The Commonwealth v Milledge

The Commonwealth v Milledge - [1953] HCA 6 - HCA 1953 case summary — Zoe

[8]

The date of resumption was 5th December 1946, and by virtue of s. 29 of the Lands Acquisition Act 1906-1936 Cth. the value to which regard was to be had in determining the plaintiff's compensation fell to be assessed according to the value on 1st January 1946. The evidence placed before his Honour on this issue consisted of evidence given by the plaintiff and by six professional valuers of whom three were called by each side. The plaintiff's evidence was directed in the main to explaining the physical characteristics of the land, the manner in which it had been used and developed, the income the plaintiff had derived from market-gardening (up to 1937), dairying, and running a racing stud, and the damage he claimed to have suffered by having to sell his stock in consequence of the resumption. Each of the valuers expressed an opinion as to the value of the land on the material date, and gave reasons based upon a consideration of one or more sales of land which he regarded as comparable with the land resumed. They all considered that the best economic use to which the land could be put was that of market-gardening and valued it on that footing. And of course each valued the land as at 1st January 1946. But they were not at one in their selection of the sales which should or might be taken into consideration as affording a guide to the value they had to determine or in adjusting the prices given so as to allow for differences of time, location, physical condition of the land, or the effect of land sales control. They applied different views as to whether the basis of valuation should be the price likely to be officially approved under the system of land sales control in operation at the material date, or the price likely to be obtained on a free market, or the price likely to be obtained in other hypothetical circumstances. Naturally enough, the results they reached differed widely. Two of the plaintiff's witnesses, Leader and Sutton, agreed in valuing the land at £275 per acre or £2,956 in all, but, while Leader assumed a completely uncontrolled sale, Sutton's figure was one which he considered would be approved on a controlled sale. The plaintiff's third witness Taplin arrived at a value of £300 per acre for ten acres and £150 per acre for the remaining three-quarters of an acre, or a total of £3,112 10s. 0d. It is not clear what view he applied as to the effect of controls. Of the defendant's witnesses, Moyle, after considering a number of sales, valued the land at £135 per acre or £1,460, allowing something over the price he considered to be obtainable under controls; Ferris, who treated only one sale of other land as being comparable, valued nine acres at £150 per acre and one and three-quarter acres at £80 per acre, or £1,565 in all, but he conceded that an uncontrolled price would exceed £200 per acre; and Wyles, who took into consideration a number of sales and allowed ten per centum over controlled prices, valued the land at £140 per acre or £1,505.

[10]

What his Honour appears to have done is to put aside the evidence of sales - he said he could not pick a sale or sales that satisfied him as closely comparable - and to take, as a figure from which to work, the average of the valuations of the six expert witnesses. The various opinions, he said, can be given cumulative effect; and he proceeded: "In that manner each opinion may be deemed to provide some reason for attracting the value towards the figure given. By thus giving, as it were, group consequence to the totality, the idiosyncracies of the individual opinions tend to be eliminated". We think that a valuation made on this basis ought not to be sustained. Even if all the witnesses had used the same material as one another, and had approached the problem in the same way, the average of the values they respectively reached would most likely be a figure which each of them would consider to be wrong. But what is worse is that it would be a figure not arrived at by the application by the court of the established principles of valuation. These objections apply here, with the addition that the differences between the valuers in point of materials and approach made an averaging process a source of error mathematically as well as legally. It must be conceded that his Honour does not expressly say that he took an average of the six valuations; but if that is not the meaning of his language, at least his words cannot be understood as describing any method which pursues the principles laid down from time to time in this Court and in the Privy Council. It is no answer to say, as counsel for the plaintiff said in argument, that the question was essentially a jury question and was so treated by his Honour. It was indeed a jury question, in the sense that it was to be decided, not by a strict adherence to precise arithmetical calculations, but by a commonsense endeavour, after consideration of all the material before the court, to fix a sum satisfactory to the mind of the court as representing the value contained in the land on 1st January 1946. But to say that the question was a jury question is not to say that it admitted of solution by accepting the opinions of all the experts as equally reliable and going through a process capable of being described as giving group consequence to the totality. The problem was not to eliminate the idiosyncracies of the individual opinions; it was to form an estimate which really satisfied his Honour's mind as being the value of the property to the plaintiff on the material date.

[12]

The substantial objection to the course his Honour pursued is that he was engaged in assessing compensation according to a statutory standard which made no provision for variations in the value of currency between the valuation date and the date of payment. Whether the application of this standard in times of extreme financial instability would provide the just terms which s. 51 (xxxi.) of the Constitution requires is a question concerning the validity of acquisitions under the Act. This Court has already held in Grace Bros. Pty. Ltd. v. The Commonwealth [1] , that the Act satisfies the requirements of s. 51 (xxxi.). In that case the topic was adverted to by Dixon J. [2] , and observations were made upon it in Bank of New South Wales v. The Commonwealth by Latham C.J. [3] , by Starke J. [4] and by Dixon J. [5] . But the point to be observed here is that Mayo J. was trying an action to determine the amount of the compensation payable under and in accordance with the Act, and the validity of the acquisition of the plaintiff's land was necessarily to be assumed. His Honour's task of assessing compensation was therefore limited by the provisions of the Act, and, in particular, the task of valuing the land was limited to assessing the value which the land possessed on 1st January 1946. The principles applicable have been explained, since his Honour gave judgment in this case, in The Commonwealth of Australia v. Arklay [6] . It was necessary for his Honour to ask himself, what price would be agreed upon between a willing seller and a willing buyer, on the assumption that official consent to the sale would be forthcoming but that the buyer would himself be subject to control if and when his turn came to sell, should the controls not be terminated in the meantime. His Honour put to himself a shorter but not necessarily different question. He asked, what sum would a reasonable person in the plaintiff's place be prepared to pay for all the existing and potential advantages on the appropriate date. And again he asked himself, what would land in the particular situation be likely to fetch in all the circumstances subsisting on the specified date. The answer to such questions must necessarily be the same at whatever distance of time after the specified date it is given. To fix a different amount in May 1952 from that which would have been thought right on 1st January 1946 is possible only if a different question is taken as the test of value. The question which his Honour seems ultimately to have asked himself is, what would a reasonable person in the plaintiff's place have been prepared, not to pay on the specified date, but to agree on the specified date to pay over a period after that date, had he known how money would depreciate in the meantime. In a word, the hypothetical sale which his Honour took as his test of value seems to have been a sale upon terms of deferred payment. A valuation made according to such a test clearly cannot stand.

[14]

There remains the item of the plaintiff's claim described as business disturbance. Though it was considered convenient in this case, as it often is, to deal with this topic as a separate matter, it must always be remembered that disturbance is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of his land lies in the fact that the compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner, that is to say with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land. But a prudent purchaser in the position of the owner would not increase his price on account of the special advantage he would get by not having to move his business, unless the amount he would have been prepared to pay apart from that special advantage was the value of the land considered as a site for that kind of business. Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date. It follows that if in the first instance the land is valued on the basis of its suitability for some more profitable form of use, there can be no justification for making an addition to the value so ascertained because of disturbance. There would be an obvious inconsistency in doing so, as the Privy Council pointed out in Standard Fuel Co. v. Toronto Terminals Railway Co. [1] . The Court of Appeal took the same view in Horn v. Sunderland Corporation [2] . The Master of the Rolls in that case expressed the point in these words: "He (the owner) can only realize the building value in the market if he is willing to abandon his farming business to obtain the higher price. If he claims compensation for disturbance of his farming business, he is saying that he is not willing to abandon his farming business, that is, that he ought to be treated as a man who, but for the compulsory purchase, would have continued to farm the land, and, therefore, could not have realized the building value" [1] . The conclusion reached was that when land being used for agricultural purposes is ripe for building, and compensation for its compulsory acquisition is fixed on the basis of its value as building land, compensation for disturbance of the agricultural business should only be awarded to the extent (if any) that the value of the land for agricultural purposes together with the compensation for disturbance exceeds the compensation payable on the basis of the land being building land.

[16]

It has already been mentioned that the valuers who gave evidence before Mayo J. all made their valuations on the basis that the plaintiff's land was to be considered as market-gardening land, and the learned judge also acted upon that basis. But the plaintiff was not conducting a market-gardening business on the land when it was acquired by the Commonwealth. He was using the land for the purposes of a dairy and racing stud, which economically were not the purposes for which it was best adapted. He made no attempt to show what the land would be worth as a site for a dairy and a racing stud, and therefore he laid no foundation for any allowance in the court's valuation in respect of disturbance of his dairy and racing stud businesses. Mayo J., however, gave detailed consideration to evidence suggesting that the acquisition of the land had caused the plaintiff loss in respect of pasture for his cattle, loss on the sale of the dairy herd, and loss of a year's natural increase in the stud breeding business. He was unable to feel satisfied that the alleged losses by disturbance were established, but nevertheless he allowed the sum of £1,000 for business disturbance. His reason for so doing was that in the course of negotiations between the parties the Commonwealth had offered to pay an amount described in a letter written to the plaintiff's solicitors by the Surveyor-General and Chief Property Officer as including £1,000 for "compensation including loss of trade etc., and sale expenses". His Honour regarded the letter as conceding that to the extent which it mentioned the item had been found on examination to be justified, and on that basis he allowed the sum of £1,000. The letter does not appear to us to be fairly open to this construction, and indeed we think that it could not properly be relied upon as making any kind of admission. But in any case, for the reasons above given, it was an error to make an allowance for disturbance of business by way of addition to a valuation placed upon the land as a site adapted to a more profitable use than that to which the plaintiff was putting it.

At a glance

Court

Decision date

Before

Source

Judgment (31 paragraphs)

Parties