RE THE BOARD OF VALUERS; EX PARTE McKAY [2011] WASC 331 (30 November 2011)

2 At the hearing of this application, the court noted that an appearance had been entered by the Board of Valuers, and by notice dated 29 June 2011 the Board of Valuers indicated that it did not intend to be heard by counsel and would abide by the decision of this court save as to costs. This morning Ms Seaward, appearing for the State Solicitor, has sought and obtained leave to appear on behalf of the Western Australian Planning Commission (the WAPC).

3 As matters proceeded, it was agreed by counsel for the applicants and by counsel for the WAPC that the WAPC should be joined to these proceedings as second respondent, and that in view of the appearance of counsel for the WAPC service of the originating motion, the supporting affidavit and other papers on the WAPC should be dispensed with, and that an undertaking would be given by the WAPC to enter an appearance in due course. I will now fix a period of seven days within which the WAPC must enter that appearance, and I will direct the joinder of the WAPC as second respondent and proceed on the footing that it has been joined and heard on the application.

4 There is quite a complicated background to the issues sought to be raised by this application. It is already the subject of at least three sets of proceedings pending in one or other of the divisions of this Court. I will come to those in a moment.

5 The story starts with the declaration by the WAPC of two reservations of part of the applicants' land near Yunderup, east of Mandurah, the subject of lot 301. That land is a large area of rural or semirural land forming an irregular quadrilateral shape. It abuts Pinjarra Road to the north and the Murray River to the east.

6 The two areas which are the subject of reservation are a narrow strip running parallel with Pinjarra Road along the northern boundary totalling 1.8501 hectares which has been reserved for future road winding, and an area of reservation totalling 4.3430 hectares along the somewhat irregular southern boundary adjacent to what is called Wilgie Creek which has been reserved for future regional open space.

7 Since those reservations were made by the WAPC, the applicants, Mr and Mrs McKay, as they are entitled to do, gave notice of their intention to sell the whole of lot 301, including the two areas which had been reserved. I stress that the land had been reserved and not taken or resumed. Their decision to sell the land gave rise to a potential entitlement to compensation for injurious affection, which would arise if the sale price achieved on such a sale were less than the true value of the land unaffected by the reservations. Whether the sale price would in fact be diminished by the reservations is, in the events which have happened, a contentious question.

8 Continuing with the history, the McKays sold the whole of lot 301 to third parties, and that sale has been completed in the sense that ownership has passed to the third parties and the contract is indefeasible. The mechanism for the sale and the fixing of the consideration payable by the purchasers to the vendors is, however, complicated. It has not been fully explored before me, but it is apparent that the contract for sale provides for several different selling prices, dependent upon future contingencies occurring; for example, whether or not rezoning of certain land occurs within a certain period; whether or not certain or proposed applications for subdivision are approved, and other comparable contingencies. Essentially, the sale mechanism is that if these contingencies are satisfied within the scale of time prescribed by the contract, the sale price will increase, different specific sale prices being provided for in the event of satisfaction of the various contingencies.

9 The land having been sold, the right of the McKays, at least in their view, to claim compensation for injurious affection accrued and they have sought to commence appropriate proceedings for a determination of their entitlement to compensation for injurious affection. The course of procedure which they have decided to embark upon is to apply for a determination of the entitlement to compensation for injurious affection and the assessment of quantum of that entitlement by an arbitrator appointed under the provisions of the Western Australian Planning Commission Act 1985 (WA). This is where the litigious histories have commenced.

10 The attempts by the McKays to have an arbitrator appointed were opposed by the WAPC, perhaps on several grounds, one of which was that the time for determining an entitlement to compensation for injurious affection had not been reached. This is because, according to the WAPC, due to the contingent nature of the contract providing for the price eventually payable by the vendors that price could not yet be ascertained, as a number of the contingencies remained to be determined in the future. So, submits the WAPC, unless and until those contingencies have been determined and the actual contract price thereby ascertained, it would not be possible for the arbitrator to determine whether or not there was an entitlement to compensation for injurious affection or not, because the price which the McKays would obtain from the land could not be known until then.

11 That application for the appointment of an arbitrator came before his Honour Kenneth Martin J, who, after hearing the matters and considering submissions, refused to appoint the arbitrator, it seems, on the basis of the submissions propounded by the WAPC. I must add that I have not in the time available had an opportunity to consider or examine his Honour's reasons for that decision in any detail.

12 From that refusal to appoint the arbitrator, the McKays have instituted an application for leave to appeal to the Court of Appeal, which is the subject of proceedings known as CACV 63 of 2011. That application for leave to appeal or appeal is, as I have been informed, presently pending before the Court of Appeal.

13 The next step in this controversy is that, the right of the McKays to claim compensation for injurious affection having been triggered, as they allege, by this sale of lot 301 and their prior notice of intention to sell given to the WAPC, a process was begun by the WAPC which led to the Board of Valuers determining, under the provisions of the Planning and Development Act 2005 (WA), the unaffected value of the subject land. There is controversy as to the purpose and the effect and the procedure adopted for this enterprise by the Board of Valuers. One purpose which seems to be acknowledged is that it is necessary for the Board of Valuers to determine a price for the subject land below which the McKays would not be free to sell without jeopardising any entitlement to compensation for injurious affection. Another purpose advanced by the WAPC is that this determination by the Board of Valuers is to fix the unaffected value of the land for all purposes, including as an unassailable benchmark for comparison in any eventual claim for compensation for injurious affection, so that if the sale price finally achieved were greater than the unaffected value, as so determined, there would be no claim for compensation for injurious affection left.

14 There is another area of controversy in the approach taken by the Board of Valuers, and it is this: where, as in a case like this, the reserved land (which in this case is the regional open space already mentioned of 4.3430 hectares and the proposed road widening strip of 1.8501 hectares) forms only a portion, and in the present case a small portion, of the total lot 301, and a valuation is to be undertaken by the Board of Valuers, a question arises as to whether the Board should confine its valuation to the limited areas which are the subject of the reservation or reservations, as is contended should be done by Mr and Mrs McKay or, alternatively, whether the Board should determine the valuation of the entire land, that is, the whole of lot 301, including both portions of reserved land, and fix the unaffected value for that entirety.

15 In the present case, the Board of Valuers adopted the latter course and determined upon a figure for the unaffected value for the entirety of lot 301, including both areas of reserved land. That is an approach which the McKays say constitutes an error of law. The McKays contend that the approach to be taken in such a situation has been authoritatively determined by a decision of this court in Board of Valuers; Ex parte Bond Corporation Pty Ltd (1998) 101 LGERA 268, a decision of Miller J, the effect of which, so the McKays submit, is that in such circumstances the Board of Valuers should confine their valuation to the land which is the subject of the reservation or reservations, in this case to the two smaller areas part of lot 301, rather than to the entirety.

16 As I have already made plain, that is not what the Board of Valuers did in this case, and a question of law is sought to be raised by the order nisi as to the propriety of the methodology for determining the unaffected valuation by the method which the Board of Valuers has employed.

17 Before further embarking upon the history of this litigation, it is necessary to notice another controversy between the parties. This is about the significance of the determination of the unaffected value as conducted by the Board of Valuers which I have just described. The position of the WAPC, as I understand it, is that if and when an arbitration to determine any entitlement to compensation for injurious affection is embarked upon, the obligation of the arbitrator is to determine whether the sale price of the land in its affected condition that is, subject to the reservations is less than the unaffected value at the critical date. Only if it is, claims the WAPC, can compensation be awarded for injurious affection, and in that eventuality, no greater compensation than that difference can be awarded.

18 For these purposes, according to the WAPC, the arbitrator must accept as binding and conclusive the unaffected value of the land as determined by the Board of Valuers. The McKays take a contrary view and submit that the determination of the unaffected value by the Board of Valuers is not binding on the arbitrator, and that in any event, in this case, for reasons already given, the approach taken by the Board of Valuers in determining the unaffected value of the whole of lot 301 is contrary to principle.

19 I now come to another area of controversy between the parties. The McKays contend that the principles adopted and explained by Miller J in Board of Valuers; Ex parte Bond are correct, applicable and binding in the present instance, whereas the WAPC submits, with respect, that that decision is wrong, or that is at least distinguishable, so that in the present instance, the correct course to follow is to value the whole of the land, as was done by the Board of Valuers when determining unaffected value.

20 The practical effect of this combination of controversies between the parties, is that: the WAPC has, by letter to the solicitors for the McKays dated 18 September 2009 (tab 17 to the affidavit of Mr Houweling sworn 20 June 2011) asserted that there can be no entitlement to compensation for injurious affection at all. The reason, as explained by the letter, is that the contract of sale by the McKays to the third party purchasers of lot 301 contemplates a potential sale price of $12,500,000, together with a potential reconveyance of part of the land to the claimants. That price might turn out to be more, according to the performance of the contingencies which I referred to earlier. The WAPC asserts that the figure of $9,424,250, as determined by the Board of Valuers for the unaffected value of the land at the date, is well short of any realistic assessment of the actual sale price, and that there can therefore be no loss due to injurious affection and hence no entitlement to compensation.

21 For present purposes this is enough to set the scene of the controversies between the parties. It is necessary now to resume my narrative of the course of other litigation bearing on these and related questions.

22 There are other proceedings pending in this court, CIV 1574 of 2011, in which the WAPC is the plaintiff and Mr and Mrs McKay are the defendants. Those proceedings seek certain declarations on matters of law which would determine or apply to the resolution of any contested proceedings, by arbitration or otherwise, between these parties for the claimed entitlement to compensation for injurious affection. By order dated 24 May 2011, Kenneth Martin J ordered that those questions of law be reserved for consideration by the Court of Appeal. The questions of law so reserved are:

1. In dealing with the McKays' application for a valuation of lots 300 and 301 on deposited plan 44563, certificates of title given, was the Board of Valuers required by s 183(1) of the Planning and Development Act 2005 to make a valuation of:

(b) only those parts of lots 300 and 301 which were reserved for Regional Open Space and (in the case of lot 301) Primary Regional Roads under the Peel Region Scheme.

1. Does the valuation referred to in question 1 finally determine 'the value of the land as not so affected' for the purpose of s 179(1)(b) of the Planning and Development Act in relation to the McKays' claim for compensation for injurious affection for lot 301 dated 25 September 2006.
2. Does s 183(1) of the Planning and Development Act prescribe a methodology to be used by the Board of Valuers to arrive at its valuation and, if so, what is that methodology.

23 Those questions, having been referred to the Court of Appeal, are now pending for consideration. I should note, as is perhaps obvious, that the questions posed extend to land beyond that which is the subject of the application now before me, in that other land, lot 300, is included, but lot 301 certainly is included. The issue of whether or not the whole of a lot or only those parts of the lot which are the subject of reservation and hence the application of the Ex parte Bond decision is raised by question 1, the issue of whether or not the determination by the Board of Valuers of the unaffected value of the land so staunchly relied upon by the WAPC is binding in the determination of the calculation for compensation for injurious affection, before the arbitrator or otherwise, is raised by question 2, and other associated issues are raised by question 3.

24 I am also informed that the decision by his Honour Kenneth Martin J to refer these questions to the Court of Appeal is itself subject to an application for leave to appeal CACV 63 of 2011, in which the McKays are seeking leave to appeal against the decision referring the questions, and that that application is also pending.

25 At present, according to the information before me, it is not known when any or all of these applications will be heard by the Court of Appeal, or whether some or all will be heard together. There is a suggestion that the Court of Appeal might deal only first with the application in CACV 63 of 2011, that is the application for leave to appeal from the decision of Kenneth Martin J to refer questions in CIV 1574 of 2011 to the Court of Appeal for decision. Those are matters which are entirely within the scope of the practice and procedure of the Court of Appeal and which I cannot pursue.

26 This brings me at last to a consideration of the basis of the application for the order nisi for a writ of certiorari which is presently before me. I adopt, with respect, the written submissions put in support of this application by counsel for the applicants, setting out the background, questions of law, and tests to be applied in determining whether or not an order nisi should be granted in cases of this nature. Essentially, the question is whether or not the determination of the Board of Valuers in the present case of the unaffected value of lot 301 is erroneous at law for valuing the entire area of lot 301 without concentrating solely on the two individual smaller areas within it which are the subjects of reservation, and otherwise whether or not the Board of Valuers was in error in departing from the principles explained by Miller J in Board of Valuers; Ex parte Bond.

27 The applicants submit in support of their application that Miller J's decision in that case was not disturbed on appeal, when that matter went to the Full Court in Bond Corporation Pty Ltd v The Western Australian Planning Commission [2000] WASCA 257 [43] [48]. Another associated alleged error in the decision of the Board of Valuers relied upon by the applicants is that the Board of Valuers failed to ascribe a present value to the contingency payments which are provided for in the contract of sale, as I have already described.

28 I am satisfied that there are arguable questions as to whether or not the approach taken by the Board of Valuers in its determination of the unaffected value of lot 301 in the present case was in accordance with law, and that is sufficient to contemplate granting an order nisi. Also, because the determination of that order nisi is almost inevitably going to call into question the correctness of the decision of Miller J in the Board of Valuers; Ex parte Bond case and its apparent endorsement in the Full Court, it seems that eventually that decision would need to be the subject of consideration by the Court of Appeal.

29 The real question, as I see it, in the present instance is whether or not an order nisi should be made now, rather than after the application for compensation for injurious affection has advanced further under the statutory procedure designed for it by this legislation. I am very conscious of the many decisions which are to the effect that judicial review should not be entertained, or only sparingly entertained, at an early part of contested proceedings, especially in proceedings where there are opportunities for the parties to make submissions to a statutorily appointed tribunal for the determination of their rights, where there are rights of audience and rights of appeal or review as the case may be.

30 It seems that the course of events which has already transpired is an example of the complexity and the delays which can occur if interlocutory disputes are pursued at an early stage of contested proceedings. However, it will be for others to determine whether or not this is a case which warrants intrusion of this kind at what might be considered a premature stage.

31 On the issue of whether or not the questions of law which have been referred by Kenneth Martin J to the Court of Appeal should be determined in proceeding CIV 2081 of 2011, or in the associated appeal of CACV 63 of 2011, the McKays take the position that they are very much opposed to the Court of Appeal being asked to determine these questions at this early stage of the proceedings for compensation for injurious affection, and that they would much prefer the arbitration to be commenced and pursued in the ordinary way. However, the McKays submit that if the Court of Appeal is to pronounce on these questions, it is desirable that the full context of the questions be presented, including their objections to the legal correctness of the decision of the Board of Valuers determining the unaffected value of this land.

32 Hence, they submit, somewhat reluctantly but out of necessity, that if all these other matters are to proceed, then their challenge by way of a claim for certiorari against the decision of the Board of Valuers should also be determined. Despite some hesitation, I am persuaded by this argument, and it seems most undesirable that these many disputes should be pursued in a piecemeal fashion.

33 It seems to be desirable for the entire conspectus of these controversies to be before any court if it is deciding whether or not to undertake judicial review, or, for that matter, if it is to decide that, because of apparent prematurity, it would be better to reject these applications and let matters take their course. Either way, a complete perspective seems desirable.

34 For those reasons, therefore, I am satisfied that, there being a prima facie case to challenge the decision of the Board of Valuers in determining the unaffected value of lot 301, there is a basis for a grant of an order nisi, but that the discretionary factors as to whether or not it is premature for this to be done can only really be determined and resolved from the wider perspective which I have been describing. For that reason, therefore, I consider that I should refer this application for an order nisi, together with any consideration of the final application if an order nisi is granted, entirely to the Court of Appeal, leaving that division of the Court free to determine them either alone or in conjunction with the other matters already before it. I will make orders to that effect. Those orders take the effect in conjunction with the orders, which I have already mentioned, of joining the WAPC as second respondent; dispensing with service and requiring an appearance within seven days.