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High Court of Australia Transcripts |
Office of the Registry
Sydney No S24 of 1999
B e t w e e n -
JOHN BOLAND (as representative partner of Abbott Tout Russell Kennedy, Solicitors)
Appellant
and
YATES PROPERTY CORPORATION PTY LIMITED and IAN FRANCIS YATES
Respondents
Office of the Registry
Sydney No S28 of 1999
B e t w e e n -
JOHN WEBSTER
Appellant
and
YATES PROPERTY CORPORATION PTY LIMITED and IAN FRANCIS YATES
Respondents
GLEESON CJ
GAUDRON J
GUMMOW J
KIRBY J
HAYNE J
CALLINAN J
TRANSCRIPT OF PROCEEDINGS
AT CANBERRA ON TUESDAY, 3 AUGUST 1999, AT 10.17 AM
Copyright in the High Court of Australia
MR R.B.S. MACFARLAN, QC: If the Court pleases, I appear with my learned friend, MR A.G. BELL, for the appellant Boland. (instructed by Minter Ellison)
MR D.F. JACKSON, QC: If the Court pleases, I appear with my learned friends, MR S.T. WHITE and MR E.A. WHITE, for the appellant in the second matter, S28 of 1999. (instructed by Moray and Agnew)
MR D.M. QUICK, QC: May it please the Court, I appear with my learned friend, MR C.D. CURTIS, for the respondents in both appeals. (instructed by Bruce and Stewart)
GLEESON CJ: Mr Macfarlan, just before you commence, have the parties agreed on division between them of the available time?
MR MACFARLAN: There was discussion, your Honour, at the directions hearing at least when the estimate was three days plus for the case, and we understand it is not now that but three days.
GLEESON CJ: That is correct.
MR MACFARLAN: The division was to be myself the first day, my learned friend Mr Jackson the second, and reply and my learned friend Mr Quick on the final day
and a little bit more. I suppose there would be a contraction of that to take account of the fact there is half a day less.
GLEESON CJ: We would expect the parties to agree on whatever is necessary, if they have not already done so, over the luncheon adjournment and perhaps you can let us know what the agreement is when we resume at 2.15.
MR MACFARLAN: I will, your Honour.
KIRBY J: Mr Macfarlan, I asked the Registrar to notify the parties of the fact that I knew Mr Boland many years ago at university and also had some connection with Abbott Tout Creer and Wilkinson, as it then was, and also, of course, took part in the proceedings in the Court of Appeal. I have been informed by the Registrar that none of the parties raise any objection to my sitting and I do not feel embarrassed. However, if there were any inhibition or concern of the parties, I think it ought to be expressed now so that that can be considered, because I would not want in any way that the parties or the Court be inhibited in any manner by the fact that I took part in the proceedings in the Court of Appeal. I do not feel that will cause a problem, but if anybody feels any inhibition about it, it would be better that it be on the table now.
MR MACFARLAN: It does not cause any difficulty on our part, your Honour.
GAUDRON J: It perhaps should also be noted that I met Mr Boland at law school and in a professional context thereafter.
MR MACFARLAN: Yes, it does not cause any difficulty on our part, your Honour.
GLEESON CJ: Yes, Mr Macfarlan.
MR MACFARLAN: Your Honours, this appeal arises out of a resumption in 1985 of land at Darling Harbour owned by Yates Property Corporation. The hearing of the proceedings for compensation before Mr Justice Cripps in the Land and Environment Court occupied some 43 days of hearing time. The hearing commenced on 30 January 1990. For YPC, Yates Property Corporation, there were called three very experienced and eminent valuers whose evidence was tendered by means of written reports and also extensive oral evidence in-chief and, of course, they were extensively cross-examined. Those valuers were engaged by YPC at different stages in the period from the first notification of resumption until the hearing. That first notification occurred in mid-1984 and it was in that year that Mr Parkinson, one of the valuers, was engaged.
CALLINAN J: Mr Macfarlan, could I ask you this? When you say, engaged by the company Yates, do you literally mean that? Were the valuers his choice or the company's choice? It may be relevant to know that, you see.
MR MACFARLAN: Yes. Your Honour, I think I would have to take that on notice and provide some detailed information.
CALLINAN J: Could I mention some other matters which I would just like you to take on notice, and I do not expect you or any of the others to deal with them now, but we do not seem to have, I think, in the record the conditions of the planning permit that was ultimately granted. Would you check that? What I am particularly interested in is the genesis of the idea that perhaps a building had to be constructed, or might be constructed 10 years after the market. You remember that at least one of the valuers did a valuation on that basis, and I am interested in the genesis of that. I am interested in any relevant conditions of the building permit as opposed to the planning approval, and I would like to know whether anywhere in the record there is any sort of an outline of the evidence that was sought to be called when the matter was remitted to Justice Cripps the second time. It is referred to in his Honour's, I think, extempore reasons, but I do not know whether we have anything more than that.
I would also like to know when Yates came out of liquidation, if it did, and you might be able to explain to me how the case came into the Federal Court. Was it cross-vested, or was this action begun in the Federal Court? Those are matters you might let me know about at some stage - either you or the others.
MR MACFARLAN: Yes, your Honour, we have made a note and will respond to those.
CALLINAN J: Thank you.
GUMMOW J: It was a section 52 claim, was there not?
MR MCFARLAN: Yes, it was, and it was commenced in the Federal Court.
CALLINAN J: Was it ever pressed? I know it was not pressed by the time that the matter got to the Full Federal Court, and there is a reference to a collateral challenge, I think before her Honour Justice Branson, but it is not clear to me whether it was actually pursued or pressed in any way in the original hearing before her Honour Justice Branson.
MR MACFARLAN: Yes. I think it was, but we will give your Honours some references to her Honour's judgment. Mr Egan, the second of the valuers, was engaged in 1988 and the third, Mr Woodley, was engaged only shortly before the hearing, that is in November 1989, the hearing commencing at the end of January 1990. There were not any formal pleadings in the Land and Environment Court which defined or crystallised the contentions of the parties on the issues of valuation. The way in which the valuation questions were to be put before the court were defined, to the extent that they were defined at all, by the valuers' written reports and then their oral evidence that was led at the hearing. That becomes important when one comes to consider the immunity question which I will deal with towards the end of my submissions.
KIRBY J: So, presumably, the written submissions, I assume?
MR MACFARLAN: And written submissions, yes, your Honour, and oral submissions, of course. The claims that YPC made before Mr Justice Cripps included, of course, compensation for the market value of the property and also for special value.
GUMMOW J: Now, the statute that governed it was 124 of the Public Works Act 1984 , since repealed?
MR MACFARLAN: Yes, your Honour.
CALLINAN J: Mr Macfarlan, Mr Hemmings settled some points of claim which purported, to some extent, to define the issues, I think.
MR MACFARLAN: Yes. They defined the issues at a level of generality beyond that to which I was intending to refer a moment ago. They did not descend to an identification of the particular arguments that were to be put on valuation, and likewise, Mr O'Keefe, Senior Counsel, who was one of Mr Simos' predecessors, settled the statement of issues which descended to a little more detail but did not descend to the sort of detail that would have thrown up the type of issue that is presently before your Honours.
The Darling Harbour Authority valuers in the case before Justice Cripps assessed the value of the property on a comparable sale basis. The YPC valuers included comparable sale evidence in what was put to the court through them. As well, YPC sought to claim compensation on a higher basis by reference to a prospective use of the resumed property as retail markets.
GLEESON CJ: Did the valuers called on behalf of the authority who assessed the values on a comparable sale basis make any assumption as to the intended use by a hypothetical purchaser of the subject land?
MR MACFARLAN: Yes they did, but it did not seem to influence them very greatly in the outcome of their consideration.
GLEESON CJ: The sales that they took as comparable sales were sales to purchasers who intended to use their land for what purpose?
MR MACFARLAN: A variety of purposes, your Honour, not including retail markets, as I recall. I am reminded that Justice Cripps describes those valuers, that is the DHA valuers, as having assumed that the highest and best use of the site included a market but that none of those valuers considered that that use gave the property any special value. So there is no special value element in the DHA valuers' assessments.
The retail markets concept which was the focus of much of the evidence of the YPC valuers was utilised in a number of different ways, but one of them was in a claim that was made for the loss which it was alleged was suffered by YPC in terms of extra time and expense as a result of having to pursue the proposals as to retail markets on an alternative site.
HAYNE J: What, in the nature of a claim for damages?
MR MACFARLAN: A claim for disturbance, in effect, your Honour, that being a type of claim that has been sanctioned by the courts as a proper form of special value claim.
GLEESON CJ: Was that claim supported by reference to Kennedy Street?
MR MACFARLAN: Yes, it was. Kennedy Street was essential to that claim because Kennedy Street, as here, was a case where the use was not an existing use but was a proposed use, albeit one in relation to which significant steps had been taken to progress the development. Indeed, prior to the resumption of this property YPC had identified the retail markets concept as one appropriate for this site and had taken steps towards progressing the development. For example, much work was done to obtain appropriate development approval and building approval.
CALLINAN J: Mr Macfarlan, in New South Wales is it a relevant consideration if one is seeking a planning permit that there may be a need for such an activity or business, that there might be a public demand for it? Is that a relevant consideration?
MR MACFARLAN: I would have to answer that I think so, your Honour, but I cannot be definitive.
CALLINAN J: I ask that because might it not assist in the obtaining of a planning approval to demonstrate to the planning authority that one had a number of stallholders who are interested in taking up stalls?
MR MACFARLAN: Yes.
CALLINAN J: That would be a matter as much in furtherance of obtaining the planning approval as it might be in establishing the business.
MR MACFARLAN: I can see the logical force of that, your Honour. I do not know that there is any evidence that in this case the steps concerning stallholder interest were actually used to assist in obtaining the development application and building approval but, again, we will give that some further thought.
CALLINAN J: There were only 40 of them out of about 900 anyway, were there not? Nine hundred approximately would have been required.
MR MACFARLAN: Yes, I think it was something like 40 who had paid a deposit, a larger number who had registered interest. It was contended for YPC before Mr Justice Cripps, in the circumstances that YPC had undertaken these steps prior to resumption, that the compensation should reflect the fact that it would take YPC longer and it would be more expensive to pursue the proposals on an alternative site. YPC's work came to be reflected in the case that was put to Mr Justice Cripps in various ways in the valuations, in some cases through the market valuations and in some cases through the valuations of special value. Of course, I will need to come to demonstrate how that occurred.
Before doing so, I should mention what Mr Justice Cripps did. He awarded YPC $22.3 million in his first judgment, then after the appeal to the New South Wales Court of Appeal he awarded an additional $217,000 in respect of abortive expenditure. He had said in his first judgment that there was no claim in respect of abortive expenditure, but he was mistaken when he said that and there had been such a claim and it was in that amount which I mentioned. When the matter came back to him, he duly awarded the amount.
GLEESON CJ: When had Yates acquired the land?
MR MACFARLAN: In 1981, your Honour, was the contract.
CALLINAN J: August 1981.
MR MACFARLAN: Yes.
GLEESON CJ: For what cost?
MR MACFARLAN: $5.1 million, your Honour.
GLEESON CJ: How much additional expense had it incurred at the time of resumption?
MR MACFARLAN: There are different views about that. The abortive expenditure was that figure of $217,000.
CALLINAN J: Then there was a claim for 2.7 million, I think, is that not right? That was the alleged further expenditure.
MR MACFARLAN: Your Honour may have in mind the stamp duty and the legal costs.
CALLINAN J: Yes.
MR MACFARLAN: Perhaps if I could come to that in a moment, because I was just about to mention that. Just to respond to the Chief Justice's question, time and expense in addition to that reflected in the 217,000 abortive expenditure had no doubt been spent with reference to the obtaining of the DA and BA. The fact that there was a DA and a BA was taken into account in assessing the market value. Both in the case that was put before Mr Justice Cripps and in his Honour's reasons, it is apparent that the existence of those approvals added very considerably to the value of the property.
In those circumstances there was no need to identify precisely what the cost was of obtaining the DA and the BA. The relevant consideration was the work having been done, and those approvals having been obtained, what was the value now taking into account those approvals. It is not possible to put a precise figure in response to your Honour's question.
When the matter came back to Mr Justice Cripps after the Court of Appeal decision, he indicated that his original award of $22.3 million had included a special value element of $500,000. It is apparent from his two sets of reasons that that award of special value represented compensation to YPC for work that had been done in progressing the market's concept. It is also apparent that the market value component of what his Honour awarded, which was the vast bulk of the original award, likewise reflected work that YPC had done; most notably, of course, in the fact that he had obtained these approvals.
CALLINAN J: Mr Maacfarlan, why would not that finding of Justice Cripps on the second occasion have given rise to an issue estoppel as to whether there had been allowance, and what was the appropriate allowance for special value? I know there was an appeal, but that appeal was never prosecuted; it was settled, and it was settled in relation to entirely different claims, as I understand it. Assume that to be so, why would there not have been an issue estoppel on that factual finding of Justice Cripps that he had made, in fact, an allowance for special value?
MR MACFARLAN: There would be such an estoppel as between the Darling Harbour Authority and YPC. I am unsure whether your Honour is referring to those parties or the present ones.
CALLINAN J: I suppose that is the answer, is it not - the different parties, but not as between Yates and the appellants.
MR MACFARLAN: That is so, but no one, I think, in these proceedings seriously contends that his Honour did not, in fact, award $500,000 in respect of special value. His Honour said it, and there is no reason to think that was inaccurate.
CALLINAN J: Even if it does not create, then, an issue estoppel, it is still a fact, is it not?
MR MACFARLAN: Indeed, your Honour, and it is a fact that does not seem to be challenged.
CALLINAN J: And it is a fact, I think, that is not given any significance at all in the Full Federal Court's decision. Is that right?
MR MACFARLAN: That is so, your Honour, because the thrust of the Full Federal Court decision is that YPC was not rewarded, or compensated, for the work that was done; that it is apparent that in a variety of ways it was through Mr Justice Cripps' judgment.
GLEESON CJ: But was there a finding of fact by the Full Court of the Federal Court that the special value which ought to have been allowed was greater than $500,000?
MR MACFARLAN: No, there was not, your Honour. But, there was an assumption, I think it would be fair to say, that that was, or probably was so, but the Full Court did not descend to consider that.
GLEESON CJ: How would one go about checking the validity of that assumption, if it were thought to be material?
MR MACFARLAN: One would look at the trial judge's findings, as we say one should, and find that there was, in fact, no head start of the nature contended for by YPC, and therefore no occasion for any additional award of compensation.
GLEESON CJ: But it must constitute the very first step in the respondents' present case, that the amount that Justice Cripps awarded for special value was inadequate.
MR MACFARLAN: Yes.
GAUDRON J: Well, is that so? When I say is that so, I have some difficulty in ascertaining whether this was a claim in contract or in tort. What was it?
MR MACFARLAN: This present claim was in both, your Honour.
GAUDRON J: Well, in contract you do not have to prove damage, do you?
MR MACFARLAN: No, not substantial damage.
GAUDRON J: Do you have to prove any damage?
MR MACFARLAN: No.
GAUDRON J: I mean, I just ask that because it is not entirely clear how the matter proceeded. Well, there may then be a question, if it is in contract, whether there is an implied term or no implied term, whether it is the implied terms of a kind generally assumed to have been supplanted by the law of negligence.
MR MACFARLAN: And that is an issue this Court has had something to say about.
GLEESON CJ: At the time these proceedings were commenced, was there a relationship of contract between a barrister and the barrister's client?
MR MACFARLAN: The authorities would suggest no.
GLEESON CJ: Yes.
GAUDRON J: Perhaps at some stage the parties might give some thought to the precise nature of the claim and what had to be proved in relation to people.
MR MACFARLAN: Well, as against us, the solicitors, it was contract in tort but the position may be different as against my learned friend's claim.
CALLINAN J: Mr Macfarlan, I had the impression, I must say, and it might be quite wrong, that the Full Federal Court approached the matter upon the basis that the claim that should have been made in the alternative was the claim that was compromised on the second appeal to the Court of Appeal. Now, I might be wrong about that, but that is the impression I had from reading the Full Court's reasons.
MR MACFARLAN: Well, I think the reasoning of the Full Court, your Honour, would be that there was a particular type of claim that was not pursued and could not be pursued at the first hearing before Justice Cripps because the evidence was not led, and Justice Cripps rejected the relevant evidence when it was sought to be led on the remission from the Court of Appeal.
CALLINAN J: But I have assumed that that evidence was the evidence that went to the claim for, I think it is about $2.7 million, that was then compromised for what, I think $1.25 million or something of that kind. I have assumed that that is what is said to have been the special value that should have been, but was not in fact, claimed before Justice Cripps. Now, I may be wrong about that, but could you think about that also?
MR MACFARLAN: Yes, I will. I am coming to that, your Honour. There were two components of the evidence sought to be led before Justice Cripps on the remission: one was a variant of this alternative site theory and - - -
GLEESON CJ: That is to say, a variant of the disturbance factor theory?
MR MACFARLAN: Yes, indeed, and the amount that was obtained on settlement of the further appeal can be understood as referable to that because the amount of the compromise reflected the stamp duty and legal costs that Yates Property Corporation would have had to pay to start up the prospective business on another site.
GLEESON CJ: But it is the case, is it not, that at no stage either on the first hearing before Justice Cripps or on the second hearing before Justice Cripps did Mr Simos propound a claim of the kind which the Full Court of the Federal Court thought should have been advanced on the basis of a remark of Justice Hardie in Baringa?
MR MACFARLAN: It depends which part of the Full Court's judgment one looks at. That is certainly true, your Honour, if one looks at the part that describes the point as one of an alleged head start of YPC over other purchasers or prospective purchasers of the same land, which was the point run by - - -
GLEESON CJ: To put the matter another way, Mr Simos never advanced a claim for special value, either on the first or the second occasion, of the kind advanced in the evidence of Mr Hart and the similar witnesses called before Justice Branson.
MR MACFARLAN: That would not be accurate in respect of the second occasion. It would be accurate in respect of the first.
GLEESON CJ: It may be important to relate the evidence that Mr Simos advanced on the second occasion to the evidence that the Full Court of the Federal Court said should have been advanced.
MR MACFARLAN: Yes, I want to do that, and that is one of the topics taken up in our written submissions.
GLEESON CJ: Thank you.
MR MACFARLAN: Before proceeding, your Honours, could I take your Honours to a few passages in the judgment of Mr Justice Cripps to demonstrate the proposition I put that the work done by Mr Yates was before Justice Cripps in the evidence and taken into account by him. That is in volume 1 of the appeal books at page 328, starting at line - - -
GLEESON CJ: Could you give us the reference to the judgment in the law reports? We may have to refer to that in any judgment we write.
MR MACFARLAN: Yes, it is in fact in volume 2 of the appeal book and, as your Honours know, the judgment in the law reports is photocopied in the appeal book, so I will give both references. At volume 2 of the appeal books, page 328, line 20, which is 70 LGRA 203. At line 20 in the appeal book, or just above that, his Honour said:
On 9 February 1984, Yates made a further development application with respect to both the Harbour Street and James Street sites -
and I interpose there, your Honours, that the Harbour Street site was overwhelmingly the larger site. The James Street one was very much the minor site -
and development consent was granted for use of the land for a proposed building for 896 stalls subject to certain conditions. On 22 May 1984 a building application was lodged and building approval was granted.
Your Honours, that approval was actually granted on 20 July 1984, which was after the notification to Mr Yates of the intent to resume, but nothing was thought to turn on that. Further down the page, at line 39:
Doing the best I can, and upon the assumptions I am required to make, it would seem to me that it would not have been unreasonable for a person in Yates' position to have believed that he could have approximately 900 stalls on the site.....Yates did a considerable amount of work in preparation for the markets. It hoped it could replace Paddys but if it could not it was prepared to compete with it. Of special significance is the circumstances that approximately 718 recorded registration forms were received from people interested in becoming stall holders at the Harbour Street markets. Each paid $50 to register interest. Perhaps of more significance is the circumstance that about forty people paid rent in advance, about $100,000 for the right to occupy stalls in the market yet to be built.....Yates received rent in advance from approximately 10 per cent of intended stall holders well before the markets were even built.
Then, your Honours, if I can go to 335 of the appeal book which is page 210 of the Law Report, at line 20. Justice Cripps says:
As will be seen, I have fixed compensation by reference to a rate per square metre derived from comparable sales. In arriving at my conclusion, I have had regard to relevant comparable sales and to what I find to be the special value of the land to Yates. Yates had available a large area of land which had the potential for use as a market.
He describes where it was:
It is true that in part the opportunity available to Yates was the result of entrepreneurial skills.....But the opportunity also arose by reason of the size of the land and its location. In my opinion, it is that which gave the land a special value to Yates. Because, as I find, there was no other land immediately available for market purposes, upon resumption Yates lost the opportunity to exploit its land for its market potential.....Nonetheless, the expressions of interest received by Yates and the receipt of almost $100,000 rent in advance before any building works were undertaken support Yates' optimism concerning the success of the market. Yates had development consent and building approval from the Sydney City Council. In my opinion, someone in Yates' position would have been prepared to have paid something more than what I might describe as "land value" sooner than lose it.
Your Honours, we would submit that it is clear that his Honour took into account that work, which is the work the subject of the claim in these proceedings, in his Honour's deliberations. In his Honour's second judgment one sees the same thing, appeal book 342, line 20. Perhaps if I start at line 13 and anticipate, to some extent, what I was going to say about the evidence put on the remission. Justice Cripps says:
There was some argument as to whether the evidentiary basis for allowing the abovementioned components had been established. It is unnecessary for me to pursue the matter because to include these items would be to alter the whole basis upon which I assessed compensation and to adopt, in effect, a method which I rejected.
What he is talking about there, your Honours, is that on the remission an attempt was made on behalf of YPC to put in another variant of this alternative site approach and his Honour picked it as being essentially the same as what had been put before him before and which he had rejected. But, then, reading on at line 18:
When I determine the case, I took into account expressions of interest etc referred to by Handley JA in his judgment at pp 76 - 79.
Then, on the next page at line 10 he speaks of having fixed a square metre rate:
as the "special value" component of the compensation. That amounted to approximately $500,000 being the amount of money over and above the "market value" a person in the position of Yates would have paid sooner than not obtain the land because of the special value the land had to Yates by reason of the work done and expenditure incurred and referred to in the decision of Handley JA.
To the extent that your Honours find in the Full Court judgment suggestions that YPC did not receive compensation for the work done by it with respect to these markets, those references are erroneous because clearly it did receive compensation and that the evidence was before his Honour and taken into account. Reading on at line 17:
I have been asked to add to the compensation I awarded the sum of $217,443.78. As I have said, a part of that was referable to expenditure incurred in actually obtaining these expressions of interest.
That is the abortive expenditure claim, your Honours -
I do not think, however, that it is appropriate to deduct that sum from the figure agreed..... When I considered the "special value" to Yates, I knew that some money had been spent but I paid no particular regard to the actual amount because I was of the opinion that however Yates acquired that interest, it was relevantly of special value to it. I propose to allow all the amounts in Exhibit 14 as "abortive expenditure" and in doing so I have been careful not to duplicate compensation.
We would, with respect to his Honour, query whether his Honour did in fact avoid duplication because the $217,000 included amounts or expenses referable to obtaining the stallholder's registration and the like, which his Honour, in turn, appears to have taken into account in assessing the general special value figure of $500,000. So, on one view, there was a duplication of compensation.
GLEESON CJ: Is it right that if we want to see the way in which the special value claim was put on the second occasion before Justice Cripps, the most convenient place to find that is in the written submissions from pages 3123 and following in volume 12?
MR MACFARLAN: That sounds right, your Honour, but I would have to check that. It is a topic we pick up in paragraph 44 of our submissions and that is one of the references, I think, which we have given but there are other places in which it can be seen.
GLEESON CJ: If that is right, it looks as though what happened was that Mr Simos went back to Justice Cripps and began by saying, "This is what Justice Handley said in the Court of Appeal and, in particular, he criticised you for referring to Kennedy Street but not explaining how you applied Kennedy Street. This is the way we say you should have and should now apply Kennedy Street." We see that from page 3123 onwards. Is that right?
MR MACFARLAN: Yes, that is right, your Honour, although the submissions manifested themselves in two amounts that were claimed. One was an amount of something like $7 million, which was Mr Woodley's assessment of loss on an alternative site disturbance basis - - -
GLEESON CJ: If that is correct, at some stage before you complete your submissions, could you explain in a summary fashion the difference between what the Full Court of the Federal Court said was the way Mr Simos should have put the case and the way we see him putting the case in his written submissions from page 3123?
MR MACFARLAN: Yes, your Honour, and it can really be expressed, I think, in perhaps two sentences. One is that the way it was put by Mr Simos was that the work done by Yates had given to Mr Yates or his company an advantage, and the advantage was that this property, the resumed property, was one on which the market's development could be progressed much more easily, quickly and less expensively than it could be on an alternative site. So, to assess the compensation which was his due, one should compare the expense and delay he would suffer in respect of the alternative site. That is the way it was put for YPC. What the Full Court said was, yes, that work of Mr Yates was done and it had value to him, but the way in which one should assess its value was not by reference to what it would cost Yates to go elsewhere, but what advantage Yates had over other prospective purchasers of the resumed site.
GUMMOW J: I am not sure I understand that. I am not blaming you for it.
MR MACFARLAN: No, I will expand it as I come to it, but perhaps if I just leave it at that at the moment.
GAUDRON J: Did they necessarily result in a different answer?
MR MACFARLAN: Not necessarily; it is a different - - -
GAUDRON J: Well, does not the Full Court has to go on and say that there is a different answer, that there will be a different answer?
MR MACFARLAN: Well, we would submit so, in light of the trial judge's findings, to which I will come, but their Honours in the Full Court really assumed that there would be an additional figure, but their Honours did not have regard to what the trial judge had held, the effect of which was that there would be no occasion for additional compensation.
GLEESON CJ: Well, is it the case that Justice Cripps's response to this argument when it was put to him was to say, "I've already taken that into account and allowed all that you're entitled to for it, subject to the $217,000"?
MR MACFARLAN: In part, your Honour. He also said that it reflected a method he had rejected and the two are difficult to put side by side, but in saying that it reflected a method he had rejected, he seemed to be referring to the extensive and similar alternative site evidence that had been led before him at the main hearing which he had not accepted in terms, because that evidence led to figures for the value of the property up to $75 million, so, as his Honour's finding was $22 million, there was obviously a large extent to which he had rejected that evidence but, with that qualification, yes, your Honour.
GAUDRON J: Prima facie, it seems to me that the way Mr Simos put it as distinct from the Full Court's might result in a higher award.
MR MACFARLAN: Yes. I think it was really accepted, your Honours, that what was being claimed before Justice Cripps was a very much greater amount than would have been produced by what YPC now contend for, and I think YPC's contention now is that their point should have been put as a fall-back position.
Before Justice Branson the position of YPC seemed to be that YPC's case before Justice Cripps should not have been put on the $50-$75 million basis, because that was legally flawed, and instead it should have been put on this much lesser head-start basis, but there has been no cavilling with the Full Court's finding that there was nothing legally wrong with the way in which the broader and larger claim was put. So, YPC's position seems to be now that their point should have been put as a fall back, albeit for a very much lesser amount of compensation.
Your Honours, there was a further appeal to the Court of Appeal following Justice Cripps' decision on the remission and, as has been mentioned, that was settled. The figure for which it was settled was $1.4 million, and that differs slightly from the figure which appears in the Full Court judgment. Because it does so differ, I should refer your Honours to volume 16 where the true figure can be seen at page 4359 line 37. This is part of a deed between YPC and the Darling Harbour Authority, and there is the recital in recital I of payment of $1.425 million. If your Honours then go to page 4356 of the same volume, your Honours will see a file note commencing at line 31 which records an attendance on Mr Simos and it says that:
Simos had been in detailed discussions with Tobias QC -
who then appeared for the DHA, although he had earlier had a role in relation to the YPC position -
over the course of the last few months and had provoked an offer of settlement calculated as follows -
Stamp duty is the largest amount, legal expenses and interest comprising $1.4 million, which by a few thousand does not coincide with the figure over a few pages, but that is as close as one can get to it. One would assume that there has been an addition of some interest in the meantime. The point is that the body of that payment represented stamp duty and legal expenses, being the notional cost of YPC that would have to be incurred if it were to pursue its proposed development on the alternative site, but of course limited to its stamp duty and legal costs.
I will not go to it, your Honours, but that is to be contrasted with the figure in the Full Court's judgment which is erroneous, volume 2, page 247, line 25. This additional amount which, leaving interest aside, was something in the order of $800,000, was for special value because it bore the character that I have described and thus it is to be notionally added to the 500,000 which Justice Cripps said he awarded before for special value, and also the abortive expenditure figure of 217,000. So there was in the ultimate a very substantial award in respect of special value. Your Honours, turning to the case that is alleged here against - - -
KIRBY J: Can I just clarify that. Do you therefore accept that of the sum and the offer of settlement on page 4356 that a proportion of that was special value which ought properly to have been awarded by Justice Cripps in the first hearing, and was it advanced before his Honour in the first hearing by the appellants?
MR MACFARLAN: Yes, your Honour. The costs that Yates would incur in going for an alternative site were claimed, and costs of that nature were included and it is the whole of that figure which is special value, your Honour, except of course the interest factor, but the interest is on the special value amount. The substantive figure of in total about $800,000 is all special value.
GLEESON CJ: Was that a settlement or a compromise of the alleged entitlement referred to on page 3125, line 41?
MR MACFARLAN: Yes, your Honour.
KIRBY J: It is not alleged there is any default on the appellant's part in failing to advance that claim at the first trial and subsequently?
MR MACFARLAN: No, it is not, your Honour. It is not alleged against us, no, your Honour; and one can see a place where the claim was made in a document which I will come to, and I do not ask your Honours to go to it now, but it is in volume 10 of the appeal books, page 2527 at line 22. There is a claim for stamp duty and legal expenses totalling $3 million in that case. The reason it is higher was because the prospective cost of the alternative site was thought to be a lot more than the cost upon which the stamp duty, the subject of the settlement amount, was calculated; but the point is that there was a claim that was made, albeit for a much higher amount.
The YPC case that is made against its former lawyers, your Honours, in these proceedings is this, and I want to put this by reference to the Full Court's description of it in volume 2 of the appeal books at 248, line 35. Your Honours will see there that the Full Court says that:
Yates put its case as follows - - -
KIRBY J: This is also now reported in [1998] FCA 8; 85 FCR 84.
MR MACFARLAN: Thank you, your Honour:
It was in an advantageous position at the date of the resumption of its land relative to any other prospective purchaser of the land wishing to build a market on the land. That advantage was of economic value. That economic value should have been taken into account as part of the special value to Yates of the resumed land. The state of the authorities that existed at the time, all of which the respondents ought to have been aware of, in particular Kennedy Street.....and Baringa.....made it clear that the advantage was compensable as part of the special value of the land. The respondents failed to lead evidence and conduct the case in a way that would see Yates obtain an appropriate award for that special value if the manner in which its valuers had assessed special value was rejected by the Land and Environment Court.
Now, your Honours will observe that the critical element at line 36 there is that the advantage said to have been enjoyed by Yates was in respect of other respective purchasers of the resumed land. The way we put it, and the way it was put before Mr Justice Cripps, was that Mr Yates' work had resulted in resumed land being advantageous as compared to alternatives and that the measure of compensation should be the cost that would be involved in YPC having to go to an alternative site.
GLEESON CJ: When you use the word compensation, it was value that he was entitled to receive and as I understand it, what is special about special value is that it reflects some kind of value to the owner over and above the value the resumed land might have to any other purchaser. It is the additional amount above market value that the owner of the land would be prepared to pay rather than lose it.
MR MACFARLAN: Yes, that is so, and your Honours will see as I develop the argument that we say that the work done by Yates was in fact referable to market value because it was work of which other purchasers could avail themselves - they could take the advantage of it. So, it was not an advantage peculiar to YPC.
GLEESON CJ: But in so far as Justice Cripps accepted that there was an amount of $500,000 by way of special value, what he was accepting was that Yates would have been prepared to pay $500,000 more than anybody else rather than lose this land.
MR MACFARLAN: Yes.
GAUDRON J: That sum must notionally be increased to something like $1.5 million when you take into account the settlement and the disbursements.
MR MACFARLAN: Yes, that is so. So, yes, in the end, the DHA appear to have accepted that Mr Yates could be regarded as someone who would have bid that much more for the land than other prospective purchasers.
GLEESON CJ: Now, the theory that was advanced by Mr Simos was that a matter relevant to assessing how much more Yates would pay than any other purchaser was how much it would cost Yates to put itself in the same position in respect of an alternate site.
MR MACFARLAN: Yes. That is what Kennedy Street says, as I will seek to demonstrate to your Honours. That is what Kennedy Street was about. It kept talking about what it would cost this owner to pursue its plans somewhere else.
CALLINAN J: But, I did not understand that anyway, because that owner was an investor who would have moved on anyway. The project in questions that was considered by Mr Justice Hardie was a finite project, it was not going to go on forever, and he treated it like a business that was going to be carried on indefinitely and I, frankly, cannot understand why, in the circumstances, any special value was allowed there at all. It was just part of the normal business activity to move on to another similar investment when that one was completed.
MR MACFARLAN: Yes. Your Honour is not the first to criticise Kennedy Street.
CALLINAN J: I think the other one is equally - well, it is not quite as extreme a case, but it is equally, I think, wrongly decided, frankly.
MR MACFARLAN: Yes. But, looking at it from the point of view of the lawyers who were sued in this case, at best the Kennedy Street stood for this alternative site concept.
GLEESON CJ: Presumably, that way of putting the case, based on Kennedy Street, has the attraction that it does not undermine your market value case by, as it were, confronting the judge with the proposition that a hypothetical purchaser would take a long time to build markets on the land.
MR MACFARLAN: Yes, that is so.
GLEESON CJ: As I understand it, the valuers called for Yates assessed their market value of the land on the assumption that a hypothetical purchaser would build markets on the land reasonably promptly.
MR MACFARLAN: And, indeed, that he could commence immediately as could - - -
CALLINAN J: Mr Macfarlan, was there anything at all that Yates had that might have been regarded as giving it a head start, accepting such a thing for present purposes, that was not readily transmissible to a purchaser and which it would not have been in Yates' interest to transmit to a purchaser?
MR MACFARLAN: No, your Honour, there was not.
CALLINAN J: Is there any item at all that one can identify, because I would like to know if there is.
MR MACFARLAN: We say there was not and that her Honour at first instance so held, and I will come to that. One can reach the conclusion either by applying Spencer's Case and saying one must assume that the purchaser would have the benefit of that knowledge or one can look at the particular facts and reach a conclusion on the facts that it would in fact have been conveyed because Mr Yates accepted in evidence that the work he had done was not of value to him on another site and that he therefore would have made available to other purchasers, or prospective purchasers, the benefit of what he had done.
CALLINAN J: Mr Justice Isaacs uses the words in Spencer's Case, "perfectly acquainted", that the hypothetical purchaser is "perfectly acquainted" with the land or the subject.
MR MACFARLAN: Yes, and we would submit, with respect, that makes sense, because unless the information or whatever it is, it may be documents that the vendor or owner has, is of use elsewhere, then it is only common sense to suggest that the owner will make it available to prospective purchasers to encourage them to pay more.
CALLINAN J: He would be a fool not be; he would not be prudent, he would be a fool.
MR MACFARLAN: Yes, and that was the effect of all the expert evidence; it was all one way on that issue. Focussing, your Honours, on what is said at that point by the Full Court, the advantage relative to any prospective purchaser, there are a number of answers we have - - -
GUMMOW J: Just before you go on to that, Mr Macfarlan, what do you say follows from your acceptance of the propositions that have been put to you by Justice Callinan?
MR MACFARLAN: That there is no head start and her Honour at first instance so held, but their Honours in the Full Court - - -
GUMMOW J: Assuming there is that concept anyway.
MR MACFARLAN: Assuming there is that concept.
GLEESON CJ: Well, as I understand the evidence, that is the point that Mr Simos was asserting from beginning to end, in his evidence, that there was no relevant head start.
MR MACFARLAN: He was.
GLEESON CJ: And that the way to get money for Yates out of the special value claim was to put the argument on the basis reflected on the bottom of page 3125, relying on Kennedy Street as support for that proposition.
MR MACFARLAN: Yes, that is the way the case was put before Justice Cripps and the way it was sought to be justified before her Honour Justice Branson.
GUMMOW J: Now why is that said to be negligent? Negligence is not about perfection.
MR MACFARLAN: Indeed, your Honour; I cannot do more than agree with that proposition.
GLEESON CJ: But Justice Branson held that it was not even wrong, let along negligent.
MR MACFARLAN: Yes. Well the way it would be put against us is that there was another way in which it could and should have been put as a fall-back position, that perhaps it may have been appropriate to assess the value and the disturbance cost by reference to what it would have cost to go to an alternative site, but there was an additional and alternative way of putting it, that is, by looking at the advantage YPC had over other prospective purchases at the resumed site, but there are many answers to that, but one of them, we say, is that, as a matter of logic, could not be regarded as a relevant factor. If one notionally puts oneself in the position of this owner of the resumed site and asks what factors it would take into account if bidding for the site, one can well imagine that the owner would say to itself, if I have to go elsewhere it will cost me so much and therefore I will pay that much more for this site to retain it, but the owner would not go on to say, well I have an advantage over these other people in the auction room in respect of this site, therefore I am going to pay so much more.
GLEESON CJ: Well, that seems to assume a state of competition between the hypothetical vendor and the hypothetical purchaser.
MR MACFARLAN: Yes.
GLEESON CJ: Indeed the very expression "head start" seems to assume a competitive situation.
MR MACFARLAN: Yes. One way this special value test has been put in the cases is by postulating that the owner is there in the capacity of a purchaser at a notional sale, and our point would be that the owner, in that position, would not logically regard it as of any particular consequence that the owner could do something quicker on the subject land than other purchasers. What the owner would be concerned about would be how much more it was going to cost him if he had to go elsewhere than the resumed site, and that would be the measure of the additional amount it would bid. So, the point made by the Full Court, we submit with respect, lacks logic.
GUMMOW J: What is the rationale of this head start doctrine? What does it mean? As the Chief Justice said, it suggests some competition and someone is to be handicapped in some way because someone else has stolen the march. How does that all fit in with Spencer's Case?
MR MACFARLAN: It does not, in our submission. Nor does it fit in with the reality of the marketplace as indicated by the expert evidence.
The Full Court, we submit, at a number of points obscured the distinction which I have sought to draw between the cost to the owner of going elsewhere, and the alleged advantage the owner would have over other prospective purchasers; the latter being, we say, irrelevant, but there is a distinction in the two concepts. What one finds in the Full Court judgment is the assertion at times simply that Yates had done work and was entitled to be compensated for it. Put in that way, it is clear that the implied stricture was met, in that certainly we did contend before Justice Cripps that he was entitled to be compensated for that work, and he was compensated.
May I illustrate the point by going to a point at which the Full Court posed the critical question in relation to my clients. Appeal book volume 2 page 261 line 10. This is the critical question to which the Full Court gave an affirmative answer. Page 261 line 10:
Next it is necessary to consider whether a reasonably competent solicitor expert in the law relating to the resumption of land should have advised Yates to advance a case that Yates was entitled to compensation for the work it had done to bring the proposed market to a point where it was capable of immediate development.
But put in that way, your Honours, it is very easy to answer. Yes, it should have been contended, it was so contended and compensation was duly awarded, albeit not as much YPC would have liked consistently with the claims it made. Your Honours will observe - - -
GAUDRON J: Is that any different from talking about special value?
MR MACFARLAN: No, it is not, your Honour. Well, in this way, I suppose, your Honour, that that work could have been, and we say was, compensated for in two different ways. One, through special value and another through market. It was through market, in the sense that the market value was derived taking into account the existence of the development and building approval which were manifestations of the work.
GAUDRON J: My real query is: is that proposition correct in so far as it is not put in a context of the value that accrued by reason of the work?
MR MACFARLAN: Yes, I take your Honour's point. It is not precisely correct because the measure of the compensation is the increment to the value, not the cost of what was done. If approvals were obtained, it is a matter of what the land is now worth, not what it cost to get the approvals. So, to that extent, it needs that qualification. What is said there, your Honours, should be contrasted with the other passage that I first read to your Honours from the Full Court judgment which was at 248 line 35, and your Honours will see that the reference to advantage over prospective purchasers is not in the question at 261.
HAYNE J: What is the hypothesis that lies behind the passage at 248? Is the hypothesis one in which Yates is competing as potential purchaser against other prospective purchasers at an auction?
MR MACFARLAN: Yes, it is certainly in a sale, perhaps not necessarily an auction, but, yes.
HAYNE J: If that is the hypothesis, why does the fact that one purchaser may be prepared to go, say, to $2 million for Blackacre whereas all other purchasers may be willing only to go to 1.5 mean that Blackacre to that purchaser, a specially advantaged one, is truly worth 2. If the hypothesis is sale, a fully informed market, a specially advantaged purchaser, presumably goes to 1.5 plus a dollar to knock out the other bidders. How do you get to 2?
MR MACFARLAN: Well, you do not, in our submission. It was that question at the top of 261 that was answered in the affirmative by the Full Court and led to the finding of negligence against us because it was at least assumed that the case was not put on that basis but, as I have sought to say, it was. Another example, your Honours, of the same problem, we would submit, is at 266 of the appeal book in the judgment of the Full Court where their Honours are dealing with the question of causation. Perhaps your Honours should look first back to 265 line 15 where they say:
Thus, we have no difficulty in reaching the conclusion that Abbott Tout was negligent in failing to advise Yates how its claim should properly be presented in the Land and Environment Court and what evidence should be led to substantiate its claim.
The contention was then made that it would not have made any difference, even if the solicitors had raised the point, and that causation issue is one I will have to come to separately, but for present purposes there is a passage at 266 line 30 to which I would wish to refer, where it is said:
there would have been a clear conflict between -
the solicitors -
and the view of counsel. We say that this assumption was without justification because as Mr Simos himself said in his evidence, it was obvious that Yates was entitled to be compensated for the work etc in bringing the proposed development to a stage where it could proceed immediately.
It is not entirely clear where that evidence is, but for present purposes it does not matter, your Honour. What the Full Court is saying there is that because Mr Simos supposedly conceded that Mr Yates was entitled to compensation for the work he had done, therefore he was acknowledging the point now put against us by YPC. But the point put against us is not that YPC was entitled to compensation for the work it had done, because in a broad sense that was obvious and it was so contended and it was so awarded. The point is a narrower one that he is entitled to compensation for the alleged head start he had over other purchasers.
GLEESON CJ: What was the head start?
MR MACFARLAN: It is alleged to have been the fact that YPC could have started building on this site immediately - - -
GLEESON CJ: But Justice Branson rejected that as a proposition of fact.
MR MACFARLAN: Yes, and the Full Court ignored that rejection.
GLEESON CJ: Justice Branson, as I understand it, found as a fact that Yates would not have been in a position to develop this land for retail markets materially more quickly than anybody else.
MR MACFARLAN: Yes, your Honour.
GLEESON CJ: Let me step back from the facts of this case a pace, Mr Macfarlan. Suppose I owned a vacant block of land in a residential area and I get the idea that I might be able to persuade the council to allow me to build a block of home units on the land: I get council's development approval, then I engage an architect and some plans are prepared for a block of home units then I get a building approval from the council for that block of home units. I arrange my finance and I engage a builder, and I am just about to commence building the block of home units when my land is resumed. How does this principle of head start then come into operation, if at all, in those circumstances? It proceeds first of all on a factual assumption, does it, that the hypothetical purchaser to whom I might have sold the land immediately before it was resumed would not have been in a position to build the home units immediately?
MR MACFARLAN: Yes, that is so.
GLEESON CJ: What is the basis of that assumption or hypothesis?
MR MACFARLAN: The basis said to have been present in this case was the expert evidence called through Mr Hart and others. Our response would be it is contrary to Spencer's Case because one assumes that a purchaser has the benefit of the knowledge that the vendor or owner has acquired, but, in any event, if one looked at the expert evidence the experts agreed that the other purchasers would be in the same position as the vendor and her Honour so held.
CALLINAN J: Mr Macfarlan, the position might be different with the Chief Justice's example if the owner were also a builder and, for example, he had plant and equipment on site which he could not otherwise utilise and perhaps he could utilise it there at marginal cost. He would, in those circumstances, be in a real position of advantage over any prospective purchaser but you need some special circumstance like that before there would be any advantage, I would have thought.
MR MACFARLAN: Yes.
CALLINAN J: That would be a true case of special value to a particular owner.
MR MACFARLAN: He may be in, as a matter of fact, a position of advantage over other purchasers but the fact that he was would not logically provide the measure of what he would pay as an additional amount to retain the land.
CALLINAN J: That may well be right, yes.
GLEESON CJ: For the reason advanced by Justice Hayne.
MR MACFARLAN: Yes.
GLEESON CJ: But, a simply example of special value in a case such as I hypothesised would be if I owned a block of units already built and functioning next door and there was going to be some kind of complementarity between the two developments.
MR MACFARLAN: Yes. Which could not be availed of by another purchaser.
GLEESON CJ: Then, a decision of the Privy Council at the turn of the century would say, I am entitled not only to the market value of the land but I am also entitled to be compensated for an extra special value which the land had to me which it did not have to anybody else, because of my business circumstances.
MR MACFARLAN: Yes. Removing personal considerations from the fact that one had one's family living next door would not be a relevant circumstance but the fact that one might have an office block next door when one was running a coffee lounge on the resumed site would be relevant.
HAYNE J: Well, the warehouse close to the factory is the classic example, is it not, the warehouse resumed and you have got to get warehousing three miles away?
MR MACFARLAN: Yes.
GLEESON CJ: But I am still not sure I see the logical answer to the problem raised by Justice Hayne. The Privy Council expressed it by saying, "This is an amount that the owner would be prepared to pay over and above any other purchaser in order to avoid losing it", but the owner does not have to pay that amount, the owner has to pay a dollar more than any other purchaser to avoid losing it.
HAYNE J: Which seems to go from valuation to compensation in the sense of compensating for loss rather than assessing value.
MR MACFARLAN: Yes. To get the owner to the $2 million in Justice Hayne's example one has to hypothesise some other purchaser who is going to push it there.
HAYNE J: Or, horror of horrors, dummy bids at the auction - things unknown, of course, in such a market.
MR MACFARLAN: Yes. But, there would not be any bona fide other purchaser who would go to that figure, on the assumptions we are making, because the property would not be worth that much to it.
HAYNE J: But it may be, Mr Macfarlan, quite seriously, that the case has to be tested against an auction in which the vendor has the right to bid, by himself or agent, and therefore can jack the price up against only one live bidder, and you can therefore get the bids up to the maximum amount that that bidder would pay, regardless of whether there is, in truth, open competition with another live bidder. The whole Melbourne house market might be said to depend on that approach to real estate auctioning, but that would be an uncharitable view.
MR MACFARLAN: Yes, that is, perhaps, why auctions are less popular in Melbourne than Sydney, your Honour.
Could I turn, your Honours, to say something about what the valuation evidence was before Justice Cripps? I, of course, do not want to take your Honours through all the permutations, but there are two relatively straightforward examples of how it was put that, I think, will illustrate what we want to say. One relates to market value and one to special value. The first is to be found in the Full Court's judgment at page 236 of the second appeal book at line 20. It is a table which is taken from Mr Parkinson's evidence, and it relates to market value. Before saying something about that could I just explain this to your Honours: Mr Parkinson's concept was that one could profitably operate these retail markets for some 10 years and then, at the conclusion of that period, the site should be used for a commercial development, whether shops or offices. So, Mr Parkinson, at line 25 has the:
Present value of $8,062,404 pa being net rental of stalls.....for 9 years deferred 1.5 years at 10 per cent
What has happened there is that he has only taken nine years because he has assumed that the first year's rental is going to be somewhat lower than the remaining nine years, and the first year's rental is in the next couple of lines:
$5,793,110 pa for one year at 10 per cent deferred 6 months -
So, what is happening there is that he is assuming that it will take from day one, six months to build the retail markets. In the 12 months then following there will be a rental, albeit not as at high a level as in the following nine years. He discounts that first year's rental back to present day values. He then discounts back the remaining nine years' rental - the present day values. Then at line 30 he deducts an amount for risk and contingency. He deducts the costs of the building and of holding charges, because during the period of building obviously there will be holding charges on the land when it is not earning any income, and so that gives him a value of the site for the limited period markets. At line 33 the redevelopment value of the main site 101/2 years hence, and he has discounted that back to present day value, and that leads him to an overall figure of $51 million in respect of market value.
The point we particularly wish to make is that this assumes that the new owner, or the purchaser, could commence building the markets immediately, and do so within the period of time suggested by YPC as relevant, namely six months.
YPC alleged it would take its six months and Mr Parkinson has given the notional purchaser the benefit of YPC's position. That is, the purchaser, whoever it is, can start immediately and it will only take it six months. So, by that means Mr Parkinson has given the purchaser the benefit of the work done by Mr Yates, because, assuming all else against us, that Mr Yates did a lot of work that would otherwise have to be repeated by another purchaser, Mr Parkinson has not factored that in; he has assumed that the purchaser would be in the same position as Yates.
Perhaps the point could be illustrated, your Honours, by notionally dividing up Mr Parkinson's valuation there. One thing he could have said was, "Well, I'll take the market value and assess it on the basis that it will take the purchaser two years to erect these markets and commence to earn income and, of course, that would push the rental further into the future and therefore provide a lower market value", and then he could have said, "When I get to special value I'll note that Mr Yates can start quicker than any other prospective purchaser, he can start immediately, therefore, for Mr Yates, the income is going to commence coming in much quicker and therefore there's an additional amount of special value which should be awarded".
Now, he did not do that; he has rolled it up as market value, we say quite properly, because he has assumed consistently with Spencer's Case that the purchasers could do the same as what YPC could have. So it would be wrong to suggest that if there were any head start - these are the other purchasers - YPC's case was presented in a way that did not give YPC the benefit of it because YPC's case was presented on the basis that everyone, or whoever the purchaser was, could start immediately.
Then, your Honours, I mention that the 5 per cent figure in that table was a matter of some criticism from Justice Handley in the Court of Appeal and he said it was too low. We would submit, with respect, it is really a matter of degree and judgment for the valuer, but the reason I mention it is that Mr Parkinson's evidence was that he chose the 5 per cent rather than a higher 10 to 15 per cent, because the steps taken by YPC had minimised the risk in relation to the retail market proposal, and thus in that fashion also he has given YPC the benefit of those steps taken by YPC. I will not take your Honours to it but the reference for that proposition is in Justice Branson's judgment at volume 1, page 127 line 15.
GLEESON CJ: What was the date at which Mr Parkinson was assessing the market value of the land?
MR MACFARLAN: The date of resumption, your Honour.
GLEESON CJ: ?
MR MACFARLAN: 1985. There was a notification in mid-1984 but the formal resumption occurred in 1985.
GLEESON CJ: So what Mr Parkinson was saying was that land that Yates had acquired in 1981 for $5 million was worth $51.8 million in 1985?
MR MACFARLAN: Yes, well, that was the market value and then when he came to a separate special value assessment, he came to $75 million.
GLEESON CJ: More accurately, he was saying a conservative assessment of its value in 1985 was $51.8 million.
MR MACFARLAN: Indeed. Now, so far as a special value is concerned, could I refer your Honours to an assessment of Mr Woodley which is in volume 10 at page 2527, and this illustrates the type of case that was put on behalf of YPC. This is an annexure to Mr Woodley's report and the theory of this, your Honours, is that it would have taken approximately two years to acquire an appropriate alternative site and then another year to get the markets operating on that alternative site. The alternative site in question, so far as all the YPC valuers were concerned, was one described in the evidence as markets 1 and 2 where Paddy's Market was operating, but it was contemplated that that site would become available at some time in the future as a result of the moving of Paddy's Markets to another site away from Darling Harbour.
CALLINAN J: There seemed to be some difference between Justice Cripps, I think, and the Federal Court in relation to Paddy's Market. Justice Cripps seemed to think that it would continue to trade in competition for some time with Yates Market, whereas I think the Full Federal Court treated Paddy's Market as if it would have ceased to operate by the time that Yates Market began to operate. There is quite different views in that.
MR MACFARLAN: Well, I think what Justice Cripps said, your Honour, was that it was contemplated that Paddy's Markets would cease to operate but there was not any absolute assurance about that, and if that did not occur, then the Yates Markets were prepared to operate in competition, and I will have that reference turned up, your Honours.
HAYNE J: What then is the theory that underlies this assessment, that Yates would have wanted to, would have had to, buy an alternative market on account of resumption? What is the premise?
MR MACFARLAN: That he would have wanted to and because of the resumption he would have had to, if he were to pursue the proposal, because this was the only suitable alternative site and it would not become available for about two years, so, essentially, what Mr Woodley was saying here was that there would certainly be retail markets income that would be derived in the future from this alternative site by YPC but it would be much delayed in coming - delayed by three years in coming - and, therefore, worth much less than a present day value and there would be significant additional expenses in pursuing it there because in the two years before building could commence there would be building cost increases, there would be holding costs during the period between acquisition and completion of the market. If I could take your Honours to that table at page 2527, line 20 it says:
Perceived likely minimum future cost of acquiring an equal freehold site $50 million + Stamp Duty and Legals -
I mentioned before that point about whether there was a claim actually made before Mr Justice Cripps for conveyancing and stamp duty costs. That is one example of where it is made. Then he adds at line 25:
Holding costs 12 months -
That would be between the commencement of year two and conclusion of year two, the holding costs of the land before the income stream commenced. At line 23:
(c) Perceived increase in costs of an equivalent markets development 2/3 years -
That is the increase of building costs. At line 30:
Perceived accrued loss of income over 3 years calculated on markets site component value of $35 million.
GLEESON CJ: Yes, but the relevance of all this lies in the opening words of paragraph (2). If all this has a point, the point is that this would have a bearing on the amount Yates would be prepared to pay for this land rather than leave it.
MR MACFARLAN: Yes, he would say to himself, "This resumed land is so much better than the alternative and the extent to which it is better is to be found in this table".
GLEESON CJ: You are not directly, at least, compensating Yates for the effect on his business at the resumption. What you are doing is working out the value to him of the land that was resumed.
MR MACFARLAN: Yes, that is so, and what he would bid at a notional auction or other sale rather than lose the resumed land.
CALLINAN J: Mr Macfarlan, that finding of Justice Cripps that I had in mind is at page 327, about line 23. It is the paragraph beginning line 23 to 35 and I think, in substance, that is a somewhat different finding from the very early one the Full Federal Court made?
MR MACFARLAN: Yes, your Honour, Justice Cripps speaks on that topic also at 322 of the appeal book, line 30 - - -
CALLINAN J: Yes, he is just outlining the evidence at 322. I think his finding is probably at 327 -
MR MACFARLAN: Yes.
CALLINAN J: I certainly do read that somewhat differently from, I think, the first or second page of the Full Federal Court decision.
MR MACFARLAN: Yes, thank you, your Honour.
GLEESON CJ: Mr Macfarlan, does it not follow that there is a necessary and close relationship then between the way you assess your market value and the way you assess your special value because, if it is contended that by reason of Yates' preparedness to develop the land it would pay a certain amount more than any other purchaser rather than lose it, you could only estimate the additional amount in the light of the hypothesis you have made as to the preparedness of the other purchasers to develop the land.
MR MACFARLAN: Yes, and that is picked up, your Honours, by the assumption or conclusion reached as to the highest and best use of the land. Justice Cripps, as with certainly Mr Parkinson and Mr Woodley, proceeded upon the basis that the best use of this land was as a market and that amongst the range of possible purchasers of the land, those purchasers or that purchaser who would want to use it as a market would be prepared to pay the most.
GLEESON CJ: What is the basis for any assumption as to the state of preparedness of any purchaser other than Yates to build these markets?
MR MACFARLAN: It really turns on the evidence of the valuers as to the possible ways in which the site could be utilised and their opinion as to the most profitable way in which it could be utilised which, on the bulk of the evidence, was as retail markets, at least in the short term. Therefore, one would assume that the competitors to purchase this land would be those interested in retail markets.
GLEESON CJ: What, if any, assumption did the valuers called for the Darling Harbour Authority make concerning the state of preparedness of any purchaser other than Yates to build markets?
MR MACFARLAN: They assumed that the highest and best use was also as retail markets and it would follow from that that there was an assumption that the best bidders would be those who are interested in retail markets, but that conclusion did not seem to loom very large in their ultimate views.
If your Honours would turn over the next page, 2528 in volume 10, your Honours will see a market valuation by Mr Woodley and I simply go to this to illustrate that he made the same assumption as did Mr Parkinson, in the table I took your Honours to a few moments ago, that the purchaser, whoever it might be, could and would commence building immediately.
GLEESON CJ: I am surprised at that. I thought that Mr Woodley made the assumption that there were already markets on the land.
MR MACFARLAN: Yes, he did a number of alternatives, but that is one of them, your Honour. That assumption was made because, by the time of the resumption date, if matters had not come to a standstill upon the prior notifications some 12 months earlier by the Darling Harbour Authority of an intent to resume, the markets would have been built, and Mr Woodley's assumption or approach on one of his bases was that YPC should not be prejudiced by the fact that they had had regard to the earlier notification from the Darling Harbour Authority and ceased work and that one should instead assume that they would have continued and by the time the land was resumed, had the markets operating, but that was one of the alternatives that he posed.
In this one, your Honours, what he did, at line 21, was to take building cost times 106 per cent, which indicates that he was assuming the costs were going to rise in a period of six months during the period of building. I will not take your Honour to it, but his oral evidence indicated that what he did was to allow six months for the building to occur and assumed that in that period there would be some increase in building costs and that, your Honours, appears in volume 11 page 2796 line 25 to 30. But the important point we would seek to make is that he did assume that the building could occur immediately and, in that way, gave to YPC the benefit of the work that YPC had done, which allegedly put YPC in a position where it could commence immediately.
Your Honours, I want to turn to the authorities relied upon by YPC for the head start principle, relied upon in this case, and there are two cases, as have already been mentioned, that are principally relied upon, but before coming to those two cases, could I refer your Honours to The Commonwealth v Reeve [1949] HCA 22; 78 CLR 410 and, your Honours, that was a case in which the Commonwealth resumed premises which the respondents leased for the purposes of conducting a coffee shop and the respondents' interest, as lessees, was found to have a special value to them, because there would be expense and loss to them if they had to conduct their coffee shop on an alternative site. One sees that from what the Chief Justice said at page 418 point 8, the third line of the paragraph:
But what other people will give for it is not unaffected by what the owner is prepared to take for it, and if the sale of the land would involve him in costs and expenses that fact may be an element which would affect the amount which he is willing to take. In some cases, however, such a fact would have no significance at all in relation to value; as, for example, when other suitable land was readily available which any person could buy. If there were many allotments all similar, none of them possessing any special advantages, and all readily purchaseable, the compensation payable to a person who carried on business on one of them would not be increased in amount by any consideration of the value of any business which he had been conducting upon the land.
Thus, your Honours, there is a recognition there that where there is not suitable land available without additional delay or expense, then that fact can be reflected in special value. I mention in passing what is on the next page but one, 420 of the report, where his Honour is quoting from Pastoral Finance v The Minister, and he makes a point which we have sought to make at different levels of this case. At about point 4 it is said:
Now it is evident that no man would pay for land in addition to its market value the capitalized value of the savings and additional profits which he would hope to make by the use of it. He would no doubt reckon out these savings and additional profits as indicating the elements of value of the land to him, and they would guide him in arriving at the price which he would be willing to pay for the land, but certainly if he were a business man that price would not be calculated by adding the capitalized savings and additional profits to the market value".
Your Honours, this was one point at which we are not at issue with the Full Court. The Full Court said that regard being had to future profits was appropriate, and as the Privy Council as quoted by the Chief Justice pointed out, it is not that one gives one the future profits, but they can be used as a guide in the calculation of value.
GLEESON CJ: This disturbance factor is referred to on page 420 six-tenths of the way down the page.
MR MACFARLAN: Yes, thank you, your Honour. The word "disturbance" is there:
Loss suffered by the owner by reason of disturbance of his business by compulsory acquisition is not itself.....an element in compensation, but it would affect the price which an owner would be prepared to take if he were willing to sell and might, in a particular case, produce the result that a purchaser would pay more than would otherwise be the case. If so, the loss due to such disturbance, though not recoverable as such as part of compensation, would be "one of the elements going to build up the purchase price to which the owner was fairly entitled in all the circumstances of the case".
In this case the evidence showed that there was a great scarcity of accommodation for any kind of business in the city area of Sydney. The room which the plaintiffs occupied was suitable for a coffee room, being conveniently situated in a busy area.
GLEESON CJ: That, as I understand it, is the way Mr Simos put the case to Justice Cripps.
MR MACFARLAN: Yes, your Honour, and that is the way we continue to seek to justify it and it is an early illustration of the point that was propounded in Kennedy Street. In Kennedy Street it was not an existing business as it was in Reeve, but the principles were applied where steps had been taken by the owner to progress the prospective development.
CALLINAN J: Mr Macfarlan, you do not say, do you, that capitalised profits, subject to all appropriate discounts and allowances for contingencies, cannot be a measure of value?
MR MACFARLAN: No, your Honour, they are a guide.
CALLINAN J: No, but it might be more than a guide. There are two cases - I think there are probably a lot of cases - but there are two cases in this Court, Dymocks Book Arcade v Federal Commissioner of Taxation, which I can only find reported in (1937) 4 The Valuer 403, a decision of Mr Justice McTiernan, and Australian Provincial Assurance Association Ltd v Commissioner of Land Tax (1942) The Argus Law Reports 156, and both of those are cases in which there is no building, there was no development, but the Court did sums which calculated building costs and all other costs, looked at likely profits and capitalised them, deducted one from the other and found that to be the valuation. In my own personal experience, it is an exercise that would be done every week in compensation and rating courts.
MR MACFARLAN: Yes, well, that is consistent with the evidence here, your Honour, from the legal practitioners who - - -
CALLINAN J: But you do not need it. There is abundant authority for it and it happens in the courts all the time. I do not understand the need for any expert evidence, or even the appropriateness of it.
MR MACFARLAN: Well, there are two points about that, your Honour. One is that the difference between what I put and what your Honour is suggesting is, perhaps, really only semantic in that what I am suggesting is that one cannot recover the profits as such, but if one makes appropriate allowances for risk and contingencies, then one is very close to that situation.
CALLINAN J: No corporation buying a business or investing in a project, in a green fields project, would do other than undertaken a feasibility study which involved precisely that exercise, in order to decide whether to invest and how much to invest. I cannot understand why Mr Hemmings was somewhat reticent about the method and why the Court of Appeal seemed to think that it was not available. It is common place.
MR MACFARLAN: That is certainly our position, your Honour, and as long as there is an appropriate discount for risk and contingency - - -
CALLINAN J: Exactly, and that is where judgment comes in, the contingencies, but it is a familiar exercise in the courts in calculating economic loss to an injured person. It is done all the time.
MR MACFARLAN: Well, that is perhaps the only point on which we find common ground with the Full Court in this case.
CALLINAN J: Yes, the Full Court looked at the two Canadian cases but did not look to the Australian experience which I think was just as obvious.
MR MACFARLAN: Yes, in the Court of Appeal, the cases of Falconer and Haddad provide support for the same approach.
CALLINAN J: Do they?
MR MACFARLAN: Yes. Your Honours, can I go to Kennedy Street, which your Honours will find - perhaps the easiest place for your Honours to find it is - there is a small volume that we have made available to the Court and our learned friends in which we have put both Kennedy Street and Baringa, but we have also included those cases which we have been able to find that, prior to the Court of Appeal decision in Yates, mentioned Kennedy Street or Baringa. It will not be necessary for me to go through all of those by any means, but they are there with the relevant passages highlighted and they support what will be our ultimate submission, that no one, at least until Mr Justice Handley's judgment, interpreted Kennedy Street or Baringa in the way in which YPC now contends those cases should be interpreted. But I will refer to Kennedy Street and Baringa and one or two of the authorities in that volume. Your Honours will find that - - -
GLEESON CJ: Well, you might need to make that point good, because the decision of the Full Court of the Federal Court turned upon the proposition that that interpretation was not only right, but that it was obvious.
MR MACFARLAN: Yes, we will show that it was not obvious to any judge who later came to consider the matter nor to the textbook writers of the day. If it was obvious to them, they did not record it in what they wrote.
Kennedy Street your Honours will find under the first tab in the volume. It was a case where land was purchased for the purposes of subdivision and resale and your Honours will see in the first paragraph of the headnote that the company had been formed for the purpose of acquiring the land, subdividing it and selling it off and a survey plan was prepared, application to the local council for consent, certain other expenditure was incurred by the plaintiff company and then there was notification of resumption, and your Honours will see that Mr Simos actually appeared in that case, he was junior counsel.
GLEESON CJ: Junior counsel to Mr Mahoney actually.
MR MACFARLAN: Yes, as junior counsel to Mr Mahoney, as he then was. Page 1255 of the report, your Honours, at line 50 Justice Hardie refers to Pastoral Finance and says:
The three decisions relied upon by the defendant are of particular interest and of some value in the instant case, as the courts were there concerned with much the same sort of problem as has arisen here; in substance, whether vacant land suitable for sale in subdivision, but not in fact subdivided, had a special value to the dispossessed owner.
At the top of 1256 at the third and fourth line he refers to the relationship of the plaintiff to the subject land and at about line 10:
Between the date of the contract to purchase the land and the date of its resumption the company had given close and careful consideration to the problems associated with the proposed subdivision. It had paid stamp duty and legal fees.....would in all probability have been a profitable venture; thus the plaintiff's profit-earning potential was diminished, the extent of such diminution depending upon a number of factors, one of the most important being the length of time reasonably required by the plaintiff to re-equip itself for this type of business. The plaintiff took no steps to acquire other land suitable for subdivision and sale.....In this state of the evidence it is difficult to determine what where the reasonable anticipations at the date of resumption as to the period necessary to enable the plaintiff to re-establish itself in the business of selling vacant land in subdivision and as to the prospects of acquiring land with the potential of the resumed land. On the somewhat meagre evidence before me I am of the opinion that a period of some two to three months should be allowed for this purpose, at the end of which time the plaintiff company could anticipate having acquired other land other land suitable for subdivision.....I am satisfied that the plaintiff company would, rather than lose the opportunity of acquiring the land, have paid a price substantially in excess of the market value of [sterling]19,500.
Your Honours, we submit that that case is an alternative site case, as particularly evident from line 35 on 1256. It was a question of the time necessary to re-establish itself in the business. Then his Honour looked to the period that could be anticipated as required to obtain other suitable land.
GLEESON CJ: Does that refer to anything different from what Chief Justice Latham referred to as "disturbance" in Reeve?
MR MACFARLAN: We submit not, your Honour. It is the same concept. Perhaps the only significant difference is that here the business was not an existing one, it was in the process of being formed, but the concept is the same and it does not provide any support for any comparison of the position of the dispossessed owner and other purchasers.
CALLINAN J: Sometimes it is referred to as reinstatement costs, I think. It is referred to interchangeably with "disturbance".
MR MACFARLAN: Your Honour, we would submit that reinstatement is a distinct principle and Justice Mahoney in Falconer, I think it was, made that point. Reinstatement is concerned with a situation where the use - an existing use - is a very special one, such as a church where there is no demand for that use and it is difficult, if not impossible, to hypothesise the notional sale and the court actually awards the cost of reinstating the existing business elsewhere.
CALLINAN J: But is not part of the reinstatement cost the cost of acquiring another site and the expenses in relation to that?
MR MACFARLAN: Yes it would be, your Honour.
CALLINAN J: And in that respect there can be an element of interchangeability between a disturbance cost and a reinstatement cost?
MR MACFARLAN: Yes, some of the same items would be recoverable, but in principle they have been regarded as distinct and I will give your Honour the reference to Justice Mahoney's description which is a useful one.
CALLINAN J: Thank you.
HAYNE J: In such cases, is the court in truth assessing an amount that will put the dispossessed owner in the position it would have been in but for the dispossession?
MR MACFARLAN: Is your Honour referring to the reinstatement principle, or disturbance, or both? The concept underlies both, I think.
HAYNE J: Yes, that in so far as either of those tags in truth identifies some principle, what is it?
MR MACFARLAN: Yes, that is the underlying concept, your Honour, yes.
GLEESON CJ: Mr Justice Mahoney in the present case quoted a passage from a judgment of Chief Justice Dixon and Justice Kitto in The Commonwealth v Milledge which he said stated the principle about disturbance and special value.
MR MACFARLAN: Yes, thank you, your Honour. That was a case of a similar ilk to Reeve. So, your Honours, there is, we submit, no support for YPC's present contentions in Kennedy Street. Baringa is the other case it relies upon. It is also in the volume, it is the third case. It was a case where land was purchased for the purpose of demolishing existing buildings and erecting another building for use as shops and flats, and if I go, your Honours, to 204, at about point 5, the beginning of the paragraph:
The next question that arises is whether the subject land had at the relevant date some special value to the plaintiff company over and above its market value. The plaintiff company expended.....in acquiring the subject land -
then money -
in rates, land tax, interest, architect's fees -
and the like. A few lines further lines further on, it is described as being in:
a condition ripe for development along the lines projected as a joint shopping and residential site -
The next paragraph, your Honours, about point 7 on page 204:
A number of important changes had taken place in the period between November 1960.....and the date of resumption.....minor recession had set in. In addition, material changes had taken place in the policy of the Manly Council in relation to home unit development.
Then five lines from the bottom:
As at the date of resumption, the plaintiff company had a development consent which appears to have been still subsisting. The building consent, on the other hand, had expired. An application for the renewal of the building consent had been refused on the ground of the proposal to resume. However, that does not mean that it would not have been renewed if there was no resumption proposal. The plaintiff company as at the date of resumption was reasonably entitled to take the view that, if it retained the land, it would have a somewhat better prospect of obtaining the requisite building approval for a structure of the type originally submitted than a new owner would have.
GLEESON CJ: That is the concept of advantage.
MR MACFARLAN: Yes.
GLEESON CJ: The advantage in that case arose from the fact that because of a change in the council's policy nobody except - may I put it this way: the owner whose land was resumed was in a far better position than anybody else to get approval for what was the highest and best use of the land; a concept of advantage that is not difficult to understand.
MR MACFARLAN: It is not a time-related advantage in the sense that has been proffered by YPC in this case. The concept embodied in that sentence is that which has been picked up in later references to Baringa - that being the ratio of the case.
KIRBY J: What is the difference conceptually between that advantage which comes in some senses from a relationship which is in part a time relationship earlier, new, from the head start of which Justice Handley was speaking in the Court of Appeal?
MR MACFARLAN: One difference is that the type of advantage in Baringa is not one - I will start again. Spencer's Case cannot operate in respect of the matter the subject mentioned in that sentence in Baringa because, assuming the purchaser has all relevant knowledge, an access to information of the vendor will not get the purchaser the same building approval.
GLEESON CJ: It is a matter of the hypothesis you make, is it not? The hypothetical purchaser in the Baringa situation - that is everybody in the world except the owner - was in a position of disadvantage compared with the owner. That is an inescapable fact. Whereas if you have to start making hypotheses about how quickly people can develop the land you have no basis for the hypothesis, do you?
MR MACFARLAN: No, that is so, and no justification for concluding there is any difference, (a) because of Spencer, and (b) because of the evidence that was in fact called in this case.
The next sentence is the one that has been focused on particularly by YPC. This is line 5 or 6:
The plaintiff company could also have undertaken a project of that type with less waiting and preparatory time; thus the plaintiff company would have had an advantage over other purchasers, in that it would not have had to bear so much by way of carrying costs; also it would have had some benefit from the substantial expenditure by way of fees paid to architects and others for and in relation to the plans and specifications.
His Honour then refers to Pastoral Finance. Just above the middle of the page:
I am also of opinion that the plaintiff company would have been reasonably entitled to conclude that it could have obtained building approval for a type of development better than and more extensive and more profitable than could have been obtained by a new owner. Looking at the matter from all aspects and bearing in mind the plaintiff's substantial expenditure on the project over and above the cost of the land, some of which gave the land an added value in its hands, and some of which was not reflected in added value, I am of opinion that, as at the relevant date, a prudent purchaser in the position of the plaintiff company would have been prepared to pay for the subject property a sum of 8,500 over and above its market value;
Now, your Honours, we say that the ratio of that case is properly to be understood as being the matter related to the ability to obtain the building approval and the headnote at point (3), the third finding of the headnote on the first page, aptly identifies the matter upon which the case turned, that is, the "better chance of obtaining a renewed building approval".
GAUDRON J: But is it possible, as Justice Hayne suggested in relation to the disturbance and alternative site cases, that there really is another underlying principle in compensation for resumption cases, that is, that sum of money which would put the owner in the position he/she/it would have been if there had been no resumption which ordinarily will be the market value, but in other cases where that is not appropriate, must take account of the position that the owner was in or would have been in if there were no resumption?
MR MACFARLAN: Yes, we accept that, that is the underlying notion in a very general sense and - - -
HAYNE J: How can that stand with cases like Milledge? At least on a quick look, Milledge seems directly opposed to the notion that questions of putting someone in the position they would have been in but for the compensation has any part to play in these cases.
MR MACFARLAN: The problem in Milledge for the claimant, your Honour, was that the use that the claimant had in mind was not the highest and best use.
HAYNE J: Yes. The claimant was a farmer who wanted some compensation for, in effect, setting the farm up elsewhere and the Court said no.
MR MACFARLAN: The rationale for that would be that if you give the owner the market value based upon the highest and best use, then that is likely to be higher than the value to the owner in respect of the owner's use which is something less than the ideal use of the property. That is why Justice Dixon said in that case an award of special value had to relate to a situation where the claimant had in mind a use, whether it was an existing one or proposed use, which was a particular application of the highest and best use.
GLEESON CJ: But what you have to begin with is the statute, is it not? It is the entitlement under the statute that is being vindicated by this litigation, and that is an entitlement to receive an amount equal to the value of the land, nothing else. The disturbance element might indicate that the value of the land to the owner is greater than the value of the land to anybody else. But the ultimate question is: what is the value of the land to the owner, not what harm has the owner suffered as a result of this resumption?
MR MACFARLAN: Indeed. That is why I only accepted that the proposition put to me was the underlying notion, but it is not a statement of the test to be applied, but it is underlying the theory.
I will just give your Honour a reference to the passage I had in mind in Milledge. Justices Dixon and Kitto spoke of special use arising out of the difference between - - -
GUMMOW J: Page?
MR MACFARLAN: 90 CLR 164 point 6, your Honour. At the middle of the page:
Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date. It follows that if in the first instance the land is valued on the basis of its suitability for some more profitable form of use, there can be no justification for making an addition to the value so ascertained because of disturbance.
So the owner is not using it in the most profitable way. He cannot obtain compensation referable to his less profitable use as well as compensation assessed upon the basis of a more profitable use.
GLEESON CJ: Yes, but that is not intended to exclude the possibility of getting special value for disturbance in relation to a planned use, is it?
MR MACFARLAN: No, it is not, your Honour, and subsequent authorities have made it clear that disturbance can relate to planned uses, proposed uses.
GLEESON CJ: Indeed, if you took that passage literally and applied it to the facts of the present case, it would exclude any claim for special value by Yates. Nobody suggests that that is right, do they?
MR MACFARLAN: Well, Yates' proposed use was a particular application of the highest and best use; the highest and best use was his retail markets, but no doubt there was more than one way of progressing such a use and if Yates had some special loss, such as the fact that he would have to incur conveyancing and stamp duty costs in purchasing an alternative site, then it was consistent with what was said, that he should receive an award in respect to them. But essentially and usually it is picked up in market value, your Honour, because the highest and best use is as, say, retail markets, and one assumes that the purchaser has the same knowledge as the vendor. Then the other purchasers who may be competing with the vendor will be, prima facie, offering the same sort of amount as the owner himself would offer. It is only in a very special case that one could identify an amount that would be special to the dispossessed owner.
CALLINAN J: Mr Macfarlan, I think that was one of the problems, that some of the valuers were referring to special value in a sense of unusually high or particularly high. What they were referring to as special value just could not answer the description of special value as a term of art on a number of occasions. Indeed, I think the same may be said of Justice Handley's decision in the Court of Appeal.
MR MACFARLAN: Yes.
CALLINAN J: Is that one of your submissions?
MR MACFARLAN: We agree with that, your Honour, but we point to the fact that there were a number of permutations put before Justice Cripps, so the alternatives were covered. If that were not the correct position, then the special value claims were certainly there.
CALLINAN J: And everything, however, was primarily put under the rubric of highest and best use, is that right?
MR MACFARLAN: Yes, assuming that the new purchaser would be able to commence the development immediately and have the benefit of Yates' knowledge and work.
KIRBY J: I suppose there is always a danger that these categories that have been developed in the cases are going to overlap because in the end they all have to get back to the statutory criterion as to the value of the land and all of these are merely formulae to try to draw out in a particular case those features which are peculiar to the value of the land.
MR MACFARLAN: Yes.
KIRBY J: But your submission is that the "special value", where that phrase is used, is in essence, something which relates to the way in which the particular dispossessed owner is in a sense in a peculiar position and ahead of the market. The market may not have seen or may not have fully perceived the value to which the dispossessed owner would wish to and might plan to and might have taken some steps to use the land.
MR MACFARLAN: We would only agree with that proposition in part, your Honour. We agree that special value has to be particular to the owner but one cannot award special value on the basis that the rest of the market has not foreseen what the owner has in mind because one is required by Spencer's Case to assume that the other purchasers do have the knowledge that the owner has, and that is the reality of the marketplace as well, that to induce purchasers to bid more the owner would be likely to convey to prospective purchasers the bright ideas the owner has about the ways in which the property can be used.
KIRBY J: And has every motivation to do so.
MR MACFARLAN: Yes, indeed.
CALLINAN J: Mr Macfarlan, there are, I think, some useful discussions of special value and disturbance as separate topics in the Law Reform Commission Report No 14, Land Acquisition and Compensation, paragraphs 239 to 241. There are attempts there to define those concepts and to distinguish them.
MR MACFARLAN: Yes, thank you, your Honour. As your Honours will have observed that - - -
KIRBY J: I think they are in your compilation, are they not? They are behind tab 17.
MR MACFARLAN: Yes. I am not sure it covers all those ones that Justice Callinan mentioned but we have extracted the part that refers to Kennedy Street and we would mention that Mr Woodley was a consultant to the commission in respect of that report, or perhaps generally. He is listed as a consultant.
KIRBY J: I see in paragraph 239 that there is yet another category called
"ransom value".
MR MACFARLAN: Right.
KIRBY J: The classifications and categories are almost endless.
MR MACFARLAN: Yes.
KIRBY J: They are the product of the imagination and ingenuity of lawyers who try to spin out that meagre statutory phrase.
MR MACFARLAN: Yes, indeed. The legislation that has come since has not been any more specific as to the bases upon which compensation should be awarded.
GLEESON CJ: I was interested in Justice Mahoney's analysis of this problem in the Court of Appeal. As I understand his judgment, which for obvious reasons is likely to be well informed, he concluded that the assessment of special value was ultimately a question of fact. Is that right, that the question of what the special value was in this case was a question of fact?
MR MACFARLAN: Yes.
GLEESON CJ: So, what we are talking about in this allegation of negligence is the way in which a particular factual case was put to the court that had to decide the fact.
MR MACFARLAN: That summarises it, yes, your Honour.
GLEESON CJ: That may have some interesting implications when we come in due course to consider the responsibility of lawyers.
MR MACFARLAN: Yes, and one of the points we make is that the question of valuation was largely a matter for the valuers. It was for them to express views upon the bases upon which the value should be assessed, and there was a limit.
GAUDRON J: I wonder if that is so in the case of value over and above market value. If we are talking about special value, something peculiar to the owner, you are talking about something that really is not easily measurable. There is no objective standard, really. You can have regard to the matters that bear on it, but in so far as one is trying to objectify it, it is really, is it not, a value judgment on the part of the trial judge?
MR MACFARLAN: And before that, on the part of the valuers who were called to give expert evidence.
GLEESON CJ: But this was not a case in which Justice Cripps, as it were, selected the evidence of one of the six valuers and said, "I agree with that valuer and on that basis I decide the case". He looked at the evidence of six valuers, he remarked about a number of features of their valuation - he might have found it hard to disregard the fact that the land had been bought for $5 million a few years before - and then he said, "Ultimately, I say the value, including special value, is $22 million".
MR MACFARLAN: Yes, well, his reasons were truncated, perhaps too much so, according to the Court of Appeal - - -
GUMMOW J: You mean abbreviated?
MR MACFARLAN: Yes, well, I probably do.
GAUDRON J: Or just brief. A virtue, one would have thought, in many cases.
MR MACFARLAN: Your Honours, we submit there is not a basis for the head start proposition of YPC in Baringa and the sentence that I have referred to at the top of 205 referring to the lesser waiting time - - -
GUMMOW J: But what are we doing, are we deciding whether these cases are correct or are we deciding what was the understanding amongst the relevant.....at the relevant time as to what the cases meant?
MR MACFARLAN: We are really looking at both, I think, your Honour. If the cases were correct, or if the proposition put was correct, we are not negligent unless we are in a position where we should have realised it to be correct and if no one had identified it in the authorities or text, then we would submit that it is unlikely one would make the finding of negligence.
GLEESON CJ: When you use the expression "it", we, perhaps, need to identify "it". It had its genesis, so far as this litigation is concerned, in a remark made by Justice Handley in the Court of Appeal, is that right?
MR MACFARLAN: Yes, which was based on this reference to Baringa and I will turn up the reference to Justice Handley, but that was the origin of it.
GLEESON CJ: And then the Full Court of the Federal Court said, not only is what Mr Justice Handley said right, it is blindingly obvious that anyone who did not see it, and proceeded on that basis, was negligent.
MR MACFARLAN: Yes, that is what they said, yes, your Honour. The passage in Justice Handley is in the appeal book at page 376, which is page 187 of the report at the Court of Appeal's decision, line 32:
In Kennedy Street, the work done by the owner likewise did not become part of the "character" or "quality" of the land. Because of it the owner was in a position to subdivide the land - - -
GUMMOW J: "likewise", now what does that refer to?
MR MACFARLAN: That refers to the point that his Honour has made about Nischu's Case. I will go back a little bit. His Honour said:
Spencer's Case requires the assumption to be made that the hypothetical purchaser is aware of the information -
held by the vendor or owner, including information contained in documents.
GLEESON CJ: But not the assumption that they remember it.
MR MACFARLAN: Yes, but he says, based on the Nischu Case, the Western Australian one, that the document itself does not become part of the character or quality of the land, such as you could assume that the purchaser receives it and can retain it.
CALLINAN J: But that is in direct conflict with Spencer's Case, which says that the purchaser is perfectly acquainted or fully conversant and if he is fully conversant he is not fully conversant for half a minute. I mean, it is just completely in conflict with either formulation of Justice Isaacs or Chief Justice Griffith.
MR MACFARLAN: We respectfully agree with that, your Honour, and - - -
GUMMOW J: What does Nischu's Case say?
MR MACFARLAN: Nischu's Case says, for the purpose of stamp duty, that the documents - - -
GUMMOW J: What were they doing, valuing some shares, or - - -
MR MACFARLAN: The documents themselves have an independent value, but to apply it to this case, if the documents recording the interests registered by prospective stall holders - - -
GUMMOW J: But what were they stamping in Nischu's Case?
MR MACFARLAN: This was relating to mining interests that were being sold, your Honour, mining tenements, and there was information acquired in relation to what was on or under the land and that was embodied in documents.
GUMMOW J: They were selling some shares, were they not?
MR MACFARLAN: I would need to check that, your Honour, but - - -
GUMMOW J: It might be an idea.
MR MACFARLAN: But directly or indirectly, it was the mining tenements, yes.
CALLINAN J: It was a share sale agreement, Mr Macfarlan.
MR MACFARLAN: Yes. The point we would make, your Honours, is that if the documents do have some independent value, so be it, but they may have some value as chattels; but the fact that they have valuers' documents, and even if one assumed that the purchaser acquired them, that is not to be the subject of compensation in respect of the resumption of the land.
GLEESON CJ: The hypothesis appears to be not only that the vendor is a willing but not anxious vendor, but also that he is not a very bright vendor. Otherwise you would think he would be forcing this information on the purchaser to encourage the purchaser to pay more.
MR MACFARLAN: Yes. Not surprisingly, Mr Yates does not fall into that category. He agreed in cross-examination that he would make the information available to the purchasers, as any sensible vendor would.
Just reading on, your Honours, on 376 of the appeal book, it referred to Kennedy Street, the second sentence, line 32:
Because of it the owner was in a position to subdivide the land more quickly than any other purchaser: see, also, Baringa Enterprises Pty Ltd v Manly Municipal Council (1965) 15 LGRA 201 at 205.
That is the genesis of his Honour's following comments:
This advantage was worth money because it reduced the risk and holding costs involved in the subdivision. A prudent purchaser in the position of the owner would therefore be willing to pay more than other purchasers who would take longer to realise the subdivision. In the words of Sugerman J ..... "by the doing of the work something has been added to the value of the land in the hands of the owner". In my opinion therefore the legal principles applied in Kennedy Street were correct.
GLEESON CJ: Now, pausing there. I gathered from the judgment from the judgment of Justice Cripps that Mr Gyles for the Darling Harbour Authority was arguing that there was never any entitlement to special value at all. He was arguing that on a basis that I think we find set out in the judgment of Mr Justice Cripps, which Mr Justice Cripps rejected. Is that right? What was the basis on which the Darling Harbour Authority was trying to persuade the Land and Environment Court, and later the Court of Appeal, that you could not get special value here?
MR MACFARLAN: I need to look at that. The valuer simply had regard to comparable sales and asserted there was no special value. Their precise reasoning, your Honour, I would have to check on.
GLEESON CJ: I presume it is not an argument that you are seeking to embrace, though I am not sure why not.
MR MACFARLAN: We do not need to. But, your Honour, we in fact say that the work done by YPC was reflected in the market value and properly so reflected in the valuations that were proffered on behalf of YPC before Justice Cripps. One could stop at that point, but we say in the alternative, even if it was not sufficient that that occur, it was also reflected in the special value assessments.
GLEESON CJ: I am looking at page 325 of the appeal book where the argument of the authority is summarised, about eight-tenths of the way down the page. They said:
the principle enunciated in Pastoral Finance could have no application to vacant land -
That argument was repeated in the Court of Appeal, was it not?
MR MACFARLAN: Yes, it was.
GLEESON CJ: But you are not pursuing it here?
MR MACFARLAN: No, we do not. We accept what was said in Falconer, which was an earlier New South Wales Court of Appeal decision, that the principle can apply in respect of a prospective use, and one example of that would be where one has vacant land intended to be utilised in one way or another.
GLEESON CJ: What, if any, relationship does that argument of the Darling Harbour Authority have to what appears on page 351 line 20?
MR MACFARLAN: That seems to reflect the argument put by the Darling Harbour Authority valuers but we would submit, with respect, that does not otherwise accord with authority.
GLEESON CJ: If that argument were correct, it would be the end of the case against you, would it not?
MR MACFARLAN: Yes, it would.
GLEESON CJ: Because as I understand it, at the relevant time, the owner was not actually putting this property to any use.
MR MACFARLAN: That is so. He was a prospective user.
GLEESON CJ: Yes.
MR MACFARLAN: Is it appropriate to continue, your Honour?
GLEESON CJ: I notice it is a quarter to one.
MR MACFARLAN: Yes.
GLEESON CJ: We will adjourn till 2.15 and over lunchtime you can have a chat to the other counsel about the matter that I raised with you at the beginning.
MR MACFARLAN: Yes, I will.
GLEESON CJ: And let us know the outcome. Very well, we will adjourn until 2.15.
AT 12.47 PM LUNCHEON ADJOURNMENT
UPON RESUMING AT 2.21 PM:
GLEESON CJ: Yes, Mr Macfarlan.
MR MACFARLAN: Your Honours, discussions between counsel have led to the suggestion that I should finish by 11 am tomorrow, Mr Jackson by 3 pm and Mr Quick by 3 pm on Thursday.
GLEESON CJ: Thank you. Nobody will be held to the outer boundaries of those times.
MR MACFARLAN: No.
GLEESON CJ: If you finish before 11 tomorrow morning, do not feel embarrassed about it.
MR MACFARLAN: No. I am sure your Honour will not be disappointed. We of course contemplated there may be a brief period for reply when Mr Quick finishes.
In relation to the matter your Honour the Chief Justice was raising just before the break about whether the disturbance principle would apply where there was not an existing use, I would remind your Honour that the Pastoral Finance Case was one where the land in question was vacant and there was a proposal that an existing business conducted elsewhere be commenced on the site in question, so it was not a case of an existing business.
GUMMOW J: What was actually happening in Pastoral Finance?
MR MACFARLAN: The owner was conducting a business elsewhere, identified this site that was resumed as a suitable one, a preferable one, for the conduct of its business - - -
GUMMOW J: Yes, I know, but what does Lord Moulton mean at the bottom of page 1088 in (1940) AC:
Probably the most practical form in which the matter can be put is that they -
that is the claimants who went before the special jury -
were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.
It is not the language of Spencer's Case, is it?
MR MACFARLAN: No, because they are directing their attention particularly to "special value".
GUMMOW J: I know they are; they are inventing it.
MR MACFARLAN: Yes.
GUMMOW J: For what materials is it being invented?
HAYNE J: Other than a very quaint jury verdict which was returned in this case - in Pastoral Finance.
MR MACFARLAN: Yes, which was restored after the intermediate court had set it aside.
KIRBY J: Mr Macfarlan, before lunch, I think, in answer to one of the questions you were asked, you indicated that it was not part of your case to deny that there was some special value in this case, is that a correct understanding?
MR MACFARLAN: That is so, yes.
KIRBY J: Therefore, in this litigation, we do not, in a sense, have a true contradictor. This is not as if we are now sitting belatedly on an appeal from the Court of Appeal decision, which appeal was mounted but then discontinued, and I am just a little concerned that you have started your case at a point where a lot of time has been spent on clarifying special value, and I can understand why, but whether or not, in the nature of this case and proper appellate technique, that one does not have to simply accept what happened to a certain point and then ask the question, is this of such a kind of special value that it can be classified as head start and that, of course, every member of the legal profession in this area should have known and should have advised the respondent on it?
MR MACFARLAN: Your Honour, our position is that special value was claimed before Justice Cripps and to some extent - - -
GUMMOW J: I know, but what does it mean? What does it mean? I am not going to write a judgment which repeats a label without a content.
GLEESON CJ: Let me ask you this, Mr Macfarlan? If you look at page 1088 in (1914)AC, Lord Moulton says, about seven-tenths of the way down the page:
No doubt the suitability of the land for the purpose of their special business affected the value of the land to them -
Does that mean that if a vendor, for any reason, would be willing to pay more, rather than lose the land, than a hypothetical purchaser would pay to acquire it, it has a special value?
MR MACFARLAN: I think there would be qualifications to that, your Honour. One would be that the reason the vendor would pay more must be related to some feature of the land, not to some personal characteristic, such as family living nearby.
KIRBY J: Sentimental value.
MR MACFARLAN: Another would be that - - -
GLEESON CJ: What about convenience?
MR MACFARLAN: Convenience, yes, with reference to a business conducted or proposed to be conducted.
GLEESON CJ: Why? What if the land on which I have a dwelling house were resumed and it is particularly convenient to me because it is next door to an elderly relative? That might produce the result that I would pay more to keep the land than anybody else would pay to acquire it. Can that reflect in special value?
MR MACFARLAN: The cases would suggest that would not, your Honour.
GLEESON CJ: Well, why?
MR MACFARLAN: That that would be something related to the personal disposition of the owner.
GUMMOW J: Well, there is some confusion wrapped up in this phrase, "the real value to them", is there not, which is what his Lordship says. That is his finding, "the real value of the land to them". Does that not somehow enable one to slide into concepts outside value in Spencer's sense?
MR MACFARLAN: If one is not careful, but one should not take it as a statute.
GLEESON CJ: Is not one of the points of Spencer's requirement that you are considering a hypothetical purchaser, that you strip the purchaser of the various attributes that seem to creep back in again when you are talking about the presence or absence of special value?
MR MACFARLAN: You strip the vendor?
GLEESON CJ: Well, you strip everybody.
MR MACFARLAN: Yes, indeed, and it is very hard to see the opportunity for an award of special value on more than an infrequent or rare occasion; that is why we say here our primary case is this was all properly taken into account as part of the market value.
KIRBY J: Yes, but you have already said that you do not contest that there was some special value, and once you do that, then we have an acceptance from all the parties - unless Mr Jackson takes a different position - that there is special value, and the case in which this Court would clarify the exact boundaries would be a case where there was a real contest between the parties as to the existence of special value or not, which could have arisen if the first appeal from the Court of Appeal had been given special leave and come here. I am just anxious that we have spent a lot of time on this issue whereas in a sense it is water under the bridge.
MR MACFARLAN: No, it is not, because we accept that there was some special value. It was claimed, and to a large extent was awarded, or to some extent it was awarded. What we join issue with was the description in the Court of Appeal of a particular type of special value, and we say that the special value on the basis identified by Mr Justice Handley was not available as a matter of law.
GLEESON CJ: Presumably, unless you think you know what special value means, you cannot say anything very sensible about whether or not the special value case in the present matter was put negligently. I notice that in Mr Brown's book on "Land Acquisition" at tab 13 of these materials that you handed up, there is a proposition that you have highlighted in paragraph 3.19. Do you accept that proposition as correct?
MR MACFARLAN: Yes, your Honour, that is what we conceive to be consistent with the authorities.
GLEESON CJ: If that is correct, it seems that the whole concept turns upon the inability in an individual case to make the hypothesis, or fairly to make the hypothesis required by Spencer.
MR MACFARLAN: Yes, usually one can. An example, perhaps, of where one cannot would be Baringa where the other purchaser was not able, so the judge indicated, to attain a building approval of the same nature. So the dispossessed owner was in a better position and would presumably pay more than the other prospective purchasers, and there was no room for a Spencer assumption of knowledge - - -
GLEESON CJ: But at the centre of the present case is this problem, is it not? As the head start case is put, it depends upon making an hypothesis. It depends upon the hypothesis that the hypothetical purchaser could not develop this land as quickly as the vendor. What is the basis for that hypothesis?
MR MACFARLAN: None, your Honour, it is erroneous, and that is part of our case.
GLEESON CJ: Is not what this author calls the abstract hypothetical purchaser intended by Spencer to be a purchaser about whom you make no assumption one way or the other on an issue like that?
MR MACFARLAN: Except an assumption that it knows as much as the dispossessed owner. But the assumption of knowledge may in very particular and perhaps rare circumstances not lead to a conclusion there is no special value, for example, if the other purchasers cannot do with the land what the owner can, for example, where the owner can get a building approval and the other purchasers cannot.
GLEESON CJ: But the point of saying that a purchaser is hypothetical, as I understand it, is to say you do not assume the purchaser is either rich or poor, or cautious or aggressive, or dilatory or expeditious. You leave those things out of it.
MR MACFARLAN: But the fact would remain in the Baringa example I gave that there was an advantage in relation to this land not available to other purchasers, namely, a building approval of a particular type.
HAYNE J: Do you not at once then slide from consideration of value that is market value, that is exchange value, into another field of discourse altogether, namely, the field of discourse of compensation in the sense in which that term is used in damages law? That slide may be permissible but can we at least see whether there is that slide made?
MR MACFARLAN: Strictly there should not be such a slide because we are considering the value of the land but because the legislation speaks of the value of the land to the dispossessed owner, the notion of compensation is not far away from one's approach to the problem, but ultimately one has to come back to the question of value and frame it in the way the cases have by inquiring what additional amount, if any, the owner would bid for it if dispossessed.
HAYNE J: But if the relevant inquiry is value to the dispossessed owner, a premise which may require some examination, a Spencer Case inquiry is interesting. It may be useful evidence but it is far from determinative.
MR MACFARLAN: Yes, that is so. That deals with the market value part of the inquiry but usually, but not necessarily, there is a separate inquiry as to whether there is some additional amount over and above market value which the - - -
HAYNE J: I know this whole body of lore as well as law is built up in this area and whether it is legitimate or not may be a separate field for debate, but what I am concerned to do is to try to identify what is the underlying principle which you say should be given effect to in this inquiry. Is it valuation? Is it compensation? Is it some mixture of the two? The mixture, if I may say so, seems to me to be the least comfortable position to arrive at.
MR MACFARLAN: It is valuation, your Honour, but one cannot disassociate it from compensation because the inquiry about value must be an inquiry as to what someone would pay and if the someone in question is losing the land, no doubt what that someone would bid for the land is coloured by what that person will lose when the land is resumed.
GAUDRON J: Well, again, and that brings me back to the underlying passage at page 3.19 of tab 13, presumably, that statement must be qualified, in any event, to relate to economic advantage.
MR MACFARLAN: Yes.
GLEESON CJ: Now, why? If you resume residential land and somebody seeks compensation for residential land, why would it only be economic advantage that is being compensated for if the theory behind it is that for some reason a vendor would be willing to pay more to avoid losing it than any other purchaser would be willing to pay to acquire it? What is the reason behind that?
MR MACFARLAN: I do not know I could point to the reason, your Honour, but that seems to be the way the principle is developed.
GAUDRON J: Is it because of the importation, as in Pastoral Finance, of a prudent person in the position of the owner, which seems to raise an objective test of special value rather than a subjective test?
MR MACFARLAN: Yes, the cases have tended to suggest one should not consider the personal idiosyncrasies of the owner in a non-economic sense, and that would be consistent with what your Honour has put.
GUMMOW J: Where does this notion of value to the owner come from in terms of the statute?
MR MACFARLAN: I will need to just find the reference, your Honour.
GUMMOW J: That just talks about value, does it not?
MR MACFARLAN: Yes, that is the way it has been interpreted, as value to the owner.
GUMMOW J: Yes. That is a gloss.
MR MACFARLAN: Yes.
CALLINAN J: Sunderland Corporation, I think, uses that expression, does it not?
MR MACFARLAN: I am not sure, your Honour.
CALLINAN J: Mr Macfarlan, can I just take up a matter that you said when you were replying to Justice Kirby's question. You say that there is no special value by way of a head start component, is that right, in this case?
MR MACFARLAN: As long as one understands that I am talking about head start in the sense of advantage over other purchasers.
CALLINAN J: Yet you say there is some special value here. I notice Justice Kirby in the Court of Appeal quite clearly said that "special value" was a term of art. Now, what do you say if there was special value here it consisted of? Are you using the term in the sense of a term of art?
MR MACFARLAN: Your Honour, our primary position is that the work done by Mr Yates was properly taken into account in respect of market value - - -
CALLINAN J: Look, I understand that. I only ask you this question because you seemed to be saying to Justice Kirby that it was common ground that there was special value here. Now, the work done by Mr Yates does not seem to me to be special value, or does not seem to give any special value. It seems to me to involve merely an application of Spencer's Case. Let us assume for present purposes that is right. Is "special" being used by you other than as meaning very high or unusually high or something not often encountered or something of that kind, and not as a term of art?
MR MACFARLAN: No, your Honour, I perhaps have not put the position as accurately as I should, but the position is as I have sought to state before. Our primary contention is that the features that were alleged to be special value are primarily referable to market value and were - - -
CALLINAN J: Well then they are not matters of special value; they are taken up in the Spencer formula.
MR MACFARLAN: That is our preferred position, your Honour.
CALLINAN J: Well I understand that.
KIRBY J: What does "primarily" mean though. Justice Cripps thought he was awarding something for special value; when it went back to him, he said I took that into account.
MR MACFARLAN: Well wholly, except for the abortive expenditure, which would be special value.
KIRBY J: So you accept that that is special value?
MR MACFARLAN: Yes.
GAUDRON J: But that is sort of disruption value, is it not?
MR MACFARLAN: Yes.
GLEESON CJ: If the $217,000-odd that Justice Cripps added on the second occasion for abortive expenditure is put to one side, the $500,000 that he included in the first place, for special value, must have been a disturbance factor, must it have not? What else could it have been?
MR MACFARLAN: No, it must have been that.
KIRBY J: Is that correctly described, in your submission, as special value?
MR MACFARLAN: Our submission here would be that it was more accurately part of the market value, but before Justice Cripps it was put in that way as part of the market value, but in the alternative, as special value.
KIRBY J: I would be appreciative of your help on this. It is the point I began before. Is this not a question that is more aptly determined by the court in an appeal where the issue joined and the issue before the court is the dimension of special value between parties who are fighting exactly on that topic as distinct from something which comes before us as a side wind, where it is agreed there was a special value and it is really not at the heart of the dispute about negligence, a breach of contract amounting to negligence.
MR MACFARLAN: Well I am not sure that is really a matter for me, your Honour, it is really a matter for the Court.
KIRBY J: No, but it is the concern that I have with the way you are putting your case; you began at a point in the case which would be apt if this were an appeal in a valuation decision, where there are parties with a contradictor and the Court is going to be faced with a decision on that point. The Chief Justice makes the legitimate point that, in order to know what counsel is supposed to be advising on, you have got to know what the issue is, but we are really in a case where defining the boundaries is not the essence of the dispute which is before us.
MR MACFARLAN: No, well I am not sure I am asking your Honours to define the parameters. What I have been seeking to demonstrate is that the work identified by Justice Handley was in evidence before Justice Cripps - and I will have to say something more about that- - it was the subject of submissions and evidence through the valuers before Justice Cripps and it was taken into account by Justice Cripps. So those steps are ones that I have had to take a little time to develop, but they are crucial to one aspect of our argument.
CALLINAN J: Is not your point this, Mr Macfarlan, that your first point is that there was no special value in any technical sense here, that all components were taken up and accounted for in the Spencer formula? However, if you are wrong about that, in the alternative such special value as there was was confined to $500,000 for which his Honour Justice Cripps made allowance.
MR MACFARLAN: Yes, your Honour, subject to a qualification about the abortive expenditure amount which was - - -
CALLINAN J: Quite; leaving that out, but subject to that, that is your position.
KIRBY J: It is your position now, but at the trial that was what Mr Gyles was saying - there was no special value. Counsel and your interest was saying there is special value. It sure is special value, and it is big special value.
MR MACFARLAN: Yes, that was an arguable position, and it was put, and put very strongly on behalf of YPC, as it should have been. We were not warranting its correctness to the court, but we were putting it as a submission, your Honour.
The bundle of cases, could I refer to just a couple? Tab 11 is the Court of Appeal decision in Falconer and at page 573 of that report Mr Justice Mahoney makes reference to Kennedy Street and Baringa just below letter B:
The cases in which special value to the owner may be found in this way have been held to be not restricted to cases of physical or legal advantage. If, for example, the owner has prepared the land for sale and obtained permits for its sale, the value of the land to him has been assessed by reference to the special advantages by way of profit which the land thereby has for him -
First Kennedy Street and another case:
and if the owner's efforts have, for example, made it more likely that he will obtain particular building permits in respect of the land, the cost of these have been taken into account -
and he refers to Baringa which was referred to in Chapman. So, your Honours, that reference to Baringa, and indeed, that to Kennedy Street, does not give any support for a principle of the sort contended for here by YPC.
HAYNE J: Indeed, it might be said that these are no more than particular decisions on particular facts evincing no principles.
MR MACFARLAN: Yes, indeed. The three textbooks that were current at the time of the hearing before Justice Cripps can be seen extracted in tabs 12, 13 and 14. Under 12 there is Fricke's book on Compulsory Acquisition in Australia. Baringa is cited there at page 32 in the footnote for the same point about the building approval. The Kennedy Street reference, which is on the next page 104, is not of any support to YPC's contention here. In Brown's textbook on Land Acquisition under tab 13, in paragraphs 3.19 and a couple of other paragraphs, there are references to Kennedy Street, which again do not support what YPC says and there is no reference to Baringa. In Hyam's text under tab 14, The Law Affecting the Valuation of Land in Australia, Kennedy Street is referred to on 144 in a way which does not support YPC. Then 147 there is a reference to Baringa, and after describing the facts of the case the author says:
In awarding special value to the owner Hardie J took into account:
(1) That the owner had a reasonable prospect of obtaining a renewed building approval, albeit, for a lesser development;
(2) that the owner had a better prospect of securing a building approval for a better and larger development than a new owner; and
(3) the substantial expenditure on the project over and above the cost of the land.
So, there is no suggestion by that author that there is to be derived from Baringa the principle that one takes into account, a head start over other purchasers.
GAUDRON J: We are to assume that (3) refers to expenditure and is unrelated to (1) and (2), are we, or we are to assume it is related to (1) and (2) in that statement? I would hardly think expenditure would bear on value except as it relates to (1) and (2) in that statement.
MR MACFARLAN: Yes, I think there was an abortive expenditure claim in that case but as well as that, no doubt, there was work done in obtaining the development approval.
GLEESON CJ: Abortive expenditure really does sound like straight compensation, does it not?
MR MACFARLAN: It is linked to the value of the land because, if the owners spent money on that land and if expenditure is only going to be of value to him in respect of that land, it is not a bad measure of an additional amount that he would pay to retain that land.
GLEESON CJ: If he spent it wisely.
MR MACFARLAN: If he spent it wisely.
KIRBY J: The dichotomy between valuation and compensation is not a pure one, as you pointed out earlier, because in the hands of the person who receives it the valuation will be compensation but the notion, I suppose, is that there is something extra for sentimental value or things of that kind.
MR MACFARLAN: Yes.
KIRBY J: But is the phrase "head start" - may I ask does that appear anywhere in any of this literature? Does it appear in any case or any book that you have been able to find before Justice Handley uttered it?
MR MACFARLAN: No, your Honour.
KIRBY J: I gather from Justice Gummow it is a phrase that has a resonance in intellectual property law.
MR MACFARLAN: Yes.
KIRBY J: Which is an area that his Honour is not unfamiliar with, of course, but maybe his Honour was using the phrase simply to describe the three categories that Justice Hardie was referring to as a sort of shorthand. Does that work with his Honour's reasons?
MR MACFARLAN: Apparently his Honour was using it in a different sense because his Honour focused on a comparison of the owner's position and that of other purchasers in a way that no other authority or prior authority, so far as we have been able to tell, focused.
GLEESON CJ: Does the word "abortive" in the expression "abortive expenditure" mean expenditure not reflected in the market value of the land?
MR MACFARLAN: Your Honour, I think it would be the expenditure that will be useless if the owner cannot pursue its proposals in respect of this land.
GLEESON CJ: So, you agree with what I put to you?
MR MACFARLAN: Yes, it is rendered useless by the resumption.
GLEESON CJ: If it is expenditure that is reflected in the market value of the land, then you get it under the Spencer principle.
MR MACFARLAN: You should do, yes.
GLEESON CJ: In so far as you are seeking to get it under some principle other than Spencer, it can only be because it is not reflected in the market value of the land.
MR MACFARLAN: Yes.
GLEESON CJ: Then on what principle do you get it?
MR MACFARLAN: Because the owner would, so it would be hypothesised, notionally pay the amount of that expenditure as an additional amount when bidding for the land in the hypothetical sale that would occur if the land had not been resumed.
GUMMOW J: Then you are funding these idiosyncrasies from the public purse, that is what it comes to.
MR MACFARLAN: That is so. The head start principle, I think, in another field, is the sort of concept referred to in Hospital Products, unrelated to the present field. I just remind your Honours with reference to what Justice Handley did say that he used this sentence:
Because of it, the owner was in a position to subdivide the land more quickly than any other purchaser.
and he called in aid Baringa.
Finally in this bundle, your Honours, could I refer to tab 19. This is actually a case decided after the Court of Appeal decision in Yates, but it does not seem to be a case in which the court was aware of the Yates decision and it is interesting for that reason to see the way in which Kennedy Street was regarded. At 362 Justice Gobbo referred to Kennedy Street and says in the middle of the page:
Those cases are illustrations of a principle that in my view supports an award of compensation to an owner developer who is in effect deprived of his stock in trade and incurs expense and costs of delay in securing replacement land to develop.....He has to search and investigate and incur cost and delay before he is again in substance in the position he was in at the time of the refusal or the acquisition.
The concept illustrated by the Kennedy Street case -
and he goes on. That is - - -
CALLINAN J: But I do not really understand that because he is going to do that anyway. A person who is a developer, when he has undertaken and completed the development of what would otherwise be the resumed property, would then move on to another property anyway. It is an expense that in the nature of things is inevitably going to be incurred and it must be offset against the accelerated benefit of the sale that takes place, the statutory sale, as it were, on the resumption.
MR MACFARLAN: It may depend, your Honour, whether the developer is a company which has the capacity to do a number of developments so that he could have effectively obtained the profit on both sites, like a sale of goods situation where a sale is lost but the manufacturer shows that it had the capacity - - -
CALLINAN J: But the resumption has nothing to do with whether the developer is going to carry on one or more properties, either consecutively or simultaneously. It is something that is entirely separate from, it is unrelated to, the resumption.
MR MACFARLAN: Well, it may be a question - - -
CALLINAN J: That is my difficulty with Baringa and Kennedy Street properties, or one of my difficulties with them.
MR MACFARLAN: Well, we do not deny the fact they are open to some criticism, and they have been criticised, as your Honours will see from some of these cases that are in this volume, but the point we would make is they certainly do not stand for the principle my learned friends cite them for.
I want to turn to a topic that we pick up in paragraph 30 and following of our written submissions, that is, that there was no negligence by the solicitors in failing to identify the alleged head start approach. I could summarise what we have to say by referring to a few points, the first of which is that there was no authority, either judicial or by way of textbook, that identified the point that we are alleged to have overlooked and which is alleged to have been obvious.
Secondly, none of the counsel who are briefed in the matter identified it despite they being highly experienced counsel, and I refer to the two counsel who conducted the hearing in the end and also to Mr Hemmings, QC and Mr O'Keefe, QC who were predecessors of Mr Simos and had the opportunity to raise this point because they were involved in lengthy discussions concerning Mr Parkinson's report, but did not raise it.
CALLINAN J: Nor did Mr Tobias, did he? Mr Tobias gave some advice too.
MR MACFARLAN: He did not raise it either. It may be not as obvious that he - - -
CALLINAN J: No, but he had a different view of what could or could not be claimed anyway.
MR MACFARLAN: Yes. It may not be as obvious that the occasion was there for him to identify it.
CALLINAN J: He was asked specific questions, I think.
MR MACFARLAN: Yes. I would like to take your Honours to one reference in this context. It is to the affidavit of Mr Webster which is in volume 13, page 3268. At point 12 on the page - this is Mr Webster's affidavit. In the second sentence he says:
I recall that the report of Mr Parkinson was settled with Mr O'Keefe QC at a conference attended by myself, Mr Parkinson and Mr Schwaiger.
Then there is a conversation about one aspect of it in particular. Paragraph 12 at line 29:
I say that during the period February-July 1988 I attended five conferences with Mr O'Keefe QC each of which involved amongst other things considering Mr Parkinson's report.
And at 3286 in the same volume, line 32:
During the period when Mr Hemmings QC was retained by Yates Property Corporation Limited, I had numerous discussions with Mr Hemmings concerning Mr Parkinson's proposed methods of valuation. During the period that Mr O'Keefe QC was retained.....I recall attending approximately five conferences, some of which related to discussions concerning Mr Parkinson's proposed valuation. Mr O'Keefe was retained.....at the time Mr Parkinson completed his first report in or about May 1989. I do not recall Mr Hemmings QC or Mr O'Keefe QC expressing concern or doubt in relation to Mr Parkinson's proposed methodologies of valuation.
While I am at this point, the following page, your Honours, line 12:
On or about 1 November 1989 I attended a conference with Mr Simos and Mr Schwaiger. During the course of that conference either myself or Mr Simos said to Mr Schwaiger the following:
"Mr Parkinson should prepare a report based on comparable sales, disregarding the market potential".
I will say a little bit more about that, your Honours, in a few moments. So counsel did not raise it and nor did the valuers. They were described in the evidence, and we have mentioned these references in paragraph 5 of our written submissions, as "foremost in their field". Another description was "the three most experienced valuers in New South Wales at that point of time". And, your Honours, there is no doubt but that they were apprised of the relevant facts. We refer in paragraphs 34 and 35 of the written submissions to the material which support that. For example, in the middle of paragraph 34 we refer to Justice Branson's finding:
that Mr Yates personally was meticulous in ensuring that each valuer was familiar with the work that had been done by YPC to advance its proposal for a retail market.
And she:
also found that the valuers were comprehensively briefed as to the factual background against which their valuations were to be prepared.
And, your Honours, I mention also some evidence that Mr Yates attended some 40 conferences with counsel concerning this. That is at appeal book volume 3 page 396 line 13.
KIRBY J: Is that to the point that all the facts relevant would have been given to counsel? - - -
MR MACFARLAN: Given to the valuer, as I - - -
KIRBY J: You could hardly expect Mr Yates to know the intricacies of valuation.
MR MACFARLAN: No, it only goes to the full briefing of the valuers, your Honour; it is one step in our argument. One way in which it was put in Justice Branson's findings, which reflected some evidence which was given, was that Mr Yates left no stone unturned to ensure that the valuers had all the relevant information. That is a finding at volume 1 page 121 line 40. Your Honours, the fact that the valuers were fully apprised of the factual material was reflected in their valuations and we have given references to those in paragraph 35 of our written submissions.
Now I turn, your Honours, to the submission which we pick up in paragraph 37, that the relevant evidence was, in fact, adduced. I would remind your Honours that the crux of the Full Court finding was that there was a failure to adduce evidence to enable the point in question to be propounded and - - -
GAUDRON J: What sort of evidence are we talking about on special value?
MR MACFARLAN: Yes, your Honour, I will take your Honour if I could to - - -
GAUDRON J: Are we talking expert evidence? Again, if we are, I am not too sure that it is really a matter which is appropriate for the evidence of experts. We are talking about something peculiar to the owner, or peculiar to a hypothetical prudent person in the position of the owner.
MR MACFARLAN: The way the Full Court put it was that it was evidence of what was done by YPC and a quantification of the value of what was done.
GAUDRON J: But who is going to value it? It is clearly outside the ordinary realm of exchange value. I would have thought that the valuer's expertise is confined to exchange value.
MR MACFARLAN: The way it was valued as we say, your Honour, was that the work that was done translated into a greater value of the property; for example, the obtaining of development and building approval. The valuers effectively valued the effect of that work because they valued the property, taking into account the fact that it had those approvals and also the fact that it had had research done and inquiries made about prospective stallholders. So, it was quantified; but quantified in an appropriate way by looking at what value it added to the property, not at what it actually cost to do it.
What the Full Court was concerned about can be seen at line 40 on 247. They say:
The contention was that if the claim had been properly investigated etc. evidence would have been led along the lines sought to be adduced at the second hearing -
GAUDRON J: I am sorry, what page is that?
MR MACFARLAN: I am coming to tell your Honour more about that. Page 249 of the appeal book at line 44, they say:
no evidence had been led to properly identify or quantify the economic value of being in a position to immediately commence the development of a market.
There are at least two steps involved in that. One was to ensure that evidence of what had been done was there before the court, and the other was to attempt to quantify it. As to the first, we deal with that in paragraph 37 of our written submissions, but may I refer your Honours briefly to one reference which is to a statement of Mr McBeth, an architect, which was before Mr Justice Cripps. It is in volume 14 page 3562, and this statement goes on at enormous length through to 3585 setting out a description of the work that was done, essentially in chronological form. For example, paragraph 21 on page 3569 refers to the consultants that were engaged. Paragraph 22 was co-ordination of all the activities. Paragraph 23, the market portion of the DA was approved by the council. Paragraph 25 on the next page, discussion with traffic authority officers. Then paragraph 34, arrangements with Metro Carparks. It goes on and on, and gives a list, for example, in paragraph 60 on 3584 of the expenditure in furtherance of the DA and BA. That, your Honours, on 3580, a figure of 217,000 became the abortive expenditure claim.
GAUDRON J: What is in furtherance of the DA? What is meant by "in furtherance"?
MR MACFARLAN: That was after obtaining the approval, your Honour. In other words, in implementation.
GAUDRON J: Yes, I thought it must be the expenditure in implementation. Yes, thank you.
MR MACFARLAN: Your Honours would add to that, notionally, if your Honours would, the references I gave earlier to Justice Cripps's judgment where his Honour referred to all the stallholder evidence and the numbers of registrations and the like. Clearly, all that material was before him. In terms of quantification there is what we put in paragraphs 38 and following of the written submissions which I have essentially dealt with already by demonstrating to your Honours that Mr Parkinson and Mr Woodley gave YPC the benefit of that work because they valued the land on the basis that any purchaser could commence immediately.
The matter of the remission to Justice Cripps is dealt with in paragraph 44 and I need to say something further about the evidence that was led in connection with that. As indicated in that paragraph there were two components to the evidence. One was the report of Mr Woodley, that is a further report, not the ones to which I have been and not one that was before his Honour on the first occasion in which, as I indicated before, there was another attempt to proffer an alternative site assessment. That report of Mr Woodley's is mentioned about six lines into that paragraph and the reference is given about two-thirds of the way through the paragraph but it is not material relating to the head start concept referred to in the Full Court's judgment.
The second component, as we put about eight lines into paragraph 44, was an attempt to quantify the value of the documents referred to by Mr Justice Handley recording the names and addresses of potential stallholders. It was not an attempt to identify or quantify a head start of the kind which YPC claims. The documents were valued at $79,000 and that document can be seen at page 3135 in volume 12 if I could go to that briefly. This was the document put before his Honour on the remission which attempted to attribute a value to the documents referred to by Justice Handley. I would remind your Honours that Justice Handley assumed that the purchaser would be able to look at the documents and become apprised of what was in them but would not be able to remember their contents or to keep the documents, so he suggested the documents themselves would have some value and the attempt to give them that value is contained in that document on 3135.
GLEESON CJ: What did Justice Cripps do about that?
MR MACFARLAN: His Honour rejected that tender and that is in the evidence at volume 7 page 1710. Perhaps, ironically, in light of what has transpired, basically on the basis that the litigation had to finish sometime or other.
GLEESON CJ: What is the page number again?
MR MACFARLAN: Page 1710, your Honour.
KIRBY J: I notice in some of the material that this was on the brink of his Honour's appointment to the Court of Appeal, that there was some measure of expedition for that reason.
MR MACFARLAN: Now, as we put in paragraph 44 of the written submissions, Mr Simos gave evidence in the court below here that to have put such a claim of that limited magnitude would, in his view, have been unacceptably inconsistent with the basis of the valuations that were being propounded, which was in the tens of millions of dollars, and that was his judgment about it. In any event, $13,000 of that 79 was, in fact, already awarded, or was, in fact, awarded by Justice Cripps. Your Honours will recall the passage I read from his Honour's second judgment where he referred to that figure, and that is in the second volume of the appeal books, page 340 line 43.
GLEESON CJ: This was separate from the abortive expenditure agreed at $217,000.
MR MACFARLAN: Yes, it was intended to be additional to it but, in fact, there was overlap, at least to the extent of $13,000. We say, in any event, there was overlap with the evidence that was before his Honour about the work that had been done and that his Honour took that into account in a more generalised sense, so to have awarded this amount as a particular sum would have involved duplication. But, of course, when the opportunity was given, as a result of the Court of Appeal decision, an attempt was made to put what claim as was arguably available.
Now, I move on, your Honours, to Section F of the submissions and at paragraph 45 that there was no head start, in fact. We point there, your Honours, in paragraph 45, to findings of her Honour Justice Branson and two, in particular. That is in (a), that is, that YPC did not have the financial capacity as at the date of resumption immediately to erect the market. The other important one is (c) and I would like to go to what her Honour said in relation to (c), and I will need to go to volume 1 of the appeal books. To lead up to that, could I take your Honours to page 14 of the first appeal book which, at line 30, sets out "Particulars" in the statement of claim of YPC in these proceedings. Your Honours will see that the allegation was that:
After paying the market value.....and all usual transfer costs thereon, any other prospective purchaser would be required to repeat the steps taken by YPC -
and it is that allegation that "any other.....purchaser would be required to repeat the steps" that is critical because her Honour's finding is the antithesis of that allegation. Then, your Honours, at 137 of the appeal book, line - - -
GAUDRON J: That is intended, as I read it - I am sorry to interrupt you - that looks as though it refers to obtaining the DA and BA as well as other matters.
MR MACFARLAN: Yes, and the way we put the case was that there were purchasers who would utilise the existing DA and BA and who would not in fact repeat the steps taken by YPC. No doubt there might be others who might have completely different ideas who would, but the question was whether every purchaser, every other one, could be assumed to be someone who would repeat the steps and her Honour rejected that proposition. The other reference - - -
GAUDRON J: I am sorry, you were going to take - - -
MR MACFARLAN: Yes. The next one, your Honours, page 137. This is again her Honour's recitation of what the applicant asserted, line 36:
the applicant asserts that it was in an advantageous position at the date of the resumption of the subject land relative to any other prospective purchaser of the land.....In summary it was the case of the applicant in this regard that any other prospective purchaser of the subject land would be required to repeat steps -
Now, it was against those allegations that her Honour made the finding at page 158 line 7. She has spoken about the expert evidence and she says in a sentence, which is perhaps as not as elegant as her Honour would have liked it to be, this:
In my view, it would be a rare case in which it could be said that a prudent purchaser who would not repeat the steps previously taken by the vendor could not reasonably be hypothesised.
It no doubt could have been expressed in a somewhat more direct way, but what her Honour is saying there is that it could not be said that amongst the range of purchasers there would not be at least one or more prospective purchasers who would be in the same position as Mr Yates. To put it another way, it could not be said that Mr Yates was in a better position than every other prospective purchaser. So, her Honour has there rejected the proposition that YPC had a head start over all the other prospective purchasers.
Now, both those findings I have just referred to were critical ones and were referred to in detail before the Full Court, but the Full Court's judgment makes no reference to either of those findings, and the finding as to lack of financial capacity was based, at least in part, on findings as to Mr Yates's credit, and that can be seen - I will not go to these but - or perhaps I should. In volume 1 of the appeal book in her Honour's judgment at page 109 line 15, she says:
I interpolate here that, in my view, the evidence given by Mr Yates on the topics of the availability of construction finance to YPC and the proposed unit trust reflects poorly on his credit. It seems to me that either Mr Yates prepared himself most inadequately to give evidence, both by affidavit and orally, of events which occurred a good number of years ago, or alternatively, he sought to be less than frank with the Court on these issues. In my view the Court is required to consider with care uncorroborated evidence of Mr Yates tending to the advantage of YPC.
I should mention the evidence on this topic went on for some considerable time, and there was a good deal of material about it, and also in her Honour's judgment at 212 of the appeal book - this is the second judgment she gave - at line 20, this is on the topic of financing:
Mr Yates gave affidavit evidence in support of this plea. The evidence called at trial showed both the plea and Mr Yates' affidavit evidence in this regard to be false, and that Mr Yates either knew or ought to have known that it was false.
GLEESON CJ: What pages, again, are the two findings of fact made by Justice Branson that the Full Court did not refer to?
MR MACFARLAN: Yes, your Honour, they are set out in paragraphs 45(a) and (c) of our written submissions. The first one as to financial capacity is volume 1, page 103, line 20, and the second is volume 1, page 158, lines 7 to 12.
GLEESON CJ: Thank you.
CALLINAN J: Mr Macfarlan, the appellants must have done quite a good job on that issue before Justice Cripps because they managed to satisfy him that Yates would have been in a position to commence the operation very quickly, if not immediately?
MR MACFARLAN: His Honour's finding was somewhat different, your Honour, except it was obviously on the same topic, but if one looks carefully at his Honour's finding, it was not inconsistent with Justice Branson's.
CALLINAN J: I thought it was. Can you - it could well be anyway because of the different evidence and the different issues, but where is that?
MR MACFARLAN: Justice Branson explains that at 103 of the first appeal book. She, at line 36, records what Justice Cripps said. He said:
The Authority put in issue what is described as the limited prospects of Yates to secure finance to undertake the market venture.
at the foot of the page -
I am doubtful that this is a relevant circumstance bearing in mind the assumptions I am required to make ... However, the matter is somewhat academic because having heard the evidence from Mr Tarrant, I am satisfied, on the balance of probabilities, that funds would have been available to Yates in 1984 and 1985 for the markets.
What his Honour is saying there, we would submit, your Honours, is that the market proposal would not have been stymied by lack of finance. He was not directing his attention to the question of whether at any particular moment in time, if time was frozen, that on that day Mr Yates could have commenced building, and whether he had finance ready to go then. It is consistent with what his Honour said to say what her Honour said, that as at that resumption date, there was not finance in place, albeit that in the following months Mr Yates probably would have been able to obtain it.
CALLINAN J: I do not know whether it is consistent, but I do not think it matters for your case whether it is or is not, in view of the different evidence that no doubt would have been given and different parties.
MR MACFARLAN: Yes. Her Honour then goes on in a passage I will not read to give that explanation of why she does not see what she found as different from what Justice Cripps found.
Returning to the submissions, your Honours, paragraph 47, we make the point that although the Full Court's judgment does not refer to those findings of fact, what it does do is to incorporate findings inconsistent with those findings of the trial judge, and if I could go to volume 2, first page 234, at line 26:
Consequently Yates was in a position where it could commence its development of the market almost immediately.
The other one was at 246, point 22.
GAUDRON J: Now, again, that 2.7 million refers to - that is the money that was spent after the DA and BA, is it, in the implementation of it?
MR MACFARLAN: No, I do not think so, your Honour. I might need to check what evidence there is about that figure.
GAUDRON J: Yes. I just have some difficulty with the notion that if the land has been given a market value on the basis of a DA and BA we could then be still talking about this $2.7 million.
MR MACFARLAN: Yes. We would say one should not because the measure is the added value, not the cost. May I check on that overnight, your Honour?
GAUDRON J: Yes.
MR MACFARLAN: Yes, the other Full Court finding is at 246, line 22:
In his reasons Handley J referred to the fact that Yates had carried out work etc that put it in the position where it could construct a market on the land more quickly than any hypothetical purchaser.
Now, Mr Justice Handley did not say that and your Honours will see what Justice Handley said in that same volume at 377 at the top of the page:
The existence of the appellant's work etc may have given the appellant an advantage or head start over other purchasers in the development of markets on this land. The judge made no finding to that effect. If such an advantage or head start did exist it would generally be worth money -
And:
Hence it would generally give rise to some special value.
His Honour, quite properly, was not making any finding of fact about that, he was flagging the possibility that that might have been the case. The Full Court firmed that up and suggested that Justice Handley had found that there was such an advantage but that was, in our respectful submission, erroneous and it ignored the findings of the trial judge. The evidence about this topic of course was voluminous before the trial judge. In this case the case went on for some six weeks. There was a vast amount of oral evidence and there were very many documents tendered and, in our respectful submission, for the Full Court to depart from the findings of the trial judge on this there would have had to have been a reasoned examination of the findings, which did not occur.
KIRBY J: I notice you put State Rail on your list of authorities. Is there any suggestion that the Full Court departed from the findings affected by the credibility determination by her Honour relating to Mr Yates?
MR MACFARLAN: Yes, your Honour.
KIRBY J: Come to it when it is appropriate.
MR MACFARLAN: Going back a step, her Honour's finding, based in part on credit, was that Mr Yates did not have the finance and, therefore, could not commence development immediately. The Full Court's finding was, without reference to Justice Branson's finding, that Mr Yates was in a position where he could commence the development of the markets almost immediately. So, it was inconsistent with it. The other reason we put the Earthline decision on the list, your Honours, is that, quite apart from the question of credit, it, in our respectful submission, very aptly identifies the advantages which a trial judge has which should be in the mind of an appellate court before interfering even in respect of non-credit findings.
What your Honour Justice Kirby spoke of in that case is very pertinent to this. Your Honour Justice Kirby there said at 160 ALR 619:
The true advantages in fact-finding which the trial judge enjoys include the fact that the judge hears the evidence in its entirety whereas the appellate court is typically taken to selected passages, chosen by the parties so as to advance their respective arguments. The trial judge hears and sees all of the evidence. The evidence is generally presented in a reasonably logical context. It unfolds, usually with a measure of chronological order, as it is given in testimony or tendered in documentary or electronic form. During the trial and adjournments, the judge has the opportunity to reflect on the evidence and to weigh particular elements against the rest of the evidence while the latter is still fresh in mind.
And so forth. Perhaps I will just finish that passage:
A busy appellate court may not have the time or opportunity to read the entire transcript and all of the exhibits. As it seems to me, these are the real reasons for caution on the part of an appellate court where it inclines to conclusions on factual matters different from those reached by the trial judge. These considerations acquire added force where, as in the present case -
and I interpolate as in this present case -
the trial was a very long one, the exhibits are most numerous, the issues are multiple and the oral and written submissions were detailed and protracted.
With respect to the Full Court, they did not exercise the caution that should have been exercised before making findings inconsistent with those found by her Honour.
In paragraph 49, your Honours, we refer to some of the evidence about this, and it is obviously impossible for this Court to apprise itself of the evidence about this topic, but what I would wish to do simply is to refer your Honours to one portion to enable your Honours to understand the nature of the evidence that was there. Could I ask your Honours to go to volume 3, page 639, which is in the cross-examination of Mr Hart who was the principal witness called by YPC on this topic. He had said in his report, your Honours, that it would take any other purchaser two years to get to the point that Yates was at and that flowed basically from a lack of research and knowledge that the other purchasers had as compared to Yates. At 639 of volume 3 at line 24 this was put to Mr Hart:
In preparing your report have you assumed that the vendor would have this state of mind.....You assume this was the state of mind, that the vendor would A, be seeking to maximise the price and B, would have provided all the information it could in order to maximise the price?---I don't think I looked at this whole report on that basis but I think that's a fair proposition.
It is a fair proposition that the vendor would have that attitude, is that what you are suggesting?---Yes, I think it's - it's a logical and normal thing for a vendor to see the maximum price.
GUMMOW J: Do your opponents dispute what you say in the first sentence of paragraph 49 of your outline? Is this in context?
MR MACFARLAN: Yes.
GUMMOW J: They do?
MR MACFARLAN: There is some detailed material in their written submissions disputing that, your Honour.
GUMMOW J: Well they will all have to be looked at, I suppose.
MR MACFARLAN: And line 34:
Yes, and to provide all information it could in order to maximise the price?---Yes.
But it is also true, is not it, that you have not in your report approached the matter on that basis?---No, I have not.
Because you have assumed that the vendor would have a lot of information that would not b e available to the purchaser?---Yes.
Well that is an assumption which he has agreed is something inconsistent with the logical and normal thing. And he says at line 7:
And that is at the crux of your report, is not it?---Yes.
Your views would have to be fundamentally different if a different assumption about that were adopted?---Perhaps.
It would be sensible to assume, would not it, that a prudent vendor in respect to this hypothetical auction would provide any lists that were in the vendor's possession of persons who had expressed interest in becoming stall holders of the prospective market?---No. I disagree with that for the comments I raised earlier, that I think that that information is proprietary and can be transferred to another property.
Assume that the vendor regards that along with other information as useless to him if he does not have this property, in other words that he does not think that he can use it anywhere else. On that assumption you would agree it would be appropriate to assume that the vendor would hand over the lists to the prospective purchasers?---On that assumption I'd suggest it was possible, yes.
And I interpolate there, your Honours, that Mr Yates gave that evidence. If he did so the information would be useless elsewhere. And line 30:
And do you mean to say that you cannot accept the proposition that if the vendor thought a list of prospective stall holders were otherwise useless to it that it would not hand them over to the purchasers?-0--All right, I accept that.
The next word should be "you", I think.
You accept that a vendor would do that?---I accept that in that circumstance, yes.
And if the prospective stall holders had signed forms which recorded their interest, those forms or copies of them would be handed to prospective purchasers?---Yes, on the assumption that they were utterly useless to the vendor.
And likewise any plans that the vendor had in respect of the property, I mean physical plans, drawings, again if the vendor thought they were otherwise useless to the vendor would be made available to the prospective purchasers?---On that assumption, yes.
And line 16 on the next page:
And if a vendor had negotiated to purchase some nearby land for the purpose of satisfying the car parking condition or in fact for any other purpose to enhance the value of the subject land the vendor would be likely to tell purchasers about that, would it not?---Yes.
Line 29:
Likewise if the vendor had taken steps towards leasing some land similarly that information would be made available to the prospective purchaser?---Yes.
And then on page 643, your Honours, line 10, this question is put:
It is true, is it not, on the various assumptions I have put to you - and I will just remind you of the critical ones, namely that - or the critical one - on the assumption that Mr Yates and his company took the view that the information in the company's possession concerning use of the property as a market would otherwise be useless to the company, that is if it did not own this property, and that it would therefore convey it to the purchaser, you would agree, would you not, that in that circumstance it is clear that the extent of the inquiries that would be done or would be undertaken here by the purchaser would be such that it would have been in substantially the same position as Mr Yates as at the time of this hypothetical auction?---Yes, but clearly on the assumption that it's agreed that that information was useless to Yates. On that assumption only.
So, Mr Hart came to agree that assuming this information was otherwise useless to Mr Yates, about which Mr Yates did agree, then other purchasers would have been in the same position, and the effect of that is that there was no head start, in our submission.
We do have a written document that summarises the evidence concerning the head start. I do not wish to take up more time dealing with the matter orally but if I could make that document available. We made it available to our learned friends at the end of last week and it substantially is in the same form as a document made available in the Federal Court. So, if I could make that available perhaps overnight to the Court and it indicates the material we rely upon.
I turn then to the question of the solicitor's role, which we pick up in paragraph 52 of the written submissions. We start with this general submission in these terms: where experienced counsel are briefed to conduct a case such as this, our submission is that the solicitor's duties in relation to the giving of substantive advice are as follows - (a) to give such substantive advice if requested; and (b) to warn the client if counsel's advice, or counsel's conduct of the proceedings, is obviously flawed or questionable.
GLEESON CJ: Underline the word "obviously". You see, part of the reasoning against you of the Full Court, as I understand, is that the head start claim was such an obvious method of developing a special value case that this was not a circumstance in which the solicitors could say they were entitled simply to be guided by counsel. It is the asserted obviousness of the head start claim that is significant at a number of points of the reasoning of the Full Court.
MR MACFARLAN: Yes, it certainly is, your Honour. We, of course, join issue very strongly with the conclusion that it was obvious. It was not obvious to any text writer, to any of the counsel involved, or to any of the valuers, and is not obvious now, we submit.
GLEESON CJ: We will have to make a decision about this for ourselves, but Mr Simos's evidence, as I understand it, was that it was not obviously right, it was obviously wrong. It makes it difficult to resolve the case without forming a view about special value.
MR MACFARLAN: At least, as to that aspect of special value, I would not suggest it is necessarily the case to set the metes and bounds of special value.
GLEESON CJ: No.
GUMMOW J: It is not a question of setting metes and bounds; it is a question of finding the core, and I do not know what it is at the moment.
MR MACFARLAN: One can proceed on the assumption, rightly or wrongly, that the law as stated in such cases as Pastoral Finances is apt and then, in our submission, readily reach the conclusion that the particular way of putting special value that is asserted by YPC falls outside the ambit of those principles.
GLEESON CJ: But if the Full Court were right and this was an obvious way of advancing or at least supporting the claim for special value then it is difficult to resist what they said about the role of the solicitor, is it not?
MR MACFARLAN: It is a matter of degree, your Honour. It depends how obvious the point is. Could I give an example of a point where we have to say there would be a breach of duty? If counsel and valuers had proffered this assessment of value on the basis of market value, ignoring the question of special value, one can readily see that it would have been the obligation of the solicitors to warn that there was a principle relating to special value and to ask whether that had been adverted to and considered.
HAYNE J: This method of analysis seems to me, Mr Macfarlan, to obscure some quite difficult issues. You speak of counsel having the conduct of the case. What does that mean in this context? You speak of valuers expressing opinions. Much may turn on what instructions the valuers were given, who formulated those instructions, what advice was sought from whom about formulating those questions, preparing the facts put before them and so on, and for my part at least, it seems to me that there is a very serious risk of obscuring much of the problems that might have to be addressed in this case if matters are spoken of in these general terms. For my part, while I have some general idea of what you mean when you say "counsel had the conduct of the case", that could cover a whole range of relationships between counsel, solicitors, lay client.
MR MACFARLAN: Yes. Well, of course, I do want to - - -
GUMMOW J: And, of course, this is all in New South Wales, is it?
MR MACFARLAN: Yes.
GUMMOW J: The organisation of the legal profession differs from State to State and Territory to Territory.
MR MACFARLAN: Yes, indeed.
GUMMOW J: We seem to be asked to write some set of rules at large.
KIRBY J: This was at a time before legal practitioners, was it not? This was at a time of barristers and solicitors?
MR MACFARLAN: Yes, it was.
GUMMOW J: But in some States it is the practice for one firm of solicitors to refer the advocacy part of it to a member of another firm. Mr Ainslie, a senior partner of one of the firms in Perth, used to appear regularly in this Court on instructions from other firms of solicitors.
MR MACFARLAN: Yes. There is no logical reason why the principles I have been seeking to expound cannot apply in such a situation.
GUMMOW J: I just do not think they can be principles. I do not think they can be principles other than in relation to a particular structure of the legal profession in a particular State or Territory and in relation to a particular factual situation.
MR MACFARLAN: Yes. The way we put it is that the position as I have stated it is likely to be the normal situation, but, of course, it is dependent upon the facts of the particular case.
HAYNE J: Normal in a divided profession, normal in an amalgamated profession, normal in what context?
MR MACFARLAN: Normal in a divided profession, your Honour, and when one looks at the facts - - -
GUMMOW J: A factionally divided profession?
MR MACFARLAN: Yes. When one looks at the facts of this case one finds that the normal was applicable, in fact it was a fortiori here and I will go in a few moments to some of the material, but one of the findings of her Honour - - -
HAYNE J: Can I make the point in this way, Mr Macfarlan, I was struck forcibly by the absence of any reference in the Full Court judgment, I think I am right in saying, at all to the retainer of counsel and what counsel were retained to do. That seems to me to be the start point, not something to be passed over.
CALLINAN J: Mr Macfarlan, different views are formed at different jurisdictions. I see counsel here settled some of the valuations but Lord Denning in Kelly v London Transport said counsel and solicitors must never do that.
MR MACFARLAN: Yes.
GLEESON CJ: In England counsel do not even talk to witnesses, do they, except expert witnesses?
HAYNE J: In Victoria you will find a judgment of Justice Brooking, I think, in a takeover case where it is fair to say his Honour did not speak kindly of counsel in connection with what was described as settling an opinion of an expert.
MR MACFARLAN: It is clear that practices have differed in different jurisdictions - - -
CALLINAN J: And that affects the nature of the retainer that Justice Hayne was asking you about, a matter which might bear very heavily on that.
MR MACFARLAN: One has to come back to the facts of this case, of course, and one feature that one has here is a finding by her Honour after consideration of many weeks of evidence, that from the commencement of proceedings which was early 1986 through until the hearing which was four years later, YPC looked to counsel and not to the solicitors for substantive advice.
GAUDRON J: This brings me back to the question I asked earlier this morning. The action against your clients is presumably in contract and tort. What precisely was the contract, what is the term of the contract that is allegedly breached, what is the precise duty that is alleged against you in tort? Where do I find that?
MR MACFARLAN: At the beginning of volume 1 your Honour will find the statement of claim - - -
GAUDRON J: I have read the pleadings, yes.
GUMMOW J: I have too.
GAUDRON J: I said I have read the pleadings - I was not greatly enlightened.
MR MACFARLAN: At pages 7 and following, the statement of claim in its further amended form. There is an allegation in paragraph 61 that "ATRK acted for YPC in the Land and Environment Court proceedings", and in 62 that "Instructed by ATRK", the second and third respondents acted as senior and junior counsel.
HAYNE J: What does that mean? It means they appeared, but does it mean more than that? Were they briefed to give advice, were they briefed to appear, were they briefed to confer with and offer opinions to experts? What were they retained to do?
MR MACFARLAN: Well, I can really only answer that by referring your Honour to the evidence of what occurred and it is probably appropriate I do so.
KIRBY J: Does that define the duty or are there any general statements of principle by courts? I mean, can it just be left to a solicitor to determine by his or her own conduct what the duty is? We have all known solicitors who simply send a back sheet to counsel and really do nothing at all in the case. Is that good enough - especially nowadays when there is time charging and there is a value added which is paid for and ought to be earned.
GLEESON CJ: Mr Macfarlan, the Full Court did not deal with this as though it were a case in which the solicitors and the barristers gave anxious consideration to whether a head start claim should be propounded, and after that discussion the solicitors deferred to the opinion of the barristers that there should be no head start claim. The Full Court dealt with this on the basis that all the lawyers involved overlooked an obvious point. That is the basis on which the Full Court approached it in terms of fact. Now, that may right or it may be wrong, but if that proposition is right, that is, everybody overlooked an obvious point, what enables the solicitors to, as it were, hand on to the barristers the responsibility for that?
MR MACFARLAN: Because the role of the barristers in the factual situation that developed for the four years leading up to the hearing involved the barristers giving the advice as to how the proceedings should be conducted and the valuation claim advanced and the solicitors attending to what needed to be done.
GLEESON CJ: I could understand how you can say the fact that the barristers overlooked this point ought to give you some pause before you conclude that the point is so obvious. But if you accept the first premise, that is to say everybody overlooked a point that in truth was obvious, then the solicitors cannot relieve themselves of the responsibility, can they? In other words, the significance of what the barristers did and did not do goes to the validity of the premise. It is a very important matter, I would have thought, to take into account in asking whether this really was an obvious point, but once you accept that there was an obvious point overlooked by everybody, why are the solicitors not responsible as well as the barristers?
MR MACFARLAN: "Obvious" is a relative term.
GLEESON CJ: Yes, but it is the term used by the Full Court.
MR MACFARLAN: Yes. I gave an example of a point that would be obvious and would fall within the formulation I suggested, that is, if the valuers and counsel had not raised any question of special value at all, one could well imagine that the solicitors would have a duty to warn the counsel or solicitors or client that there was a question of special value and that needed to be addressed.
KIRBY J: You accept that. Now, take a solicitor out in Wilcannia, never had a valuation case, but he knows Mr Simos or Mr X is a real expert and he says he has made a lot of inquiries, and he says, "Well, that is my value added, I find the top barrister". Does he still have an obligation to research all the nuances of this area of the law and say, "Hang on, you have forgotten special value", or "Have you considered special value"?
MR MACFARLAN: No, no he does not, your Honour, and that is why I said the term "obvious" is relative and relative to a solicitor of that character, special value would probably not be obvious.
GLEESON CJ: But the Full Court held that your clients held themselves out as having expertise in valuation law.
MR MACFARLAN: That is why I accepted, your Honour, that the overlooking of the special value point would be an obvious point that my clients would be required to bring to the attention of someone relevant.
KIRBY J: Do you accept that finding in the Full Court that your clients held yourselves out as experts in this area of the law?
MR MACFARLAN: We accept that there was some evidence about that, but we say it came to be superseded - - -
KIRBY J: I thought I read that they had a special department or something of that kind, did they not?
MR MACFARLAN: Yes, but that was at a stage before the matter became litigious. There then followed the commencement of the litigation and a partner who specialised in litigation took control of it with a junior solicitor working under him.
KIRBY J: He does not have the expertise. His expertise is courtrooms and their nasty environment, not the nuances of valuation - - -
MR MACFARLAN: He had the expertise, and they both did, to do what was required by the division of labour and functions that occurred in the period of four years leading up to the hearing. Contrary to the Full Court's findings, the junior solicitor involved did apprise himself of the basic principles of law relevant to the matter, and I am going to go to the evidence which demonstrates that.
GLEESON CJ: But in deciding whether in a particular case it is the obligation of a solicitor to raise a point with counsel, you are not going to get much assistance from general assertions about the relationship between barristers and solicitors, are you? You have to make a judgment in the light of the nature of the particular case, the nature of the expertise professed by these particular solicitors and, most important of all, the nature of the point?
MR MACFARLAN: Yes, I accept that, your Honour.
KIRBY J: Is there a problem with that, that if you say the nature of the expertise professed by a solicitor, some solicitors might say, "I don't profess anything. I was admitted 30 years ago, and that's enough for me. I just send back sheets". Is that acceptable? The solicitor can define that the law does not define the duty that is owed to the client?
MR MACFARLAN: The retainer of the solicitor is a very important element, we submit, in defining the extent of the duty, but it does not necessarily set the outside limits of the duty. In the context of a solicitor such as your Honour has mentioned, the concept of obviousness would be a different one than in relation to solicitors more used to the type of matters with which we are concerned.
In answer to what the Chief Justice just said, I did put the general matter I first enunciated as the normal position, and I was intending to indicate by that that it would be the position that one would usually find by examining the facts of individual cases. It is not determinative of this case because one has to take the next step to look at the facts here and see whether this is a normal sort of case or something different. When one does, one finds it is, we submit, a fortiori in the context of the duty as I have sought to define it. So, it does require me to spend a few minutes dealing with the facts as they transpired here.
KIRBY J: Can I ask you just to pause for one minute before you do that? Is there any statement of the grand theory which the common law imposes on the solicitor? Is it stated, for example, only in terms of retainment that the solicitor is duty bound only to do what he or she contracts to do? Is there some general principle that has been stated by this Court, or other courts of high authority, that lead you into how you evaluate the facts, otherwise we are going blind into the facts.
MR MACFARLAN: Well, the most succinct statement that we have found, and one which seems to us to reflect pre-existing authority, is in a decision in Matrix Securities v Theodore Goddard, which I think is only reported in (1988) STC 1 at page 27 and there is a short passage there that I would go to. That was a case in which there was a need for taxation advice to be given and there was a solicitor who was expert in taxation law who was requested to brief counsel, which did occur, to settle a letter to the Inland Revenue Commissioners, and the letter was settled in conference between the solicitor and counsel. What was said in that case at page 27 was this. In referring at letter e to the earlier decision in Locke v Camberwell Health Authority it was said that Lord Justice Taylor there summarised the relevant authorities in this way:
`(1) In general, a solicitor is entitled to rely upon the advice of counsel properly instructed. (2) For a solicitor without specialist experience in a particular field to rely on counsel's advice is to make normal and proper use of the Bar. (3) However, he must not do so blindly but must exercise his own independent judgment. If he reasonably thinks counsel's advice is obviously or glaringly wrong, it is his duty to reject it.'
Then the judge continues:
Mr Slater distinguished that passage as referring to a solicitor without specialist experience, whereas here TG did have specialist experience. The only difference that that makes is that the solicitor must bring that experience to bear on that matter. It remains the position, in my judgment, that after leading counsel has given considered advice to the client, such as was given at the 13 July conference, it is only a solicitor's duty to differ from it at that time and to give separate advice or to record reservations separately to the client if there was an important point on which the solicitor regarded counsel's advice as being seriously wrong.
That, we would suggest, is an appropriate statement of the general approach and, your Honours, what her Honour held in this case was that - and this is in volume 1, page 153 line 20, that after:
the Land and Environment Court proceedings was instituted, YPC looked to counsel, and in particular senior counsel, for legal advice as to the conduct of the proceedings and not to ATRK.
And that is reflected by the evidence that was given before her Honour. What Mr Yates agreed - - -
GAUDRON J: Do you say that that evidences the terms of the retainer or that it varied the terms of the retainer? How is this put?
MR MACFARLAN: It is not a complete statement of the terms of the retainer but it is a description - - -
GAUDRON J: No. There is not one, is there, anywhere?
MR MACFARLAN: There is not one, no, because the retainer was developed de facto as matters went along over a period of years when particular roles were adopted with the assent and acquiescence of the client.
GLEESON CJ: Is it any more than an application to the particular facts and circumstances of the case of the general duty to exercise reasonable care, skill and diligence?
MR MACFARLAN: Insofar as there is a claim in tort against us, no, it is not, and insofar as I acknowledge that there is a duty to warn, that is an application of principles relating to such a duty. What Mr Yates agreed to in relation to the many he went to, and I remind your Honours that he went to some 40 or so, was that counsel made suggestions and requests. Mr Schwaiger, who was the junior solicitor, attended to them, as far as he could, and that was basically Mr Schwaiger's role and that is in the third appeal book, page 398, line 16 to line 20. Could I take your Honours to volume 15 where one sees the nature of what occurred from the weekly meeting minutes that commenced to be prepared.
Weekly meetings with the valuers and counsel commenced in July 1989, that is about six months before the hearing commenced, and the first of those can be seen at 4081 of volume 15. It shows that what the solicitors did was to attend to the many matters spoken of by counsel.
KIRBY J: What page is it?
MR MACFARLAN: Page 4081, your Honour, or perhaps 4080 is the first one. That is a meeting at which Mr Webster was present, Mr Egan, Mr Parkinson and Mr Schwaiger and a whole variety of matters were discussed including, at the end, the interviewing of witnesses. The next meeting on the next page, Mr Dominish joined those people present. Down the right-hand column one sees various matters identified for Mr Schwaiger to attend to. On page 4082 Mr Schwaiger is there. Mr Schwaiger to arrange BES to provide something at line 30 on 4082 about retrieval of documents, "BES to check feasibility" and these minutes continue on at great length. One sees more at 4091, handwritten minutes. At 4093, line 18, for example:
Council files - need to check whether these files have been subpoenaed -
et cetera. Schwaiger "to check". Line 15 - - -
CALLINAN J: Mr Macfarlan, there are, I suggest, some statements in Astley, that case that was recently decided by this Court, which would at least imply, although they are speaking in the context of contributory negligence, but which would at least imply that there would need to be a specific bargain and arrangement made if there were to be any reduction or change in perhaps the conventional arrangements made between solicitors and client.
MR MACFARLAN: Yes.
CALLINAN J: That passage is at page 181, paragraph 86 of Astley.
MR MACFARLAN: It is that type of notion that led me to suggest what the conventional or normal arrangement was.
CALLINAN J: I appreciate that, but the passage - and I know that their Honours were speaking in terms of contributory negligence - but the passage would imply, I think, or may have a general application - it may have a general application to the effect that you would really need to bargain quite expressly for a change from the conventional arrangements rather than just, as here, accepting that you are going to perform certain tasks without saying, "Well, that is all we are going to do and we are not going to be liable for anything beyond that".
MR MACFARLAN: Yes.
CALLINAN J: It is just a possibility and I refer you to paragraph 86.
MR MACFARLAN: Well, it is a bit - logically that should not, and could not, be confined to an express agreement. It must be able to be done impliedly if it can be done expressly but, no doubt, caution would be exercised in concluding that there was such an implied agreement.
KIRBY J: Is there not a slight problem with this, that you are putting forward a series of memoranda which rather suggests that Mr Schwaiger is a messenger boy who just does messages that counsel would instruct and yet he will be charging as a lawyer, he will be charging as a solicitor, and is there not a value added that can be expected that the common law will lay down that is of the nature of a solicitor? You are putting forward a theory that is a rather low self-esteem or low self-estimate of the role of a solicitor.
MR MACFARLAN: Well, he is not acting as a messenger boy, he is doing the work of a junior solicitor, which is attending to matters required by counsel involving subpoenas, inspection of documents. That work is of a serious professional nature. It may not be on the higher echelons of work done by other people but, nevertheless, it is professional work and very important professional work.
GLEESON CJ: But, Mr Macfarlan, the decision of the Full Court, which was related to the particular facts of this case, turned upon an unexceptionable major premise concerning the duty of a solicitor, did it not? If you look at 157 ALR at 52 - - -
MR MACFARLAN: In the Full Court's decision?
GLEESON CJ: In the Full Court's decision.
MR MACFARLAN: Yes, I am sorry, I do not have the Law Report, your Honour. If your Honour can tell me where in the judgment it is.
GLEESON CJ: They said:
a competent solicitor experienced in the law relating to the resumption of land would have appreciated that Yates was entitled to compensation as a result of being in a position to immediately develop the land and he would have advised Yates to put forward that claim -
Now, the major premise is that the standard of care owed by Yates is that defined by reasonableness in the conduct of a competent solicitor experienced in the law in relation to resumption of land. That is the same test that Justice Branson applied as appears from the bottom of page 47 of the Full Court's judgment. The difference between the Full Court and Justice Branson was in the minor premise, was it not, that is to say, the application of that principle to the facts and circumstances of this particular case?
MR MACFARLAN: We join issue with the major premise, your Honour, because although there was evidence at the outset of statements concerning expertise, what occurred in a period of years thereafter indicated that those looking after the matter for the solicitors were of a different ilk. The partner involved was a litigation expert and the solicitor having the day-to-day handling of the matter and attending the conferences was a junior solicitor competent to deal with the task that he was being asked to do, but not having the level of expertise that might otherwise have been the case.
The weekly reports that were sent to the client in relation to what was occurring commence in volume 15, your Honours, at 3226. As a matter of chronology, they commenced on 18 February 1987 and thereafter they were dispatched weekly, and they were prepared by Mr Schwaiger but Mr Bartrop supervised Mr Schwaiger and read the reports. Paragraph 55 of our written submissions indicates that Mr Bartrop's evidence - and this was not the subject of any cross-examination, he swore an affidavit which was read, but he was not called for cross-examination - was that he spoke to Mr Schwaiger regularly about the matter's progress, Mr Schwaiger kept him up to date on developments and he read the weekly reports, and that he regarded that as a satisfactory way for the matter to be handled, and it was not suggested to him that there was some deficiency in the way he dealt with the matter.
It was obvious to those instructing on behalf of the client that the person on behalf of the solicitors attending the conferences and being present during the discussions between counsel and valuers was Mr Schwaiger, the junior solicitor. The evidence of Mr Schwaiger as to his position, which was not contradicted, stood in contrast to the Full Court's finding. If I could refer your Honours to what the Full Court said about this, they found - this is at page 235 of volume 2, lines 35 through to 40:
Mr Schwaiger knew nothing about the law relating to the compulsory acquisition of land and he knew nothing about the law relating to the valuation of land. At no stage did he acquaint himself with the basic principles involved.
That simply did not accord with the evidence. What their Honours appeared to be relying upon in that regard was evidence in volume 5 of the appeal books at page 1017 line 15, which was evidence directed to the position when Mr Schwaiger first took over. His evidence went on to describe how he acquainted himself with basic principles thereafter. In volume 5 at 1017 line 10:
in paragraph 12 of your first affidavit you say that when you took over the conduct of this matter within Abbott Tout you had no previous experience of resumption law?
A. That is correct.
Q. Had you studied resumption law or the principles involved at any time?
A. No.
Q. When you took over the matter, did you do anything to acquaint yourself with the principles involved in such a case?
A. No.
Q. Did you not go to the firm library and extract a book on valuation law and have a look at it?
A. No, I did not at the time I took over the carriage of the matter.
Q. In the months immediately following -
did he do that?
A. I cannot recall specifically doing that.
Q. Ever?
A. I'm not saying ever; I'm saying in the months ahead, the months - the initial months after the taking over the carriage.
Now that is the only evidence that would support the view that Mr Schwaiger did not acquaint himself with the basic principles, but that is directed only to the initial months of what turned out to be a matter that took many years in its progress.
GLEESON CJ: What, in your submission, was the nature and extent of the solicitor's responsibility, if any, to consider and advise in relation to principles of valuation law?
MR MACFARLAN: The extent of the duty, your Honour, was two faceted: one was to give advice, if and when requested; the second was to warn if there was some obvious point apparently being overlooked by the valuers or counsel.
GLEESON CJ: The Full Court would not disagree with that.
MR MACFARLAN: One cannot determine what is obvious, unrelated to the particular context, because it is a relative term, so I am going to the context.
GLEESON CJ: Exactly, but how do you understand yourself to be differing from the Full Court in relation to the nature and extent of the responsibility of the solicitors?
MR MACFARLAN: In so far as they described it as an obligation to bring obvious points to attention, we do not differ. I am now relating the facts of this case to attempt to give context and content to the term "obvious".
GLEESON CJ: Mr Macfarlan, it is about time to adjourn. Can I ask you a question that you might consider over the adjournment? At page 441 in volume 5 of the Commonwealth Law Reports in the judgment of Sir Isaac Isaacs in Spencer, there is a reference on line 4 to "special damage". The question is, what is the relationship between the "special damage" referred to in that paragraph and the special value with which we are here concerned?
MR MACFARLAN: We will consider that, your Honour.
GLEESON CJ: We will adjourn until 10.15 am in the morning.
AT 4.16 PM THE MATTER WAS ADJOURNED
UNTIL WEDNESDAY, 4 AUGUST 1999
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