Williamson v Melbourne Water Corporation [2013] VCAT 673

[4]

The compensation payable by the respondent is to be paid to the applicant within 28 days of the date of this order.
Where relevant, interest is payable on any unpaid amounts in accordance with Part 6 of the Land Acquisition and Compensation Act 1986, such interest to be agreed between the parties or, failing agreement, to be determined by the Tribunal.

Williamson v Melbourne Water Corporation [2013] VCAT 673 | Case summary | Zoe

[25]

Kevin Williamson owns approximately 118 ha of land fronting McGregor Road, Pakenham, just to the south of the Princes Freeway (Pakenham Bypass). He and his family have farmed the land for many years, primarily through raising beef cattle.
Ali Holdings #1 Pty Ltd ("Ali Holdings") owns a smaller parcel of land of approximately 37 ha fronting McGregor Road, between Mr Williamson's land and the Pakenham bypass. Ali Holdings purchased the land in 2006 as an investment, having regard to its potential for future urban development. Part of the land is currently leased for use as a broiler farm, and Mr Williamson agists cattle on part of the land.
Both the Williamson land and the Ali Holdings land are now within the Urban Growth Boundary, although the land is unlikely to be developed for urban purposes until the medium to longer term. Both parcels of land are also affected, in part, by an existing Land Subject to Inundation Overlay ("LSIO") under the Cardinia Planning Scheme, having regard to potential overland flood flows across parts of the land. The LSIO broadly follows a pre-existing creek or watercourse known as the McGregor waterway.
Having regard existing and future urban development in the area, Melbourne Water Corporation ("Melbourne Water") has extended its McGregor Road Drainage Scheme to include both the Williamson land and Ali Holdings land. That drainage scheme has for some time covered other land to the north of the Pakenham bypass, much of which has now been developed for residential use.
Melbourne Water has already undertaken some works on the Williamson land and Ali Holdings land, and adjacent land, and has prepared some plans for other future drainage infrastructure. The works undertaken in or around 2005 and 2006 as part of the extended McGregor Road Drainage Scheme included:
- two major pipes, of 2400mm and 2100mm diameter respectively, beneath the Pakenham bypass, that essentially drain some of the recently subdivided residential land to the north of the bypass, and feed into a drainage pit on VicRoads land south of the bypass and immediately to the north of the Ali Holdings land; and
- a 1200 mm low flow pipeline that commences from the drainage pit at the end of the two major pipes, just north of the Ali Holdings land, and traverses the Ali Holdings land and the Williamson land adjacent to the McGregor waterway, with an outlet into the waterway near the south of the Williamson land.
The intent of the two major pipes is that they operate as part of the higher capacity trunk infrastructure, designed to protect the already developed land and the Pakenham bypass in a 1:100 year flood event. The intent of the 1200 mm low flow pipeline is that it will be sufficient to drain 'normal' flows from these two major pipes (i.e. from frequent low intensity storms) under the Ali Holdings land and the Williamson land. The combined capacity of the two major pipes is however in the vicinity of seven times the capacity of the 1200mm low flow pipeline. In a major flood event, the intent is that the excess water flows that cannot be accommodated by the 1200mm pipe will 'bubble up' from the drainage pit at the end of the major pipes, and flow across the Ali Holdings land and the Williamson land - primarily into and along the existing McGregor waterway.
Despite this 'intent', a major (1:100 year) flood event in fact occurred in 2011, and the flow of excess water did not confine itself primarily to the existing McGregor waterway. There was consequential flooding to a broader area of the Ali Holdings land and the Williamson land. Melbourne Water contends that this extreme flood event was exacerbated by flooding from other sources, including the nearby Toomuc Creek which flows along the far western boundary of the Williamson land.
In the medium to longer term, when the Ali Holdings land and the Williamson land is ultimately developed for urban purposes, Melbourne Water proposes a major 50m-wide drainage reserve through the land to deal with peak drainage flows and major flood events. This reserve is proposed by Melbourne Water to be located broadly along the line of the 1200mm low flow pipeline and the McGregor waterway.
Ali Holdings and Mr Williamson have both made two claims for compensation against Melbourne Water. In particular:
- pursuant to the former Melbourne and Metropolitan Board of Works Act 1958 ("MMBW Act"), both claimants have made claims for compensation arising from the construction of the 1200mm low flow pipeline across their respective land (the MMBW Act claims in L81/2010 and L84/2010). The primary contended basis for compensation is the reduced land value caused by the creation of a statutory easement across the land, with a consequential claim for severance, disturbance, injurious affection, and other related costs. As part of his claim, Mr Williamson also claims additional compensation for direct pecuniary loss and damage to his property and grazing activities that he contends was caused by the works, or as a consequence of the works; and
- pursuant to the Water Act 1989 ("Water Act"), and as an alternative to the injurious affection claim in the MMBW Act claims[1], both claimants have made claims for compensation arising from the flow of water onto their respective land resulting from the McGregor Road Drainage Scheme (the Water Act claims in W65/2011 and W93/2011). The primary contended basis for compensation is the increased likelihood of inundation to part of the land, and an increase in the duration and intensity of inundation, which both claimants claim is reflected in a further reduced land value over and beyond the reduced land value claimed through the MMBW Act claim.
Melbourne Water has disputed all of the claims for compensation, and the disputed claims therefore form the basis for the four applications to the Tribunal.
Although there was a large volume of background documents, evidence and submissions, which materially assisted us in our understanding of the issues, the ultimate dispute between the parties can be largely confined to a limited number of issues of liability and valuation. Whilst we have considered all of the evidence and submissions, we have referred in these reasons only to the material we consider necessary or desirable to substantiate our decision on determinative matters.

[26]

The MMBW Act claims arose within the jurisdiction of the Tribunal's Land Valuation List, and the Water Act claims arise within the jurisdiction of the Real Property List. At the request of the parties, all four claims were heard together by a presidential member and a valuer member appointed to both Lists. In February 2013, the Land Valuation List merged within the Tribunal's Planning and Environment List.
All four claims have changed substantially since they were commenced, both in terms of the allegations made, the legal and valuation basis for the claims, and the quantum claimed[2].
Although 'further' or 'second further' amended particulars of claim were filed by both claimants on 7 September 2012, only three weeks before the first hearing in October 2012, the claims continued to change and evolve through that hearing, without any clear further amended particulars. This included:
- not calling, and not proceeding to rely on the evidence of, the claimants' valuer Robin Hocking, despite a witness statement having been filed;
- pleading that the low flow pipeline was constructed without lawful authority or consent, and requiring its removal, but not proceeding with such a claim;
- re-instating some of the claimed disturbance losses for Mr Williamson that had been expressly deleted in the further amended particulars of claim[3];
- re-calculating the claims by reference to new plans and land areas for land within and outside the LSIO, the easement, and modelled additional flows[4] - a matter undertaken 'on the run' and requiring the recall of a witness (including on the last day of the October 2012 hearings) and requiring later clarification; and
- re-characterising the legal and valuation basis for the Water Act claims as instead or alternatively being claims for injurious affection within the MMBW Act claims (on the last day of the October 2012 hearings).
Whilst some clarification and/or updating of a compensation claim within a hearing is common, the approach by the claimants in this proceeding was unsatisfactory. Melbourne Water claimed (with some justification) to be disadvantaged by the claimants' conduct of the proceedings and sought that we disallow many of the late changes to the claims.
In circumstances such as this, the Tribunal is faced with a dilemma. Although the Tribunal is not a court of pleadings, these proceedings were of a complex court-like nature prepared by both sides on a carefully pleaded basis. The claimants' changing claims clearly had the appearance of 'shifting the goal posts' in the lead up to the hearing and on an almost daily basis during the October 2012 hearings, such that even a well-represented party like Melbourne Water had difficulty following the case it had to meet.
Having regard to ss 97 and 98 of the Victorian Civil and Administrative Tribunal Act 1998, the Tribunal has a duty to act fairly and to attempt to bring before the Tribunal and resolve all relevant issues in dispute. The Tribunal has discretion whether to allow a change to a claim at any stage in a proceeding. In considering the exercise of that discretion, the Tribunal may consider a range of factors including the nature, substance and timing of the change; the respective implications for the parties in terms of potential prejudice, costs and delay; procedural fairness; and relevant case management matters[5].
Here, we consider that the changes to the claims during the October hearings (albeit late and sometimes confusing) were largely in the nature of re-calibrating, re-calculating, or re-characterising the existing claims. The overall quantum of the claims has substantially reduced since they were first commenced, rather than being increased. Although we agree that Melbourne Water has been somewhat disadvantaged by the claimant's conduct, these claims have been outstanding for some time. The claims are for compensation by affected parties arising from the actions of a statutory authority on their land and raise complex issues, where a procedural approach beneficial to the claimants should ordinarily be preferred[6]. In our view, there is value in having the claims properly characterised and dealt with as a mater of justice for those affected parties. Melbourne Water is a body well able to deal with the amended claims, provided appropriate procedural fairness is accorded to it.
Accordingly, having regard to all of the material and evidence before us, we saw merit here in having all relevant issues canvassed, so that we could determine all of the underlying issues in dispute between the parties. In reaching this view in the circumstances of this case, we do not seek to excuse the procedural conduct of either claimant, nor do we seek to establish any principle that suggests that very late amendments to a claim before the Tribunal will always be allowed. Procedural fairness cuts both ways, and what is fair will vary from case to case.
Based on the above, at the end of the October 2012 hearings, we allowed further written submissions to deal in particular with the injurious affection claim. We subsequently fixed the proceedings for a further hearing in March 2013 on this issue. We also granted leave for further amended particulars to be filed to clarify the 'final' amounts claimed in each matter[7].

[35]

Despite the common ground, Melbourne Water raised two[9] threshold issues concerning the application of s 283 of the MMBW Act arising from the repeal of the Act in 2007 and the timing of the claims in 2010.
Melbourne Water first contended that the compensation claims could not be made by either claimant in 2010, even if still technically within the four-year limitation period contemplated by s 283(1) of the MMBW Act, because the Act had been repealed in 2007 with no continuing effect. It contends that the opportunity to bring a compensation claim is not saved by transitional provisions in the Water Act 1989 (Water Act).
Relevantly, clause 5(2)(b) of Schedule 16 of the Water Act provides that "any debts, liabilities and obligations" of the pre-dating Melbourne Water Corporation (i.e. here, arising under the MMBW Act) are deemed to be the debts, liabilities and obligations of the re-established Melbourne Water Corporation under the Water Act. We note that the construction of the pipeline as a Melbourne Water asset and the acquisition of the statutory easement are both expressly preserved and vested in Melbourne Water under clause 5(2)(a) and clause 9 of the transitional provisions in Schedule 16. Indeed, the heading to clause 5, whilst not determinative, indicates that the pre-dating and re-established forms of the Melbourne Water Corporation are "deemed to be the same body".
Despite Melbourne Water's protestations to the contrary, we prefer the view that the construction of the pipeline and acquisition of the statutory easement carried with it a contingent liability or accrued obligation to pay compensation arising from that construction or acquisition for the balance of the four-year limitation period. The effect is that this four-year 'limitation period' survived the repeal of the MMBW Act. Indeed, we would find it very surprising if the legislation intended an outcome whereby Melbourne Water could avoid its potential liability for compensation through a statutory corporate restructure. We see no such intention evident in the transitional arrangements.
Our view is bolstered by the fact that s 283 of the MMBW Act was essentially replaced (at least insofar as it affected Melbourne Water) by s 155 of the Water Act, with somewhat similar (but not identical) compensation provisions and no statutory limitation period. The intention was that Melbourne Water would continue to be liable for compensation for loss or damage arising as a direct, natural and reasonable consequence of the performance of similar functions by it in the future.
Our view is also bolstered by s 14(2) of the Interpretation of Legislation Act 1984. To the extent that section applies, and to the extent there is no express contrary intention appearing in the Water Act or its transitional provisions, the repeal of the MMBW Act did not affect:
- anything done or suffered under that Act (s 14(2)(d));
- any right, privilege, obligation or liability acquired, accrued or incurred under that Act (s 14(2)(e)); or
- any remedy in respect of such right, privilege, obligation or liability (s 14(2)(g).
The second threshold issue raised by Melbourne Water is its contention that the four-year limitation period for compensation should be interpreted so that any compensation claim had to be completed within the four years, rather than only commenced within that period. This is because of the words "shall if required within four years of the exercise of the powers make full compensation ..." in s 283(1)(b) of the MMBW Act. Such an interpretation implies that the 'requirement' to make compensation has to be made as a final determination by a relevant body (such as an order by this Tribunal) within the four years.
Whilst we agree that the matter is not free from ambiguity, we prefer the view that the words "shall if required ..." simply refers to a 'requirement' by the party seeking compensation. This could be manifested through a formal notice of claim to Melbourne Water and/or the commencement of a Tribunal proceeding within the four years, through which an affected party seeks or demands (or 'requires') that compensation be paid. Not all claims will lead to a requirement by a Tribunal that compensation be paid, as many will no doubt be settled directly by Melbourne Water without legal proceedings. Moreover, given the vagaries and delays of litigated compensation claims, it is not in a claimant's power to control the date of any final determination of a disputed claim.
Here, in our view, the earliest that it could be said that the four-year limitation period commenced is 24 April 2006. As will be seen, we consider the relevant valuation date to be later than this, but it is this date of 24 April 2006 that the claimants have both 'pleaded' (in their respective Particulars of Claim) that the 1200mm pipeline works were physically completed. This date is 'admitted' by Melbourne Water (in its Particulars of Defence). If this is correct, the four-year limitation period therefore expired as early as 24 April 2010.
Mr Williamson did not lodge his application to the Tribunal until 19 November 2010, and Ali Holdings on 23 November 2010. However, the file records that both had separately made an initial claim to Melbourne Water in writing on 22 April 2010 through their solicitors. Both claims were headed "Notice of Claim", signed and dated by the relevant claimant on 21 April 2010, and both referred expressly to s 283 of the MMBW Act. The notices clearly set out that compensation was sought under various sub-headings (albeit for a different quantum than now sought), including the reduced value of the land based on an assumed easement, with some supporting information provided.
Melbourne Water responded to both claims by separate letters dated 29 September 2010, indicating that it did not intend to obtain any interest by compulsory acquisition, but making an open offer of compensation "for the loss suffered in relation to the acquisition of an easement interest in the land and associated disturbance". Neither letter indicated that Melbourne Water then considered the claims to be misconceived, statute barred or out of time. Indeed, the Melbourne Water offers were based on a valuation indicating a relevant date of 31 July 2010, the interest assessed being an easement for drainage purposes, and an assumption being that "the easement is to protect "low flow" stormwater drain/pipe which was constructed in 2005/06".
Neither Mr Williamson nor Ali Holdings accepted the offers made, leading to a 'disputed claim' and the commencement of the Tribunal proceedings a few weeks later.
We are satisfied that both claimants first 'required' compensation to be paid on 22 April 2010 when their solicitors lodged the formal claims with Melbourne Water. It follows that, even accepting the earliest date for expiry of the limitation period (i.e. 24 April 2010), the 'requirement' for compensation was made by both claimants just within the four-year limitation period contemplated by s 283(1)(b) of the MMBW Act.
Accordingly, in our view, neither claim under the MMBW Act is statute barred by the repeal of the Act in 2007 or the timing of the claims in 2010.
Although it will be self-evident from what we have said, we also consider that the view we have reached on the proper interpretation of s 283(1) of the MMBW Act and the transitional provisions is consistent with a modern and purposive approach to statutory interpretation, having regard to the purpose of the relevant legislative and compensatory regime. Indeed, given the way in which Melbourne Water initially processed the claims in 2010, and the offers then made, we are surprised that Melbourne Water has now sought to avoid the payment of any compensation under the MMBW Act claims on an alleged legal technicality.

[41]

Where the assessment of compensation requires a market assessment of land value, there must obviously be a 'relevant date' at which the market value is to be assessed given the ups and downs of the property market over time.
Melbourne Water contended that the claimants had pleaded that the 1200mm pipeline works were completed on 24 April 2006, and Melbourne Water had 'admitted' this date, so that the claimants could not now contend for a different date for this event. The claimants' original valuer (Robin Hocking) had used this April date for his initial valuation for the MMBW Act claim, although he was not called as a witness (despite a witness statement having been filed), and his evidence was not relied upon by the claimants at the hearing.
Although we agree that admitted facts and pleadings should not be lightly disregarded, the Tribunal is not strictly a court of pleadings. Moreover, the physical completion date of the pipeline works is not necessarily the relevant valuation date for a claim based more broadly on the reduced land value caused by the acquisition of a statutory easement, just as the completion date of any works may not be the relevant valuation date for the acquisition or registration of a more formal easement.
Indeed, Melbourne Water's own valuer (Leslie Brown) had opted for a relevant valuation date of 9 June 2006, being the contractual date of 'practical completion' of the Melbourne Water works by its agent's contractor. We note that another valuer in Leslie Brown's firm had undertaken the initial valuation for Melbourne Water in 2010 using a relevant date of 31 July 2010.
We prefer the relevant date contended for by the claimants' counsel, namely 9 September 2006. This is the date three months after the contractual date of practical completion when, under the contract for works and at the end of a defects liability period, the pipeline formally vested in Melbourne Water. We see this vesting date as being more akin to the usual relevant date adopted for compulsory acquisition - i.e. the Notice of Acquisition when the formal interest in the land vests in the acquiring authority. In our view, it is this vesting date on 9 September 2006, when Melbourne Water formally acquired its interest in the pipeline asset, that best equates to its acquisition of a right in the nature of a statutory easement to protect that asset. It is that statutory easement that forms the basis of the compensation claim relevant to reduced land value.
We note that the claimant's valuer (Geoffrey Brown) had undertaken a valuation in 2012, using a relevant date of 16 May 2012 (being the date of his inspection), based on instructions from his clients' lawyers. In his evidence at the hearing, Geoffrey Brown essentially endorsed the use of a relevant date of 9 September 2006 for the MMBW Act claim. Given market movements, both up and down, between 2006 and 2012, his evidence was that the values for the Ali Holdings land and the Williamson land would not have changed greatly - particularly having regard to the actual purchase price of the Ali Holdings land in June 2006 and its similar value in 2012. He was therefore of the opinion that his 2012 valuation would still be appropriate if the relevant date was 9 September 2006, and with his other adjustments unaffected.
Based on the evidence and submissions before us, we consider that there is little valuation consequence arising from the choice of relevant dates in mid-2006, given the minimal difference between Leslie Brown and Geoffrey Brown in their base 'rate per hectare' valuation calculations. There was also a consensus view that there was little market movement between April and September 2006, albeit that the local property market was trending slightly upwards during this time.
We have therefore applied a relevant date of 9 September 2006 for land valuation purposes for the MMBW Act claim.
The claimants' counsel requested that we also determine a date when Melbourne Water first entered the Williamson land and the Ali Holdings land, as this may be relevant to the calculation of interest on any unpaid compensation under s 53(1)(b) of the LAC Act. The uncontested evidence of Mr Williamson was that Melbourne Water's contractor delivered pipes onto his land on 19 September 2005 and that the construction works commenced soon thereafter. In the absence of contrary evidence, we are satisfied that this is the date when Melbourne Water entered into possession of the land within which its statutory easement now subsists.

[43]

It was common ground that, through the construction and use of the 1200mm low flow pipeline, Melbourne Water was deemed (by reference to s 232A of the MMBW Act) to have acquired a statutory easement, despite it not having formally acquired a registered easement.
The parties however disagreed about the width of the 'deemed' easement, with the claimants arguing its deemed width to be 11.2 metres and Melbourne Water arguing for 4 metres.
The extent of the easement is of course relevant to the valuation of the acquired interest in the land for which compensation is payable. However, given the views we later express on injurious affection and/or the Water Act claim, the overall effect on compensation as between the two contended easement widths is perhaps more marginal. An easement of lesser width means a greater area of 'extra' land to be discounted in value for the effects of additional inundation - and vice versa, albeit that the valuation adjustments to be applied to the easement and the extra inundated area are not identical.
The claimants contend for a 11.2 metre wide easement on the basis of a 1200mm (or 1.2 metre) diameter pipe, plus 5 metres laterally on either side of the pipe. The basis for the 5 metres arises under s 148(1)(b) of the Water Act, whereby a person cannot (without consent) construct any structure or place fill within 5 metres laterally of any Melbourne Water works. The claimants concede that, as at the relevant date of 9 September 2006, s 148(1)(b) of the Water Act did not apply to Melbourne Water, and it only became bound by these Water Act provisions (in an amended form) from 1 July 2007, through the Water (Governance) Act 2006. They nonetheless assert that the proposed 5-metre restriction was in an 'introduction draft' of the Water Governance Bill, introduced into Parliament on 9 August 2006[14]. They argue that the 5-metre lateral restriction was thus within the contemplation of Melbourne Water shortly before the relevant date of 9 September 2006, and its intent must have been to acquire rights under the statutory easement with such a future benefit.
The 5-metre restriction is also found in Melbourne Water's 'Build Over Guide' (Version 2, June 2009)[15], and is also argued to be the extent of the 'impairment' effectively created by the pipeline.
We prefer the contentions of Melbourne Water in favour of a 4-metre wide easement. In particular:
- Melbourne Water has not taken any registered easement. It only wants and needs a deemed statutory easement to protect its works, and 4 metres is sufficient for this purpose. If it had acquired a formal easement, it would likely have been a standard 4-metre drainage easement along the pipe.
- neither ss 143 and 144 of the former MMBW Act[16] that did apply to Melbourne Water at the relevant date, nor the earlier version of Melbourne Water's 'Build Over Guide' then in force[17] contained any lateral restriction.
- apart from not applying to Melbourne Water at the relevant date, s 148(1)(b) of the Water Act is not determinative. It only creates a requirement for authority consent for structures or fill, but does not create any proprietary interest in the land.
- although not applying to Melbourne Water at the relevant date, the version of s 148(1)(b) then in force contained only a 1-metre lateral restriction either side of works of an Authority (which would have then led to a 3.2 metre easement).
- if Melbourne Water was to carry out further works beyond the 4 metres, a separate and additional compensation trigger would arise.
For the purpose of the valuation assessment in these proceedings, we have therefore determined the width of the deemed statutory easement to be 4 metres.

[45]

Both the Williamson land and the Ali Holdings land are affected, in part, by the Land Subject to Inundation Overlay ("LSIO") under the Cardinia Planning Scheme. As we have indicated, the LSIO broadly follows the McGregor waterway that traverses the land. Although we understand that more refined flood plain modelling has been undertaken, the LSIO remains in the planning scheme (at least proximate to the Williamson land and the Ali Holdings land) in the same area as originally mapped when the current planning scheme commenced operation. The LSIO has not changed in this vicinity in the period immediately prior to, or since, the relevant date.
Both valuers (Geoffrey Brown and Leslie Brown) accept that the LSIO represents a town planning impediment to the future development and use of the land for industrial/warehouse purposes, and both applied a discount to the value of the land in the LSIO in their respective 'before' and 'after' valuations - although the actual adjustments vary.
In their initial valuation assessments and written reports, both valuers had assumed that the deemed statutory easement (at either 4 or 11.2 metres) would be wholly contained within the LSIO. As a result of further modelling and mapping undertaken by Melbourne Water's hydrologist (Jonathan McLean), it became apparent that this was not the case for the Ali Holdings land, and that much of the easement lay just outside the LSIO - for the Ali Holdings land this is 1,272 m² for a 4-metre easement[18]. This necessitated an adjustment by both valuers within their evidence, to account separately for the area of the easement within and outside the LSIO on the Ali Holdings land. We have taken this adjustment into account.
As we have noted, Melbourne Water has also recently committed to constructing works on VicRoads land just north of the Ali Holdings land, as recommended by Mr McLean, to better direct excess water flows from the two major pipes into the McGregor waterway and away from much of the balance of the Ali Holdings land and the Williamson land. These are now proposed to be permanent works within an easement to be acquired over the VicRoads land, rather than the temporary bund initially proposed. Although the claimants had initially contested that any such works would be constructed, they now accept that this will likely occur and that the potential for future flooding (and any consequential impacts) in a major flood event should be modelled on this basis.
Mr McLean's modelling and mapping for the McGregor Road Flood Study had canvassed three scenarios[19]:
- Rural Flows, based on a pre-development scenario without the inclusion of any pipe infrastructure.
- Existing Conditions, assuming development of the upstream catchment, underground drainage at the Pakenham bypass (the two major pipes), the low flow pipeline, the 'surcharge' or bubbling-up of excess water as an overland flow, and assuming a bund or permanent works would be constructed to prevent a major surface flow across the northern boundary of the Ali Holdings land.
- Ultimate Development Conditions, assuming future industrial development with flood and stormwater drainage all contained within a trapezoidal channel with a base width of 15 metres within a 50-metre drainage reserve.
Additional plans for these scenarios had been prepared by Mr McLean for discussion purposes between the parties, and were tendered by the claimants at the hearing[20]. These included plans showing greater detail of:
- the land within and outside the LSIO and easement;
- the extent of the 'extra' area beyond the existing LSIO that would be inundated in a 1:100 year flood event under existing conditions; and
- the lesser area that would be required for drainage of the land in the ultimate development scenario when compared to the LSIO or the pre-development rural flows.
Subject to some further clarification we sought, we have found these additional plans, and Mr McLean's hydrological and flood study evidence generally, to be extremely helpful to our deliberations - particularly in relation to the Water Act claims and the injurious affection claim. As will be seen, a key difference between the claimants and Melbourne Water in these claims (and the major difference in terms on the quantum of compensation) is the extent to which the 'after' valuations should be based on the existing conditions scenario (where the 'extra' land subject to inundation may be depreciated in value), or ultimate development conditions scenario (where there may be a net enhancement in land value once the flood event issues are resolved within a confined drainage reserve).
Mr McLean's evidence indicates that, if the LSIO was now being redrawn based on more refined modelling, it would likely cover a different area with respect to the Ali Holdings land and the Williamson land - even for the historical pre-development rural flows. The claimants for a time argued that a notional or deemed LSIO should be considered. We have however based the 'before' valuation on the LSIO as it existed in the planning scheme at the relevant date. This was the known planning impediment to development that then existed. This was essentially the approach adopted by both valuers.
We note for the record that the claimants had also called hydrological evidence through Mohammed Cheema but, through no fault of Mr Cheema, his evidence became superseded by events. He had been asked to assume no bund would be constructed, and he had prepared his evidence on less sophisticated modelling than that ultimately undertaken by Mr McLean. Mr Cheema largely endorsed Mr McLean's approach, and it was later 'adopted' by the claimants.

[46]

Although based on different assumptions and calculations, the 'market value' component of the MMBW claims (i.e. the valuation of the land in the statutory easement in the 'before' and 'after' scenarios) does not differ markedly between the claimants and Melbourne Water. The key difference between them is whether there is any additional allowance that should be made for severance in the 'after' scenario.
As indicated earlier, both the Ali Holdings land and the Williamson land, in the before scenario, are bisected by the LSIO that broadly follows the McGregor waterway.
Geoffrey Brown valued the land to the east and west of the LSIO at the same rate per hectare in the 'before' scenario for Ali Holdings, but applied a notional adjustment for the land to the west of the LSIO in the 'after' scenario. An adjustment of 5% (or $11,000/ha) was applied for the Ali Holdings land west of the LSIO.
Geoffrey Brown's approach, and the claim for severance only in the 'after' scenario, appears to be predicated on the basis that the statutory easement and low flow pipeline has created the impediment to the development of the land west of the LSIO, and will lead to a loss of flexibility in the way the land west of the LSIO can be developed. By valuing the land to the east and west of the LSIO at the same rate in the 'before' scenario, this method assumes that the LSIO itself has not created any such impediment or loss of flexibility. We find this assumption surprising[21].
The Williamson land is a little more complex, having a second LSIO and floodway, further to the west along Toomuc Creek. Geoffrey Brown therefore splits the land into three components - the land east of the LSIO, the 'middle' land west of the LSIO (but east of Toomuc Creek), and the land west of Toomuc Creek. As between the land east of the LSIO and the middle land, Geoffrey Brown allows an adjustment of 5% in his 'before' scenario ($200,00/ha for the land east of the LSIO and $190,000 for the middle land). It appears that this adjustment primarily reflects the lesser value of that land parcel having regard to its substantial distance from a main road frontage[22], and its location between the LSIO and Toomuc Creek, rather than specifically reflecting severance created by the LSIO. To consider otherwise would be inconsistent with his approach to the Ali Holdings land east and west of the LSIO. It would also be inconsistent with his more express allowance for severance for land west of the Toomuc Creek floodway in his 'before' scenario[23]. In the 'after' scenario, he then makes a minor adjustment for severance of 0.5% (or $1000/ha) for the middle land west of the LSIO. For similar reasons to our views in relation to the Ali Holdings land, we find this approach (i.e. only dealing with severance of the middle land in the 'after' scenario to be surprising and anomalous.
We prefer the approach of Leslie Brown on this issue. He takes the view that the LSIO has itself already created the impediment to the development of both the Ali Holdings land and the Williamson land west of the LSIO - either directly, or in recognition of the likely drainage reserve and overland flow channel that will ultimately replace it. Leslie Brown has therefore already allowed for severance in his 'before' scenario, adjusting the land to the west of the LSIO by 15% for the Ali Holdings land and 25% for the middle land to the west of the LSIO for Williamson. We agree with Melbourne Water that these are significant adjustments that already recognise the effect of the LSIO and likely pattern of development from east to west.
Leslie Brown then takes the view that the statutory easement and low flow pipeline has not materially worsened that pre-existing impediment, and is largely within the area of the existing LSIO, and no additional allowance is therefore required for severance in his 'after' scenario. He conceded under cross-examination that the severing impact in the 'before' scenario was the LSIO and in the 'after' scenario was the LSIO and the low flow pipeline, but considered the two severing impacts in the 'after' scenario to be related.
There was much debate at the hearing about where a 50-metre wide drainage reserve might be best located in an ultimate development scenario (and whether the existence of the low flow pipeline and easement limited flexibility in the future location of the reserve). On this, we prefer Mr McLean's evidence on behalf of Melbourne Water - namely, that the drainage reserve would most likely follow the natural landform, and thus largely follow the McGregor waterway alignment[24], as does the statutory easement. We agree with Melbourne Water[25] that any change to that alignment would need to carefully considered for its adequacy, integrity, addressing environmental considerations, and cost, and would likely be at the cost of the developer.
Accordingly, although the claimants argue that the statutory easement has made it 'more likely' that the overland flow channel and drainage reserve will need to be aligned with the easement[26], we are of the opinion that this is already the most likely scenario. We think it highly unlikely that a future drainage reserve would be located away from the pre-existing LSIO or McGregor waterway given the natural landform, and we do not agree with the claimants that there is an increased risk of a 'second separator' or further development impediment being created by the drainage reserve being located separately from the statutory easement for the low flow pipeline. Indeed, if there was merit in locating the future drainage reserve further to the west (albeit we think costly and unlikely), we agree with Leslie Brown that the low flow pipeline could be shifted and co-located at the same time given the significance of the overall drainage works being undertaken.
We consider that the LSIO has already created an impediment to the development potential of the land west of the LSIO, and this has not been made materially worse through the creation of the statutory easement and low flow pipeline. We thus consider it a preferable valuation approach to allow for the similar effects of severance in both the 'before' and 'after' scenarios, and not just as an additional allowance in the 'after' scenario. It follows that there is no further adjustment for severance in the MMBW claims of either Ali Holdings or Mr Williamson.

[49]

Both claimants have made claims for compensation arising from the flow of water onto their respective land resulting from the McGregor Road Drainage Scheme. The primary contended basis for compensation is the increased likelihood of inundation to part of the land, and an increase in the duration and intensity of inundation, which both claimants say is reflected in a reduced land value.
The claims were initially framed as a claim under s 157 of the Water Act. On the last day of the October 2012 hearings, the claimants' counsel contended that the claims could alternatively be characterised as claims for 'injurious affection' as part of the MMBW Act claims. Although the legal basis for each claim was said to be slightly different, the claimants contended that the underlying valuation methodology and quantum of compensation would be the same in either case. The claims for injurious affection were thus made as an alternative claim to bolster the claimants' prospects of success if the Water Act claims were unsuccessful on a legal or threshold basis.
Melbourne Water strongly resisted both claims. As we have indicated, we ultimately allowed the claimants the opportunity to put their claims, in the alternative, as claims for injurious affection. This necessitated the further hearing on 25 March 2013, and Melbourne Water recalled Mr Daff, Mr McLean and Leslie Brown.
We agree with the claimants that we should technically consider the injurious affection claim first, on the basis that the 'relevant date' for the MMBW Act claims is 9 September 2006, and the 'relevant date' for the Water Act claims is the present time.
Given that the claims, if successful, would result in compensation in the vicinity of $200,000 to $220,000 for both Ali Holdings and Mr Williamson, there are also implications for substantial interest to be payable on the injurious affection component of any MMBW Act claim (i.e. from 2006), as opposed to a Water Act claim. However, statutory interest is a consequence of a compensation claim over which we have no discretion, and it does not affect our decision either way.

[56]

Our earlier finding (that the MMBW claims are not statute barred) applies also to the claimants' late raising of the alternative claim for 'injurious affection'.
Melbourne Water raised a further threshold issue specifically in relation to this late claim. It effectively contended that, even if the other components of the MMBW Act claims were found to be within time and not statute-barred, the injurious affection claim represented a new and distinct head of claim having regard to the various factors set out in s 41(1) of the LAC Act. Melbourne Water argued that it was not merely a variation to an existing head of claim and, considered separately, this separate head of claim for injurious affection was well outside the four-year limitation period.
We prefer the view contended for by the claimants' counsel. Provided a valid claim is made within the four-year limitation period, the compensation under s 283 of the MMBW Act is to be determined consistently with the principles in the LAC Act. Regard must be had to a range of factors in s 41 of the LAC Act. This includes any depreciation in the value of the interest of the claimant under s 41(1)(e).
We do not consider that the 'factors' we must consider under s 41 of the LAC Act each raises a separate and distinct head of claim for the purpose of any statutory limitation period. Rather, they comprise the components of a single 'claim' for compensation that must be taken into account, to ensure that compensation is properly assessed in respect of the acquired interest in land. Provided that a claim for compensation for the acquired interest in land is made within time (as here), the claim is not then 'fixed' by reference to the quantum claimed or particular components. The claim is the starting point for an assessment of fair and reasonable compensation. In our opinion, and save for the procedural fairness issues we have dealt with earlier, there is no reason why a claim cannot be re-calibrated by reference to the various factors and components under the LAC Act as it is assessed.
Melbourne Water raised a number of other threshold bases upon which it contended the injurious affection claim should be rejected[27], including the absence of evidence to satisfy key elements of its claim. We have dealt with some of these issues in general terms already. None of these in our view necessarily prevent a proper consideration of the claim.
However, we agree with two of the main bases upon which Melbourne Water contends that the injurious affection claims for both claimants fail, namely:
- the claimed loss does not arise from the "implementation of the purpose for which the land was acquired" - s 41(1)(e) of the LAC Act does not therefore apply; and
- having regard to the highest and best use of the land, and the enquiries that would have been undertaken by a hypothetical purchaser, no depreciation in the value of the claimant's interest in land is established. (This second issue is common to the Water Act claims).

[58]

Using the words of s 41(1)(e), the claimants both claim a depreciation in the value of their respective land that immediately adjoins the land deemed to be acquired for the easement, by reason of the implementation of the purpose for which that land was acquired.
The claimants rely on the decision of the High Court in Marshall v Director-General, Department of Transport (Queensland)[28], although the claimants' counsel did not take us through that decision in any detail. In Marshall, land was acquired for road purposes, and alterations to the road drainage system made part of the claimant's residual land more susceptible to flooding, even though no part of the highway or drainage system was located on the acquired land. The High Court allowed a claim for injurious affection, and departed from earlier Queensland authority that had precluded compensation unless at least some of the works causing the injurious affection had been performed on the acquired land itself. This is the principle for which the decision in Marshall is most commonly cited.
We agree with the claimants' counsel that this principle from Marshall, if applied and considered in isolation, would potentially allow a claim for injurious affection caused by flooding to part of the Ali Holdings residual land and the Williamson residual land even if the works causing the flooding had been performed on other land (i.e. the VicRoads land, or other land to the north), rather than on the land acquired for the easement.
This perhaps gets the claimants to first base, but we consider the analogy with Marshall stops there. First, Marshall was decided under a Queensland provision (s 20(1)(b) of the Acquisition of Land Act 1967 (Qld)) that expressly required regard to be had, in assessing compensation, to "the exercise of any statutory powers by a constructing authority otherwise injuriously affecting such other land" (our emphasis). It is a very different provision to s 41(1)(e) of the LAC Act in Victoria. Secondly, the purpose of the acquisition in Marshall was for road purposes, and the court was prepared to give a broad interpretation to the works of the road authority on other nearby land that might be considered incidental to that same purpose of acquisition for road purposes. Here, the works causing the flooding do not arise from the same purpose, nor are they incidental to it.
Here, s 41(1)(e) refers to the implementation of the purpose for which the land was acquired. Melbourne Water's acquisition of the statutory easement was for drainage purposes - specifically an easement for the low flow pipeline. The 'implementation' of that purpose, broadly construed, would include anything arising from the use of that low flow pipeline. We agree with the claimants that s 41(1)(e) of the LAC Act should be read in conjunction with s 283 of the MMBW Act, being the provision giving rise to the compensation claim and that, in turn, applies the LAC Act. This provision refers to compensation for damage sustained through the exercise of powers by Melbourne Water and for the use of land for its purposes. However, the provision is necessarily constrained by s 282, and is tied to the exercise of a specific power creating the trigger for compensation in a particular case. Here, again, that specific power is the construction and use of the low flow pipeline.
The hydrological evidence of Mr MrLean, accepted by both parties, is that the increased flood risk (which the claimants rely upon as the basis for the claimed depreciation in land value) is not caused by the low flow pipeline. The evidence is that the increased flood risk on the Ali Holdings land and the Williamson is caused by the separate upstream works forming part of the McGregor Road Drainage Scheme, including the two major 2400mm and 2100mm pipes beneath the Pakenham bypass that drain land to the north. Even without the low flow pipeline, that increased flood risk would exist - perhaps to a higher level.
Tellingly, the claimants' counsel conceded in final submissions, in response to direct questioning by us, that the increased flood risk is caused by the upstream works and not by the low flow pipeline.
We therefore find that the increased flood risk does not arise from the implementation of the purpose for which the statutory easement was acquired, nor from the exercise of power by Melbourne Water to construct and use the low flow pipeline. The trigger for compensation for injurious affection as part of the MMBW Act claims therefore fails at a threshold level.
As will be seen, this impediment does not apply to the Water Act claims, which arise on a different statutory footing.

[73]

It was common ground between the parties that:
- there was a flow of water onto the Ali Holdings land and the Williamson land arising from the Melbourne Water's exercise of its functions.
- the flow of water arose from the intentional conduct of Melbourne Water in the development of its infrastructure under the McGregor Road Drainage Scheme, including the construction and use of the two major 2400mm and 2100mm pipes draining land to the north of the Ali Holdings land and the Williamson land. The claimants did not allege any negligent conduct on the part of Melbourne Water, and Melbourne Water did not contest the reverse onus of proof in s 157(2) in relation to its intentional conduct.
- for the purpose of s 157(4)(b), there was no proportionate liability for the flow of water attributable to a person or body other than Melbourne Water.
- a claim for compensation under s 157 of the Water Act could include loss or damage in the nature of any reduced land value resulting from the flow of water.
- to the extent an assessment of reduced land value is based on a "before" and "after" assessment of value, the starting point (or "before" value) for the Water Act claims should be the "after" value determined for the purpose of the MMBW Act claims, so as to avoid any overlap in the respective claims.
We accept the detailed and uncontested evidence of Graeme Daff of Melbourne Water in relation to the background and rationale for the McGregor Road Drainage Scheme, and we believe that no adverse inference should be drawn about the way in which Melbourne Water has planned and implemented that drainage scheme over many years.
Indeed, Melbourne Water does not oppose the theoretical basis of the Water Act claims arising from its intentional and staged implementation of works under the drainage scheme. The compensation trigger is the flow of water arising from the McGregor Road Drainage Scheme, including the upstream works in the construction and use of the two major 2400mm and 2100mm pipes draining land to the north of the Ali Holdings land and the Williamson land. It is not tied to the construction and use of the low flow pipeline and/or the acquisition of the statutory easement for that purpose. As such, the threshold impediment to the MMBW Act claims does not arise for the Water Act claims.
Melbourne Water's basis for contesting the Water Act claims is essentially one of quantum. Its contention is primarily that:
- having regard to a proper assessment of land value, there is no reduced land value caused to either the Ali Holdings land or the Williamson land by the possible flows of water that may occur on the land before it is developed for urban purposes, and the quantum of each claim should be assessed at zero; and/or
- the claims are based on remote, indirect or speculative damage, which s 157(4)(c) of the Water Act requires to be excluded.
Both valuers have applied the normal principles under the LAC Act to their assessments, without clear reference to the specific provisions of the Water Act. We agree with both parties' counsel that this is not strictly correct. Unlike the MMBW Act, the Water Act does not expressly apply the LAC Act. Little may turn on this factor in this proceeding, as arguments about the purpose or date of acquisition under s 41(1) of the LAC Act do not arise in any event.

[76]

We accept the evidence of Mr McLean that the Melbourne Water works associated with the McGregor Road Drainage Scheme have created an increased flood risk to the Ali Holdings land and the Williamson land.
We accept that, at the present time, the area of likely inundation in a major 1:100 year flood event is larger than the LSIO, and generally accords with Mr McLean's mapped 'Existing Conditions' plan[29] to which we have earlier referred, and which assumes that the bund or permanent works will be constructed.
We also accept the evidence of Mr McLean in relation to the lesser area that would be required for drainage of the land when it is developed in the longer term, including a 50-metre drainage reserve. We accept that this generally accords with his mapped 'Ultimate Development Conditions' plan[30] to which we have also earlier referred.
The dispute between the parties essentially boils down to which of these plans provides a proper basis for the 'after' valuation in the context of these claims. Ultimately, and given the highest and best use of the land, we agree with Melbourne Water that there is no reduced land value to either the Ali Holdings land or the Williamson land created by the increased flood risk in the period prior to development of the land. The compensation under the Water Act claims (and the injurious affection claims, if they had not failed on a threshold issue) is therefore assessed at zero. There are two main reasons for reaching this view.
First, in the 'before' scenario, both valuers (Geoffrey Brown and Leslie Brown) accept that the LSIO represents an impediment to the future development and use of the land for industrial/warehouse purposes, and both applied a discount to the value of the land in the LSIO in their respective valuations. This is common valuation practice. Moreover, this is the case even though, in the mapped 'Rural Flows' plan[31] prepared by Mr McLean, based on a pre-development scenario without the inclusion of any pipe infrastructure, the area of modelled flood inundation differs significantly from the area of the LSIO. It is nonetheless the LSIO that represents the town planning impediment to future development and use by triggering an additional planning permit requirement to address drainage issues within the development process[32].
In the 'after' scenario, with the major pipes in place, the LSIO in the planning scheme is still the same. It is still the known town planning impediment that would theoretically be used by the valuers. For the claimants to succeed, they need to establish that, in the 'after' scenario, a prudent hypothetical purchaser would have undertaken hydrological modelling along the lines of the 'Existing Conditions' plan, and established that the LSIO was incorrect and that the flood risk had increased. The claimants would also need to establish that this hypothetical purchaser would then have used this information to seek a change to the planning scheme to incorporate an expanded LSIO into the scheme that matched the hydrological modelling, so that it was substituted as the formal and known planning impediment that, in turn, led to a reduced land value. Alternatively, it would need to be demonstrated that the hypothetical purchaser would determine from this 'Existing Conditions' plan that the flood risk to the land in the period before urban development was detrimental to its future development potential, and reduce the amount it was willing to pay for the land accordingly.
The claimants led no evidence in support of such an approach, relying simply on Geoffrey Brown's valuation evidence adopting the 'Existing Conditions' within his valuation methodology in the 'after' scenario.
Conversely, there was clear evidence from Mr Daff and Mr McLean on this issue - Mr Daff's evidence from his experience with Melbourne Water and its successors in dealing with developers on drainage issues, and Mr McLean from his experience in advising purchasers and developers on hydrological issues. Both were strongly of the view that a prudent hypothetical purchaser would likely undertake some investigations and some form of hydrological modelling, but not along the lines of the 'Existing Conditions' plan. Both considered that a hypothetical purchaser seeking to purchase the land for its future development potential would only be interested in its future development yield, and the drainage issues that would need to be resolved to achieve that outcome - e.g. the likely location and width of a future drainage reserve. The hypothetical purchaser would not be materially interested in any interim flood risk, but would focus on the works in the ultimate development scenario. A hypothetical developer would focus on whether or not the future risk would be increased or decreased. In this case, the works would ultimately remove that risk at the time of development. Any discussions with Melbourne Water and/or any hydrological modelling would thus focus not on the then existing conditions (as this was not the highest and best use) but on the likely 'Ultimate Development Scenario'.
We accept and agree with this evidence. We agree with Mr Daff and Mr McLean that it would be a rare situation, if ever, where a purchaser would undertake a costly existing conditions modelling process for no real gain, or undertake a planning scheme amendment process to amend an LSIO on an interim basis knowing that a further planning scheme amendment would be required in any event, at the time of or following development, to delete the LSIO and show the new drainage reserve. We agree with Mr Daff that, in practice, an existing LSIO remains in place in a planning scheme, without amendment, until a new drainage reserve is fixed at the time of development.
It follows that a hypothetical purchaser of the Ali Holdings land or the Williamson land in the present case would not obtain a plan such as the 'Existing Conditions' plan, or rely upon such a plan as a basis for valuing the land. We agree with Melbourne Water that it is not appropriate to assume or deem an expanded LSIO in the 'after' scenario. A prudent hypothetical purchaser would seek advice or modelling akin to the 'Ultimate Development Scenario' plan, and ascertain that a drainage reserve of 50 metres (as opposed to some other width) would be required to meet Melbourne Water's requirements and to drain the modelled flows of water in a 1:100 year flood event. It is this information that would influence what a purchaser was willing to pay for the land.
Secondly, and relatedly, it is common ground that the market value of the land should be assessed at its highest and best use. On this basis, the development potential of the land for future industrial/warehouse development is its highest and best use, and higher than a valuation based on its existing rural use.
By relying on the 'Existing Conditions' plan as a basis for compensation, the claimants seem to assume potential damage or impact to its existing rural (farming) use. That is irrelevant if the proper basis for valuation is its highest and best use based on its future development potential. We agree with Mr McGurn and Leslie Brown that the increased risk of flooding that arises through Melbourne Water's works, and the occasional flow of water across the land, does not affect its future development potential. It is a short term and/or transient risk that only arises in the pre-development phase over the next 10 to15 years[33]. The risk will be removed in the medium to longer term when a drainage reserve is constructed as part of any future development or subdivision. It is that future development potential that still represents the highest and best use of the land for valuation purposes in the 'after' scenario, and which is best represented in the 'Ultimate Development Scenario' plan.
This does not mean that damage caused by Melbourne Water's works is never compensable. If Melbourne Water's works caused physical damage to the Ali Holdings land or the Williamson land, that damage may be separately compensable under the Water Act. However, having regard to appropriate valuation principles, we do not consider that there is any loss or damage in the nature of any reduced land value resulting from the increased risk of a flow of water across the land in the short to medium term. A valuation based on the future development potential of the land is unaffected by such risk.
It follows that we prefer the valuation approach and evidence of Leslie Brown on this issue to that of Geoffrey Brown. We consider that the 'Ultimate Development Scenario' plan provides the best basis for valuation in the 'after' scenario. We do not consider the 'Existing Conditions' plan relevant to the valuation exercise. On such basis, there is no depreciation or diminution in land value, and no compensation is therefore payable.
There is a potential issue with Melbourne Water's valuation methodology, but it does not assist the claimants' cause. We raise it simply as a matter of record. Leslie Brown uses the 'Ultimate Development Scenario' to demonstrate that, for both the Ali Holdings land and the Williamson land, a lesser area would be required for a 50-metre drainage reserve than the area subject to the existing LSIO. There will be a net increase in developable land free from a drainage impediment. For example, for the Williamson land, 5.42 ha is in the LSIO but only 2.63 ha will be required for the drainage reserve. Leslie Brown suggests that there may therefore be an enhancement in land value. Although we do not need to decide the issue, we are not convinced that this is necessarily an 'apples' and 'apples' comparison.
A valuation approach to assess compensation commonly relies on the comparison of a 'before' and 'after' valuation as at the relevant date. Leslie Brown's opinion about enhancement relies on the 'before' scenario being assessed by reference to the LSIO, and the 'after' by reference to the 'Ultimate Development Scenario'. However, it is not necessarily the case that the assumed intervening event - the Melbourne Water works to the north, including the two major pipes, and the increased risk of flows of water across the land - is the cause of any change in valuation.
As indicated, the LSIO did not change in the 'before' and 'after'. It is still an existing planning impediment. Also, the development potential of the land (whether represented by the 'Ultimate Development Scenario' plan or not) has not materially changed - particularly if one accepts the evidence that this future development potential is not affected by the increased flood risk prior to development, and that the state of knowledge of a hypothetical purchaser is not affected by the works to the north. If these factors are unchanged, then the same factors should apply in both the 'before' and 'after' scenarios. The valuation would be the same in both scenarios.
If this is the case, then there is no enhancement in value, but no depreciation either. As we have said, this does not assist the claimants' cause. If the value is the same in the 'before' and 'after' scenarios, it still leads to there being no reduced land value created by Melbourne Water's works and the increased flood risk, and no compensable loss.
It follows from the above that, although Ali Holdings and Mr Williamson have each established a theoretical basis for a claim under s 157 of the Water Act 1989, they have failed to establish any compensable loss or damage under that Act arising from reduced land value. Similarly, even if the claimants were to overcome the threshold issue for an injurious affection claim under the MMBW Act, the compensation for that component would be zero, as there has been no depreciation in land value other than that directly caused by the acquisition of the statutory easement.

[79]

Ali Holdings entered into a contract of sale to purchase its land on 1 June 2006, and settled and became the owner of the land on 5 December 2006.
Melbourne Water contended that, as the 1200mm pipeline works were completed on 24 April 2006 (as pleaded and admitted), Ali Holdings could not have suffered any loss or damage resulting from a diminution in the market value of the land. This was because any loss had already been suffered by the prior owner as at 24 April 2006, and factored into the sale price. It contended that only that prior owner could have made a claim under s 283(1) of the MMBW Act based on reduced market value.
Mr Ali gave evidence that he was unaware of the construction of the pipeline when he purchased the land, and had only driven around the perimeter of the land. He had left matters such as the checking of the Section 32 vendor statement to his solicitors. Melbourne Water however contended that a prudent hypothetical purchaser buying the land as at 1 June 2006 would have made proper investigations and known of the construction of the 1200mm pipeline and factored it into the price it was willing to pay for the land.
We agree that we should assess compensation having regard to what a prudent hypothetical purchaser would have known at the time of purchase, rather than the knowledge of the actual purchaser if that knowledge was shown to be deficient. However, we do not agree with Melbourne Water that Ali Holdings is unable to make its claim.
First, for reasons outlined earlier, we consider that the relevant valuation date is 9 September 2006, after Ali Holdings purchased the land, when Melbourne Water more formally acquired an interest in the nature of an easement. As we have also indicated, despite the pleaded and admitted date for completion of the works in April 2006, even Melbourne Water's valuers have relied on a relevant date of 9 June 2006 or 31 July 2006, both after Ali Holdings purchased the land.
Secondly, even if we are wrong on this, we do not consider that a prudent hypothetical purchaser, acting reasonably as at 1 June 2006, would necessarily have known of the 1200mm pipeline construction or its potential implications for land value. The pipeline was constructed under the land. The Section 32 vendor statement upon which any purchaser was entitled to rely (and upon which a prudent hypothetical purchaser would presumably have relied) contained relevant statutory certificates, including a water authority certificate[34] purporting to give the information required under s 239G(1) and (2) of the MMBW Act. That certificate did not disclose any unregistered encumbrance, or any matter arising from the exercise of the Board' functions. Although the certificate is dated 20 March 2006, prior to the completion of physical works, it does not refer to any works remaining outstanding in the exercise of the Board's functions under Part X of the MMBW Act (which includes ss 282-283). The information under s 239G(1) referred only to sewers. The information under s 239G(2) contained only a disclosure that part of the land may be subject to inundation in a high storm flow, consistent with the existence of the LSIO. This was the only drainage information supplied.
We do not therefore consider that Ali Holdings is prevented from bringing its MMBW Act claim.

[80]

In the 'before' scenario, Geoffrey Brown valued all of the 'unaffected' Ali Holdings land (i.e. the land outside the LSIO) at $220,000/ha. This leads, as we have indicated, to the same value being applied by Geoffrey Brown to the land east and west of the LSIO. Geoffrey Brown conceded under cross-examination that there was an element of 'averaging' in this process. Not every hectare on the land bears an identical value and the land was likely to be developed from east to west, with the land fronting McGregor Road having a higher value.
In his 'before' scenario, Leslie Brown valued the 29.5 hectares of unaffected Ali Holdings land east of the LSIO at $218,250/ha - not dissimilar to Geoffrey Brown's $220,000/ha. However, for the smaller 4.51 hectares of unaffected land west of the LSIO, he valued that area at $185,513/ha (calculated as 85% of the rate per hectare for the east land). The lower rate for this area takes account of the severing effect of the LSIO and likely pattern of development from east to west.
Geoffrey Brown valued the land in the LSIO at $55,000/ha, being 25% of the unaffected rate per hectare. Leslie Brown valued the land in the LSIO at $75,000/ha, being roughly 40% of the calculated rate per hectare for the west land, or 37.5% of the overall calculated rate per hectare for the unaffected land outside the LSIO. The difference of $55,000/ha and $75,000/ha was indicated by Leslie Brown to be a matter of valuers' judgement, rather than reflecting any particular disagreement based on comparative sales data or other factors. Geoffrey Brown did not offer any particular basis for the difference.
Both valuations are credible, and lead to a not dissimilar overall valuation of market value in the 'before' scenario - $7.65m by Geoffrey Brown and $7.5m by Leslie Brown. In cases such as this, it is sometimes considered appropriate to simply choose the valuation that favours the claimant, as the claimants' counsel urged in this case. However, we have a clear preference for Leslie Brown's 'before' valuation, which we adopt. In particular:
- it properly discriminates between the land east and west of the LSIO, including the higher value of the land parcel fronting McGregor Road and likely pattern of development;
- it properly recognises the severing effect of the LSIO in the 'before' scenario (which Geoffrey Brown's valuation does not) and is thus also more compatible with the view we have taken of severance in the 'after' scenario. In our view, it would not be consistent to simply adopt Geoffrey Brown's overall 'before' valuation and then apply Leslie Brown's 'after' methodology;
- the overall valuation of $7.5m better reflects the actual contemporaneous sale price of the very land under review, which was sold for $7.5m in June 2006 in a competitive but relatively flat market[35];
- because Leslie Brown has adopted the actual sales price as an overall valuation, and used comparative sales data to provide a basis for his rate per hectare for the land east and west of the LSIO, there is at least some justification (by deduction) for the rate per hectare he has adopted for the land in the LSIO.
In the 'after' scenario, we have allowed for a 4-metre wide statutory easement, which equates in land area to 0.1439 hectares within the Ali Holdings land. Given the additional modelling and mapping undertaken by Mr McLean, we are able to adjust the calculated areas for the easement land that is inside and outside the LSIO, rather than relying on the 'guestimates' of the valuers[36].
For the area of the easement inside the LSIO, we have adopted Leslie Brown's valuation rate of $37,500/ha (being 50% of the valuation rate per hectare for the LSIO land). We consider it appropriately represents the lesser land value created by the fixed impediment of the easement and pipeline. For the small area of the easement outside of the LSIO, Leslie Brown had adopted a valuation rate of $75,000/ha. We do not consider the easement is any less of a fixed impediment on future development outside the LSIO. We consider the same rate per hectare should apply to the easement land whether it is inside or outside the LSIO, and we have therefore also adopted the rate of $37,500/ha for the area of the easement outside of the LSIO. Given the small land area, adopting the alternative view would not change the outcome.
For the Ali Holdings land, Geoffrey Brown had applied an adjustment of 5% (or $11,000/ha) to the land west of the LSIO in the 'after' scenario, to take account of severance through a contended loss of flexibility in future development potential created by the statutory easement.
As we have indicated, we prefer the methodology of Leslie Brown on this issue, where the severing effects of the pre-existing LSIO are taken into account in both the 'before' and 'after' scenarios, and with there being no materially worse severance arising from the statutory easement and low flow pipeline. Accordingly, we do not make any adjustment for additional severance in the 'after' scenario.
Based on the above, the following 'before' and 'after' outcomes arise for the Ali Holdings MMBW claim:

[84]

Ali Holdings claims professional expenses of $15,934.35, comprised of $8,338.85 in legal expenses (Rennick & Gaynor) and $7,595.50 for two valuation reports from Robin Hocking (CJ Ham & Murray). These professional costs exclude the costs of the Tribunal application process, which will be dealt with separately if any costs application is made.
Section 41(f) of the LAC Act provides that, in assessing a claim, regard must be had to any legal, valuation and other professional expenses 'necessarily incurred by the claimant by reason of the acquisition'.
For the legal expenses, Melbourne Water queried a number of items. It ultimately sought that a discount of 40% be applied to reflect this, and to reflect an allowance for the solicitor-client component of the costs. We take this latter allowance to mean the costs incurred by the law firm in providing a desirable or full-service to Ali Holdings but not 'necessarily incurred' with respect to the Melbourne Water acquisition on an inter partes basis - similar to the distinction between solicitor-client and party-party costs in litigation.
Overall, we do not consider $8,338.85 to be unreasonable for legal expenses in a claim such as this, and the disputed items are marginal. We have allowed the full sum claimed.
For the professional expenses, we take a different view. The valuation reports of Robin Hocking appear to have been misconceived in their analysis and had led to an inflated and more complex claim than warranted, and Mr Hocking's valuation was not relied on at all, and was ultimately supplanted by that of Geoffrey Brown. That said, it is clearly appropriate for a professional valuation report to be obtained at an early stage, and there will always be an element of expense in considering the proper basis for a claim, with some options being researched and/or canvassed but later dismissed. At least one report was warranted. We therefore disagree with Melbourne Water's contention that we should disallow this item in full, but consider a 50% discount should apply for the valuation reports. We therefore allow $3,797.75 for this item.
This leads to a total allowance of $12,136.60 for professional costs.

[99]

In the 'before' scenario, Geoffrey Brown valued the 'unaffected' Williamson land east of the LSIO at $200,000/ha, and the middle land at $190,000/ha. This is slightly less than the $220,000/ha for Ali Holdings, primarily having regard to the larger landholding. The 5% difference between the values for the land east of the LSIO and the middle land was said by Geoffrey Brown to be 'in particular because it is a substantial distance from any road frontage, and is located between the Toomuc Creek and McGregor waterway'[42]. Geoffrey Brown valued the land west of Toomuc Creek at a much reduced value of $47,500/ha, being 25% of the valuation rate for the middle land - reflecting his view of its dissection from the main land parcel, irregular triangular shape, and difficulty of access.
In his 'before' scenario, Leslie Brown valued the unaffected Williamson land east of the LSIO at $200,000/ha - the same as Geoffrey Brown. However, he valued the middle land at $150,000/ha and the land west of Toomuc Creek at $100,00/ha, reflecting the respective severing effects of the LSIO and Toomuc Creek, difficulties of access and distance from road frontage, and the likely pattern of development from east to west.
Geoffrey Brown valued the land in the LSIO and the Toomuc Creek LSIO at $50,000/ha and $47,500 respectively, being 25% of the unaffected rate per hectare for the land immediately to its east in each case. He also valued the land in the Toomuc Creek floodway at $5,000/ha. Leslie Brown valued the land in all of these areas consistently at $75,000/ha, being the same value he had applied for the Ali Holdings land in the LSIO. He again explained his difference from Geoffrey Brown's values in the LSIO as a matter of valuers' judgement, rather than reflecting any particular disagreement based on comparative sales data or other factors.
Both valuations lead to different overall valuations in the 'before' scenario - $18.96m by Geoffrey Brown and $17.91 by Leslie Brown. However, although a million dollars apart in their 'before' valuations, and severance aside, they are a similar amount apart in their 'after' scenarios, so the difference has minimal practical effect for compensation purposes - see further below. In similar fashion to our opinion in relation to the Ali Holdings land, we have a clear preference for Leslie Brown's 'before' valuation, which we adopt. In particular:
- it properly discriminates between the land east and west of the LSIO, including the higher value of the land parcel fronting McGregor Road and likely pattern of development;
- it properly recognises the severing effect of the LSIO in the 'before' scenario (which Geoffrey Brown's valuation does not, or does not sufficiently) and is thus also more compatible with the view we have taken of severance in the 'after' scenario. In our view, it would not be consistent to simply adopt Geoffrey Brown's overall 'before' valuation and then apply Leslie Brown's 'after' methodology;
- we consider the 'cascading' valuations of the east, middle and west land at $200,000/ha, $150,000/ha and $100,000/ha to be more sound than the $200,000/ha, $190,000/ha, and $47,500/ha values applied by Geoffrey Brown that appear to us to overstate the value of the middle land and understate the value of the land west of Toomuc Creek, and lead to a more anomalous comparison between the two;
- we prefer the consistent valuation of the land in the LSIO at $75,000/ha and consider it to be more defensible than the differential and lower valuations by Geoffrey Brown, having regard to the fact that some of the LSIO land will become developable, and thus has development potential, as further drainage infrastructure is implemented over time.
In the 'after' scenario, we have allowed for a 4-metre wide statutory easement, which equates in land area to 0.1968 hectares within the Williamson land, all of which is within the LSIO. For the easement land, again as for Ali Holdings, we have adopted Leslie Brown's valuation rate of $37,500/ha (being 50% of the valuation rate per hectare for the LSIO land - this is not materially different to Geoffrey Brown's 40%adjustment, albeit applied to a different figure).
For the Williamson land, Geoffrey Brown had applied an adjustment of 0.5% (or $1,000/ha) to the middle land west of the LSIO in the 'after' scenario, to take account of severance through a contended loss of flexibility in future development potential created by the statutory easement. Apart from separately valuing the easement land, this is the only consequential adjustment Geoffrey Brown makes in his 'after' scenario, and represents in itself the main component ($37,800) of his reduced market value[43]. We find such a small adjustment surprising and difficult to justify. As we have indicated, we prefer the methodology of Leslie Brown on this issue, where the severing effects of the pre-existing LSIO are taken into account in both the 'before' and 'after' scenarios, and with there being no materially worse severance arising from the statutory easement and low flow pipeline. Accordingly, we do not make any adjustment for additional severance in the 'after' scenario.
Based on the above, the following 'before' and 'after' outcomes arise for the Williamson MMBW claim[44]:

[102]

In his further amended statement of claim in May 2011, Mr Williamson claimed $26,536 for pecuniary loss based on item identified in the Agricultural Management Services (Foletta) report. In the second further amended statement of claim, Mr Williamson changed this claim to a claim for $48,681 for pecuniary loss based on items identified in Geoffrey Brown's report. The Foletta report was expressly deleted as a supporting document. Both Mr Foletta and Geoffrey Brown were called to give evidence at the hearing, as was Mr Williamson. In Mr Williamson's own written witness statement, he claimed disturbance losses at $72,398[46]. After all of this evidence and cross-examination, Mr Williamson's counsel submitted an amended 'Particulars of disturbance loss'[47] with a claim for $69,791[48] combining items from both the Foletta and Brown material.
Melbourne Water contested the amended claim as being inconsistent with the witness statements and/or lacking in supporting evidence for some items. Melbourne Water had not called its own witness, John Mulvany, on these issues due to his unavailability (but sought to rely on his statement), and claimed to be prejudiced by the ever-changing claim. We have considered Mr Mulvany's statement, but weighted it accordingly.
We agree with Melbourne Water that the framing of this aspect of the claim is confusing, and ought not to be condoned in a pleaded case where the claimant is represented by professional advisers and competent counsel. Mr Williamson filed a further amended claim on 20 December 2012, deleting the claim for pecuniary loss, and confirming the claim for $69,791 for 'business disturbance loss'. We have considered the claim on this basis.
'Loss attributable to disturbance' is defined in s 40 of the LAC Act as meaning 'pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of' the diminution of the claimant's interest.
We agree with Melbourne Water that:
- we should apply the seminal decision of Halwood Corporation Ltd v Roads Corporation[49] in considering the meaning and inter-relationship of the words 'natural, direct and reasonable';
- there should be a very close and limited causal connection between the triggering event and the pecuniary loss suffered; and
- Mr Williamson bears the persuasive burden of satisfying the Tribunal that causation is established on such a basis.
In similar fashion to the earlier discussion about injurious affection, we consider a difficulty exists for Mr Williamson in establishing that certain of his disturbance losses arise directly from a diminution of his interest in the land created by the acquisition of the statutory easement for the low flow pipeline, as opposed to being caused by excess flooding arising from other works in earlier stages of the McGregor Road Drainage Scheme - for example, items (b) and (e) below. On such basis, physical damage arising from particular flood events in 2011 might have been better claimed under relevant Water Act provisions.
Even allowing for this, we agree with Melbourne Water that several items lack a sound evidentiary or causal base, and that Mr Williamson has failed to meet the persuasive burden of satisfying us about several of the claimed items. We will deal with each item in turn.

[121]

In its second further amended particulars of claim, Mr Williamson claimed general damages (in the form of solatium) calculated at 10% of the reduced market value of his land. This was then claimed to be $5,000.
We have earlier set out the wording of s 44(1) of the LAC Act. From that wording, it can be seen that the 10% to which it refers is a ceiling, rather than a particular reference point in itself. The fundamental task is to assess an appropriate lump sum amount for solatium (if any), which cannot exceed this cap. The Supreme Court has nonetheless indicated that this could be done by reference to a percentage of the reduced market value[52]. Solatium is clearly discretionary[53]. It is not an amount for 'provable loss'[54], either in the form of a loss to which the claimant is otherwise entitled under the LAC Act or as a placebo for other tangible loss not covered by the heads of compensation under that Act. As s 44(1) indicates, solatium covers intangible and non-pecuniary disadvantage.
Unlike Ali Holdings, Mr Williamson is an individual claimant to whom many of the non-exhaustive factors in s 44(2) of the LAC Act arguably apply. He and his family have lived on the land as their principal place of residence, and farmed it for many years. Mr Williamson is of an advanced age where the Melbourne Water works on his land (and the compensation process) has been a troublesome experience for him. Although some of his concerns may be perceived rather than real, and some events possibly created by circumstances other than solely through the Melbourne Water works, we are satisfied that the process have given rise to particular worry, trouble or nuisance that warrants some award of solatium. Equally, however, although Mr Williamson may have an emotional attachment to his land, it is not as though he is being divested of it. A relatively small easement has been created, through which a low flow pipeline passes under his land. We agree with Melbourne Water that the easement and works do not cause a permanently blight to the aesthetic or agricultural values of the land. The impacts of particular flooding are separately compensable as business disturbance losses.
Melbourne Water properly conceded that Mr Williamson was entitled to some form of solatium, but argued that it should amount to no more than 5% of the direct loss of market value, excluding severance[55]. Based on its then assessment of 'direct' lost market value of $10,000, it considered solatium should not exceed $500. We agree with that assessment. Given we have also ultimately assessed the direct loss in market value at $10,000, an amount of $500 for solatium is appropriate.

At a glance

Court

Decision date

Source

Judgment (170 paragraphs)

Parties

Legislation Cited (6)

Cases Cited (2)

Williamson v Melbourne Water Corporation [2013] VCAT 673 (1 May 2013)