Hoy v Coffs Harbour City Council

BATHURST CJ: This is an application for leave to appeal brought pursuant to s 57(1) of the Land and Environment Court Act 1979 (NSW) (LEC Act), from a decision of a judge of the Land and Environment Court, dismissing an appeal from a decision of two commissioners of that Court: Hoy v Coffs Harbour City Council [2015] NSWLEC 128 (Primary Judgment). The commissioners determined that the applicant was entitled to compensation of $2,034,957.39 in respect of the compulsory acquisition by the respondent (the Council) of certain land owned by the applicant in the Coffs Harbour area: Hoy v Coffs Harbour City Council [2014] NSWLEC 1217 (Commissioners’ Determination).

The appeal from the decision of the commissioners to the primary judge was brought pursuant to s 56A of the LEC Act. Such an appeal was limited to an appeal from an order or decision on a question of law. Section 57(4)(c) of the LEC Act provides that any appeal from a decision made under s 56A can only be brought by leave. Such an appeal is, again, limited to an appeal from an order or decision on a question of law.

The applicant was the holder of a substantial parcel of land (16.3 hectares) at 105 Hoys Road, Moonee Beach (the land). The land was rezoned for public purposes. The land thus fell within the provisions of s 21(1)(a) of Pt 2 Div 3 (the hardship provisions) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act).

The applicant gave notice under s 23 of the Act, requiring the Council to acquire the land. Section 25 of the Act provides that land acquired under the hardship provisions is to be acquired by compulsory process. The applicant was offered compensation in the amount of $3,180,000 but objected to this amount as she was entitled to do by virtue of s 66 of the Act. The commissioners who heard the objection ordered that she be compensated in the amount of $2,034,957.39. Her appeal was rejected and she has now sought leave to appeal to this Court.

To understand the nature of the application it is necessary to set out some of the relevant legislation.

As I indicated, Pt 2 Div 3 of the Act deals with acquisition in the case of hardship. Section 23 provides that an owner who suffers hardship may require the relevant authority to acquire land designated for acquisition. So far as is relevant, it provides as follows:

Section 24 provides for circumstances where the authority is not required to acquire the land. So far as is relevant, it is in the following terms:

Section 25 deals with the method of acquisition under the Division. It provides as follows:

Section 26 contains at least a potential limitation on the amount of compensation that can be awarded for the acquisition. It is in the following terms:

These provisions essentially provide that an owner whose land has been designated for public purpose can, in effect, accelerate the acquisition process by requiring the relevant authority to acquire the land. Once the process of acquisition has been set in train, the Valuer-General under s 47 of the Act is required to determine the amount of compensation to be offered. Division 4 of Pt 3 of the Act deals with the determination of the amount of compensation. The following provisions are of relevance:

In her appeal to the primary judge, the applicant challenged three principal aspects of the commissioners’ decision. The first was the approach taken by the commissioners to what was described in the commissioners’ valuation as “the residual lot”, being that land subject to constraints (the residual lot). The commissioners stated that the residual lot had the following constraints for development purposes:

The commissioners concluded that the balance of the land, excluding the residual lot, could be subdivided into 106 lots, each having a value of $18,000. The commissioners determined that the residual lot only had nominal value. Having regard to their conclusion on the total market value of the land, it is evident, as a matter of mathematics, that they attributed a value of $72,000 to the residual lot.

The second issue was described in some parts of the hearing as “the hypothetical development valuation approach” issue and on other occasions as “the steep land” issue. As it emerged ultimately in argument, it appeared to relate to a failure to adjust for differences in development costs caused by the difference in topography of potential comparable sales.

The third issue involved the construction of s 59(a) of the Act, namely, whether the legal costs incurred in establishing hardship were disturbance costs within the meaning of that provision.

Although the commissioners made allowance for disturbance and solatium, the Council contended that the effect of s 26 of the Act was that the applicant was not entitled to any allowance for those matters. This was the subject of a cross-appeal before the primary judge and the subject of an application for leave to cross-appeal in these proceedings.

In considering these issues, it is important to bear in mind that the appeal to the primary judge and any appeal to this Court is limited to an appeal against an order or decision on a question of law. In ISPT Pty Ltd v Valuer-General [2009] NSWCA 31, Allsop P (as his Honour then was) summarised the nature of the process in the following terms:

In the Court below, the primary judge criticised the approach taken by the applicant in her summons, in particular, what her Honour described as “a scatter-gun approach” to the identification of questions of law: Primary Judgment at [17]. This criticism, in my opinion, was justified. The summons in the Court below asserted that the commissioners committed six errors of law, each being expressed in entirely general terms with numerous sub-grounds referring mainly to factual matters said, by reason of the absence of supporting evidence or a failure to deal with certain matters, to constitute errors of law. No attempt was made, at least with any precision, to identify the question or questions of law involved in the appeal.

The draft notice of appeal filed in connection with the present application asserts a number of discrete errors of law, once again, in the main, amounting to assertions that there was no evidence or reasoning to support the commissioners’ conclusions or that there was a failure to grapple with conflicting evidence on particular issues. Although such matters can constitute errors of law (see Kostas v HIA Insurance Services Pty Ltd [2010] HCA 32; 241 CLR 390 (Kostas) at [90]; Pollard v RRR Corporation [2009] NSWCA 110 (Pollard) at [58]-[59], [65]; Redbro Investments Pty Ltd v Ceva Logistics (Australia) Pty Ltd [2015] NSWCA 73; 89 NSWLR 104 (Redbro) at [53]; Segal v Waverley Council [2005] NSWCA 310; 64 NSWLR 177 at [43], [66]-[69]; Murray v Sheldon Commercial Interiors Pty Ltd [2016] NSWCA 77 at [60]-[63]), care must be taken that the evaluation of these grounds does not involve a rehearing on the merits as distinct from consideration of a question of law which vitiates the decision. Such a question can include a question of mixed fact and law: Maurici v Chief Commissioner of State Revenue [2002] HCA 8; 212 CLR 111 at [8]; Kostas at [25].

What I have described as the first issue is the subject of Grounds 1 to 3 of the draft notice of appeal. Those grounds are in the following terms:

The primary judge referred to the commissioners’ findings on the constraints on the land, to which I have referred above at [11], and set out the findings of the commissioners on the residual lot. These findings were in the following terms:

The primary judge, having reviewed the principles governing an appeal against an order or decision on a question of law in a manner not the subject of any criticism, considered that the attribution of value of $72,000 to the residual lot did not involve an error of law. Her Honour expressed her conclusion in the following terms:

Senior counsel for the applicant submitted that there were two errors of law involved in the commissioners’ decision. He submitted that the commissioners first, refused to pay any regard to evidence which he described as “all one way”, to the effect that the residual lot could be developed as a rural residential lot for housing, and second, refused to pay any regard to evidence that, even if fully constrained, the land was worth more than $72,000.

In her written submissions, the applicant pointed to the fact that the valuer engaged by her, a Mr Paris, adduced what were described as comparable sales of large residential lots, whilst noting the evidence of the valuer engaged by the Council, Mr Davis, that the land had no value. In that context, it should be noted that the commissioners referred to the contention of Mr Paris that the residual land had value and referred to the four comparable sales of residual parcels to which Mr Paris referred: Commissioners’ Determination at [99], [105]. They pointed to the fact that Mr Paris referred to adjustments or “location, topography, access, date of sale, zoning, inter alia” without providing details: at [120]. They further noted that Mr Paris asserted without explanation “a rate of $300,000 for application to the rural home site at the subject property”: at [125]. The commissioners’ ultimate conclusion was in the following terms:

The applicant complained, without elaboration, that this approach failed to address her case, namely, that lots of the nature of the residual lot were sold on a per lot basis rather than a per hectare basis. It is not clear how this was said to be an error of law, much less vitiate to the decision, particularly in circumstances where the balance of the land was valued on a per lot basis and the commissioners concluded that the residual lot had only nominal value, the evidence being that, at most, it could only support a single dwelling: see below at [26].

Senior counsel for the applicant accepted that the commissioners rejected the evidence of Mr Paris on the residual lot, but stated that even if the commissioners were entitled to reject his analysis and conclude that the land was fully constrained, they did not take into account two other sales of properties which were said, without any supporting expert valuation evidence, to be comparable.

The applicant also submitted that, before the commissioners, she had submitted that “the evidence in favour of the approval of a residue lot capable of being developed with a dwelling house was all one way”. Senior counsel for the applicant acknowledged that the commissioners referred to the evidence of Mr Connelly and Mr Ryan where they said it may be possible that the constrained land could support a dwelling house: Commissioners’ Determination at [52]-[58]; see above at [20]. Mr Connelly and Mr Ryan were town planners, the former being engaged by the applicant, the latter by the Council. Senior counsel for the applicant referred, in particular, to the cross-examination of Mr Ryan where he stated that the residual lot had the potential to be so developed and submitted that the commissioners ignored this evidence.

Finally, the applicant submitted that there was no evidence to support a finding that the residual lot had a value of $72,000 and the commissioners erred in arriving at that figure.

It is well-established that a decision reached in the absence of evidence to support it constitutes an error of law: Kostas at [91]-[92]. Further, a tribunal will err in law if it fails to deal with or give consideration to the cases presented by the parties or prefers one piece of conflicting evidence over another without giving reasons for doing so: see Redbro at [53]; Pollard at [66]. Whether a decision is vitiated by these matters does involve a question of law.

However, in the present case, the commissioners considered the evidence and explained the reasons for their conclusions. They accepted the evidence of Mr Davis that the residual lot had no value and rejected the competing evidence of Mr Paris for the reasons I have summarised above at [23]. It could not be said that the commissioners failed to deal with the competing valuation evidence.

Further, the commissioners, in the paragraphs of their decision which I have set out above at [20], also considered and accepted the town planning evidence that there was potential to develop the residual lot as a rural/residential lot. However, for the reasons given at [58] of their determination, they considered that notwithstanding that potential, the lot had only nominal value. In reaching this conclusion, they considered the evidence and explained their reasons. There was no error of law involved in the approach they took.

The other error of law was said to be the attribution by the commissioners of a value of $72,000 to the residual lot. It was submitted that there was no evidence to support this valuation.

In that context, it is important to remember that the task of the commissioners was to value the land, of which the residual lot only formed part. They concluded that the total value of the land was $1,980,000. As I indicated above at [12], having regard to the valuation of the 106 lots, they attributed a value of $72,000 to the residual lot.

As with the subject of the first aspect of this ground of appeal, the commissioners considered the evidence and concluded the residual lot had nominal value. This left them with the task of either concluding that it did not increase the value of the overall parcel or giving some limited value to it. In what was essentially a matter of judgment consequent on their conclusion that the land had nominal value, the commissioners ascribed $72,000 to the residual lot in determining the total value of the land. There was no error of law in arriving at this conclusion, which was, on one view, generous to the applicant.

The primary judge dealt with this issue in her judgment in a similar manner: Primary Judgment at [38]. Whilst it may be that the draft grounds of appeal on this issue raised a question of law, there was no error in the conclusion reached by her Honour. There is no merit in these grounds of appeal.

This issue is the subject of Grounds 4, 5 and 6 of the grounds of appeal. Those grounds are in the following terms:

In the Court below, the applicant sought to rely on the following grounds of appeal relating to this issue:

In the written submissions in the Court below, the following submissions were made in support of this ground:

The primary judge refused leave to argue this ground. In her judgment, she noted that the hypothetical development valuation approach was not relied on before the commissioners and the applicant could not complain that the commissioners did not deal with it: Primary Judgment at [51].

In argument on this issue in the Court below, senior counsel for the applicant said that “the heading might be the Hypothetical Development Method but the argument which we’re addressing was a subset of the hypothetical development method”. The primary judge stated that, having regard to the written submissions, that was not the basis on which the argument was put forward and invited senior counsel for the applicant to seek to amend the summons. The applicant, after consideration, decided not to seek leave to amend.

To illustrate the nature of what was sought to be argued, the applicant, in her written submissions, argued that the commissioners found that certain land at Ainslee Drive, Korora, was an “indirectly relevant” comparable property and made an adjustment for topography, but failed to analyse engineering evidence concerning the cost of developing that land or make any adjustment that took account of the engineering evidence concerning that cost. It should be noted that senior counsel for the applicant conceded that neither of the expert valuers using the hypothetical development method as a check on their valuation found it necessary to undertake this task.

Each party accepted that the grounds of appeal the subject of this issue raised the same issues as Ground 4 in the grounds of appeal below. The primary judge was said to have erred in refusing leave to argue this ground. The primary judge took the view, having read the grounds of appeal and the submissions in support, that the challenge was that the commissioners had erred in failing to consider the hypothetical development method of valuation. In my respectful opinion, to the extent that Ground 4 of those grounds could have been read to be wider than an assertion of a failure to consider that method of valuation, the submissions in support were clearly limited to that issue.

When, in argument, it emerged that what was sought to be argued was wider than that which was suggested by the grounds of appeal and the written submissions, the primary judge sensibly invited the applicant to amend her summons. This may have clearly articulated the issue sought to be argued so that further consideration could be given as to whether it was appropriate to permit it to be raised. The appellant having declined the invitation to amend, it was appropriate for her Honour to refuse leave. No error of discretion was demonstrated and leave to appeal on these grounds should be refused.

The ground of appeal dealing with this issue is in the following terms:

In support of an application for leave to cross-appeal, the Council contended that, having regard to the provisions of s 26 of the Act, it was an error of law to make any allowance for disturbance costs or solatium, including, but not limited to, the legal costs the subject of the ground of appeal.

The primary judge, in rejecting both the applicant’s appeal on legal costs and the cross-appeal, stated that a textual analysis of the words of s 26 showed that they are not ambiguous and that the words “need not” confer a discretionary power on the State or the Court on appeal to make allowance for disturbance costs or solatium: Primary Judgment at [121]. However, she concluded that s 59 of the Act did not extend to legal costs incurred in the making of a hardship application: at [126].

In relation to the cross-appeal, senior counsel for the Council pointed to the fact that s 25 required the land acquired under the hardship grounds to be acquired by compulsory process and that under s 47, it was the Valuer-General who determined the compensation payable. He submitted that the Council, which exercises the discretion to acquire on the hardship grounds, has, in those circumstances, no opportunity to decide whether it will give any allowance for the matters referred to in s 55. Senior counsel for the Council submitted that it would be unusual to vest in the Valuer-General a discretion as to whether or not particular amounts are payable or not as distinct from determining the appropriate amount of compensation in accordance with Pt 2 Div 3 of the Act.

In relation to the legal costs the subject of the appeal, the Council submitted that the costs predated the acquisition process and, in those circumstances, were not connected with an acquisition. The Council submitted that there is no entitlement to compensation until a decision to acquire is made and, as such, legal costs in respect of hardship applications cannot fall within s 59(a) of the Act.

The applicant submitted that the legislation should be interpreted in such a way as to protect the interests of persons whose property interests are affected by compulsory process in favour of the interests of the acquiring authority: Cumerlong Holdings Pty Ltd v Dalcross Properties Pty Ltd [2011] HCA 27; 243 CLR 492 (Cumerlong Holdings) at [33]-[34]. Second, she submitted the words “need not” indicated a choice by the legislature of discretionary words in contrast to the words “must” or “may”, which appear in many other sections of the Act. Third, she submitted that the construction found by the primary judge was supported by the Second Reading Speech introducing s 26 into the Act.

So far as the question of legal costs was concerned, the applicant again emphasised the need for a liberal construction of provisions concerning compensation for compulsory acquisition, pointing out that the words “in connection with” are words of wide import. She submitted that proving hardship to the satisfaction of the State is something which leads to compulsory acquisition and so the costs of doing so were incurred in connection with it.

It is convenient to deal with the cross-appeal first.

I have set out s 26 of the Act above at [9]. In the Second Reading Speech introducing the Act, the relevant Minister made the following remarks:

As was stated in Alcan (NT) Alumina Pty Ltd v Commissioner of Territory Revenue [2009] HCA 41; 239 CLR 27, the task of statutory construction must begin with a consideration of the text itself, although the meaning of the text may require consideration of the context, which includes the general purposes and policy of the provision in question: at [47]; see also Commissioner of Taxation v Consolidated Media Holdings Ltd [2012] HCA 55; 250 CLR 503 at [39]. Context and purpose are important as the task of the Court is to give the words the meaning the legislature is taken to have intended them to bear. Such purposes can be inferred from the statute itself and, where appropriate, by reference to extrinsic material. However, in making use of such extrinsic material, it must be remembered that such material can only be used as an aid to statutory construction, not for the purpose of identifying the subjective purpose or intention of the legislature: Certain Lloyd's Underwriters v Cross [2012] HCA 56; 248 CLR 378 at [23]-[26]; Project Blue Sky v Australian Broadcasting Authority [1988] HCA 28: 194 CLR 355 at [69]-[71], [78].

In the present case, the issue is whether the words “need not” in s 26 of the Act require the valuing authority, in determining compensation in respect of an acquisition initiated through the hardship provisions, to make no allowance for the special value of the land or any loss attributable to severance or disturbance and solatium, or merely confer a discretion on the valuing authority to disregard those matters.

In my opinion, s 26 confers a discretion on the Valuer-General in determining compensation under s 47 to take the matters referred to in s 26 into account, notwithstanding that the acquisition process was activated by the hardship provisions in Pt 2 Div 3. This is for a number of reasons. First, as a matter of language, the words “need not” are appropriate to confer a discretion. Second, one of the objects of the Act is to ensure compensation on just terms for owners of land that is acquired by an authority of the State: see s 3(1)(b) of the Act. It is difficult to see how a construction of s 26 which would exclude, for example, compensation for special value to a person who is entitled to have his or her land acquired on the ground of hardship is consistent with that object. This approach, which, in my view, is discernible from the text of the Act, is consistent with what was said by the Minister in introducing the legislation.

The construction also gives effect to what was stated by Heydon J in Cumerlong Holdings at [33]-[34] that provisions of this nature should be construed generously and liberally because they are protecting the interests of those whose property rights have been damaged, in this case by the land being designated for public purposes.

The Council submitted that if s 26 conferred a discretion, the acquiring authority would have no opportunity to decide whether it would make any allowance for special value and the other matters referred to in s 55. This does not seem to me to affect the position. First, the Council does not have the opportunity when it moves to invoke the compulsory acquisition provisions itself. Second, s 25(2) of the Act makes it clear that land required to be acquired under the hardship provisions can be acquired by agreement, the acquirer thereby having the ability to negotiate what it regards as an appropriate price.

The Council also submitted that it would be unusual for a discretion to determine the matters referred to in s 26 to be conferred on the Valuer-General. I do not see why this is so, particularly when the Valuer-General is empowered to determine the quantum of non-financial disadvantage for solatium.

For these reasons, the commissioners had a discretion to make an allowance for disturbance and solatium. The cross-appeal did not suggest that there was any error in the exercise of that discretion if it existed. In those circumstances, as the matter the subject of the cross-appeal raises a question of general importance, leave to cross-appeal should be granted but the cross-appeal dismissed.

So far as the seventh ground of appeal is concerned, I do not think the power to compensate for legal costs extends to costs incurred in establishing hardship. The power to award legal costs, contained in s 59(1)(a), relates to costs incurred by a person entitled to compensation in connection with the compulsory acquisition of the land. A person is only entitled to compensation once the authority becomes bound to acquire the land, that is, in the case of a hardship application, once the pre-conditions in s 24(2) are established to the satisfaction of the relevant authority referred to in s 24(1). Legal costs incurred in establishing hardship are incurred prior to an entitlement to compensation arising and thus do not fall within s 59(1)(a).

Further, although, as the applicant pointed out, the words “in connection with” are of wide import (see for example, Claremont Petroleum NL v Cummings (1992) 9 ACSR 1 at 41-42), it does not seem to me that in the present context, costs incurred in establishing an entitlement to have the land compulsorily acquired fall within the definition. Section 59(1)(a), in my opinion, is directed to compensating persons for legal costs incurred in respect of an acquisition, whether resulting from the application of the hardship provisions or the action of the acquiring authority. It does not confer an entitlement to compensation for costs which arise prior to that time.

I do not consider the matters raised by Grounds 1 to 6 of the draft grounds of appeal warrant leave being granted. Further, I see no reason why, on an application of this nature, being a second appeal from a decision of the commissioners, costs should not follow the event. It follows that I would make the following orders:

SIMPSON JA: I agree with Bathurst CJ.

PAYNE JA: I agree with Bathurst CJ.