cotogno (1987) 164 CLR 1 Mason CJ, Brennan, Deane, Dawson and Gaudron JJ said (at 13): "Whilst there can be no malice without intent, the intent or recklessness necessary to justify an award of exemplary damages may be found in contumelious behaviour which falls short of being malicious or is not aptly described by the use of that word …"

Their Honours, in this passage, indicated that an award of exemplary damages requires proof of a degree of "intent or recklessness". 400 In Gray v Motor Accident Commission (1998) 196 CLR 1 Gleeson CJ, McHugh, Gummow and Hayne JJ emphasised (at 9) that the remedy of exemplary damages is exceptional "in the sense that it arises (chiefly, if not exclusively) in cases of conscious wrongdoing in contumelious disregard of the plaintiff's rights". 401 Bergin J, in her reasons, referred to the following remarks of Kirby J in Gray (at 29): "[S]uch damages may be recovered whatever the subjective intention of the tortfeasor if, objectively, the conduct involved was high-handed, calling for curial disapprobation addressed not only to the tortfeasor but to the world."

It is not clear, with respect, whether the remarks of Kirby J were intended to be a departure from the principle articulated by the majority. In any event, I do not see how conduct - even when objectively measured - can be regarded as "high-handed, calling for curial disapprobation addressed not only to the tortfeasor but to the world" without having some regard to the knowledge, intention, or recklessness (in other words, the state of mind) of the defendant. 402 In State of New South Wales v Riley (2003) 57 NSWLR 496 Hodgson JA (with whom Nicholas J agreed) said (at 530): "In my opinion, as made clear in Gray , while 'conscious wrong-doing in contumelious disregard of another's rights' describes the greater part of the field in which exemplary damages may properly be awarded, it does not fully cover that field. Similarly, malice is not essential: Lamb v Cotogno . Conduct may be high-handed, outrageous, and show contempt for the rights of others, even if it is not malicious or even conscious wrong-doing".

I accept, with respect, that in unusual cases exemplary damages may be appropriate where the conduct of the defendant is neither malicious nor conscious wrongdoing. But it remains that high-handedness and outrageousness require regard to be had to the state of mind of the defendant. 403 The Council is a corporate body, and hence regard has to be had to considerations that differ from those that apply to the determination of the knowledge of a natural person. In Tesco Supermarkets Ltd v Nattrass [1972] AC 153 Lord Reid (at 170 and following) discussed "the nature of the personality which by a fiction the law attributes to a corporation". His Lordship said: "A living person has a mind which can have knowledge or intention or be negligent and he has hands to carry out his intentions. A corporation has none of these: it must act through living persons, though not always one or the same person. Then the person who acts is not speaking or acting for the company. He is acting as the company and his mind which directs his acts is the mind of the company. There is no question of the company being vicariously liable. He is not acting as a servant, representative, agent or delegate. He is an embodiment of the company or, one could say, he hears and speaks through the persona of the company, within his appropriate sphere, and his mind is the mind of the company. If it is a guilty mind then that guilt is the guilt of the company. It must be a question of law whether, once the facts have been ascertained, a person in doing particular things is to be regarded as the company or merely as the company's servant or agent. In that case any liability of the company can only be a statutory or vicarious liability." 404 In the present case, there is no person of whom it could be said that he or she was the embodiment of the Council. The conduct said to give rise to exemplary damages was that of Mr McMahon and Mr Atkinson. Mr McMahon, although an officer of some seniority, took instructions on the issue from others, and did not even sign letters that he had drafted. Mr Atkinson was a consultant surveyor retained by the Council - he was undoubtedly only its agent. 405 Knowledge imputed to a corporate body through an agent may be enough to constitute a guilty mind for the purposes of determining whether a crime has been committed (cf Beach Petroleum NL v Johnson (1993) 43 FCR 1; Permanent Trustee Australia Co Ltd v FAI General Insurance Co Ltd (2001) 50 NSWLR 679) and I accept that knowledge or recklessness of agents may give rise to an award of exemplary damages against a principal. 406 But actual knowledge must be distinguished from imputed knowledge. The difference is relevant to the determination of a duty of care: Crimmins v Stevedoring Industry Finance Committee (1999) 200 CLR 1 (at 42 per McHugh J) and Woolcock Street Investments Pty Ltd v CDG Pty Ltd (2004) 78 ALJR 628 (at 645, [87] per Gleeson CJ, Gummow, Hayne and Heydon JJ). It is all the more so in determining whether exemplary damages should be awarded. 407 I do not think that the principle expressed by Brennan, Deane, Gaudron and McHugh JJ in Krakowski v Eurolynx Properties Limited (1995) 183 CLR 563 (at 583) (to which Santow JA refers) is of much assistance to Tellamist on this issue. Their Honours said: "A division of function among officers of a corporation responsible for different aspects of the one transaction does not relieve the corporation from responsibility determined by reference to the knowledge possessed by each of them".

See also the remarks of Callinan J in Rogers v Nationwide News Pty Ltd (2003) 77 ALJR 1739 (at 1759-1762). 408 I doubt whether, even objectively speaking, the requisite mental element (be it consciousness of wrongdoing, or recklessness) or the inference of high-handed contumelious behaviour, essential to an award of exemplary damages, can be established by a theory of collective knowledge. That is, by having regard to different acts by two or more different persons, undertaken by each without knowledge of what others did or would do, then assuming that the defendant corporate body had the collective knowledge and intention of the persons concerned, and proceeding to use that collective corporate state of mind to infer contumelious conduct. That, in essence, would result in constructive contumely, and that is not what exemplary damages is aimed at.

The trial judge's findings as to exemplary damages 409 Bergin J found that the Council attempted, deliberately, to keep its intentions as to the construction of the drain and the removal of the trees secret. This finding, which much influenced her Honour's further findings, was challenged by the Council. 410 The judge noted that, by March and April 1991, the Council had already purportedly approved the engineering drawings for the drain on the proposed Public Reserve Land but did not inform Mr Neal or Tellamist of its intention to construct that drain in the area and did not obtain their consent. Her Honour found that the Council did not provide copies of the drawings of the drain to Tellamist until October 1991 "well after the trespasses had occurred". 411 Bergin J attached considerable weight to a letter dated 16 August 1991 drafted by Mr McMahon directed to Daracon by the Council. The letter pointed out that the proposed drain was to be located on land intended to be "open space public reserve". The letter went on to say: "This land was to have been dedicated by lodging of deposited plan to that effect. The plan was not lodged but this is to be rectified. In the mean time you are instructed to proceed with work on the subject drain. Council will hold you indemnified against any action should any be taken because of your presence on that land." 412 In cross-examination Mr McMahon accepted that he knew by 12 August 1991 that Tellamist had instructed Daracon not to go on to the land. Thus, Mr McMahon, after knowing about the destruction of the trees, gave a further instruction to Daracon to recommence with the works. 413 Her Honour described Mr McMahon's evidence in which he admitted instructing Daracon to recommence the works with indemnity after the trespasses had been committed as "quite extraordinary". She said: "At the very least, it is evident that the Council understood that there was to be a buffer consisting of trees to provide a visual screen. Just how that was going to be achieved in the jaws of the batters of the proposed drain is not made out in the evidence. It was high-handed to knock down the trees on the reserve and then suggest to [Tellamist] that the drain would be to its benefit without giving it the opportunity to make that decision for itself. I am satisfied that Mr McMahon, who had the delegated authority to grant [Tellamist's] cluster development consent, was frustrated with the lack of progress of the dedication of the proposed public reserve. However, he had achieved a process for that dedication by the insertion of the condition in the consent. He knew that it had not yet happened and I am satisfied that the Council's conduct in August 1991 was in contumelious disregard of [Tellamist's] rights." 414 The judge referred to a note made by Mr Atkinson at the time of a meeting he had on 16 August 1991 with Mr Hale of Daracon which was in the following terms: "I also advised David H that Rex [ie Mr Palmer] was not to discuss any details of the project with anyone who asked - particularly Neal and to refer him to us if he had any questions."

Mr Atkinson claimed in his evidence that the matters he did not wish Daracon to discuss with Mr Neal were the financial arrangements between Daracon and the Council. Mr Atkinson also said that the reason that he instructed Daracon in this fashion was because Mr Neal had threatened legal action. Her Honour found, however (by way of inference), "that Mr Atkinson must have meant that Daracon was not to have discussions with Mr Neal about the subdivision generally, rather than simply about the financial arrangements between the Council and Daracon in respect of the subdivision". 415 Her Honour concluded: "What was required was an open and fair approach, with the Council informing [Tellamist] of its intentions in relation to the construction of the drain at that time. On 7 August 1991, the Council approved [Tellamist's] cluster development application with the condition in relation to the enhancement of the public reserve when it knew it was about to fell all the trees and remove the vegetation on the reserve and construct this very wide drain. The evidence is overwhelming that [Tellamist] was not aware of the dimensions of the proposed drain at the time of the trespasses and did not have a copy of the drawings until after the trespasses had been committed."

Tellamist's refusal to transfer the Public Reserve Land 416 The August 1991 trespasses must be seen in the context of what had occurred in regard to the dedication of the Public Reserve Land. Much of the Council's behaviour is explicable by the conduct of Tellamist itself, in refusing to transfer that land and in attempting, thereby, to have the amount of s 94 contribution fees payable by it reduced. 417 I have mentioned that, by the letter of 16 October 1989, the "total concession of all s 94 contribution fees associated with the approved 27 lot subdivision" was agreed to "total approximately $30,000." At that stage the Council had not agreed to waive any other s 94 contribution, and in particular, had not agreed to waive that contribution in regard to the proposed 35 lot cluster development. The Heads of Agreement provided that "[t]he Council shall waive any requirement for the payment by [Tellamist] of a Section 94 Contribution", but did not specify whether the s 94 contribution waived was in respect only of the 27 lot subdivision or the 35 lot cluster subdivision as well. 418 I have pointed out that, according to Mr McMahon, in March 1991 he told Mr Neal that he had looked at the linen plan that had been lodged for Stage 1 of the development and had noticed that it did not include the dedication of the Public Reserve Land. According to Mr McMahon, Mr Neal said that that had not been done "intentionally" and promised to get his surveyor "to prepare a plan to reinstate the public reserve". According to Mr McMahon, Mr Neal spoke about the Public Reserve Land as being "technically" Tellamist's. Later, Mr Neal said that he would only dedicate the Public Reserve Land "at the end of the development". It is then that Mr McMahon replied, "We'll see about that". Mr Neal, as I have noted, did not deny that these conversations occurred. 419 By letter dated 23 April 1991, drafted by Mr McMahon, addressed to Mr Rennie, the Council called upon Tellamist to make the necessary arrangements for the Public Reserve Land to be dedicated to the Council. The letter, further, referred to the waiving of the s 94 contribution of $28,262 (condition 4). 420 Mr Neal testified that, upon being asked by Mr Blackmore when he proposed to dedicate the public open space land, he replied "I am prepared to keep my word". He said: "I'm just waiting to see what you do with your word (to waive the s 94 contribution)."

Mr Neal said that he would dedicate the public open space land "in about five minutes" as soon as agreement had been arrived at in regard to the s 94 contribution. It was not made clear what Mr Neal regarded as the Council's "word". 421 It is apparent from Mr McMahon's testimony that he thought that Tellamist, through Mr Neal, was attempting to take advantage of the errors that had been made in relation to the Public Reserve Land by obtaining a further waiver of contribution fees. Mr Neal was refusing to transfer the Public Reserve Land to the Council until the entire development was complete; thereby bringing pressure to bear on the Council to agree to waive the contribution fees to the cluster development. Bergin J made no factual findings in this respect, but on the uncontroverted facts Mr McMahon's belief was not unreasonable.

The factual findings leading to the determination of contumelious conduct 422 Mr Inatey SC, who together with Mr Henskens appeared for the Council, submitted that certain factual findings made by her Honour were incorrect. He submitted that these findings were important links in the chain of the judge's reasoning that resulted in the finding of contumelious conduct. I deal with these contentions below.

When the Council first gave Tellamist the drawings of the drain 423 Mr Inatey submitted that her Honour erred in finding that the Council did not provide drawings of the drain to Tellamist until October 1991, well after the trespasses that occurred between 10 and 12 August 1991. This finding supported the further findings that Mr McMahon deliberately concealed information about the drainage works from Tellamist until well after the trespasses had occurred, and that the Council did not have "an open and fair approach". 424 The finding that the Council only provided drawings of the drain to Tellamist in October 1991 appears to be based on certain replies given by Mr McMahon in cross-examination. 425 Mr McMahon stated in an affidavit sworn on 3 August 1995 that the plans of the drain were handed to Mr Neal at a site meeting on 16 August 1991. Mr McMahon was cross-examined about what occurred on 16 August 1991 and said that he could not recall whether he told Mr Neal on that day about the plans. It was apparent that he could not remember what in fact had occurred. He said: "I think Tellamist would have known on the 16th [of August] that they were drainage works. I have a recollection of a meeting where plans were handed over." 426 The exchange that seems to have led to the finding by the judge then occurred. Cross-examining counsel put to Mr McMahon: "I want to suggest that that wasn't until October 1991, you wouldn't dispute that, would you?"

Mr McMahon replied, "No". 427 But the evidence adduced on behalf of Tellamist did not support the question put by counsel. Mr Neal in fact testified by affidavit that he received the drain drawings and specifications from Daracon on 23 August 1991. In the present context, receipt from Daracon was equivalent to receipt from the Council. Thus, in finding that the Council only gave the plans to Tellamist in October, her Honour was mistaken. The plans were handed over at the latest on 23 August 1991.

The explanation given by the Council for its conduct 428 Mr Inatey next challenged the judge's finding, in support of her reasoning that the Council wished to keep its intentions as to the drain secret, that, after the trespasses between 10 and 12 August 1991 (although Tellamist's solicitors requested an explanation and reason for the Council's actions) there was "no letter in evidence explaining the Council's conduct".

Mr Inatey pointed out that on 3 September 1991 the Council replied to Tellamist's solicitors letter of 16 August 1991, stating: "Council acted in good faith in commencing to carry out drainage work on the subject land."

And: "As you and your client are well aware the subject land is delineated as a public reserve on the plan of subdivision which is the subject of your client's development consent 4370/89. This development consent 4370/89 also formed an integral part of the agreement entered into between your client and Council for which your client received $250,000 and a discount of $28,262 for s 94 contribution payable as a condition of DA consent 4370/89, being a 26 lot subdivision. As you should also be well aware your client's residential development was approved on the basis that it would drain into this line. Without this drain inter-allotment drainage will be necessary and Council will be obliged to withhold all building consents until this is provided."

This letter set out the attitude of the Council that it maintained consistently since August 1991.

Was Mr McMahon responsible for the August 1991 trespasses? 429 Bergin J said that she was satisfied that Mr McMahon was frustrated with the lack of progress of the dedication of the proposed Public Reserve Land. Her Honour concluded: "Mr McMahon's evidence of his conversations with Mr Neal in March and April 1991 when he found that the public reserve had not been included in the linen plan demonstrates the approach that he took thereafter."

I understand her Honour to be of the view that Mr McMahon's frustration led him to authorise Daracon to trespass on Tellamist's land and that his "approach" involved the contumelious disregard of Tellamist's rights. 430 The Council submitted, however, that the evidence did not support a finding that Mr McMahon was responsible for the August 1991 trespasses and, in my view, this submission is correct. 431 After Mr McMahon engaged Atkinson and Tattersall to be the project manager for the Council's industrial subdivision, he did not get involved in the detail of the project. The idea of having a drain in the Public Reserve Land was first formed by Mr Atkinson in the latter half of 1990. This did not involve any instruction from the Council or any concern to increase the return to the Council's subdivision. Mr Atkinson said that it was a decision made in his professional judgment. 432 There was no evidence that Mr McMahon knew of the detail of the work that Daracon was undertaking. He said that, prior to the trespasses between 10 and 12 August 1991, he did not even know that a drain was to be installed on the Public Reserve Land and did not know that the trees were to be knocked down. 433 On 8 August 1991 Mr Atkinson, not Mr McMahon, gave Daracon instructions to clear the Public Reserve Land. Mr Atkinson then believed that that land had been dedicated to the Council. Daracon went on to the Public Reserve Land two days later. Tellamist protested immediately. There was no evidence that Mr McMahon was involved in any way in Daracon doing this work or that he even knew that it was to take place. 434 On 12 August 1991 Mr Atkinson met with Mr Neal and agreed to stop work on the Public Reserve Land. No further work ensued on the drain thereafter (the next trespasses, that occurred in November and December 1991 involved incursions into the Public Reserve Land unconnected with the drain).

The letter of 16 August 1991 435 By 12 August 1991 Mr McMahon knew that Tellamist had instructed Daracon not to go on to its land. Nevertheless, at some time in the next four days, he drafted the letter to Daracon which Mr Walsh, the general manager of the Council, signed on 16 August 1991. This letter (as I have previously mentioned) pointed out that the proposed drain was to be located on the Public Reserve Land which was to have been (but was not) dedicated to the Council by the lodging of a linen plan. According to the letter, the omission to dedicate the Public Reserve Land was to be rectified. The letter then instructed Daracon to proceed with the work and indemnified Daracon "against any action should any be taken because of your presence on that land".

436 In cross-examination, counsel for Tellamist made much of this letter and put to Mr McMahon that when he so instructed Daracon he did not "care one jot about the rights of Tellamist". Mr McMahon did not agree with this proposition. Nevertheless, Bergin J was much influenced by the fact that, Mr McMahon, after knowing about the destruction of the trees, gave a further instruction to Daracon to recommence with the works. As I have mentioned, her Honour described Mr McMahon's evidence in which he admitted instructing Daracon to recommence the works and indemnifying it against claims in consequence as "quite extraordinary". 437 The force of the criticism of Mr McMahon for drafting the letter, it seems to me, is significantly dissipated when regard is had to the fact that no trespass occurred in consequence of it. The August trespasses had been completed by the time the letter was signed. No further trespasses occurred in that month after 12 August. On 21 August 1991, five days after the letter, Mr Atkinson instructed Daracon orally and in writing to stop work on the construction of the drain and, in writing, withdrew the works on the Public Reserve Land from the Council's contract with Daracon. The November and December trespasses involved incursions into the Public Reserve Land that did not involve the drainage works and were not caused in any way by the letter of 16 August 1991. 438 Mr McMahon maintained that in writing the letter of 16 August 1991 he believed that the Council was entitled to have the work performed on the Public Reserve Land. He believed this to be the case because of his understanding of the agreement that had been concluded between the Council and Tellamist. He was not shaken in cross-examination in this respect. The trial judge made no finding disbelieving him. 439 While Mr McMahon was wrong in his belief, it is not difficult to understand how he came to it and I do not think that it was entirely unreasonable. When regard is had to the context, I do not think that the letter was "extraordinary". But even if it were, and evidenced that Mr McMahon did not "care one jot about the rights of Tellamist", that (assumed) state of mind in Mr McMahon was of no consequence to the trespasses between 10 and 12 August 1991 because he knew nothing of the works by which the drain was to be installed and the trees knocked down, and it was of no consequence to the later trespasses.

The authority of Mr McMahon 440 In attributing great weight to the state of mind of Mr McMahon, Bergin J stated that Mr McMahon "had the delegated authority to grant [Tellamist's] cluster development consent". 441 There was, however, no evidence to that effect. Indeed, the evidence was to the contrary. A witness, Mr Douglas, said that he had the delegated authority of the Council to give development consent to the cluster development, not Mr McMahon. Mr Douglas was the person who under delegated authority gave consent to the development application DA 4670/89. Mr McMahon testified that he was not granted delegated authority. Mr McMahon was not a delegate of the Council.

Mr Atkinson's state of mind 442 I reiterate that Mr Atkinson was a consultant surveyor, not an employee of the Council. He was in essence in charge of the works required for the development of the Council industrial subdivision and, hence, of the drainage works. 443 At some time prior to June 1991, Mr Atkinson ascertained that the Council had not become the owner of the Public Reserve Land and he informed Mr McMahon of this fact. Mr McMahon told him that he had reached agreement with Mr Neal and that he, Mr Atkinson, should proceed. 444 Mr Atkinson testified: "I wasn't privy to what Council was doing with Neal or what he was, what Council were informing Mr Neal of."

Mr Atkinson did not know that Mr Neal was delaying the dedication of the land as a bargaining factor in an attempt to avoid paying the s 94 contribution fees that the Council had required from Tellamist. 445 Mr McMahon did not think of telling Mr Atkinson about the delay in the transfer of the Public Reserve Land. He was not cross-examined about why he did not tell Mr Atkinson about the change of mind on the part of Mr Neal. The inference is that he did not think about what consequences might flow from his omission to do so and he simply forgot what he had told Mr Atkinson. 446 On 8 August 1991, when Mr Atkinson instructed Daracon to proceed with the works, he still believed that the Public Reserve Land had been dedicated to the Council. He was not deliberately attempting to flout Tellamist. He gave no further instructions to commit any further trespass. As mentioned, some 13 days later he directed Daracon not to go on to the Public Reserve Land again. 447 On 16 August 1991 Mr Atkinson told Mr Hale of Daracon that Mr Palmer, the foreman, was not to discuss any details of the project with anyone who asked, particularly with Mr Neal, and to refer Mr Neal to the Council if he had any questions. 448 Mr Atkinson explained that one of the reasons for these instructions was that Mr Neal had threatened legal action. In context, I consider that to have been a reasonable response that has no sinister implications. Bergin J came to a different view, but the inference her Honour drew was informed, to a significant extent by findings with which I have found to be erroneous.

Was Tellamist "ambushed"? 449 Bergin J said that Tellamist was "ambushed". Her Honour explained: "Firstly, it did not know that the trees were to be felled and secondly, it did not know that there was to be a drain of such significant proportions on the proposed public reserve where it understood, reasonably in my view, that a buffer of trees and vegetation was to be maintained in which it was to construct a landscaped playground and barbeque area." 450 I do not think it can be said that on 16 August 1991 the Council consciously held back information as to the intended drain and removal of trees when the August trespasses took place. This assertion is based on the letter drafted by Mr McMahon that bears that date and Mr Atkinson's instruction to Mr Hale of that date. I have dealt with these matters but would add that the last of the August trespasses occurred on 12 August. Thus, whatever Mr McMahon and Mr Atkinson did on 16 August it was not done before or during the trespasses but four days thereafter. 451 With respect, I do not agree with the categorisation of the Council's conduct as an "ambush". There is no evidence that any officer of the Council knew that the trespasses were to occur before they took place. Mr Atkinson instructed Daracon to proceed with the excavation of the drain in the belief that the drain was to be constructed on the Council's land. I do not accept that the Council deliberately kept its intentions secret from Tellamist. 452 If I may repeat the observations of Santow JA at [55]: "In essence the appellants contend that two errors were made when the plan for the heads of agreement was drawn up. The first was that the land that should have been allocated by Tellamist to the Council as 'public reserve', pursuant to the exchange of letters, was not so allocated in the plan attached in appendix 1 to the heads of agreement. Further the public reserve land that was to remain part of the land of Council (under the exchange of letters) was actually transferred to Tellamist." 453 In my view, these contentions should be upheld. The fact is that the one hand of the Council (Mr McMahon) did not know what the other (Mr Atkinson) was doing. 454 Daracon did as it was told. There is no suggestion that, prior to the August 1991 trespasses, it knew that the trees were on Tellamist's land. The later trespasses occurred by reason of carelessness rather than deliberate conduct. 455 Rather than "ambush", the situation would more aptly be described as a state of confusion and error.

Conclusion as to exemplary damages 456 There was no relevant guiding mind of the Council that had a "conscious" disregard for Tellamist's rights in the sense discussed in Tesco Supermarkets. 457 When imputing to the Council the knowledge of Mr McMahon and Mr Atkinson, and having regard to all relevant circumstances in context, I do not think that the conduct of the Council comes anywhere near contumelious behaviour - even if the formula of objective, high-handed, behaviour is applied. 458 I would uphold the appeal in regard to the award in respect of exemplary damages.

The legal principles governing the determination of diminution in value 459 At the trial Tellamist elected to claim damages assessed by reference to the diminution of the value of its land resulting from the Council's trespasses. In written submissions, Tellamist stated that it had "elected this method of assessment and not the cost of repairs". This statement was consistent in the way Tellamist's case was put at trial. Tellamist did not claim the cost of reinstating the trees and Bergin J did not assess damages according to this method. I did not understand Mr Ellicott QC, who together with Mr Drummond appeared for Tellamist, to argue that damages should be assessed on this basis. It is therefore not necessary to say anything more about the cost of reinstatement. 460 As Santow JA comments, there was some confusion on the part of Tellamist in the way it put its argument in regard to damages. Arguments were at times based on loss in value and at times based on loss of profits. The case, however, was put before Bergin J as a loss in value claim. Indeed, Tellamist expressly elected before her Honour to claim on this basis. Her Honour assessed damages by reference to a loss in value. There is no notice of contention and in all the circumstances I do not think that is open to Tellamist to seek now to put its claim for damages on a loss of profits basis (if that is what it intends, and even at the end of the argument it was not entirely clear to me whether it was doing so or not). I shall proceed on the assumption that the claim is for loss in value caused by the trespasses. 461 The principles enunciated in Spencer v The Commonwealth (1907) 5 CLR 418 as to the valuation of land remain authoritative. Griffith CJ said (at 432): "In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, ie, whether there was in fact on that day a willing buyer, but by inquiring 'What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?' It is, no doubt, very difficult to answer such a question, and any answer must be to some extent conjectural. The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together."

The land said to have dropped in value is the land intended for the 35 lot cluster development. Once that land had been subdivided and was ready for sale as a cluster development, Tellamist intended to sell it. The business of Tellamist was land development and the land in question was, in effect, part of its stock in trade. Accordingly, the valuation of the Tellamist land before and after the trespass must be determined by having regard to the profits that the property, when developed, might have yielded ( Boland v Yates Property Corp Pty Ltd (1999) 167 ALR 575 at 652, [28] per Callinan J). The appropriate method of valuation in the present case is the "hypothetical development method" referred to in Boland v Yates (at 653, [286]). That method is explained in Closer Settlement Ltd v The Minister (1942) 17 LGR (NSW) 62.

The deemed knowledge of the hypothetical seller and purchaser 462 The knowledge that the hypothetical seller and purchaser are to be deemed to have was laid down in Spencer. That case involved an action for compensation under the Property For Public Purposes Acquisition Act 1901 (Cth). The relevant date for valuation purposes was 1 January 1905. As I have noted, Griffith CJ said (at 432): "The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time".

Isaacs J said (at 440): "In the first place the ultimate question is, what was the value of the land on 1st January 1905? 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 as 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."

The date at which the loss is to be determined 463 The general rule is that the loss must be determined at the date of the tort. 464 In some circumstances regard can be had to subsequent events in order to determine the proper weight to attach to the circumstances which existed on the material date: McCathie v Federal Commissioner of Taxation (1944) 69 CLR 1 (at 16). 465 A more liberal approach to the use of subsequent events may be discerned from what was said in Johnson v Perez (1988) 166 CLR 351. Mason CJ remarked (at 355-356): "There is a general rule that damages for torts or breach of contract are assessed as at the date of breach or when the cause of action arises. But this rule is not universal; it must give way in particular cases to solutions best adapted to giving an injured plaintiff that amount in damages which will most fairly compensate him for the wrong he has suffered".

His Honour noted that one established exception to the general rule was in the assessment of damages for personal injury. 466 Wilson, Toohey and Gaudron JJ said (at 367): "As a general rule, 'damages for tort or for breach of contract are assessed as at the date of the breach' (Lord Wilberforce in Miliangos v Frank (Textiles) Limited [1976] AC 443 at 468). The rule will yield if, in the particular circumstances, some other date is necessary to provide adequate compensation". 467 In the present case, however, I see no reason to depart from the general rule that the loss and diminution in value is to be determined at the date of each trespass, effectively the trespasses between 10 to 12 August 1991. 468 Mr Inatey submitted that regard should be had to the fact that Tellamist had retained its land and has not disposed of any part of it. Unchallenged evidence by an expert called by the Council, Mr Howes, was to the effect that in December 2002 the value of the Tellamist land was $3,100,000. That sum is far more than the damages claimed by Tellamist on the basis that the land would have been developed and sold. 469 The general rule, however, is that a subsequent falling or rising market will not affect the amount of damages a wronged plaintiff is entitled to receive for a tort committed on a particular date: see Housing Commission of New South Wales v Falconer [1981] 1 NSWLR 547 (at 576) and Jamal v Moolla Dawood, Sons & Co [1916] AC 175 (at 180). There is no warrant for departing from that rule in this case. 470 Mr Inatey submitted that regard should also be had to the fact that the Council approval for a 35 lot cluster development had lapsed and it was improbable that the land could still be developed as a 35 lot cluster development. He submitted, in particular, that Malec v J C Hutton Pty Ltd (1990) 169 CLR 638 supported this proposition. 471 I do not agree, however, that Malec supports the argument advanced. Malec concerned damages for personal injuries, and that, as Mason CJ remarked in Johnson v Perez, is a well-established exception to the rule. 472 The Council raised issues of subsequent fact that it submitted went to the question of mitigation of damage. In essence, however, these matters have no bearing on the claimed diminution in value of the land at the dates of the trespasses.

The trial judge rejects the Council's argument that Tellamist suffered no loss 473 Tellamist claimed that the value of its land intended for cluster development was diminished because the trees were removed. This is the essence of the claim for compensatory damages. The trees, according to Tellamist, provided a screen that contributed to the value of the development. That value, it is said, was lost when the trees were removed. 474 The Council submitted that, in truth, there was no loss in value. This contention rested on the following propositions: (a) No building on the cluster development could take place without the Public Reserve Land being dedicated to the Council.

(b) Upon dedication, the Council would construct the drain on the Public Reserve Land and would remove the trees (the Council's evidence was to this effect).

(c) In any event (as was stated in evidence by Mr Howes and recounted by Bergin J - Mr Howes not being cross-examined on this issue) the tree removal by the Council in August 1991 "would have been substantially required" by the condition in the cluster development consent that provided for the establishment of a children's' play area including facilities, a barbecue and landscaping.

(d) A willing buyer of the land in question would have known of the matters in (a),(b) and (c).

(e) Thus, a willing buyer would only offer to pay a price for the land on the assumption that, before building development took place, the screen of trees would be removed. 475 The Council argued that the removal of the trees simply put into effect what a willing buyer would believe would inevitably happen prior to any building on the cluster development. Hence, the value contributed to the land by the screen of trees could play no part in establishing the market value of the land. On this basis, there was no loss. 476 Bergin J rejected the argument so advanced by the Council. Her Honour said: "There are some real questions about the Council's entitlement to proceed with the construction of the drain when: (1) no notice to or consent from [Tellamist] had been sought; (2) the land was subject to a tree preservation order; (3) the Council had represented to [Tellamist] that there would be a buffer between its land and [Tellamist's] land with reference to the public reserve as both open space and also a 'koala corridor'; and (4) that it had actual knowledge that [Tellamist] had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that [Tellamist] enhance the buffer area with the establishment of the playground and landscaped barbeque area." 477 It is necessary to deal with each of these "questions" in turn, but before doing so I would emphasise that the fundamental issue is the determination of what Griffith CJ in Spencer (at 432) described as the point at which "a desirous purchaser and a not unwilling vendor would come together". This calls for the determination of the affect of the dispute concerning the Council's rights to the Public Reserve Land (and in particular its right to remove the trees) on the hypothetical seller and purchaser (and, thereby, the market value of the land in question). The objective merits of the arguments raised in connection with the dispute are not conclusive. They are not the fundamental issue. 478 In this context, it is noteworthy that her Honour did not proceed to answer what she described as the "real questions about the Council's entitlement to proceed with the construction of the drain". The point to be made is that the existence of "real questions" about the Council's entitlement did not, without more, detract from its argument that Tellamist did not suffer any loss. Her Honour appeared to assume that the mere existence of these "questions" meant that the Council's argument failed. That, however, is not correct. It was necessary to go on to consider how the questions identified by her Honour affected the price that a willing but not anxious purchaser would be prepared to pay for the Tellamist land.

The knowledge to be attributed to the hypothetical purchaser 479 Bergin J correctly observed that if Tellamist had proceeded with the cluster development, "a condition [condition 10] of the consent [for DA 4370/89] was that [Tellamist] was required to dedicate the public reserve area to the Council prior to the release of the building application". In any event, as Mr Inatey pointed out, "because the Public Reserve [Land] was integral to the subdivision proposed within the development application there was no necessity for a condition of consent". 480 Mr Fagan, the valuer called by Tellamist, agreed that a prudent purchaser of the cluster development land would be "most interested" in knowing what was going to occur on the Public Reserve Land and would make enquiries of the Council as to what would be located there. 481 Mr Fagan was asked to assume that the Council would inform would-be purchasers that an open drain would be constructed on the Public Reserve Land, that this would require the trees to be felled, and that the Council intended to replant the public reserve area. Mr Fagan agreed that, on that assumption, "there would be no difference in the value of the property on a before and after basis". He accepted that the Tellamist land, in the short term, would be "in exactly the same position" as the "after value" of the property. These views were the foundation of the opinion expressed by Mr Howes and, therefore, were common ground. 482 A hypothetical purchaser must be taken to know that the Public Reserve Land would have to be transferred to the Council before any building work could occur. The evidence is incontrovertibly to this effect. 483 Further, in my view, the hypothetical purchaser must be taken to know that compliance with condition 6 would require substantial removal of trees from the "buffer area" which was to be the Public Reserve Land. Mr Howes testified that the work necessary to comply with condition 6 would be something that a hypothetical purchaser would take into account in assessing the purchase price of the land intended for cluster development. In my view, this evidence must be accepted. As I have mentioned, Mr Howes testified that the tree removal by the Council in August 1991 would have been "substantially required" by that condition. 484 The following questions then arise: Firstly, is the hypothetical purchaser to be deemed to know the Council's intentions concerning the drain and the removal of the trees? Secondly, is the hypothetical purchaser to be deemed to know that compliance with condition 6 could well, in any event, require the removal of a substantial amount of trees? 485 Santow JA writes in this regard: "A hypothetical Spencer purchaser prior to the trespass, who was aware of Condition 10, may well have known that what was described as a 'public reserve' would have to be dedicated to Council before the Building Application would be released. But it does not follow that such a purchaser would know that the trees would be destroyed or that a drain would be constructed on that 'public reserve'".

His Honour poses the question: "[H]ow can it be said that the Spencer purchaser would not pay for the land on the basis that, at that time, there was little or nothing to suggest that the trees would be destroyed?" 486 In Spencer (at 441) Isaacs J said: "To arrive at the value of the land at [the relevant] date, we have, as I conceive, to suppose it sold then, not by means of a forced sale, but by voluntary bargaining between the plaintiff and a purchaser, willing to trade, but neither of them so anxious to do so that he would overlook any ordinary business consideration. We must further suppose both to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property." 487 In Marks v GIO Australia Holdings (1998) 196 CLR 494, McHugh, Hayne and Callinan JJ said (at 514): "It is necessary, then, to determine whether the value of what was acquired is less than what was paid. How is value to be assessed? It is to be assessed objectively, not according to what either or both of the parties to the contract believed that it would obtain from the contract. That is, the value of what in fact was acquired is to be identified according to what price freely contracting, fully informed parties would have offered and accepted for it (cf Spencer v The Commonwealth (1907) 5 CLR 418 at 431-432, per Griffith CJ; at 441, per Isaacs J.)"

See also Boland v Yates . 488 In Kenny & Good Pty Limited v MGICA (1992) Ltd (1999) 199 CLR 413 (at 648-649, [266]-[269] per Callinan J). McHugh J referred to the passage of Isaacs J's judgment in Spencer that I have quoted above and said (at 436, [50]): "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."

Gummow J (at 446, [80]) agreed with McHugh J's analysis. 489 In my view, the overwhelming thrust of these authorities is to the effect that the hypothetical seller and purchaser are to be assumed, in the hypothetical situation postulated, to be aware of all information relevant to the market price, about which a prudent purchaser would inquire. 490 Regard should also be had to those cases involving common law negligence which state that if inquiry ought to be made, and no inquiry is made, it is to be assumed that a true answer would be given. See in this regard Selangor United Rubber Estates Ltd v Cradock (No 3) [1968] 1 WLR 1555 at 1606-7 per Ungoed-Thomas J and the cases of persuasive authority cited there. See also Linter Group Ltd v Goldberg (1992) 7 ACSR 580 at 640 per Southwell J. I see no reason why that approach should not be applied to the issue that presently arises. 491 On the basis of these authorities it is not to the point whether the Council might or might not have informed the hypothetical willing purchaser of the drainage plans and its intention to remove the trees. It is to be assumed that the Council would have told the hypothetical purchaser the truth. As Isaacs J said in Spencer (at 441), we must suppose both seller and purchaser "to be perfectly acquainted with the land, and cognizant of all circumstances which might affect its value". 492 In any event, as a matter of fact, I consider that the correct inference is that the Council would have told the hypothetical purchaser the truth. 493 The Council had purported to approve the drainage plans and its approval formed part of its formal consent to the subdivision of its own land. The drainage plans formed part of the Council's file. There is no suggestion that the Council's consent was not a public document and that it was not capable of being inspected at the Council's office by any interested party. 494 An examination of the area on the Public Reserve Land on which the Council intended to construct the drain would indicate, inevitably, that - for the drain to be constructed - many trees would have to be removed and the screen of trees would be materially impaired. Condition 6 also made it clear that trees would have to be removed. 495 On my reading of the transcript, it was not put to any witness of the Council in cross-examination that the Council would attempt to conceal its intentions with regard to the drain and the trees. In fact, the plans of the drain were handed over to Tellamist no later than 23 August 1991. 496 Accordingly, in my view, a reasonable hypothetical purchaser, at the time of the trespasses, on inquiry would have been told of the Council's intentions to build the drain and to remove the trees once the land was dedicated to it. In addition, the hypothetical purchaser would know about condition 6 and its consequences. 497 The hypothetical purchaser would also know that, subject to the "real questions" to which Bergin J referred, once the Council became the owner of the Public Reserve Land there would be nothing to stop it from removing the trees and constructing the drain. The next issue is then, what regard would the hypothetical purchaser have to those questions?

The question of notice to or consent from Tellamist (question (1)) 498 The first "question" identified by her Honour arises from the fact that "no notice to or consent from [Tellamist] had been sought". I think the following points should be made about this. 499 It is irrelevant to the present issue whether the Council had given notice to or sought consent from Tellamist prior to the trespass. The true issue is whether a hypothetical purchaser would believe that, after dedication of the Public Reserve Land to the Council the Council would be required to give notice to or seek consent from Tellamist before removing the trees. 500 Assuming that the land was dedicated to the Council, then, subject to questions (2), (3) and (4), the Council, as owner of the land, would not have to give notice to or seek consent from Tellamist before clearing the trees from the site. That is to say, but for the matters the subject of questions (2), (3) and (4), there is nothing that a hypothetical purchaser would sensibly regard as requiring the Council to give notice to or obtain consent from the owner of the cluster development land before constructing the drain and removing the trees. 501 Accordingly, if the hypothetical purchaser would not regard questions (2), (3) and (4) as giving rise to a real prospect that the trees might not be removed, then question (1) would not affect the market value of the land. In truth, the hypothetical purchaser would not regard it as a question of any moment whatever.

The question arising from the existence of the Tree Preservation Order (question (2)) 502 I now turn to question (2), namely the effect of the Tree Preservation Order on the market value of the Public Reserve Land. 503 A Tree Preservation Order made pursuant to the powers of the Council under cl 41, Interim Development Order No 2, Shire of Port Stephens applied to all land situated within the Shire. It precluded the cutting or removal of trees without the prior consent of the Council. 504 The Council was the relevant consent authority in regard to the Tree Preservation Order. That fact alone militated against the Tree Preservation Order being a significant impediment to actions by the Council on its own land. 505 The Tree Preservation Order had not precluded the clearing of the Council and the Tellamist land prior to the trespasses; that is, the clearing that resulted in all the trees on the Council land and the Tellamist land being removed (apart from the band of trees that remained on the Public Reserve Land). 506 It is arguable that, as the Council approved the engineering and drainage works required in accordance with the development consent granted in respect of its industrial subdivision, it would not have been necessary for the Council to obtain a further consent from itself for the removal of the trees. Mr Douglas, an officer of the Council involved in the process for the approval of the subdivision of the Council's industrial land, testified that this was the case. These are matters that a hypothetical purchaser would bear in mind. If the Council were required to give a fresh consent, I accept that it would be required to act reasonably in determining whether it should, itself, comply with the Tree Preservation Order. It would, of course, take into account that it had already - tacitly - given that consent when approving its subdivision. That being so, a hypothetical purchaser would assume that the prospect of the Council not giving consent would be extremely remote. 507 Any attempt to set aside a consent by the Council to remove the trees would involve difficult litigation that would involve delay and expense. Apart from the entirely speculative chances of success in such litigation, there would remain the prospect of an appeal to the Court of Appeal. 508 In my view, the prospects of a hypothetical purchaser being prepared to pay more for the land because of the Tree Preservation Order were zero.

The question of representations about a buffer zone and a koala corridor (question (3)) 509 I now turn to question (3), namely the representations by the Council to Tellamist "that there would be a buffer between [the Council's] land and [Tellamist's] land with reference to the public reserve as both open space and also a 'koala corridor'". 510 These representations were not issues to which particular attention was given at the trial. They were not raised in the pleadings and were not issues upon which firm factual findings were made. Her Honour merely said that the representations gave rise to "real questions". 511 Even if representations were made as to the creation of a buffer, the removal of the trees did not preclude a buffer being created on the Public Reserve Land. A buffer zone does not necessarily mean a treed zone. It may simply mean a zone involving public open space between the Council land and the Tellamist land. Indeed, it was a zone on which a children's' play area, barbecue and landscaping had to be established, involving substantial removal of trees. 512 The representations as to the retention of trees and a koala corridor were of vague and uncertain content and in my view did not give any clear indication of the Council's intention in these respects. Moreover, no argument was advanced explaining how representations to Tellamist could be relied on by the hypothetical purchaser. The representations do not run with the land. 513 The Heads of Agreement made no reference to any agreed restriction on the rights of the Council to cut down trees on the Public Reserve Land and it is arguable that the Heads of Agreement negate any prior representations to that effect. This question, too, does not appear to have been considered at the trial and was not investigated on appeal. 514 No evidence was given as to what Tellamist would have done had it known of the asserted falsity of the representations or what any person on behalf of Tellamist did upon learning about the falsity of the representations. There was no evidence that Tellamist complained that what was done was contrary to representations made to it. 515 In an affidavit sworn by Mr Neal on 19 December 2001, he set out what he asserted Tellamist would have done had it been notified of any proposed action by the Council to enter upon the Public Reserve Land to construct the drain and remove the trees. The steps were said to involve the making of representations to the Council about the effect of incorporating fill along the Council land, where the drain should be constructed, the specifications of the drain, the preservation of the trees and vegetation on the Public Reserve Land and the effect of the Tree Preservation Order. Mr Neal did not say that the construction of the drain and the removal of the trees were contrary to any representations made to Tellamist by the Council. He did not assert that legal action would have been taken to restrain the Council from removing the trees. 516 The representations in question cannot, alone, give rise to any rights on the part of Tellamist against the Council. Bergin J made no finding as to whether they created some kind of estoppel against the removal of the trees and this issue was not investigated at the trial. In this appeal it would not be possible to find that any such estoppel existed. 517 A hypothetical purchaser should be taken to know that the Council would firmly resist any contention that it was bound by the asserted representations. Such a person would know that resort would have to be had to difficult, costly and lengthy litigation to restrain the removal of the trees based on the allegation that the representations were made. 518 In the circumstances, I do not think that the matters raised by question (3) would cause a hypothetical willing purchaser to ascribe a value to the land intended for the cluster development based on the continued existence of the trees.

The question of Tellamist's reliance on the buffer (question (4)) 519 The final "real question" (question (4)) is that the Council "had actual knowledge that [Tellamist] had relied upon the maintenance of the buffer in deciding to proceed with the cluster development and had even made it a condition of the consent that [Tellamist] enhance the buffer area with the establishment of the playground and landscaped barbeque area". 520 Much of what I have said concerning question (3) applies to question (4), particularly as to the meaning of "buffer". 521 It is by no means clear from the evidence that Tellamist relied upon the maintenance of the buffer in deciding to proceed with the cluster development. Even if it did, the removal of the trees did not constitute a failure to maintain the buffer. 522 There does not appear to have been any evidence that any person in the Council knew that Tellamist relied (that is, if it did) on the maintenance of the buffer in deciding to proceed with the cluster development. 523 Nothing in condition 6 required the retention of the trees in their pristine condition. 524 I do not think that question (4) would add to the market value of the cluster development land. In my view, it would have had no affect on a hypothetical purchaser's view of what price should be paid for that land.

Conclusion 525 In my view, for the reasons I have set out, the four "real questions" would not have carried any weight with a hypothetical purchaser. In my view, such a purchaser would not have attributed any value to the cluster development land by reason of the continued existence of the band of trees. Thus, in my view, the removal of the band of trees in the course of the trespasses did not affect the value of the land. 526 It follows that I would uphold the argument of the Council. In my view, Tellamist did not sustain a loss as a result of the trespasses. 527 It follows, also, that the claim for consequential damages must fail. Tellamist did not proceed with the cluster development and there is no real prospect of it ever doing so in the future. Tellamist's case was that it did not proceed with the cluster development because it considered that, without the trees, the development was not economically viable. But, if that is correct, the cluster development (for the reasons I have given) was never economically viable. Accordingly, Tellamist cannot recover, by way of damages from the Council, its costs - incurred before the trespass - of preparing for the cluster development. 528 As the trespasses were established (and, indeed, admitted), Tellamist is entitled to nominal damages for the wrongful acts of the Council. I would order the Council to pay Tellamist nominal damages of $1,000 (representing $250 for each set of trespasses). 529 In my opinion the appeal should succeed and the cross-appeal should be dismissed. The judgment and orders made by Bergin J should be set aside. There should be judgment for Tellamist for $1,000. I shall say nothing about costs orders as we were requested to leave costs until further order. Mr Inatey indeed requested that at this stage the Court make no orders at all. 530 I would therefore leave it to the parties to make written submissions within 14 days as to the orders proposed. **********

Last Modified: 10/05/2004 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.