Tolson and Anor v Road and Maritime Services [2014] HCATrans 263 (14 November 2014)

Last Updated: 19 November 2014

[2014] HCATrans 263

IN THE HIGH COURT OF AUSTRALIA

Office of the Registry
Sydney No S136 of 2014

B e t w e e n -

ROBERT TOLSON AND NORAH TOLSON

First Applicant

ELF FARMS SUPPLIES PTY LTD

Second Applicant

and

ROAD AND MARITIME SERVICES ABN 762 363 71 088

Respondent

Application for special leave to appeal

KIEFEL J
BELL J

TRANSCRIPT OF PROCEEDINGS

AT SYDNEY ON FRIDAY, 14 NOVEMBER 2014, AT 11.03 AM

Copyright in the High Court of Australia

MR T.F. ROBERTSON, SC: May it please the Court, I appear for the applicants for special leave with MR J.E. LAZARUS. (instructed by Shaddicks Lawyers)

MR R.P.L. LANCASTER, SC: May it please the Court, I appear with MR N.M. EASTMAN for the respondent. (instructed by Henry Davis York)

KIEFEL J: Yes, Mr Roberston.

MR ROBERTSON: May it please the Court. There is a bundle of materials that we have provided. Can I ask the Court just to turn to the first of them, which is the statute? Page 5 of the bundle sets out the objects clauses. Section 3(1)(a) is the object that particularly concerns us. That is:

to guarantee that, when land affected by a proposal for acquisition by an authority of the State is eventually acquired, the amount of compensation will not be less than the market value of the land (unaffected by the proposal) at the date of acquisition –

The Court of Appeal decided that the amount of compensation payable to my clients would be less than the market value of the land unaffected by the proposal at the date of acquisition. In fact the decision was that the market value should be nil. Now, that object is - that is effectively ring-fencing market value providing that if your land is resumed you are entitled at the minimum to market value unaffected by the proposal - is reinforced in section 10 which provides what is said, what is stated to be a statutory guarantee of market value.

This is the case when there is a conveyancing transaction - indeed, every conveyancing transaction in New South Wales, must notify the potential purchaser that there is an acquisition proposal affecting the land and when that notification takes place it must contain a guarantee in terms of this provision, that is that if and when acquired – remember the word “eventually” in 3(1)(a) suggests that sometimes acquisition proposals overhang land for many years and, indeed, in New South Wales for many decades – the amount of compensation will not be less than market value assessed under that Act, unaffected by the proposal. The words “unaffected by the proposal” are - - -

KIEFEL J: There is a tension then between section 10 and section 55, construed in the way that the Court of Appeal construed it.

MR ROBERTSON: Indeed, and, your Honour, that is the - - -

KIEFEL J: The question is how do you use section 10 to construe section 55 in the way for which you contend?

MR ROBERTSON: Section 55 states the heads of compensation but not the mechanics - - -

KIEFEL J: How you go about it.

MR ROBERTSON: - - - not how to go about it.

KIEFEL J: But the critical question is it not, as Justice Basten pointed out, that on your approach paragraph (f) of section 55 has no work to do.

MR ROBERTSON: No, with all respect, your Honours, that is not the case. Take, for example, linear infrastructure, roads or railways which intersect a lot, leaving land or residue land on either side. It may be that because of the advent of the road or the railway, on one side the land gets rezoned urban and so it improves in value. On the other side it may remain rural and be adversely affected by the rail line or by the road.

So you take one away from the other. In other words, 55(f) allows for the position that you may have more than one area of land affected by the proposal and, indeed, it does not even require intersection. You can have an adjoining lot that is not affected at all by the resumption which is still subject to 55(f) and so it allows for the fact that you can subtract a gain from a loss to see what the result is and still apply 55(f) according to its terms.

If I may say so, the fundamental distinction between 55(a) and 55(f), apart from the fact that they deal with different lands, or two fundamental distinctions, is that one is a realised loss - that is the resumption. The other one is a potential loss or gain measured at the resumption date but which is not realised unless you force its owner to sell and the effect perhaps, if you offer no market value for the resumed land, is a double resumption or a double forced sale.

KIEFEL J: Well, your argument is basically that there should be no offset for betterment.

MR ROBERTSON: Correct. Well, your Honour, the - - -

KIEFEL J: Why is not an offset for betterment in relation to adjoining land not consistent with the objects of the Act which is to compensate for loss?

MR ROBERTSON: Because the object of the Act, 3(1)(a) - - -

KIEFEL J: Compensation means you should be no worse off than you were, so why is taking into account an increase in the value of adjoining land inconsistent with that object?

MR ROBERTSON: Because, your Honour, there are two reasons. First, that is not what 3(1)(a) says and 3(1)(a) is not restricted just to the assessment of market value. This was an error which crept in, with respect, to Justice Preston’s judgment when he deals with the objects and talks about 3(1)(a) as involving section 56. Section 3(1)(a) addresses the - - -

KIEFEL J: Consistent with 3(1)(b) - - -

MR ROBERTSON: - - - outcome. It may be consistent - well, your Honour, no, with respect. One is dealing with two different things: a realised loss caused by the resumption and some gain that may be achieved only if you sell or lease the retained land at some time in the future which may never happen. The market may fall or it may be downzoned. There could be all sorts of circumstances which mean that the dispossessed owner is unable to capture those future gains but there - - -

KIEFEL J: Go back to section 3(1)(a), the:

not less than the market value of the land (unaffected by the proposal) - - -

MR ROBERTSON: Yes, those are critical words.

KIEFEL J: Yes, quite. So it is saying all other things being equal, market value is the ruling guide. But all things are not equal when you have an increase for betterment.

MR ROBERTSON: Well, your Honour, nor when you have a decrease for injurious affection. In that situation you are dealing not with the land that has been taken. You are dealing with an incidental impact on land that remains in the ownership of the dispossessed owner.

KIEFEL J: I am not suggesting that there are not difficulties with the construction of the Act. It leaves the Court in a position where it has to try to synthesise section 55 with the rest of the Act. There is some difficulty with that.

MR ROBERTSON: Your Honour, can I just point out that (b) does not deal with retained land.

KIEFEL J: Yes, I realised that after I had said it.

MR ROBERTSON: Yes, your Honour, (a), when it expresses this “unaffected by the proposal” proposition, is picking up, of course, what the court said in Walker’s Case and in Walker’s Case this object was important and when you consider that market value must be measured on the hypothesis that the public purpose has not been implemented, whereas injurious affection or betterment is assessed on an entirely different hypothesis, that is the actuality that the proposal has been implemented or is about to commence, you are allowing by detracting or subtracting betterment from market value, you are allowing the purpose to diminish market value which this Court said in Walker Corporation was impermissible and which, of course, is contrary to section 56 and it is contrary to 3(1)(a) and it is contrary to the statutory guarantee.

So we would respectfully submit that section 55 being silent on how you reconcile potential differences obviously enables you to take into account section 54(1) which says the purpose is to “justly compensate” and justice is not an undefined virtue in this legislation. It is defined very clearly in 3(1)(a) and section 10. The kind of justice that the legislature intended to deliver to persons whose land had been resumed was a justice that ring-fenced market value and gave you an irreducible minimum amount of compensation. Now, your Honours, the other point is, of course - - -

KIEFEL J: Did Justice Basten emphasise section 54(1)? Because there are tensions within the Act in its construction an approach might be to select a lead provision.

MR ROBERTSON: Well, in an earlier case in Leichhardt v RTA a Bench of five in the Court of Appeal, including Justices Basten and Beazley, unanimously decided that section 54(1) was what was called a “just terms override” in the language of Justice Spigelman.

KIEFEL J: Yes.

MR ROBERTSON: Then El Boustani, another decision of the Court of Appeal last year, Justice Preston, who gave the lead judgment with which Justice Beazley agreed, reinforced that view but in this case Justice Basten’s judgment goes a considerable way to distinguishing what had been said in the five member Bench in Leichhardt by reasoning that there is no just terms override because that leaves justice not anchored to any practical application and we say that is wrong because it was anchored in the objects of the Act and the statutory guarantee.

But, moreover, he says that it should not be allowed to influence the way you deal with the various heads of compensation and section 55. Yet, when the court turned to the cross-appeal, which dealt with the question whether disturbance was affected by betterment, it seems that the members of the court did take into account section 54 and each member of the court referred to double counting as being something that was impermissible. There is nothing in section 55 to prevent double counting. You could only find double counting to be impermissible if you applied section 54 as affecting the construction of section 55.

KIEFEL J: Justice Basten does not seem to overlook section 54(1) at paragraph 35.

MR ROBERTSON: Well, your Honour, he does not overlook it in the sense that he refers to it and then I think at paragraph 37 - - -

KIEFEL J: He expresses in terms which indicate he is regarding it as central, I would have thought.

MR ROBERTSON: Well, your Honour, but his reasoning process then says that, if you look at paragraph 49, for example, at 111, this is where, and Justice Hodgson in a decision which Justice Bell was a member of the court decided that - - -

KIEFEL J: This is the AMP Case - - -

MR ROBERTSON: The AMP Case, the question did not arise - is criticised here by Justice Basten and he says at 49:

Hodgson JA stated that “it seems to be unjust that the acquiring authority should get the acquired land for nothing, and that the person whose land is acquired should get nothing for it, just because of a benefit that may be shared by others.” That is a factor which might well be thought significant in terms of an equitable outcome: however, it is not a consideration identified in s 55 and is therefore (because s 55 purports to be exclusive of considerations which can be taken into account) a prohibited consideration.

So, although Justice Basten refers to section 54, the effect of his application of his construction of section 55 is to exclude injustices that might amount from an under-compensation. Equally, you would have to exclude injustices that would amount to an overcompensation involving double counting, unless you recognise that section 54 had an important role to play.

BELL J: Your argument does not depart in any degree from the analysis of Justice Hodgson in the AMP Case, does it?

MR ROBERTSON: No.

BELL J: Yes.

MR ROBERTSON: Although we add to it the fact that there is a problem with - there is a fundamental tension between allowing market value to be reduced by having regard to the effect of the proposal, because that is a prohibition which is redolent throughout the Act and it is also affected in section 24. Now, these are owner-initiated acquisition provisions where, if you suffer hardship, you can force the resuming authority to acquire ahead of its ordinary, planned program for acquisition. You will see at page 15 of the bundle, you will see in section 24(2):

An owner of land suffers hardship if:

(a) the owner is unable to sell the land, or is unable to sell the land at its market value - - -

KIEFEL J: I cannot seem to find section 24.

MR ROBERTSON: Page 15.

KIEFEL J: Yes.

MR ROBERTSON: So hardship being defined as not being able to sell your land at market value, the relief of hardship is to compel the acquisition so you can achieve market value. The Act has a certain symmetry to it in this respect and given the fact that section 55 did not state the way in which these paragraphs were to interact, we would say the usual approach should be taken, that where you are subject to exercises of State power which deprive you of your property you should be properly compensated and if it is the intention of the legislature to deprive you of that compensation that should be expressed.

There is a bundle of authority in this Court on this specific point. Set-offs have been decided by this Court in two previous decisions - in 1903 and in the Adelaide Producers Co-operative Case in the 1960s where it said, following Harding in the Privy Council in the 19th century, that if you are going to set off betterments from market value then you have to say so expressly.

It is against that background that all the statutes that my learned friend has referred you to in other States to make a point about the absence of importance of the issue the Court has before it today, all of those statutes have express set-off provisions and New South Wales law, before the Just Terms Acquisition Act, had express set-off provisions in some of its acquisition laws. They were not carried over into this Act and that was a deliberate purpose, as is set out by the Minister in his second reading speech.

If you turn to the bundle of authorities of my learned friend that is behind tab 4, and if you go to page 272 of the Hansard at the first full paragraph, this is what the Minister described as the key concepts on which the legislation is based. He says:

Blight occurs when land becomes unsaleable or devalued because of a belief that it will be acquired for some public project . . . To try to minimise the adverse effects of blight caused by necessary and legitimate long-term government planning, the bill incorporates a statutory guarantee. This guarantee indicates that any property which is eventually needed will be acquired at its market value unaffected by the government-caused blight.

So he goes on. There is more by way of explanation about the importance of this key concept. To answer your Honour, the presiding Judge’s question about just compensation in general, at 272 and the second-last paragraph, just the last couple of sentences of that paragraph - this is the paragraph beginning “However”, he says:

Just terms” is seen as a proper and equitable measure of compensation to landowners who are forced to sell to government, land which would not otherwise be available for sale. “Just terms” has been an important policy plank of this Government.

So the Minister’s speech makes it abundantly clear that this key concept of the legislation was to overcome the seizing up of the marketplace which occurs where you have long-term government projects overhanging large areas of land and people are unable to sell - where inevitably sales have to occur because of deaths or divorces or just general market forces, but purchasers are not guaranteed, that if the land is eventually acquired, they will get the market value that they have laid out when they purchased the land.

This is a really fundamental feature of the legislation and with the greatest respect to the Court of Appeal, to use effectively the reasoning that you have that market value is a different concept to the retained land because one is effected by the proposal and the other is not, and then translate that reasoning into disturbance by saying you cannot set-off disturbance values because disturbance compensation is different to other forms of compensation is inconsistent and illogical. Now, your Honours, there are other points - - -

BELL J: Well, Mr Robertson, just directing your attention briefly to those other points, appreciating you contend that there is a point of general importance in your first ground - - -

MR ROBERTSON: I was going to make a concession, your Honour. The lease question does not seem to us on mature consideration to arise – the ground 2 - and the other ground is dependent on what we say is a misapprehension of the facts by the Court of Appeal in - - -

KIEFEL J: They depend upon your first ground being made out.

MR ROBERTSON: It depends on the first ground, yes. It is a short point. If the Court please, those are our submissions.

KIEFEL J: Yes, Mr Lancaster.

MR LANCASTER: Thank you, your Honour. Your Honour, the applicant’s contentions fix on the object expressed in 3(1)(a) of the Just Terms Act and there are a number of reasons why, in our submission, the so-called guarantee does not have the effect that our friends contend. The first is section 55 itself, which is expressed unambiguously, we contend, as a requirement to have regard only to the matters identified in it for the purpose of assessment of compensation, so whatever effect the object stated has it is not an effect that persists in the application of section 55 in the assessment of the amount of compensation.

The second reason is in the objects section itself, section 3(2) which is also reflected in section 10(3). In other words nothing in this section gives rise to or can be taken into account in any civil cause of action. We contended at trial and in the Court of Appeal, but it was not expressly dealt with in the Court of Appeal reasons, that the civil cause of action includes the cause of action in the Land and Environment Court for the determination of compensation. Accordingly, the object itself - - -

KIEFEL J: A kind of Clayton’s objects clause, is it?

MR LANCASTER: The reference my learned friend made to the second reading speech gives more than a clue. It explains why it was that the guarantee was included. It was a message to the market essentially, to market participants, to say there might be an eventual acquisition of your land that a public authority is planning and that that may become known in the market, but we are saying by the expression of this object in legislation that there will be market value determined without regard to any effect that that nomination for future acquisition might have.

That was the explanation for what blight was, so it had an effect and was meant to have an effect on market participants before acquisitions took place and it was meant to reassure, as section 56 did enshrine eventually, that when market value is calculated it is done in a way that disregards the effect of the public purpose of the acquisition. So it is true that we contend for a construction of section 3(1)(a) that gives it no substantive operation in the assessment of compensation under section 55, but that appears to reflect precisely why it was first enacted. In other words, it was not for the purpose of determining the relationship among themselves of the various heads of compensation in section 55.

KIEFEL J: But provisions such as section 3(2) and 10(3) would not prevent this Court taking sections 3 and 10 into account in the process of construction.

MR LANCASTER: As a matter of statutory construction? I accept that, your Honour.

KIEFEL J: That is the question, really, is it not?

BELL J: Justice Basten approached the matter upon a view, I think, that section 55(f) had no work to do if one were to accept the applicant’s contention. But Mr Robertson does identify an area for operation of section 55(f).

MR LANCASTER: May I address that?

BELL J: Yes.

MR LANCASTER: The area of operation is said to be in respect of severance. That relies, in my submission, on a mistake in appreciation of the difference between the categories of compensation in 55(c), namely loss attributable to severance, on the one hand, and 55(f) and its use of the term “severance”, on the other hand. In our submission, Justice Basten correctly dealt with this at paragraph 39 of the reasons at application book 107.

BELL J: Yes.

MR LANCASTER: A section 55(c) category of loss attributable to disturbance is for a different and more specific consequence of an acquisition. It is for the loss of market value that is caused by the feature of two areas of retained land being separated from each other. The 55(f) category is directed to a different matter, which is the reduction in the value of retained land, whether that be described as adjoining or severed from – it does not matter – by reason of the carrying out of the public purpose, and they are quite different areas. In fact, my learned friend’s concession that there is a set-off available against 55(c) defeats his main argument because 55(c) is not linked to 55(f) in a way that my learned friend contends.

BELL J: I am sorry, (f) contemplates not only taking into account decrease, but increase. How does that work with the suggestion that (c) and (f) are entirely discrete?

MR LANCASTER: Because the increase in value from the retained land may come about by reason of the carrying out of the public purpose - for example, brand new and efficient infrastructure, being a new road - - -

KIEFEL J: The nature of the purpose.

MR LANCASTER: The nature of the purpose. It is not related to the consequence of two previously consolidated areas of land now being separated. It is quite different.

BELL J: Yes.

MR LANCASTER: Once one appreciates the difference between (c) and (f), there is no warrant for saying stop the set-off process at (c). It must also logically and in principle extend to (a) and (b) as well, in other words, market value. If I may briefly go back to - - -

BELL J: If one looks at 54(1) as the leading provision informed by the objects, amongst other things, then there is a difficulty, is there not, in reconciling the two?

MR LANCASTER: It did and does require a synthesis, as the court has identified. That synthesis is carried out by Justice Basten in paragraph 37 - in other words, specifically identifying that by requiring in section 55 the assessment of compensation “in accordance with this Division”, that picks up the two aspects of section 54(1), including its reference to just determination of compensation.

In another case, it might be that the issue specifically arises - well, to what extent is that adjustment one that is acceptable? Nobody contends 55 is a mathematical formula, but what is the difference between taking into account by reference to just terms in section 54 and the specific enumeration of features in section 55? That is not this case. Both his Honour Justice Basten and Justice Preston at paragraph 100, where his Honour referred to section 54 as “the lodestar”, appreciate the significance of section 54 but synthesise that general requirement for just terms into the assessment of compensation under 55.

That synthesis results in a position where there is not a mathematical precision in the calculation of compensation by reference to the 55 factors – it has to be just overall – but there is no warrant thereby for saying section 55 should be taken to prohibit the kind of set-off that Justice Sheahan at first instance applied. My learned friend cannot find a statutory foothold, in my submission, for the proposition that there is an actual positive prohibition to take the step that Justice Sheahan took of setting off the increase in value of the retained land, which is the proposition, in my submission, that lies at the heart of why the application should be refused.

Can I mention two other responses to particular propositions? My learned friend referred to the presumption in respect of deprivation of property rights without providing for just compensation. The power to acquire property, of course, is not the Just Terms Act; it is section 177 of the Roads Act, which we have included in our bundle. That is an unambiguous power on the RTA, among other authorities, to acquire land for their purposes.

There is a specific provision in section 178 for the compensation for such acquisitions to occur pursuant to the Just Terms Act. There really is no room for the operation of any presumption in a statutory context like that, where there is an express power whose very purpose is to acquire property and contemplates a regime for compensation by reference to the Just Terms Act in its detailed provisions.

Finally, in relation to the other provisions in other States upon which we rely, it is not the position that in every other jurisdiction there are express set-off provisions. In the Commonwealth and the ACT there is a general requirement to have regard to all relevant matters, including a list of enumerated matters in the calculation of compensation. One of those matters is any increase or decrease in the market value of the land but there is no set-off provision, and differently from New South Wales, it is an inclusive, not an exclusive, list of factors that must be taken into account, so it is quite different from section 55 of the New South Wales Act insistence that only the matters enumerated in section 55 be taken into account.

In Queensland, South Australia, Tasmania, Victoria and Western Australia there are requirements for specific regard to enhancement or set-off, and allowances for set-off and enhancement to be made. It varies among the States as to against what amounts of compensation they are to be set-off, so this issue simply does not arise in those jurisdictions. Accordingly, this is just a New South Wales issue. My learned friend contends for Justice Hodgson’s described position in AMP, which is a dissenting view that does not presently hold sway in New South Wales - - -

BELL J: Whether that is quite right or not, it was a Coulton v Holcombe issue that the court divided over on that.

MR LANCASTER: “Dissenting” perhaps might not be the right word, but it is not a view that presently holds sway in New South Wales and there is, in our submission, insufficient reason to disturb the clearly stated position about what section 55 means and how it operates in the decision under the application. May it please the Court.

KIEFEL J: Yes, Mr Robertson.

MR ROBERTSON: Can I deal with the “statutory foothold” submission first? That reverses the approach to construction. I referred earlier to the Adelaide Produce Case. Perhaps I should just take your Honours to page 150 of our bundle. This is a decision of this Court, a unanimous decision[1961] HCA 20; , 106 CLR 85 at 92, just the first paragraph:

To turn now to the question of the enhancement of the value of the Company’s remaining land . . . it is clear that it is only by virtue of a special provision that the betterment of land from which land taken is severed can be taken into account for determining the compensation to be paid for the land taken or for the injurious affection of other land. Such special provisions have from time to time been made and sometimes they merely allow the betterment of retained land to be set off against any injurious affection of that land.

That is consistent with the underlying proposition that the approach to compensation is that when land is taken, when property is taken, it is to be compensated - - -

KIEFEL J: Then the question is why paragraph (f) of section 55 is not such a provision?

MR ROBERTSON: But it does not refer to set-off, your Honours, and it does not deal with market value - - -

KIEFEL J: But the question is, I suppose, whether by saying “any increase in the value of adjoining land”, it is obvious that the only way that can be taken into account is by way of set-off.

MR ROBERTSON: It says “any increase or decrease”, so the decrease matches the increase and sets off against the increase in that land - - -

KIEFEL J: But it does not say the total achieved by taking into account the increase and decrease, and then applying it.

MR ROBERTSON: It is not a mathematical formula, as the courts keep saying, and there is no doubt about that, yet it was applied as such here. The second problem with what my learned friend has said is his description of the statutory guarantee as being a message to the marketplace. If it is a message to the marketplace, which undoubtedly it is, it is a misleading one, as Justice Hodgson pointed out. It is effectively a statutory lie, if market value is not ring-fenced and those dispossessed of their land are not compensated according to it. If the Court pleases, those are our submissions.

KIEFEL J: The Court will adjourn for a short period.

AT 11.37 AM SHORT ADJOURNMENT

UPON RESUMING AT 11.41 AM:

KIEFEL J: We consider that there are insufficient prospects of success in this matter to warrant the grant of special leave. Special leave is refused with costs.

AT 11.41 AM THE MATTER WAS CONCLUDED