Where a resuming authority has constructed improvements on acquired land prior to resumption, the cost of those improvements is relevant evidence but not determinative of value; compensation must be assessed on a willing buyer-willing seller basis taking into account the potentialities of the land with its improvements.
Later decisions that cite Collins v Livingstone Shire Council
Decisions cited by Collins v Livingstone Shire Council
COLLINS v. LIVINGSTONE SHIRE COUNCIL [1972] HCA 35; (1972) 127 CLR 477
Compulsory Acquisition (Q.)
High Court of Australia
Barwick C.J.(1), Menzies(2), Walsh(3), Gibbs(4) and Stephen(5) JJ.
CATCHWORDS
Complusory Acquisition (Q.) - Land - Compensation - Assessment - Buildings and plant - Works constructed by resuming authority prior to resumption - Reservoir and fence partly on acquired land and partly on other land - Measure of compensation - Whether cost of works - Whether value of improvements - Estimation of value - The Public Works Land Resumption Acts, 1906 to 1955 (Q.), ss. 22 (2), 23 - Local Government Act, 1936 (Q.), as amended, s. 32 (12).
HEARING
Brisbane, 1972, May 29; June 30. 30:6:1972DECISION
June 30.2. The appellants served on the respondent on 10th May 1968 a written claim for compensation. As found by the Land Court the respondent, on 30th May 1968, made a written offer to the appellants to pay the sum of $100 by way of compensation. (at p481)
3. On 20th June 1968 the appellants' solicitors wrote to both the respondent
and to the Registrar of the Land Court a letter in
the following terms :
"re Public Works Land Resumption Acts, 1906 to 1955 reApart from this letter, no other letter or written notice was sent by or on behalf of the appellants rejecting the abovementioned offer of compensation. (at p481)
Claim for Compensation by J. D. and P. J. Collins to the
Livingstone Shire Council
We refer to the above and wish to advise that we are acting
on behalf of Messrs. P.J. and J.D. Collins.
The claim for compensation was served upon the Livingstone
Shire Council on the 10th May 1968. We understand
that a statutory offer of $100 has been received and a copy of
this letter will be forwarded in due course.
We enclose herewith the following : -
(a) Copy of Claim lodged in this matter.
(b) Copy of Proclamation published in the Govenment
Gazette on the 12th August 1967.
(c) Photostat copy of Certificate of Title No. C49525,
Volume 294, Folio 28.
We should be grateful if you would kindly acknowledge
receipt of these documents. A copy of this letter is being
forwarded to the Council's solicitors, Messrs. Watt and Connolly."
4. The Land Court entertained the appellants' claim for compensation, deciding that the appellants had effectively rejected the respondent's offer of compensation. On 16th October 1969 it assessed the total compensation payable to the appellants in respect of the compulsory acquisition of their land at $660, comprising $300 for the value of the unimproved land and $360 for improvements being the assessed value of the fencing to which I have referred. (at p481)
5. The appellants appealed to the Land Appeal Court pursuant to s. 23(3) of the Act. By majority the Land Appeal Court assessed the total compensation payable by the respondent at $20,000 of which $19,342 represented the proportion of the total expenditure of the respondent in the construction of the whole reservoir which was attributable to the construction of that part of it which occupied that part of the appellants' land which had been compulsorily acquired. (at p482)
6. On 11th March 1971 the Land Appeal Court stated a case for the opinion of
the Supreme Court, asking three questions as follows
:
"(1) Whether the Land Court had jurisdiction to entertain
the claim.
(2) If yes to (1), whether the proper measure of compensation
is the unimproved value of the resumed land plus the
cost incurred by the council in erecting the portion of
the reservoir and fencing which stand upon it.
(3) If no to (2), what is the measure of compensation
payable ?" (at p482)
7. In that case, apart from the facts I have so far mentioned, it was said :
"10. The estimated cost of the construction of that part of
the reservoir which is erected on Lot 1 is $19,342. The
estimated cost of the erection of that part of the fencing
which is on Lot 1 is $360.00. The total cost of
construction of the whole reservoir and all the fencing was
$40,988.81.
11. The section of the reservoir erected on the claimants'
land could not be put to any profitable use as a separate
entity and the cost of removing that section would exceed
the value of the land on which it stands. The
unimproved value of the resumed land at the date of
resumption was $300.
12. The cost of construction of the fixtures was borne by te
council and the claimants contributed nothing towards
their cost.
13. There were other sites on hills at Emu Park on which it
would have been possible to build a reservoir and at the
chosen site the reservoir could effectively have been
constructed in a different position adjoining the claimants'
land.
14. The reservoir cannot be put to use by any person or body
other than the council as part of its water reticulation
scheme for Emu Park and Yeppoon. At the date of
resumption there was no other potential purchaser of
the land which was resumed but the council.
24. . . . The ground of the decision of the majority" (i.e.
of the Land Appeal Court) "was that the portion of the
reservoir and fencing erected on the claimants' land
formed part of their land, and that the proper measure
of compensation, the council being the only possible
purchaser, was, and as a matter of alw was required to
be, the value of the land taken as though unimproved
plus the cost of making the structures forming part of
it." (at p482)
8. The Supreme Court answered the questions asked of it as follows :
"(1) Yes.and ordered that the matter be remitted to the Land Appeal Court. (at p483)
(2) No.
(3) No answer."
9. The appellants, by notice of appeal dated 24th September 1971, appealed to this Court, seeking the reversal of the answer of the Supreme Court to the second question on the ground that it ought to have been answered in the affirmative. (at p483)
10. The respondent, by notice dated 12th October 1971, cross-appealed, claiming that the Supreme Court had erroneously answered the first question. The respondent also, on 6th October 1971, gave notice of objection to the competency of the appellants' appeal. (at p483)
11. The objection to competency having been set down for hearing, the appeal and cross-appeal and the objection to competency came on for hearing, at which time the appellants sought special leave to appeal. The Court heard argument as if on an appeal, reserving its decision on competency, upon the application for special leave and upon the appeal and cross-appeal, should special leave be given. (at p483)
12. Little need be said, in my opinion, as to the Supreme Court's answer to the first question. That answer was, in my opinion, clearly right. The jurisdiction of the Land Court is given by s.23(4) of the Act. Whether or not the respondent's offer of compensation had been rejected, the Land Court clearly had jurisdiction to entertain the appellants' claim for compensation. The effect of the non-rejection of the offer was not to deprive the Land Court of jurisdiction but merely to deem the offer to have been accepted. In fact, the amount had not been paid, so that non-rejection could only affect the quantum of compensation which could properly be awarded. Whether or not there had been a rejection was a matter of fact which the Land Court had jurisdiction to decide. In the result it did so, holding that there had been an effective rejection of the offer. (at p483)
13. In my opinion, the answer given by the Supreme Court to the second question was correct. Whilst, as will appear, I think that the structure on the appellant's land at the date of the compulsory acquisition formed part of the land in respect of which compensation had to be awarded, it is, in my opinion, undoubtedly clear that the appellants were not entitled as a matter of law to have the structure valued at the proportionate cost expended by the respondent in its construction. There is no warrant whatever, in my opinion, in this Court's decision in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 for such a conclusion. So much I say, not because of any differences in the facts of that case and this ; nor do I think that proposition insupportable because to accept it would involve the conclusion that it treats the respondent, not as a willing purchaser but as a purchaser under compulsion to buy ; nor because to accept the proposition would be to give to the appellants an increase in value of the land acquired, due to "the realized undertaking as it exists in the hands of the undertaker", to use the language used in Cedars Rapids Manufacturing and Power Co. v. Lacoste (1914) AC 569, at p 577 . I do so because cost and value are not necessarily coterminous, however much, in some circumstances, cost may be persuasive of value. Nothing decided or said in the case of Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 would support the proposition that, as a matter of law, the cost of construction was necessarily and inevitably the value of the structure. (at p484)
14. It is the refusal of the Supreme Court formally to give an answer to the third question, having answered the second, which, to my mind, poses the problem in this case. Of course the Court ought formally to have answered that question for apart from all else, it was apparent that the Land Appeal Court, if the second question were answered negatively, was seeking guidance for its further consideration of the matter. Whether the failure formally to give an answer in all the circumstances of the case would afford a sound ground for appeal need not be considered having regard to views I am about to express. (at p484)
15. Although the Supreme Court gave no express answer to the third question, it is apparent to my mind that, in the reasons of the majority, they did in substance do so ; and, with an important qualification, did so correctly. (at p484)
16. To make this clear it is necessary to set out a number of passages from
the reasons given by the majority. Having observed upon
the facts, as I have
outlined them, their Honours said this (1972) Qd R, at pp 198-200:
"We do not doubt that a tribunal which has the functionTheir Honours concluded(1972) Qd R, at p 201:
of assessing compensation payable to the respondents should
consider that the material section of the reservoir forms part
of the resumed land. It is a corollary to this proposition that
such tribunal should have regard, in order to ascertain the
price a willing pruchaser would pay for the land with the section
of the reservoir already constructed on it, to the likelihood that
the appellant, as a willing purchaser, may be willing to pay
more for the land as a potential reservoir site with part of a
reservoir built on it than it may otherwise pay if the land
lacked such partially erected structure.
In our opinion the erection of this reservoir for reticulation
purposes on its present site forms part of the scheme of water
supply to which we have referred. Because it is part of the
scheme, in considering the amount of compensation to be
awarded, the tribunal should not consider that the resumed
land has been enhanced in value due to the fact that part of
the reservoir has already been constructed by the resuming
authority on land which adjoins the resumed land, because to
do so would have the consequence that the award of
compensation would be increased by a factor the existence of
which is entirely due to the scheme underlying the compulsory
acquisition . . . . In other words, the tribunal should not
consider that the value of parcel P was enhanced by the fact
that a reservoir was wholly constructed on land adjoining
it. Therefore, we think that the majority of the members of
the Land Appeal Court erred in taking into consideration, as
an element which added value to the resumed land, that part
of the reservoir was erected on allotment 5 and on Hawke
Street. The proper approach is to look at the respondents'
land with its part reservoir thereon and to disregard the fact
that the other portion of the reservoir was completely erected,
in so far as it could be done, on the adjoining land. That half
of the structure on the adjoining land, was, as we have said,
part of the scheme underlying the acquisition and any increase
in value to the respondents' land by reason of the carrying
out of some of the works involved in the scheme on the
adjoining land should not have been taken into consideration.
To put it another way, we think that there is inherent in the
view of the majority of the Land Appeal Court the proposition
that the value to the respondents of their land (together with
its part of the completed reservoir) is a proportional part of
the value of the realised undertaking as it exists in the hands of
the appellant council. The view that we have taken does not
mean that the Land Court should not take into consideration
the fact that the land may have special value for the appellant
council, and for it alone, nor does it follow that the giving of
consideration to that special value will allow the existence of
the scheme to enhance the value of the land."
"In our opinion the case should be remitted to the Land
Appeal Court which should, in assessing the price which a
willing purchaser would pay to a willing vendor, have regard
to the principles to which we have referred including the
potentiality of the land as a reservoir site and whether such
potentiality has been increased at all by the fact that a part
of the reservoir is already constructed upon it." (at p486)
17. So far, in my opinion, this was an answer to the question as to the
"measure of compensation payable" using the expression "measure
of
compensation" as meaning the manner of approach to the assessment of
compensation in this case, a meaning, evidently intended,
in my opinion, by
those who framed the question. (at p486)
18. To round out such an answer I would have expected that, having regard to the answer given to the second question, it would have been pointed out that, in applying the directions given, the Land Appeal Court in treating the respondent as a willing but not anxious purchaser and in estimating what it would reasonably give and the appellants accept for the land with the structure thereon, could have regard to the cost of constructing that structure, i.e., the partially complete reservoir as on the appellants' land, not as a measure of the price, but as some, though not an overwhelming, indication of what the price might be. But I would not regard its failure to add these considerations as being itself a ground of appeal. (at p486)
19. But the reasons of the majority did not stop at the point where I have
ended my quotation. They proceeded, immediately following
that quotation, as
follows (1972) Qd R, at p 201:
"By reason of the fact that the section of the reservoir
erected on the respondents' land could not be put to any
profitable use as a separate entity, and on the basis that the
Land Court should not have regard to the part erected on the
adjoining lands, it seems to follow that there is no advantage
for the appellant to acquire the respondents' land (with a
section of the reservoir erected on it and the remaining section
not constructed) rather than to acquire vacant land and go
to the expense of erecting an entirely new reservoir on that
land." (at p486)
20. In this passage their Honours, in my opinion, entered upon ground upon
which they were not entitled to tread. In truth, they
proceeded to decide the
facts : and, in my opinion, erroneously. It did not follow that because the
assessment of compensation had
to be approached on the footing that only the
part of the reservoir which was on the appellants' land had been constructed
and that,
as it stood, it could not be properly used, that the respondent as a
willing purchaser would have given nothing for it. Whether the
respondent
would have done so or not, or whether it would have preferred to look for land
elsewhere, were matters of fact not committed
to the decision of the Supreme
Court. Conformably with the earlier parts of their Honours' reasons which I
have quoted, it was for
the Land Appeal Court to consider whether the
respondent would have purchased and what it would have given in a concluded
negotiation
between itself and the appellants, each being a willing but not
anxious participant in the negotiation. (at p487)
21. In the result, I would be content with the answer which I think the Supreme Court in substance gave to the third question, it being understood that the Land Appeal Court were entitled to regard the respondent as a willing buyer, though the only buyer, and, if they saw fit, to have regard to the cost of construction of the part of the reservoir constructed on the appellants' land as a fact in the consideration of what the respondent as such a purchaser would give and the appellants accept for the land and all the improvements thereon, including the partially completed section of the reservoir. (at p487)
22. I turn now to what order the Court should make. In my opinion, the appellants were not entitled to appeal as of right : nor was the respondent so entitled to cross-appeal. The answers given by the Supreme Court did not in themselves, and the order resolving the matter did not, constitute a final judgment : nor were they otherwise within s. 35 (1) (a) of the Judiciary Act 1903- 1969 (Cth). (at p487)
23. Consequently, special leave to appeal was necessary. The Supreme Court's answers to questions one and two were plainly right. Question three was in substance answered : the answer given was in point of law clearly correct. But an associated opinion on a matter of fact was both beyond the scope of the questions answered and was erroneous. Because beyond the questions asked, it was merely obiter and not binding on the Land Appeal Court, which is, in my opinion, entitled to disregard it and to consider for itself the questions of fact doing so conformably to the directions in law which the answers to the questions and the reasons of the court so far as they relate to those questions involve. (at p487)
24. I see no matter of general public importance in the addition of these obiter dicta to the reasons for judgment in this case. I would not be prepared in these circumstances to grant special leave to appeal. However, I understand that that view is not shared by a majority of the Court hearing the case. Thus, special leave to appeal being given, in my opinion, the appeal should be allowed, the answer of the Supreme Court to the third question set aside and in lieu thereof order that that question be answered, as follows : (at p487)
25. Compensation is to be assessed for the land and all its improvements including the structure of the partially completed reservoir. It is to be supposed that the balance of the reservoir had not been built at the date of the compulsory acquisition. The respondent may be regarded as a possible purchaser. The compensation will in this case be that sum which the Land Appeal Court decides that the respondent if a purchaser would give and the appellant accept, for the land and all its improvements, each being willing but not anxious respectively to buy and to sell and without being under any compulsion to do so. In estimating the price which would be so agreed, the Land Appeal Court may have regard along with any other relevant evidence to the cost of constructing the partially completed reservoir, not as a measure of price or value but as a fact to be weighed in making the estimate. (at p488)
26. The objection to competency should be sustained. Special leave to appeal having been given by majority, the appeal should be allowed, the third question asked in the stated case answered as I have indicated and the cross-appeal should be dismissed. (at p488)
MENZIES J. I consider that in this case the Court should grant special leave to appeal from the judgment of the Full Court of Queensland and vary that Court's order by answering question 3 specifically. (at p488)
2. I will state my reasons for this conclusion by reference to and without repeating what the Chief Justice has written about the facts of the case and the proceedings in the courts below. I also share his opinion about the correctness of the answers to questions (1972) Qd R, at p 192 and [1941] HCA 37; (1941) 67 CLR 544 (at p488)
3. My reading of the judgment of the learned Chief Justice of the Supreme
Court of Queensland is that His Honour decided that the
Council could not, at
the date of acquisition, be regarded as a willing purchaser of the land
belonging to the appellant so that
what it would be prepared to pay for the
appellant's land with a section of the reservoir upon it would not be a
material consideration
in assessing its value. His Honour said (1972) Qd R, at
p 192 : "The law contemplates a willing vendor and also a willing
purchaser--not
a purchaser under a 'pressing need' to acquire the land."
Again, in referring to the decision of this Court Geita Sebea v. Territory
of
Papua [1941] HCA 37; (1941) 67 CLR 544 , his Honour said (1972) Qd R, at p 193 : ". . . in
Geita's Case [1941] HCA 37; (1941)
67 CLR 544 the Court was not faced
with the situation in
this case where, to preserve the value of the asset of its own land,
the
council is obliged to acquire the
other land." The decision of Hoare and W. B.
Campbell JJ. relating to the assessment of the
value
of the land is, I think,
to be
found in the following statement (1972) Qd R, at p 201:
"In our opinion the case should be remitted to the Land
Appeal Court which should, in assessing the price which a
willing purchaser would pay to a willing vendor, have regard
to the principles to which we have referred including the
potentiality of the land as a reservoir site and whether such
potentiality has been increased at all by the fact that a part
of the reservoir is already constructed upon it. By reason
of the fact that the section of the reservoir erected on the
respondents' land could not be put to any profitable use as a
separate entity, and on the basis that the Land Court should
not have regard to the part erected on the adjoining lands, it
seems to follow that there is no advantage for the appellant
to acquire the respondents' land (with a section of the
reservoir erected on it and the remaining section not
constructed) rather than to acquire vacant land and go to the
expenses of erecting an entirely new reservoir on that land." (at p489)
4. The observations which I have quoted amount in substance, although not in
form, to an answer to the third question and I think,
with great respect, that
they are wrong (1) in so far as they indicate that the section of the
reservoir on the appellant's land
cannot be regarded as adding to the value of
the land ; and (2) in so far as they direct that what the council would be
prepared
to pay for the land with the section of reservoir thereon must be
disregarded in the assessment of its value. (at p489)
5. In my opinion, the compensation payable is the value as at the date of the acquisition of the appellant's land with the section of reservoir constructed thereon but without regard to the section of the reservoir constructed upon other land. In arriving at this value, the council should be regarded as a willing purchaser. The Cost of the construction of that section of the reservoir upon the appellant's land can be taken into account in determining the value, but that cost does not of itself determine the amount by which the unimproved value of the land has been increased because there was constructed on it a section of the reservoir. Accordingly, regard should be had to any relevant evidence of the value of the land at the date of the acquisition. (at p489)
6. The decision appealed from does, I think, involve important questions of land valuation, although the circumstances are such that one might hope that the particular problem will not arise again. It is therefore a fit case for special leave. I would accordingly grant special leave to appeal and would vary the order of the Full Court by answering question 3 as follows: The measure of compensation payable is what a willing purchaser, including the council, would pay for the land as it was at the date of acquisition with a section of reservoir constructed thereon but without regard to the construction of so much of the reservoir as was not upon that land. (at p490)
7. This answer is, I think, substantially in accord with that proposed by the Chief Justice in which I am ready to join. (at p490)
WALSH J. The facts and the course of the proceedings in this matter are set out in the judgment of the Chief Justice. In my opinion an appeal as of right did not lie from the decision of the Supreme Court of Queensland. But if special leave to appeal, rather than leave to appeal, was necessary, I am of opinion that special leave to appeal should be granted. (at p490)
2. I agree with the reasons given by the Chief Justice for holding that the answer given by the Supreme Court to the first question in the stated case was correct. (at p490)
3. The second and third questions in the stated case are related questions. The Supreme Court answered the second question "No" and did not answer the third question. I agree with the reasons of the Chief Justice for concluding that the answer of the Supreme Court to the second question was correct. I am in agreement also with the answer which he has formulated as that which should be given to the third question. I shall state my reasons for my conclusions relating to the second and third questions. (at p490)
4. In my opinion, it is clear that the portion of the reservoir and the portion of the fence which were on the acquired land at the date of the acquisition had become part of the land and were owned by the appellants. I have had the benefit of reading what my brother Gibbs has written relating to the submissions on behalf of the respondent based upon certain provisions of the Local Government Act 1936, as amended, (Q.) and I agree with him that none of those provisions operated to prevent the improvements from becoming the property of the appellants. (at p490)
5. What had to be assessed was the value at the date of acquisition of the
land with any improvements then upon it. The value of
the land to the owner
had to be ascertained, by considering "the price which a willing vendor might
reasonably expect to obtain from
a willing purchaser". In Raja Vyricherla
Narayana Gajapatiraju v. Revenue Divisional Officer, Vizagapatam (1939) AC
302, at p 312
, their Lordships, after using the expression which I have just
quoted, went on the say:
"The disinclination of the vendor to part with his land andLater their Lordships said(1939) AC, at p 313 that if land possesses special features as regards its position or its potentialities, what has to be ascertained by the arbitrator as best he may from the materials before him is what a willing vendor might reasonably expect to obtain from a willing purchaser "for the land in that particular position and with those particular potentialities". Their Lordships decided, also, that that principle applies where there is but one potential purchaser and it applies if that potential purchaser is the authority which possesses compulsory powers of acquisition. (at p491)
the urgent necessity of the purchaser to buy must alike be
disregarded. Neither must be considered as acting under
compulsion. This is implied in the common saying that the
value of the land is not to be estimated at its value to the
purchaser. But this does not mean that the fact that some
particular purchaser might desire the land more than others
is to be disregarded. The wish of a particular purchaser,
though not his compulsion, may always be taken into
consideration for what it is worth."
6. Those principles were applicable, in my opinion, to the assessment of compensation for land acquired under the statutes which authorized the acquisition of the land in this case. In carrying out the difficult task of estimating, in accordance with those principles, the amount which the owners as vendors might have reasonably expected to obtain, it seems plain that many factors might properly be taken into account. Therefore, unless the decision of this Court in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 requires a different conclusion, it seems clear that the tribunal assessing compensation was not bound as a matter of law to determine it by adding to the unimproved value of the land the cost of the erection of the portion of the reservoir and fencing which stood upon it and accordingly, it seems clear that an affirmative answer could not be given to the second question in the stated case. However, the majority in the Land Appeal Court were of opinion that the compensation was required as a matter of law to be determined in that way. In the Supreme Court the decision in the Geita Sebea Case [1941] HCA 37; (1941) 67 CLR 544 was regarded as inapplicable to the circumstances of the present case. There are, however, statements in the judgments in that case which could be taken as assertions that the method of assessing compensation there approved was the only method which could properly be applied in circumstances not materially different from those existing in this case. The Geita Sebea Case [1941] HCA 37; (1941) 67 CLR 544 merits therefore some further examination. (at p492)
7. The case stated to this Court in the Geita Sebea Case [1941] HCA 37; (1941) 67 CLR 544 did not ask what was the proper method of taking into account the improvements on the land. It did not ask whether the cost of the improvements was necessarily to be included in the amount of compensation. It did ask whether the potentialities of the lands for use as an aerodrome should be taken into account in valuing the lands. It asked, also, whether the claimants were entitled to claim compensation for their interest in the "works" upon the aerodrome and in the buildings on the lands. When the questions set out (1941) 67 CLR, at p 546 and the answers given (1941) 67 CLR, at p 555 are examined it is plain, in my opinion, that no part of the actual decision of the Court depended upon the proposition that as a matter of law the cost of the construction had to be included as such in the value assigned to the lands. (at p492)
8. It appears that the only evidence relevant to value that was placed before the Court of first instance in the Geita Sebea Case [1941] HCA 37; (1941) 67 CLR 544 was evidence of the value of the lands "without regard to any potentiality as an aerodrome" and evidence of the "value" of the work done in making the aerodrome and in erecting buildings (see (1941) 67 CLR, at p 546 ). In those circumstances, Starke J. said (1941) 67 CLR, at p 554 that as there was no market and as some artificial method had to be adopted, the "most satisfactory" method was to take the agricultural value of the land plus an addition measured by what it would cost to make or establish the improvements and structures forming part of the land, but taking into account a proper deduction for obsolescence or depreciation. Those observations are to be regarded, in my opinion, as being no more than statements of his Honour's opinion on the facts of the case. Again, in the judgment of Williams J. (1941) 67 CLR, at p 558 , there appear statements or assumptions of fact, not of law, which led his Honour to his conclusion that the value was to be assessed as the agricultural value of the land plus the value of the expenditure on the improvements. When his Honour said that "the vendors would know that the Crown would pay this amount but no more" and that "the Crown would know that the vendors could reasonably expect this price" he did not state a proposition of law but an assumption of fact which could, and in his opinion should, be made in estimating what price would be fixed upon a sale by the vendors, considered as willing vendors, to the Crown considered as a willing purchaser. It may be added that an examination of the cases cited (1941) 67 CLR, at pp 554, 558 in support of the statements to which I have referred reveals, in my opinion, that those cases were concerned with particular problems arising out of particular statutory provisions and that they contain nothing which requires the adoption in the present case of a rule that the amount by which the value of the land was increased by the placing on it of improvements was necessarily equated with the cost of construction less depreciation. (at p493)
9. The Supreme Court decided not to answer the third question. It is provided by s. 47 of the Land Acts, 1962 to 1968 (Q.) that the Full Court when a case is transmitted to it "shall hear and determine every question of law arising thereon". The Full Court understood the third question as using the expression "measure of compensation" to mean the method of arriving at the value of the land and as being based upon an assumption that there could be only one such method. Since in my opinion the Court did provide in substance, although not in form, an answer to the third question, I need not decide whether or not the Supreme Court was correct in declining to give an answer to that question. As the joint judgment of two members of the Court contained observations which, in my opinion, did constitute in effect an answer to the third question which, although in a large measure correct, was in part erroneous, I am of opinion that it is proper for this Court to intervene and to give an answer to the question and, in my opinion, it should answer it in the terms which the Chief Justice has formulated. I agree with the opinions of the Chief Justice relating to the passages which he has set out from the joint judgment in the Supreme Court and his Honour's reasons for those opinions, in so far as they affirm the correctness of part of that judgment and explain why part of it was considered by his Honour to be erroneous. But I am of opinion that the Land Appeal Court would have endeavoured to give effect in its further consideration of the case to the whole of what the Supreme Court had said and would not have considered itself free to disregard that part of the joint judgment which was in my opinion erroneous. Therefore I think that this Court should give an answer to the third question. (at p493)
10. In my opinion, special leave to appeal should be given and orders should be made as proposed by the Chief Justice. (at p493)
GIBBS J. This is an appeal from a judgment of the Full Court of Queensland by which answers were given to two of three questions submitted for the decision of that Court by a case stated by the Land Appeal Court under s. 45 of the Land Acts 1962 (as amended) (Q.). The appellants conceded that in the circumstances of this case no appeal lay as of right and sought leave, or if necessary, special leave, to appeal. The questions involved in the case are in my opinion of sufficient importance to warrant the grant of special leave and for that reason I shall assume, and need not decide, that the appellants require special leave rather than merely leave to appeal. (at p494)
2. The circumstances of the case have been set out in the judgment of the
Chief Justice, which I have had the advantage of reading.
The first question
asked in the case stated was whether the Land Court had jurisdiction to
entertain the appellants' claim for compensation.
It was contended by the
present respondent that the appellants had not served on the respondent a
notice in writing rejecting its
offer of compensation and that in consequence
the Land Court had no jurisdiction to determine the appellants' claim for
compensation.
The argument was based on s.22 (2) and s.23 (1) of the Public
Works Land Resumption Acts, 1906 to 1955 (Q.) ("the Resumption Acts"),
which,
notwithstanding their repeal by the Acquisition of Land Act of 1967 (Q.),
continued to govern the present case. Those sections
provided as follows:
"22 (2). A claimant upon whom an offer of compensationSub-section (2) of s. 23 provides, inter alia, that the claimant shall file a copy of his claim and of all notices and other particulars in the office of the registrar of the Land Court, and sub-s. (4) provides, inter alia, that "the Land Court shall have jurisdiction to hear and determine all matters of compensation arising under this Act". It is apparent that it was within the jurisdiction of the Land Court to decide whether a claimant had rejected an offer made by a constructing authority, and that if the Land Court made an erroneous decision on that point it would nevertheless be acting within the limits of its jurisdiction (cf. Parisienne Basket Shoes Pty. Ltd. v. Whyte [1938] HCA 7; (1938) 59 CLR 369 ). Moreover, the decision of the Land Court, affirmed by the Land Appeal Court and the Full Court, that the appellants had served on the respondent a notice in writing rejecting the offer made by the respondent was not, in my opinion, erroneous. The action of the appellants in lodging with the registrar of the Land Court a letter enclosing a copy of their claim and other documents was obviously taken in purported pursuance of s. 23 (2) and was intended to commence proceedings in that Court for the determination of compensation ; it implied that the offer was rejected. On the same day, the appellants served on the respondent's solicitors a letter enclosing a copy of the letter lodged with the Registrar and this could only be understood as notice that the appellants rejected the respondent's offer. The affirmative answer given by the Full Court to the first question raised by the case stated was therefore correct. (at p495)
is made pursuant to subsection one of this section, may,
within sixty days commencing on the date of the making of
the offer of compensation, serve on the constructing authority
a notice in writing rejecting the offer.
If a notice in writing rejecting the offer is not served within
the time aforesaid, the offer of compensation shall be deemed
to be accepted by the claimant and the constructing authority
shall forthwith settle the compensation in accordance with
that offer.
23 (1). If the constructing authority within the time
prescribed by and otherwise in accordance with subsection one of
section twenty-two of this Act makes no offer, or if the claimant
within the time prescribed by and otherwise in accordance
with subsection two of section twenty-two of this Act rejects the
offer, the amount of compensation to be paid shall be
determined by the Court, and the following provisions shall have
effect."
3. The substantial questions that now arise are as to the basis on which the Courts should have assessed the compensation payable to the appellants in respect of the compulsory taking of their land under the Resumption Acts. At the date of the proclamation by which the appellants' land was taken there was erected on the land portion of a reservoir built by the respondent for the purpose of providing a water supply for the townships of Emu Park and Yeppoon. The reservoir was a circular structure with a concrete base and concrete retaining walls ; about two-thirds of it were upon the subject land and the rest was on some adjoining land. The reservoir was surrounded by a high wire fence part of which was on the subject land. The respondent, with a brave disregard for legal niceties, had built the reservoir and the fence without obtaining the consent of the appellants and before giving to the appellants notice of its intention to exercise its powers of compulsory acquisition. (at p495)
4. There can be no doubt that the parts of the reservoir and of the fence
that were built on the appellants' land were fixed to
the soil and had thereby
become subject to the ownership of the appellants. The respondent in its
submission to the contrary relied
on certain provisions of the Local
Government Act, 1936 (as amended) (Q.,), which it was said had the effect that
if a local authority
carried out construction work of a kind which it was
authorized to perform on land which remained in private ownership at the time
when the work was done, the work would nevertheless
become the property of the
local authority. In my opinion, however, the provisions
to which we were
referred fall short of achieving
the result desired by the respondent. Section
32 (12) of the Local Government Act
provides that "the materials of all roads,
bridges, ferries, wharves and jetties, and other public works under the
control of the
Local Authority, and all things appurtenant thereto, shall
belong to the Local Authority". These general words must refer to public
works
lawfully carried out and cannot be construed as giving the local authority a
right to the ownership of works wrongfully constructed
on lands in other
ownership. Section 50 (2) of those Acts provides, inter alia, as follows :
"(2) (i) For the purposes of exercising and performingIt will be noted that the sub-section refers to works provided "on" a road but not to works done "on" other land. It is unnecessary to discuss the scope of this sub-section or to consider whether payment of compensation is a condition precedent to the exercise of the powers conferred by par. (i) in relation to land other than a road, because the sub-section clearly does not authorize the erection of a permanent structure such as a reservoir upon the surface of land in private ownership. Finally, reference was made to s. 51 (3), which deals with the case where work is done on land after the local authority has given notice of its intention to acquire the land. That sub-section obviously has no application to the present case where the work was completed before such notice was given. In support of its submission, the respondent relied upon the judgment in Commissioner of Main Roads v. North Shore Gas Co. Ltd. [1967] HCA 41; (1967) 120 CLR 118,but the observation in that case (1967) 120 CLR, at p 127, that, when a statute empowers someone other than the owner of land to affix things in the soil and yet retain ownership of the things so affixed, the fixtures do not become part of the freehold, has no application to the present case where the work was done illegally and not in the exercise of any statutory power. (at p497)
any of the functions of local government under this Act or
any other Act, the Local Authority may provide any works,
matters, or things as are necessary on, through, across, or under
any road, and may also on making compensation therefor
carry any such works, matters, or things into, through,
across, or under any other land.
(ii) In the exercise and performance of the functions
of local government under this Act or any other Act, the Local
Authority . . . may at all reasonable times enter upon any
land, structure, or premises to carry any works, matters, or
things into, through, across, or under any land and to execute
any work, matter, or thing in any structure or premises . . . "
5. Section 19 of the Resumption Acts provides, inter alia, that compensation shall be assessed according to the value of the land, estate or interest of the claimant on the date of the proclamation taking the land. In the present case the land had to be valued as it was at the date of the resumption, that is, with part of the reservoir and the fence erected upon it. If the value of the land had been increased by the erection of the fixtures the appellants are entitled to the increased value notwithstanding that the fixtures had been put on the land by the respondent at its own expense. The respondent would not be the first local authority which has been required to pay for resumed land compensation which has been fixed by reference to the increased value given to the land by work carried out thereon by the local authority prior to the date of the resumption : Willoughby Municipal Council v. Valuer-General (1934) 12 LGR (NSW) 41 ; Cheyne v. Council of Shire of Landsborough (1944) 20 CLLR (Q) 42 . Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 is a similar case, although there the improvements were made by the Crown and its licensees during the term of a lease and not in unauthorized anticipation of a resumption. (at p497)
6. But although the appellants are entitled to the value of the land with the
structures thereon, it does not follow that the structures
must be valued as
though they formed part of a completed reservoir. In Pointe Gourde Quarrying
and Transport Co. Ltd. v. Sub-Intendent
of Crown Lands (1947) AC 565, at p 572
, Lord MacDermott said:
"It is well settled that compensation for the compulsory(1915) 2 Ch 252, at p 258 'Increase in value consequent on the execution of the undertaking for or in connexion with which
acquisition of land cannot include an increase in value which
is entirely due to the scheme underlying the acquisition. As
it was put by Eve J. in South Eastern Railway Co. v. London
County Council :
the purchase is made must be disregarded'."The principle there laid down has been discussed and applied in many cases, of which the most recent appears to be the decision of the House of Lords in Rugby Joint Water Board v. Shaw-Fox (1973) AC 202 . In the present case the scheme underlying the acquisition provided for the construction of a complete reservoir. In so far as the work done in pursuance of that scheme was done on the land of the appellants, I have already pointed out that it cannot be disregarded for it affected the condition of the land itself. However, in so far as the work done under the scheme on other land had the effect of further enhancing the value of the appellants' land, it has to be disregarded. In other words, the appellants were entitled to be awarded the value of the land in its actual condition at the time of resumption and with all the potentialities it had at that date, but without any increase in value due to the fact that the construction of the reservoir and fence had been completed. The Land Court and the Land Appeal Court were therefore required to indulge in a flight of the imagination and to value the land on the assumption that no part of the reservoir or the fence had been erected on the adjoining lands. The facts stated in the case show that the section of the reservoir erected on the subject land could not have been put to any profitable use by itself and that the cost of removing it would have exceeded the value of the land on which it stood. Nevertheless it is possible, if not probable, that an uncompleted portion of the reservoir standing on the appellants' land could have been extended into a complete reservoir by the doing of further work on the adjoining lands. If so, this potentiality for development had to be valued. The case stated does not reveal whether, or with what difficulty or cost, an uncompleted concrete retaining wall and base could have been used in the construction of a complete and usable reservoir, but evidence on this aspect of the matter would be necessary to enable a court to assess the value of the potentiality of the portion of the reservoir to be converted into a whole. Obviously no difficulty existed in relation to the extension of the fence. (at p498)
7. It appears from the case stated that there were other sites in the area on
which a reservoir could have been built. However,
if it would have been
possible to put the part of the reservoir on the appellants' land to
substantial use in the construction of
a complete reservoir, this potentiality
would obviously have given the appellants' land an advantage over vacant lands
in the area.
It further appears from the case stated that the reservoir could
not have been put to use by anyone other than the respondent. The
fact that
the respondent would have been the only possible purchaser of the land with
its potentialities for development into a completed
reservoir does not mean
that the appellants must only be allowed the unimproved value of the land.
That this is so is now well established.
In Raja Vyricherla Narayana
Gajapatiraju v. Revenue Divisional Officer, Vizagapatam (1939) AC 302, at p
323 , in a well-known passage,
Lord Romer said that :
"even where the only possible purchaser of the land'sIn Geita Sebea v. Territory of Papua (1) this Court acted on the same view. (at p499)
potentiality is the authority that has obtained the compulsory
powers, the arbitrator in awarding compensation must ascertain
to the best of his ability the price that would be paid by a
willing purchaser to a willing vendor of the land with its
potentiality in the same way that he would ascertain it in a
case where there are several possible purchasers . . . "
8. The determination of the question what a willing vendor might reasonably have expected to obtain from a willing purchaser for the land in its condition at the date of resumption and with those potentialities for use in the construction of a completed reservoir as it may be found to possess is one of considerable difficulty. The Land Court awarded the appellants the unimproved value of the land and the full cost of erecting the portion of the fence theron, but allowed nothing for the value of the reservoir. In the course of its judgment the Court said that the part of the reservoir erected on the appellants' land had no economic value, and that there were engineering difficulties which would have precluded it from being converted into a water reservoir, by which was meant a reservoir constructed entirely within the appellants' land. The Court, however, appears to have overlooked that the reservoir in its notionally uncompleted state could have been completed by work done on the adjoining lands. The ground of the decision of the Court was expressed by saying that "that part of the structure erected on the resumed land by the respondent is not deemed to be an improvement which had any value at the date of resumption". The Land Court was in error in viewing the matter in that way. On appeal the majority of the Land Appeal Court, applying, as they thought, the decision of this Court in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 , awarded in addition the full cost of construction of that portion of the reservoir which was situated on the appellants' land. They allowed nothing for obsolescence or depreciation because the reservoir had so recently been constructed. The learned judges of the Full Court, in their decision of the questions arising on the case stated, took a different view ; they held that it was wrong to regard the cost of construction as the measure of compensation and accordingly answered in the negative the second question asked in the stated case. Their Honours, however, declined to answer the third question, by which they were asked what was the measure of compensation payable, apparently regarding it as dealing with methods of valuation and as involving matters of fact and evidence rather than of law. (at p499)
9. I do not regard Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 , as laying down any principle that would require a court, in assessing compensation in a case such as the present, to allow the unimproved value of the land plus the cost of establishing the improvements thereon less any proper deduction for obsolescence or depreciation. It seems that the observations of Starke J. (1941) 67 CLR, at p 554 , and Williams J. (1941) 67 CLR, at p 558 , as to the way in which land should be valued were obiter, since the matter to which they were directed does not appear to have been directly raised by the questions in the case stated (which are set out in the report (1941) 67 CLR, at p 546 ). In any case, their Honours said no more than that the method there approved was suitable to be applied in the circumstances of that case, which are distinguishable from those of the present, where the improvements must be regarded as having been fragmentary and useless until formed into a finished reservoir and not, as in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 , completely erected and ready for use. The method adopted in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 , is familiar enough to courts concerned with valuation matters and provides a useful means of arriving at the value of a structure or improvement in many cases. However where, as in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 , and in the present case, the relevant statute requires compensation to be assessed with reference to the value of the land acquired, evidence of the cost of improvements (whether of actual cost or of what the cost would be at the date of valuation) may be relevant to the value of the land in its improved state, but it is the value and not the cost that is the matter for ultimate determination. Some improvements increase the value of land to a greater extent than the cost, but in other circumstances the cost of an improvement may greatly exceed its value, e.g., because its wasteful design renders it unnecessarily expensive to construct, or because it is redundant or out of place and cannot be put to profitable use having regard to its situation. Moreover, the cost of a partially completed structure may exceed its value because additional expense may be occasioned by commencing construction afresh and the total cost of a structure erected in two stages may be more than if the construction had proceeded from the beginning without interruption. In the present case, where it is necessary to imagine that at the date of resumption the portion of the reservoir on the resumed land was the only part in existence, the valuation has to be made on the assumption that the respondent when it acquired the land could only get a useful reservoir by extending the walls and base on to the adjoining land. In making a valuation on the basis it would be relevant to consider evidence as to the feasibility of completing the unfinished reservoir in this way, as to any engineering or constructional difficulties that would be likely to be presented and as to what extent, if any, the costs of linking the notionally existing portion with the newly constructed portion would diminish the value of the existing structure. It was erroneous for the Land Appeal Court to regard the cost of construction as the proper measure of value ; the cost was only one of the facts to be considered in arriving at the value and the weight to be given to it would depend on the other evidence, including any evidence as to the matters to which I have just referred. On the other hand, two of the learned judges in the Full Court also fell into error in saying that there was no advantage for the respondent to acquire the appellants' land (with a section of the reservoir erected on it and the remaining section not constructed) rather than to acquire vacant land and go to the expense of erecting an entirely new reservoir on that land. This observation suggests that the additional value given to the land by the section of the reservoir erected upon it may be disregarded, and such a suggestion is contrary to the principles I have already discussed. (at p501)
10. For these reasons, I consider that the answer given by the Full Court to question (2) was correct. However, I consider that question (3), on its true meaning, sought a judicial decision as to the legal principles to be applied by the Land Appeal Court in making the valuation, and that in the circumstances of the case it ought to have been answered. I would now answer the question in the manner suggested by the Chief Justice. (at p501)
11. I would grant special leave to appeal and allow the appeal. (at p501)
STEPHEN J. I have had the advantage of reading the reasons for judgment of the Chief Justice and, for the reasons stated by him, would have refused special leave. I agree also with the remainder of his reasons for judgment and, since special leave is to be given, would allow this appeal, set aside the answer to the third question asked and substitute for it an answer in the form set out in the reasons of the Chief Justice and dismiss the cross-appeal. (at p501)
2. I wish only to add this : although the cost of constructing that portion of the reservoir situated on the respondents' land is no doubt one fact to which the Land Appeal Court may have regard, I regard the reference to this particular fact in the answer to the third question as dictated rather by the inference which might otherwise flow from the answer to the second question than by any particular weight to be given to the cost of construction as a factor in assessing compensation. The cost of construction is a fact which has achieved prominence in this case due, no doubt, to the decision in Geita Sebea v. Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 . However, in that case a complete entity, a fully constructed aerodrome, was in question and in the circumstances there existing the cost of erecting the improvements of which that aerodrome consisted, less an allowance for depreciation, was clearly of prime importance. What is here involved is an incomplete portion of a structure ; its incorporation as an integral part of a completed reservoir may perhaps pose substantial engineering problems affecting its value to the respondent as a possible purchaser. The tribunal of fact will no doubt assess the weight to be given to the cost of construction in the light of this. (at p502)
ORDER
Objection to competency upheld. By majority special leave to appeal granted. Appeal allowed. Order of the Full Court of the Supreme Court of Queensland varied by ordering that the third question asked in the stated case be answered as follows:"Compensation is to be assessed for the landand by deleting the order for costs.
and all its improvements including the structure
of the partially completed reservoir. It is to be
supposed that the balance of the reservoir had not
been built at the date of the compulsory
acquisition. The respondent may be regarded as a
possible purchaser. The compensation will in
this case be that sum which the Land Appeal
Court decides that the respondent if a purchaser
would give and the appellants accept, for the land
and all its improvements, each being willing
but not anxious respectively to buy and to sell and
without being under any compulsion to do so.
In estimating the price which would be so agreed,
the Land Appeal Court may have regard along
with any other relevant evidence to the cost of
constructing the partially completed reservoir,
not as a measure of price or value but as a fact
to be weighed in making the estimate"