Schembri v Roads Corporation (Land Valuation) [2009] VCAT 691 (16 April 2009)
VICTORIAN CIVIL AND ADMINISTRATIVE TRIBUNAL
LAND VALUATION LIST
VCAT REFERENCE NO. L83/2007
CATCHWORDS
Land Acquisition and Compensation Act 1986 – loss attributable to disturbance – costs and expenses of replacement land – interest claimed for failure to make an offer within the time prescribed – Solatium
APPLICANTS
Joseph Schembri, Denise Schembri, Carmen Schembri and Peter Schembri
RESPONDENT
Roads Corporation
SUBJECT LAND
Mount Derrimut Road, DERRIMUT
WHERE HELD
Melbourne
BEFORE
Jeanette G Rickards, Senior Member
HEARING TYPE
Hearing
DATE OF HEARING
28, 29 & 30 July 2008
DATE OF ORDER
16 April 2009
CITATION
Schembri v Roads Corporation (Land Valuation) [2009] VCAT 691
ORDER
The amount of compensation as agreed by the parties payable by the Roads Corporation for expenses pursuant to section 41(1) (f) Land Acquisition and Compensation Act 1986 is $75,000 and interest as agreed by the parties will be payable under the Act from 28 February 2006, the date of the Notice of Intention to Acquire.
The amount of compensation payable by the Roads Corporation pursuant to section 41(1)(d) Land Acquisition and Compensation Act 1986 is $675,669.78 ($586,918.44 and $88,751.34).
The amount of solatium payable by the Roads Corporation pursuant to section 44 Land Acquisition and Compensation Act 1986 is 2% ($220,000.00).
Interest payable in respect of any unpaid compensation under Orders 2 and 3 is payable in accordance with the Land Acquisition and Compensation Act 1986, such interest to be agreed between the parties or, failing agreement, to be determined by the Tribunal.
Costs reserved.
Any application for costs or a determination of interest is to be made in writing (including supporting submissions) and filed with the Tribunal and served on the other party within 60 days of the date of this Order.
Jeanette G Rickards
Senior Member
APPEARANCES
For Applicants
Mr J Delany SC, Barrister instructed by Deacons
He called the following witnesses:
Mrs Carmen Schembri
Mr Joseph Schembri
Mr Matthew Beasley
For Respondent
Mr C Wren SC, Barrister instructed by Garland Hawthorn Brahe
He called the following witnesses:
Mr Chris Kalapoutis
Mr Alistair Kensley
REASONS
Background
The Schembris’ own a 42.64 hectare parcel of land on the corner of Middle Road and Mount Derrimut Road, Derrimut which they purchased in 1980[1]. The land at the time of purchase was within the Rural zone under the Planning Scheme. The Schembris’ purchased the land with the intention of developing it.
The Roads Corporation (the Authority) acquired a 12.3 hectare portion of the land on 4 May 2006[2]. On September 22, 2000 Amendment C13 was gazetted reserving land for “the construction of the connection to the Western Freeway of the Western Ring Road”[3]. A Public Acquisition Overlay was placed over land to be used, including the Schembris’ land.
Upon gazettal of the notice of acquisition the interest in the land described in the notice is divested or diminished and what is left is a claim for compensation[4].
Agreed matters and Issues to be determined
Mr Delany informed the Tribunal that the market value of the land acquired had been agreed upon at $11m and this amount had been paid to the claimants. Firstly an amount of $7.4m which was the Authority’s initial offer was paid and subsequently the amount of $3.6m was paid.
Three issues therefore remain for the Tribunal to determine:
How much compensation is payable for loss of general disturbance?
How much allowance should be made for solatium? and
How much compensation is payable for legal valuation and other professional expenses?
In relation to the third question, midway through the hearing and partway through hearing evidence from Mr Beasley the Tribunal was advised by the parties that they had come to an agreement in relation to the amount of compensation payable for expenses pursuant to s 41(1)(f) Land Acquisition and Compensation Act 1986 (LAC Act). The amount agreed is $75,000 with the parties also agreeing that interest payable will be from 28 February 2006, the date of the Notice of Intention to Acquire.
As a result this leaves two issues for the Tribunal to determine. In regard to the compensation payable for loss of general disturbance, this claim is made up of two sub-claims, one being the costs and expenses of replacement land and secondly interest as a result of the loss of use of money. In regard to the allowance for solatium the Authority has offered 2% ($220,000) and the claimants seek 5% ($550,000).
Loss attributable to disturbance
In section 40 LAC Act ‘loss attributable to disturbance’ is defined as any pecuniary loss suffered by a claimant as the natural, direct and reasonable consequence of –
(b) the fact that an interest of the claimant in that land has been divested or diminished, being a pecuniary loss for which provision is not otherwise made in this Part;
Section 41 sets out the principles on which compensation is to be based, of relevance is section 41(1)(d):
(1) Except as otherwise provided in this part, in assessing the amount of compensation payable to a claimant in respect of an interest in land which is acquired under this Act, regard must be had to the following factors –
(d) any loss attributable to disturbance;
Replacement land
The claimants seek the costs and expenses incurred in the pruchase of replacement land. Mr Delany submitted that of the $11m compensation awarded and advanced to date, both families have purchased replacement land; both families have incurred and paid, whether from their own direct bank accounts or by way of loans from family companies, the stamp duty and legal expenses of buying replacement land.
Joseph and Denise Schembri have purchased two properties, one on 12 August 2007 at 665 Arthurs Seat Road, Arthurs Seat for $4.25m (stamp duty and legal expenses $238,334.89), and on 26 November 2007 they bought out Peter and Carmen Schembri’s interest in a property they jointly owned at 425 Point Cook Road, Point Cook for $367,950 (stamp duty and legal expenses $42,515.89). Joseph Schembri indicated they intended to purchase a third property with the remaining $882,050 (expected stamp duty and legal expenses $50,339.00). The stamp duty and legal expenses in relation to the purchase of each of these replacement properties totals $331,189.78.
Peter and Carmen Schembri have purchased two properties, one on 12 April 2007 at 52 Sargood Street, Altona for $620,000 (stamp duty and legal expenses $35,019.16). This property has since been sold. They also bought out their son Charles’ interest in a property they jointly owned at Fitzgerald Road, Laverton on 5 June 2008 for $5.28m (stamp duty and legal expenses $271,048.90). They have therefore expended a total of $306,068.06 in stamp duty and legal expenses.
Mr Wren in opposing the payment of any replacement costs submitted that all of the land that has been purchased has not been purchased with a view to going on and developing land in an industrial subdivision, similar to the land it is replacing. Rather, he submitted, lifestyle choices have been made. Lifestyle in respect of the settlement of the family home by the Schembris’ junior; the acquisition of farming property on Arthurs Seat Road; the acquisition of a vacant home site for Mr and Mrs Schembri senior and the purchase out of the existing property in which they had a joint interest.
Mr Delany submitted the claimants suffered loss because they had land which was taken and they incurred costs and expenses in the form of stamp duty and legal costs to replace it. The land that was acquired formed part of a piece of land that had been held for 26 years. When it was purchased it was zoned Rural and undeveloped. The family has always intended to develop it and at numerous times applied for permits to develop a dwelling and a nursery, to subdivide it and to rezone it. The land has recently been rezoned to Industrial and it is the Schembris’ intention to subdivide, construct warehouses and hard stand on what is left, to lease it out but continue to hold the land.
Mr Wren submitted the acquisitions were highly speculative, in this respect he referred to the evidence of Mr Kensley and stated that the land at Arthurs Seat Road which contains a substantial residence and is used as an equestrian centre is currently zoned Green Wedge and is impacted upon by a number of overlays. It is therefore unlikely to be developed, as Mr Schembri intends into a retirement village, as given the current zoning and overlays there is minimal opportunity for developing this land.
In relation to the land at Point Cook Road this is outside the urban growth boundary and although close is unlikely to be a residential development opportunity until after 2030. It is also affected by the flight path of the nearby airport, although there are no overlays that indicate how this land is presently impacted. Any future development is therefore highly speculative.
The Sargood Street land which was vacant had the potential for development for residential purposes, although in a Residential 1 zone, it was Mr Kensley’s view, it did not necessarily have subdivisional potential. This land has since been sold.
The only replacement land that is said to be comparable is the land at Fitzgerald Road which is zoned Industrial 2 and is used as a display yard for a company that auctions plant, machinery and vehicles. Although it is lesser in size at 5.526ha than the acquired land Mr Kensley considered this was a potential redevelopment site, it could be subdivided, developed with factories and leased out.
Mr Kensley did conclude that Sargood Street, and Fitzgerald Road are comparable, in that they had development potential. Point Cook is not directly comparable and Arthur’s Seat is ‘not comparable’. His comparisons were based on July 2008 figures.
Mr Joseph Schembri had a different view of the replacement lands’ potential. In evidence he submitted, if there was industrial land that he could have purchased he would have done so, but the prices were out of his scope. He rejected the claim that his purchases were lifestyle choices, rather his view was that the purchases, particularly the Arthurs Seat Road property was not dissimilar to his originally purchasing the Mt Derrimut land, it has good position and potential, even if at present, the planning scheme does not allow some developments.
In relation to the land at Fitzgerald Road where his parents had bought out his brothers’ share, Mr Schembri referred to its position next to One-Steel and indicated they were interested in buying the land. In each case, he submitted the land they have purchased is land purchased in their own name and which is land for development.
The claimants’ submit, the Authority’s instruction to Mr Kensley and his assessment of ‘comparability’ is an irrelevant and misconceived exercise. Mr Kensley in cross examination admitted it was not a request he had had before. Mr Delany drew the distinction between the requirement when assessing market value for a valuer to refer to section 5A Valuation of Land Act 1960 (VL Act)[5], but there is nothing about disturbance loss that requires the application of section 5A VL Act. The concept of ‘comparability’ is not, he submitted, included in this part of the legislation as it is in relation to market value. In this respect he relied upon the High Courts’ reliance in Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority[6] on the statement by McHugh J in Marshall v Director –General, Department of Transport where he stated:
The duty of courts, when construing legislation, is to give effect to the purpose of the legislation. The primary guide to understanding that purpose is the natural and ordinary meaning of the words of the legislation. Judicial decisions on similar or identical legislation in other jurisdictions are guides to, but cannot control, the meaning of the legislation in other jurisdiction. Judicial decisions are not substitutes for the text legislation although, by reason of the doctrine of precedent and the hierarchical nature of our court system, particular courts may be bound to apply the decision of a particular court as to the meaning of legislation.[7]
Mr Wren submitted the replacement land costs claimed cannot be said to be a foreseeable pecuniary loss incurred by the claimants as a natural, reasonable and direct consequence of the acquisition. He referred to the claimants as speculators, that is someone who purchases land with the hope that at some stage in the future something may change. A proposition strongly contested by Mr Delany.
Mr Wren submitted the claimants were fortunate that as a result of the construction of the ring road by Vic Roads the land was rezoned industrial. The land would not have been developed as originally proposed as no development plan had been approved and it was not Vic Roads that was to blame in this regard, rather it was concerns raised by the Department of Sustainability and Environment in relation to flora and fauna and issues relating to Melbourne Water’s approval of the development plan and the treatment of the lots.
He concluded, it was obvious the intention of the claimants was to sell the subdivided lots, not as submitted by the claimants to retain and lease the lots. This is evidenced he submitted, by the need to service a debt, secondly it was unlikely that warehouse construction costs would have resulted in a level of debt to the claimants that a rate of return would not be likely to meet the interest costs of their borrowings, the land had been put out for sale by tender and if the right offer had been made it was likely the whole of the land would have been sold. Lastly Mrs Carmen Schembri advised she and her husband had bought out another son they shared a property with at Laverton North, to ensure there was no difficulty in dividing the proceeds among the family after their death. Mr Wren questioned whether it was therefore likely that they would have continued to retain the Mt Derrimut land with another son.
Mr Wren submitted that having the cash in hand had resulted in a benefit to the Schembris’ in being able to get their house in order regarding ownership of the other properties, not for the purpose of investing in equivalent land from which they could derive an income, or which had the development potential of the land that they had just been divested of by reason of the acquisition.
In this respect he referred to the judgment of Batt J on behalf of the Court of Appeal in Tefords case where it was concluded that the purchase of a further parcel of land over and above the amount of market value, other than two replacement properties, was not a “reasonable consequence of the acquisition or that stamp duty referrable to that purchase was a pecuniary loss suffered by the respondent as the reasonable consequence of the acquisition having regard both to the amount already expended and to the cost of the third property”. Whilst Batt J concluded that “the purchase of this third property had its genesis in the acquisition, the acquisition was no more than a necessary condition for the purchase: it was not the direct cause of it”[8].
The replacement land purchased by the Schembris’ may not have an immediate redevelopment potential, although I accept that the Sargood Street property (putting aside it has since been sold) and the Fitzgerald Road property do have such potential. I am not as sure of the other two properties, although there is the potential that they could be rezoned in the future, allowing for some future redevelopment that is at present not permitted. I however accept that the purchases as replacement land are the choice of the claimants and whether the development potential of each parcel comes to fruition or not that is a matter for the claimants.
As a result of the acquisition of 12ha of their land the claimants have used the market value given as compensation for the land to purchase other land. They have not exceeded the amount given to them by way of compensation and still retain an amount that could be used in the future to purchase additional land. Each of the pieces of land purchased are considered by the claimants to have some development potential and in this respect they consider that as the land that was acquired was held by them for the purpose of development, each piece of land they have purchased can also be held by them for development whether now or sometime in the future.
I am not sure that the criticism of the replacement land is a matter that should weigh upon my consideration as to whether the Schembris’ are entitled, as they have requested to the stamp duty and legal expenses, expended in the purchase of these properties. The purchase of replacement land, whatever it may be, necessarily results in the claimants incurring stamp duty and legal expenses in relation to such purchases. Certainly it has been accepted in Tefords case and other earlier decisions that there is an entitlement to an amount of compensation for ‘stamp duty paid on the transfer of it of land to replace the land acquired compulsorily, as being ‘loss attributable to disturbance’. Whether such loss is a reasonable consequence of an acquisition poses an objective, not subjective test.
Whether the claimants have made lifestyle choices or more particularly put their house in order, the purchases they have made are to replace the land that has been acquired. I do not consider the claimants are speculators, particularly given the long association they have had with the acquired land and the land purchased does not fall in my view as speculative land purchases.
The land purchased is within the amount given as compensation, an amount the claimants would not have had to enable the purchases to occur, but for the acquisition. Whilst the land is not an in globo purchase, is not all zoned Industrial as the acquired land, it is land nevertheless that can be developed. I do not accept that these purchases must be ‘comparable’ as the Authority instructed Mr Kensley to consider. There is nothing within the legislation that leads me to conclude that this was a necessary assessment of replacement land.
Whether replacement land purchased is in one piece or several pieces it is foreseeable that such purchases will incur stamp duty and legal expenses. Stamp duty and legal expenses incurred in the purchase of replacement land is a consequence of the purchase of land and in my view an expense that was foreseeable by the Authority.
I accept the claimants suffered loss because they had land which was taken and they incurred costs and expenses in the form of stamp duty and legal costs to replace it. The amount for stamp duty and legal expenses expended in the transfer of the four parcels of land I consider amounts to a pecuniary loss which has been incurred as a natural, direct and reasonable consequence of the claimants’ interest in land that has been acquired having been divested. I consider the claimants are entitled to the amount claimed.
The amount of $882,050 has not as yet been spent on any replacement land despite a period of two years having lapsed. Mr Delany indicated that stamp duty on this amount would be $47,993 and including Titles Office fees of $1346 and an amount of $1000 for the conveyance the amount claimed in respect of the cost and expenses for replacement land not yet purchased is $50,339.
I was referred to the decision of Gobbo J in Kozaris v Roads Corporation[9] where he was satisfied that ‘the acquiring Authority should have foreseen that the claimant would replace his house on the farm property and the claimant’s loss was a direct pecuniary loss within s.11B(1)(c) of the Act and is recoverable, even though the expenditure has not yet been incurred’. The section relied upon being a precursor to section 41(1)(d).
I do not equate the replacement of a farm dwelling, part of the operation of the farm, where the court accepted that the claimant intended to build a new house, but was waiting on securing his compensation, given the size of the expenditure involved, which was more than the market value for the existing dwelling, as being similar to the expenditure of an amount remaining of money already received. In this case, although Mr Joseph Schembri indicated he intended to buy a third property, two years have gone by without a purchase. I am not as convinced as the court was in Kozaris that further replacement land will be purchased. Nor am I convinced that further replacement land has not been purchased due to the claimants’ on going issues with Melbourne Water. As no property has been purchased it cannot be said that there has been any expenditure on stamp duty that could be considered to be a pecuniary loss suffered. No loss to date has been suffered and it may not be suffered. It is not considered that the claimants should be given any compensation in this regard.
Taking the amount of $50,339 away leaves a total amount of $586,918.44 claimed for stamp duty and legal expenses incurred in the purchase of the four properties. It is my view this is a loss attributable to disturbance within the meaning of section 40 LAC Act and the claimants are entitled to this amount as compensation.
Loss of use of money – Interest
Section 31 LAC Act relates to the initial offer of compensation and provides:
(1) After the notice of Acquisition has been published in the Government Gazette the Authority must make an offer in writing to each claimant of whose entitlement to compensation it is aware.
(2) An offer under this section must be made –
(a) within fourteen days after the date of acquisition; or
(b) within such further period as –
(i) may be agreed upon in writing between the Authority and the claimant;
(ii) …
(3) The offer must set out the amount that the Authority, on the information available to it , has assessed as a fair and reasonable estimate of the amount of compensation payable to the claimant under this Act on the assumption that the claimant held the interest in respect of which the offer is made.
(4) An offer under this section must be accompanied by –
(a) a copy of the certificate of valuation to which the Authority has had regard in making its offer; and
(b) …
(5) In making its offer the Authority must have regard to a valuation of the land carried out by the Valuer-General or a person who holds the qualifications or experience specified under section 13DA (1A) of the Valuation of Land Act 1960.
Section 51 relates to advances of compensation and provides:
(1) Upon the service on a claimant of an offer under Part 3 or 5, the claimant may, by notice in writing, require the Authority to advance an amount equal to the amount of compensation offered in respect of the claimant’s interest or the loss or expenses sustained or incurred by the claimant or, if the claimant is a person to whom section 44(3) applies, the amount of compensation by way of solatium offered to the claimant.
The Authority is required to make the advance within one month. If the advance has not been paid at the expiration of the period referred to the Authority is liable to pay interest on the unpaid amount of the advance, from the expiration of that period until the date of the advance[10]. Interest payable at the rate fixed for the time being under the Penalty Interest Rates Act 1983[11].
The Notice of Intention to Acquire the land was made on 27 February 2006 and was gazetted on 4 May 2006. Pursuant to section 31(2) LAC Act the Authority was required to make an offer within 14 days of the date of gazettal, that is the 18 May 2006. The offer was not made until 2 August 2006. The offer of $7.4m was accompanied by a certificate of valuation. The claimants’ immediately requested an advance of $7.4m which was paid within the period required under the legislation.
The amount of $88,751.34 is claimed. This quantum of the claim, it was submitted, has been calculated by reference to the interest actually being paid by the claimants (as to that part of interest actually being paid) and received by the claimants on monies invested by them once the advance was paid as to the balance. This is calculated as follows:
(a) Peter and Carmen Schembri – interest at the rate of 4.75 percent on the amount of $3.7m for 76 days from 20 May 2006 to 4 August 2006 – $36,594.52;
(b) Joseph and Denise Schembri – interest at the rate of 6.77 percent (being the lower of the interest rates on the 2 loans) on $3.7m from 20 May 2006 to 4 August 2006 – $52,156.82.
The Authority acknowledges that it did not comply with the provisions of section 31 but says that the claim for interest is not a natural, direct and reasonable consequence of the acquisition of the claimants’ land. It was submitted the Authority is required to comply with a process when making an offer and the loss that arose is not a foreseeable loss consequence upon the acquisition of part of the claimant’s land and there is no statutory basis for the claim of this nature to be made.
In this respect Mr Kalapoutis indicated that he requested the Valuer-General on 3 March 2006 to undertake a valuation to assess the market value of the land. On 4 April 2006 the Valuer-General instructed Mr Kensley to undertake the valuation on behalf of the Valuer-General. Mr Kensley it is understood was required to provide the valuation by 2 June 2006, which was not within the timeframe to allow the Authority to comply with section 31(2).
The Authority indicated it had written to Mr Joseph Schembri seeking an extension of time in which to make the offer from two weeks to eight weeks[12]. The Authority requested information from Mr Schembri regarding his proposed plans to subdivide the land. In this regard Mr Delany submitted, the legislative scheme requires that the acquiring authority obtain valuation advice and if it needs to get plans and costing to do that, that is a matter for it, the Authority should not rely on any delay that may have occurred in seeking such information from Mr Schembri.
Mr Murray provided a valuation of $7.5m on 26 May 2006 and Mr Kensley provided his valuation of $6.9m on 20 June 2006. Following a conference on 17 July 2006 between the two valuers, Mr Kensley revised his valuation to $7.4m and on 27 July 2006 the Valuer-General issued a certificate of valuation for the market value of the land of $7.4m. The authority then made an offer of $7.4m on 2 August 2006.
Mr Delany submitted, the Authority did have available to it a valuation certificate carried out by a qualified valuer – Mr Murray for $7.5m on 26 May and was only 8 days late. The offer could have been made at this time.
The claimants’ solicitors wrote to the Authority on 15 June, 7 July and 27 July 2006 requesting an offer be made. The latter two letters put the Authority on notice that interest would be sought from 18 May 2006.
Mr Delany referred to several decisions[13] in support of his contention that where there is doubt regarding, as in this case, whether interest should be paid from the date the offer was required to be given under the legislation, then it should be given a liberal interpretation resolved in favour of the more liberal estimate.
Mr Delany submitted, compensation is payable under the LAC Act for such pecuniary loss sustained by the claimants as the ‘natural, direct and reasonable consequence’ of the fact that the interest of the claimants’ land has been divested or diminished, being a pecuniary loss provision which is not otherwise made. As Batt J indicated in Halwood in terms of causation, whether or not a loss is the natural, direct and reasonable consequence must be determined, as the High Court said in Medlin[14] by the application of common sense and experience.
In Hungerfords and Others v Walker and Others[15] the High Court held that expenses incurred and opportunity costs arising from money being paid away or withheld as a result of a breach of contract or negligence are pecuniary losses suffered by the plaintiff as a result of the defendant’s conduct and therefore are an element of the loss for which he is entitled to be compensated by an award of damages. Interest was intended to give the plaintiff some protection against the late payment of damages.
Mason CJ and Wilson J stated:
If a plaintiff sustains loss or damage in relation to money which he has paid out or forgone, why is he not entitled to recover damages for loss of the use of money when the loss or damage sustained was reasonably foreseeable as liable to result from the relevant breach of contract or tort?
…
In principle he should be awarded the compensation which would restore him to the position he would have been in but for the defendant’s breach of contract or negligence. Judged from a commercial viewpoint the plaintiff sustains an economic loss if his damages are not paid on the due date. The loss may arise in the form of the investment cost of being deprived of money which could have been invested at interest or used to reduce an existing indebtedness. Or the loss may arise in the form of the borrowing cost i.e., interest payable on borrowed money or interest foregone because an existing investment is realized or reduced.
The loss of interest on funds borrowed or invested was clearly foreseeable by the Authority. Mr Kalapoutis indicated he knew and acknowledged that people invested money to earn interest and to pay interest on loans, the Authority knew there was a mortgage on the property, the Authority knew Mr Schembri was keen to obtain an advance, there was no agreement to extend the time, and the Authority knew that, if it did not pay the advance on time, then whilst it might enjoy the benefit of the money otherwise advanced, the claimants would be deprived of the benefit of that money in the Hungerford’s sense. In Hungerford’s case there was no money withheld because there was no offer and no ability to call for an advance. In this case there was money withheld, because there was a breach of the duty to make a mandatory offer within a mandatory time frame, entitling the claimants to seek an advance.
Mr Wren submitted, the mechanism of the Act is pretty specific as to what flows in the event an offer is not made. Section 37 LAC Act enables the claimant to refer the matter and have it as a disputed claim and send it off to the Tribunal. They elected not to do that.
Mr Delany rejected this argument, submitting the entitlement to claim by the disposed owner under section 37 is directed to different circumstances; does not, once made, carry with it any entitlements to seek to require an advance of compensation in the amount claimed or otherwise and does not address the question of disturbance loss.
Mr Wren relied on the decision of Gobbo J in Roads Corporation v Melbourne Estates& Finance Co Pty Ltd[16] as being a claim for interest that would have been had, had the money been made available as not being compensable. He equated the claim in this case to that in Melbourne Estates, as opportunity costs lost by reason of being without the money for the 76 days that it otherwise would have been entitled to had the offer been made in accordance with section 31. In Melbourne Estates it was submitted the value was capable of being used in a number of ways, namely to be used as a security to raise funds for other developments. In this case it is said the money could be used to extinguish the debt the claimants had in respect to a number of accounts in debt or in negative territory by reason of the loan facility. In this respect Mr Wren submitted the debt and the interest payable on it in this case was not referrable to the acquisition of the land but was a business cost and expense incurred by Mr Schembri in running his business.
Gobbo J determined that Hungerfords’ Case was not applicable in the Melbourne Estates Case as it was not a case of money being withheld.
With regard to these two decisions Mr Delany noted Melbourne Estates is a case concerned with compensation under the Planning and Environment Act not the LAC Act. Under the Planning and Environment Act there is no statutory entitlement to interest, there is no provision which allows a claimant to require an advance and there is no provision for the making of an offer.
Mr Wren in his final submissions stated that ‘the issues associated with the acquisition and its assessment are controlled by the Act and the Act alone’. This is a very telling observation and one which the Authority appears to be trying to avoid . He submits that the loss, if any arises by reason of the Authority’s inability to comply with the requirements of the legislation. This is fundamental when it is said that compensation is a creature of the Act. If this is so then a fundamental principle is that a person that has had their land acquired should be able to rely on the time frames set out under the Act and be assured that the Authority will comply with such time frames.
It is acknowledged that the Authority is required to comply with government policy and follow a process, but that does not alleviate it from complying with its statutory requirements. I consider that a failure to comply with its statutory obligation, that is the making of an offer within the time specified under the legislation, has a foreseeable loss consequence.
Mr Wren indicated that for a foreseeable loss a penalty is imposed by way of interest under sections 53 to 57 of the LAC Act
I do not accept that if the authority fails to comply with section 31 it is incumbent on the claimant to address this situation under section 37. The Authority is the body acquiring the land and the person whose land is being acquired is at a distinct disadvantage in the process. The Act seeks to ensure that the acquiring authority is required to comply with specific provisions and it does not make it incumbent on the landowner to take up the running in the process.
The failure by the Authority to comply with section 31 is a direct consequence of the acquisition of the claimants’ land. The failure to comply with section 31 results in a loss to the claimants which in my view was foreseeable by the Authority.
The provisions of sections 53 to 57 set out different scenarios in which interest can or cannot be awarded. None of the scenarios referred to in these sections relate to the particular instance where the Authority has failed to comply with section 31 and made a late offer. The payment of interest is not confined to only the scenarios referred to in sections 53 to 57.
I consider the loss of the ability to use the compensation offered is a pecuniary loss that is a natural, direct and foreseeable consequence of the Authority’s failure to make an offer within the time required and falls within the definition of ‘disturbance loss’ in section 40 being a pecuniary loss for which provision is not otherwise made. The amount claimed, based on the actual interest being paid by the claimants is I consider to be reasonable. I consider the claimants are entitled to the amount claimed of $88,751.34.
Solatium
Section 44 LAC Act provides that
(1) The amount of compensation may be increased by such amount, not exceeding 10% of the market value of the land, by way of solatium as is reasonable to compensate the claimant for intangible and non- pecuniary disadvantages resulting from the acquisition.
(2) In assessing the amount payable under subsection (1), there must be taken into account all relevant circumstances applicable to the claimant including, without limiting the generality of the foregoing –
(a) The interest of the claimant in the acquired land; and
(b) The length of time during which the claimant had occupied the land; and
(c) the inconvenience likely to be suffered by the claimant by reason of removal from the land; and
(d) the period of time after the acquisition of the land during which the claimant has been, or will be, allowed to remain in possession of the land; and
(f) the age of the claimant;
The claimants are seeking 5% of market value for solatium ($550,000.00). The Authority has offered 2% ($220,000.00).
The meaning of solatium was examined by Barber J in March v City of Frankston [17]:
As a matter of ordinary English usage, it means “a sum of money or other compensation given to a person to make up for loss or inconvenience”. See the Shorter Oxford English Dictionary, 3rd ed., which adds to the above definition the following: “Specifically in Law a sum of money paid over and above the actual damages as solace for injured feelings”. It is an expression apt to describe an award of some amount to cover inconvenience and in a proper case distress caused by compulsory taking. It is quite inapt to describe an amount awarded for provable loss to which the claimant is entitled.
… does not cover or include any amount awarded in consideration of disturbance. It is a discretionary power in the Court and the solatium should be assessed in respect of imponderable factors arising from the compulsory nature of the acquisition.
On my view of the meaning of solatium I should endeavour to compensate the claimants for the nuisance and annoyance resulting from the disruption of their business and the trouble caused them by the acquisition. Any such award must not include any of the factors which they have established and been compensated for under section 26(b) – but represents only the imponderables which are mot specifically provable.
The claimants have owned the land for 26 years. Mr Joseph Schembri indicated that at one stage he and his wife contemplated moving to the land and operating a retail and wholesale nursery. The land was zoned Rural and the Planning Appeals Board refused a permit application for the use and development of the land for a nursery and dwelling. Attempts were made to have the land rezoned to Industrial in order that the Schembris’ could construct warehouses on the land and lease the warehouses. Possession of the land was taken almost immediately after the acquisition. Peter and Carmel Schembri are aged 80 and 79 years respectively and Joseph and Denise Schembri are aged 55 and 44 years respectively.
Mr Delany equated the circumstances in King & Ors v Minister for Planning and Housing[18] as being similar, where the Kings had hoped to develop a large parcel of land and in that case 5% solatium was the amount awarded. This is compared to the recent decision of the Tribunal in awarding 4% solatium in Moore v Roads Corporation[19] where it was considered Mr Moore was a speculative investor who hadn’t suffered an intangible and pecuniary disadvantage.
Gobbo J in King stated:
…activities that might be generally described as being part of the process of acquisition are to be taken into account, especially where the process is a lengthy one. In principle, I do not see why, provided a disadvantage is casually linked to the acquisition, that one cannot take into account events that precede the actual acquisition. There would appear to be a distinction between matters that are implicit in a forthcoming acquisition and disadvantages that are not implicit in such an acquisition. If the former only were to be compensated, however, it may mean that the ground would already be substantially, if not wholly covered by the ordinary principles of compensation for loss attributable to disturbance. It could not have been intended to limit solatium in that way since it is of the nature of solatium that it covers matters not otherwise covered by ordinary principles of compensation for loss attributable to disturbance.
… I can take into account relevant matters falling within both general and statutory guidelines for assessment of solatium if these matters flow from not merely the fact of actual acquisition but also the process of acquisition.
It was evident particularly from the evidence of Mr Schembri that the acquisition, ‘the process’ as he referred to it, has caused frustration, inconvenience and stress. Mr Kalapoutis in his evidence confirmed Mr Schembri and his family appeared stressed and frustrated due to the process.
Mr Delany submitted 5% of the market value ($550,000.00) is modest and reasonable and relied on the amounts granted in several previous cases in the order of 4 and 5%.
Mr Wren submitted that the frustration etc suffered by Mr Schembri and his family was not as a consequence of the acquisition by Vic Roads but rather as a result of the acquisition by Melbourne Water that was still ongoing. In this respect he submitted it was inappropriate to award an amount higher than 2% for the distress and inconvenience caused by Vic Roads in this acquisition. Vic Roads had indicated an intention to enter the land in February and November 2005, no inconvenience was caused to Mr Schembri as a result. The issues referred to by Mr Schembri regarding Vic Roads refusal to allow access to Mt Derrimut Road have been compensated in the award of market value.
I acknowledge that the process has been somewhat frustrating for the Schembris’, I however do not consider that this results in any more than inconvenience particularly in having to deal, even minimally with a Government Authority. The amount of 2% for Solatium has been offered by the Authority, whilst I was asked to allow 4% as awarded in Moore’s case, I note that the amount of 4% was what the Authority had offered and the Tribunal accepted that this was reasonable in the circumstances. In this matter I consider the amount of 2% offered by the Authority to be appropriate in these circumstance.
Jeanette G Rickards
Senior Member
[1] Titles were received in 1983 on the payment of the balance of the purchase price.
[2] Acquisition was commenced in 1996
[3] A Panel had considered the acquisition which included five options. Option five did not affect the Schembris’ land and in 1999 the Panel recommended an alignment that would not affect their land. This was changed by the incoming government.
[4] S 24 & 31 Land Acquisition and Compensation Act
[5] 5A. Determining value of land
(1) Unless otherwise expressly provided where pursuant to the provisions of any Act a court board tribunal valuer or other person is required to determine the value of any land, every matter or thing which such court board tribunal valuer or person considers relevant to such determination shall be taken into account.
(2) In considering the weight to be given to the evidence of sales of other lands when determining such value, regard shall be given to the time at which such sales took place, the terms of such sales, the degree of comparability of the lands in question and any other relevant circumstances.
(3) Without limiting the generality of the foregoing provisions of this section when determining such value there shall, where it is relevant, be taken into account-
(a) the use to which such land is being put at the relevant time, the highest and best use to which the land might reasonably be expected to be put at the relevant time and to any potential use;
(b) the effect of any Act, regulation, local law, planning scheme or other such instrument which affects or may affect the use or development of such land;
(c) the shape size topography soil quality situation and aspect of the land;
(d) the situation of the land in respect to natural resources and to transport and other facilities and amenities;
(e) the extent condition and suitability of any improvements on the land; and
(f) the actual and potential capacity of the land to yield a monetary return.
[6] [2008] HCA 5 at [62]
[7] {2001] HCA 37
[8] Melbourne City Link Authority v Teford Pty Ltd [2001] VSCA 54 at 114
[9] [ 1991] 1 VR 237
[10] Section 51(4) Land Acquisition and Compensation Act 1986
[11] Sections 51(5) and 55 Land Acquisition and Compensation Act 1986
[12] Letter 27 February 2006
[13] Murdesk Investments Pty Ltd v Roads Corporation [2006] VSC 363; Marshall v Director General, Department of Transport [2001] HCA 37; (2001) 205 CLR 603; Halwood Corporation Ltd (In Liq) v Roads Corporation [2008] VSC 28
[14] Medlin v State Government Insurance Commission (1995) 182 CLR 1
[15] (1990) 171 CLR at 142 and 143
[16] [1993] 2 VR 602
[17] [1969] VR 350
[18] [1991] VSC 28
[19] [2008] VCAT 838