Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority

Johnston v Roads and Traffic Authority [2000] NSWLEC 226, unreported; Latoudis v Casey (1990) 170 CLR 534 ; Pastrello v Roads and Traffic Authority of New South Wales [2000] NSWLEC 209, unreported; CASES CITED: Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2004) 134 LGERA 195; Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 535, unreported; Waters v PC Henderson (Australia) Pty Limited, NSWCA 40678/91, 6 July 1994, unreported.

APPLICANT Mr J J Webster SC SOLICITORS Minter Ellison LEGAL REPRESENTATIVES:

RESPONDENT Mr A E Galasso (Barrister) SOLICITORS Deacons

THE LAND AND ENVIRONMENT COURT OF NEW SOUTH WALES

30024 of 2003 Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority

JUDGMENT 1 Talbot J: In a judgment delivered on 9 July 2004, Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority (2004) 134 LGERA 195, I determined that the market value of land acquired by the Sydney Harbour Foreshore Authority ("the respondent") on 26 September 2002 for the purpose of determining compensation payable to Walker Corporation Pty Limited ("the applicant") was $60,000,000. At the date of acquisition there was an uncompleted contract for sale between the applicant as purchaser and Caltex Petroleum Pty Limited ("Caltex") as vendor so that the amount of compensation payable was adjusted by deduction of the outstanding purchase price by $16,500,000. 2 In a further judgment delivered on 24 September 2004, Walker Corporation Pty Limited v Sydney Harbour Foreshore Authority [2004] NSWLEC 535, unreported, following a separate hearing on 7 and 8 September 2004 in relation to the issue of compensation payable for loss attributable to disturbance, I determined that the amount of compensation payable for disturbance was $55,138.50 so that the total amount of compensation, payable to the applicant by the respondent, pursuant to s 55 of the Land Acquisition (Just Terms) Compensation Act 1991 ("the Just Terms Act") is $43,555,138.50. The parties have subsequently agreed to the terms of a stay on the effect of the determination of compensation pending the outcome of an appeal to the Supreme Court. 3 The compensation notice issued to the applicant pursuant to the Just Terms Act assessed compensation in the sum of $10,100,000. Following lodgement of the objection to the amount of compensation offered in the compensation notice, the respondent claimed that the applicant was only entitled to a sum of $50,000, being compensation solely in respect of disturbance. 4 In its Further Amended Points of Claim the applicant claimed $64,500,000 as compensation for its interest in the market value of the land as the purchaser under the uncompleted contract for sale. I determined on the balance of probabilities that the point of equipoise that would be reached between a willing but not anxious vendor and purchaser would be $60,000,000 in the extremely competitive market that prevailed at the time of acquisition. The sum of $60,000,000 contrasts to the component of compensation claimed as the market value of the land by the applicant at the conclusion of the hearing in the sum of $81,000,000. 5 It cannot be said that the applicant was not relevantly successful in pursuing its objection to the amount of the compensation offered. Although the applicant was unsuccessful to the extent of its pursuit of the total amount of its claim as it related to the market value of the land and the loss attributable to disturbance, it nevertheless has achieved the assessment of a significantly greater amount of compensation than the amount it would have received if the matter had not been litigated. 6 The applicant contended for a number of alternative basis upon which market value could be determined. It was successful only in respect of one of these, namely, but for the steps in the resumption process the zoning would have permitted residential development. The highest and best use was for a residential development in accordance with the underlying zoning. It was not necessary in that event for the Court to resolve issues in relation to the prospect of pursuing a development approval pursuant to State Environmental Planning Policy No.5 - Housing for Older People or People with a disability ("SEPP 5") or by relying on existing uses. I nevertheless found that existing use rights may not have applied to the whole site. 7 The respondent denied that the underlying zoning would have been residential. It also argued that an approval for a SEPP 5 development would not have been forthcoming and that existing use rights were not attached to the land. Accordingly it contended that the proper basis for the assessment of compensation was the industrial zoning which applied at the date of compulsory acquisition. 8 In my opinion, it was appropriate for the applicant to pursue each of the avenues available to it in respect of the determination of highest and best use. The evidence in relation to existing use rights and the prospective application of SEPP 5 formed part of the factual circumstances relating to the value of the land and the determination of its market value. They were each matters that the hypothetical prudent purchaser would have taken into account and investigated as part of its overall assessment. The arguments put forward on behalf of the applicant were cogent and relevant to the investigation a prudent purchaser would have undertaken. The case for existing use rights and a perspective SEPP 5 development were not frivolous and they both fell within the contemplation of the relevant legislation. Therefore, this is not an appropriate case to separate out issues in relation to particular aspects of the case and to apportion costs according to the extent of success by the respective parties in respect of those issues (Pastrello v Roads and Traffic Authority of New South Wales [2000] NSWLEC 209, unreported, Johnston v Roads and Traffic Authority [2000] NSWLEC 226, unreported, Waters v PC Henderson (Australia) Pty Limited, NSWCA 40678/91, 6 July 1994, unreported. 9 I propose to adopt the general approach taken by courts where proceedings involve multiple issues and not attempt to differentiate between the particular issues on which the applicant was successful and those on which it failed in respect of the assessment of market value. 10 However that is not an end to the matter as Mr Galasso, who appears for the respondent in respect of this aspect of case, has made a novel submission to the effect that as the applicant was put in a position far in excess of a position which it could be expected to be in, if it were not for the provisions of the Just Terms Act, there should be no order as to costs. His argument relies upon the Court accepting the following propositions:-

1. On any view of it the basis for compensation determined by the Court in so far as the applicant's position was concerned constituted itself as an undoubted " windfall" to the applicant.
2. The applicant had made application for development consent to redevelop the land for residential purposes by the erection of 83 residential units relying upon the provisions of SEPP 5, whereas the Court valued the land on the basis of a theoretical yield of 138 units.
3. The Court, by its judgment, set aside the actual planning situation in relation to the land at the date of acquisition and substituted or artificially reconstructed history dating back as far as the late 1980's.
4. But for the acquisition by the respondent the value of the land would never have been elevated to the position that the Court determined as a function of the application of the Just Terms Act consequent upon the acquisition.
5. The applicant, as the person having a compensable interest in the relevant land at the date of resumption, has in fact benefited by the acquisition to an extent that would not otherwise or ordinarily be available to it.
6. The applicant has been put in the place of being given the benefit of the operation of the Just Terms Act, but has not incurred the burden sought to be addressed by the Act because it has never been a person actually seized of the land during the time the steps in the resumption process were being undertaken.

11 Quite simply put Mr Galasso says that the applicant is now in a position far in excess of a fair and just result and that to award costs in favour of the applicant, would in the circumstances, be punitive to the respondent. This he says is contrary to the principle expressed by the High Court in Latoudis v Casey (1990) 170 CLR 534 at 543 that the purpose of a costs order is to be compensatory to the successful party. 12 The submission by Mr Galasso overlooks the nature of the proceedings and seeks to obscure the fact that the Court has done no more than apply the provisions of the Just Terms Act for the purposes of assessing the market value of the land. The scheme of the Act is to create a statutory regime whereby compensation is deemed to be just and reasonable if it is assessed in accordance with the provisions of the Act. 13 The respondent would have been aware when it resumed the land that it was liable to pay compensation assessed against the market value of the land on the basis that the scheme to acquire the land or the steps in the resumption process are ignored. Moreover, although Caltex as vendor and Walker as purchaser had not acted to complete the contract for sale at the date of resumption, they were legally obliged to do so pursuant to a call option agreement that was forged in September 1997. There is no evidence of the rate of escalation of the value of the land between the date of the original agreement in September 1997 and the date of acquisition on 26 September 2002. The call option was exercised by Walker on 19 April 2002. The value of the land in 1997 is not relevant to the assessment of compensation following compulsory acquisition. Nor is the price agreed pursuant to the call option agreement made five years before. Simply because Walker was fortuitous in its dealings with Caltex does not mean that it should be deprived of the full benefit of its bargain by bearing the burden of its costs. 14 The formula stipulated by the Just Terms Act for the assessment of compensation takes no account of the date of purchase of the land by the dispossessed owner. It requires only that the persons holding an interest in the land, as defined, be compensated in the manner prescribed. That is irrespective of whether the owner has suffered a burden as a consequence of the steps in the resumption process. The award of compensation is not conditional upon the owner having been deprived of any particular benefit arising out of ownership of the land or bearing any particular disadvantage on that same account, except in so far as those matters fall within the statutory elements required to be taken into account for the assessment of compensation. I know of no legal concept to the effect that before compensation can be awarded the resumee must suffer some burden as a consequence of the undertaking of steps in the resumption process. 15 Under the provisions of s 54(1) of the Just Terms Act the assessment of compensation is deemed to be just if it is determined by having regard to all the relevant matters nominated within Part 3. In particular s 55 extrapolated by the provisions of ss 56, 57, 58, 59, 60 and 61. 16 The applicant was adjudged to be entitled to the amount of compensation calculated by the Court. To that extent it has been successful in achieving a market value determination that bears no comparison to the amount offered by the respondent. 17 The objects of the Act are not couched in terms of loss but rather compensation that will not be less than the market value of the land; (see in particular s 3(1)(a) of the Just Terms Act). If there is any relevance to a burden carried by the dispossessed owner then it would be that whilever the land remains under the threat of resumption and steps in the resumption process have curtailed the development potential, the owner may not be able to fully capitalise on the benefit of its interest in the land. Ultimately such a burden is relieved and recognised by the assessment of compensation on the basis that the adverse effect of the public purpose for which the land is acquired must be ignored. 18 The reality of the situation is that the respondent, as the resuming authority, made an offer of compensation to which the applicant objected under s 66 of the Just Terms Act. If the objection had not been made the applicant would have received at best an amount of $10,100,000, but even an amount as low as $50,000. The legislation provides in s 45 that a person who does not lodge an objection is taken to have accepted the offer made, except where the provisions of s 66(3) apply.

19 For all of the above reasons the question of any alleged windfall benefit to the applicant, whether or not it occurred at all, is irrelevant. 20 The argument in relation to the costs of the separate hearing in respect of the claim for compensation for loss attributable to disturbance falls into a different category. The respondent originally made an offer in the sum of $50,000. The applicant rejected the offer and made a claim for a substantially higher amount. Ultimately the claim could not be sustained. Essentially the amount of compensation awarded for loss attributable to disturbance was in line with the offer initially made by the respondent. In those circumstances I am prepared to treat the respondent as the successful party in relation to the claim for disturbance and exercise my discretion to make an order t hat the applicant pay the costs of the respondent in respect of the separate hearing on that issue. 21 I propose to make the following orders:-

1. The respondent pay the costs of the applicant in respect of the part of the proceedings the subject of judgment delivered on 9 July 2004.
2. The applicant pay the costs of the respondent in relation to the part of the proceedings the subject of judgment delivered on 24 September 2004.
3. The respondent pay the applicant's costs in respect of the applicant's Notice of Motion 18 October 2004.
4. The applicant pay the respondent's costs in respect of the respondent's Notice of Motion 19 October 2004.

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