Land and Environment Court New South Wales Medium Neutral Citation: Parfett v Roads and Maritime Services [2014] NSWLEC 1182 Hearing dates: 11 and 12 February and 19 June 2014 Decision date: 05 September 2014 Jurisdiction: Class 3 Before: Miller AC Decision: See para 73 Catchwords: Acquisition of highly productive rural land under the Land Acquisition (Just Terms Compensation) Act 1991, highest and best use of land, special value, s 57, claim for anticipated capital growth in land value not allowed Legislation Cited: Roads Act 1993 Land Acquisition (Just Terms Compensation) Act 1991 Land and Environment Court Act 1979 Blayney Local Environmental Plan 2012 Cases Cited: Beckers v Roads and Traffic Authority of NSW [2006] NSWLEC 717 at [45] Boland v Yates Property Corp Pty Ltd [1999] 74 ALJR 209 at [269] Commissioner of Succession Duties (South Australia) and Executor Trustee and Agency Company of South Australia Limited and others [1947] 74 CLR 358 at 373 George D Angus Pty Ltd v Health Administration Corporation [2013] NSWLEC 212 Mir Bros Unit Constructions Pty Ltd v RTA [2006] NSWCA 314 Morris v Danoz Directions Pty Ltd (in Liq) (No 2) [2010] FCA 836 at [13] Peter Croke Holdings Pty Ltd and Anors v Roads and Traffic Authority of NSW [1998] 101 at LGERA at [38] Yates Property Group Pty Ltd (in Liq) v Darling Harbour Authority [1991] NSWLR 156 at 186 Texts Cited: The Principles and Practice of Valuation Dr J F N Murray (P 62, 3rd edition 1954) Category: Principal judgment Parties: David Charles Parfett (Applicant) Roads and Maritime Services (Respondent) Representation: Mr I Hemmings SC (Applicant) Mr P Tomasetti SC and Mr M Wright (Respondent) McIntosh McPhillamy & Co (Applicant) Lander and Rogers (Respondent) File Number(s): 30353 of 2013 Judgment 1This is a claim for compensation consequent upon the compulsory acquisition of primary production land located a short distance north of Blayney. Background 2On 14 December 2012 Roads and Maritime Services (RMS) compulsorily acquired from Mr D C Parfett part of the property known as Springlawn (the subject property) to enable widening of the Mid Western Highway. The land was acquired under the provisions of the Land Acquisition (Just Terms Compensation) Act 1991 (the Just Terms Act) for the purposes of the Roads Act 1993. 3In accordance with s 42 of the Just Terms Act, RMS offered Mr Parfett compensation in an amount determined by the Valuer General. Mr Parfett objected to this amount. Section 66(2) of the Just Terms Act requires this Court to hear and dispose of Mr Parfett's claim for compensation. Compensation is to be determined in accordance with Division 4 of Pt 3 of the Just Terms Act. The acquired land 4The acquired land has an area of 6.953 ha and is now known as lots 6 and 7 Deposited Plan 1170289. Lots 6 and 7, together, comprise a long narrow parcel varying in width from approximately 20 m to approximately 90 m on the north-western side of the Mid Western Highway and extending along the entire approximately 1.4 km frontage frontage of Springlawn. Partial settlement of compensation claim 5Prior to the commencement of the hearing the parties reached agreement in respect of the following elements of compensation payable under the Just Terms Act: Section 55 (a). Market value of the land acquired at $13,000 per hectare $90,500.00 Section 59 (a). Legal costs, (2 amounts, $2812.50 and $2100) $4,912.50 Section 59 (e). Legal fees in connection with the discharge of a mortgage $1,200.00 Section 59 (f). Relocation of general purpose shed $22,000.00 Section 59 (f). Relocation of silos $20,000.00 Section 59 (f). Relocation of cattle yards $5,000.00 Section 59 (f). Care and maintenance of replacement trees on the residue land $10,000.00 Total $153,612.50 Outstanding claims 6The only matters in dispute are the applicant's further claims under s 59 (f) in respect of: Business disturbance for loss of profits $39,847.00 Foregone capital growth $90,099.00 Total $129,946.00 The respondent maintains that the applicant is not entitled to compensation in respect of either claim 7The relevant part of s 59 is in the following terms: 59. In this Act: "loss attributable to disturbance" of land means any of the following: (a) ... (f) any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition." The subject property 8Prior to the acquisition Springlawn comprised 2 lots, purchased separately in 2003 and 2006, having a total area of 148.943 ha. 9Zoning is RU1 Primary Production pursuant to Blayney Local Environmental Plan 2012 (the LEP). The objectives under the plan include: "To encourage sustainable primary industry production by maintaining and enhancing the natural resource base." Under the LEP the two lots enjoyed the benefit of a dwelling entitlement (subject to development approval) but this feature did not ultimately become a consideration. 10By agreement between the parties the subject property was not inspected by the Court. The Belubula River dissects the property in a north/south direction. Alluvial flats adjoin the river and comprise the central part of the property. These flats flood from time to time (to a depth of 30 to 60 cms) but higher land to the north west and north east enables stock to retreat in such times and also in wet winters. Mr Parfett's evidence was that the subject property "is also a natural amphitheatre and is protected from the strong and drying winds in Summer, and the cold winds in the Winter." 11Improved pastures have been sown and comprise a mix of temperate grasses together with white and strawberry clovers. The pastures are said to be fertilised with 20 t of fertiliser spread every 3 years. Internal fencing divides the subject property into 4 major paddocks and 2 smaller holding paddocks which, together with a laneway, serviced the cattle yards in their location prior to the acquisition. However, Mr Parfett stated that normally all internal gates are left open. Stock water is available from the Belubula River and dams located near the Mid Western Highway frontage but not within the acquired land. The evidence 12The Court received written and oral evidence from Mr DC Parfett, Mr N V McMichael, Agricultural Consultant and Registered Valuers, Messrs T Jelbart (for the applicant) and M K Hopcraft (for the respondent). Highest and best use 13In his report Mr Hopcraft states: The property is presently utilised for finishing of steers following breeding on associated properties throughout the district owned by the registered proprietor (Mr Parfett). The higher carrying capacity is attributable to the well-established improved pastures and the heavier alluvial soils extending over the majority of the property together with the double frontage to the Belubula River. The current utilisation of the property is considered to be its highest and best. 14In oral evidence Mr Jelbart agreed with Mr Hopcraft's conclusion. I accept their agreement. During the hearing, the highest and best use was also described as the growing out and fattening of cattle. While Mr Hopcraft's statement referred only to the steers, Mr Parfett's evidence was that heifers and cows were also depastured from time to time. The business disturbance claim for loss of profits 15The calculation of the amount claimed was undertaken by Mr Jelbart based on the evidence of Mr McMichael which, in turn, took into account information provided by to him by Mr Parfett. 16Springlawn, as a result of the acquisition, has been reduced in size by 6.953 ha representing 4.67% of the subject property. No evidence was tendered to suggest that the carrying capacity and thus the productivity of the acquired land was less than the retained land. 17I am satisfied that the business conducted by Mr Parfett on the subject property has been reduced in size and profitability because the number of cattle that could be fattened or grown out on the retained land is less than the number previously carried on the subject property. 18Notwithstanding the fact that the applicant's claim was made under s 59(f) and the hearing conducted on this basis, I subsequently formed the opinion that the acquired land could be regarded as having a "special value" to Mr Parfett and, therefore, compensation must be considered under s 57 of the Just Terms Act. This was an issue that was not addressed at the original hearing in February 2014. 19Accordingly, the views of Counsel were canvassed at a supplementary hearing, on this particular point, on 19 June 2014. 20During that hearing, Mr Hemmings stated that he "disavowed reliance upon special value" but went on to say that "I don't think there's any doubt that there is the potential for the same amount of compensation to fit within different heads. I don't think there's any doubt about that. It's then a question whether it does fit within both heads and then whether it fits - if it fits equally within both, it doesn't matter." 21Mr Tomasetti pointed out that "No claim is made for special value by the applicant. The respondent gave the Court detailed submissions on why that was - why any claim in this case could not be characterised as special value." He concluded "With great respect, the Court's task is to determine the case on the issues raised by the parties." 22It is clear that the practical effect of the extract from Mr Hemmings' submissions, above, is that the applicant now pleads his case in the alternative. 23The correct categorisation of claims under the Just Terms Act is important to ensure a claim can be thoroughly analysed and tested against the particular section or subsection and that just compensation is ultimately determined. I have considered the further submissions of Counsel. I have now come to the conclusion that the claim made for business disturbance for loss of profits under s 59(f) should be properly categorised as a claim for special value under s 57. 24The key point is that the loss of profits, following the acquisition, have been calculated in a two-step process (with which process I agree for the reasons which follow), based on the additional income generated by Mr Parfett from the acquired land (on a proportionate basis), over and above the level of income expected to be derived by other persons, utilising the land to the same highest and best use. 25This indicates that the acquired land had a special value to Mr Parfett in accordance within the meaning of s 57 of the Just Terms Act. Special value 26Section 57 is in the following terms: In this Act: special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person's use of the land. 27In Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209 at [269] Callinan J described special value as: The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it. None of the examples given by the Full Federal Court are true examples of special value. There will in practice be few cases in which a property does have a special value for a particular owner. Obviously neither sentiment nor a long attachment to it will suffice. The special quality must be a quality that has an economic significance to the owner. In Beckers v Roads and Traffic Authority of NSW [2006] NSWLEC 717 at [45] Pain J said: For special value to arise, the advantage must be incidental to the... use of the land and additional to market value. The advantage must be "something objectively ascertainable derived from the land or some attribute or property of it and cannot be recognised if it rests in mere subjective affectation or emotional involvement (Bronzel v State Planning Authority (1979) SASR 513 at 524. 28In the case of rural land which was being used by the dispossessed owner to its highest and best use, up to the date of acquisition, two broad possibilities for the assessment of some elements of compensation arise. 29Where the income from the acquired land is reflective of the return (either expressed as a rate of return on its market value [yield] or in dollars per hectare) expected from broadly similar land devoted to the same highest and best use, a claim for business losses attributable to disturbance under s 59(f) does not arise as the market value of the acquired land is reflective of its income potential. 30Alternatively, where the income from the acquired land exceeds the return, (either expressed as a rate of return on its market value [yield] or in dollars per hectare) exceeds the return from broadly similar land devoted to the same highest and best use, a claim for special value, under s 57 of the Just Terms Act, can arise. 31It is the second possibility which is applicable in this case. The evidence, which I examine in due course, shows that Mr Parfett, as the dispossessed owner, used the acquired land for its highest and best use and the return, expressed as a yield, exceeded the expectations of vendors and purchasers in the market place as evidenced by the market value of the acquired land. Therefore, the value of the acquired land to Mr Parfett, as a hypothetical potential purchaser, will exceed that of its market value. 32In the case of each possibility, entitlement to further compensation may arise under ss 58, 59 and 60. Mr Parfett's evidence 33Mr Parfett owns other properties in the district utilised for the breeding of beef cattle which, to use his words, "effectively guarantees the supply of steers" to Springlawn. At an appropriate time in the season or their lifetime over 500 cattle per annum were moved from these other properties to Springlawn for growing out or fattening. These cattle were depastured on Springlawn for approximately 160 days with sale numbers being organised to match stock truck capacity. 34No objection was raised as to the income and expenditure figures prepared by Mr Parfett, covering three pages (Court Book pp 24, 25 and 26), which became part of Annexure B to Mr Michael's report. Notwithstanding that these pages were not easily legible I was able to glean the following information: * Over the four year period ending in June 2013 a total of 2321 head (an average of 580 per annum) were sold from Springlawn at a gross value of $2,014,055; an average of $868 per head. I have come to the conclusion that gross value excludes the freight to sale and Meat and Livestock Australia (MLA) levy. Average sale live weights are shown but no information is provided in respect of the live weights of these cattle at time of arrival at Springlawn. * Costs including fertiliser, labour, Shire rates and incidentals (said to include repair and maintenance, Livestock, Health and Pest Authority rates and drench) total $20,031 although, elsewhere, costs are shown at $22,000. I have adopted this latter figure. Freight of cattle to sale and MLA levy are additional costs. * The purchase price of cattle is not shown as cattle are transferred from other properties owned by Mr Parfett. However, Mr Parfett has conducted a sensitivity analysis based on a live weight entry to Springlawn of 275 kg at prices ranging from $2 to $2.30 per kilogram. Sale weights used range from 400 to 455 kg at prices ranging from $2.05 to $2.20 per kilogram. As an example the gross margin on a beast with an entry weight of 275 kg and being sold at 425 kg would be $300 assuming that the price per kilogram live weight on each occasion was $2. In the same exercise Mr Parfett has estimated live weight gain per day at .84 kg per beast but the basis of the calculation behind this figure was never explained and I place no weight upon it. * On p 24 of the Court Book Mr Parfett sets out information obtained from the Department of Primary Industries on a Dry Sheep Equivalent (DSE) basis for the Southern Tablelands and Tableland country generally. (Mr McMichael's evidence was that DSE "is the amount of feed that is required to sustain a 50 kg Merino wether in forward store condition for 12 months" [transcript P 35]). It would seem that Mr Parfett then adopts a DSE of 16.42 per hectare for Springlawn which would appear to be the approximate average between the DSE rating of 18.5 applicable to Southern Tablelands for land "sown with perennial pasture, legumes, fertiliser with irrigation/beneficial flooding" and 14.84 for land described as improved pastures/fertiliser/basalt soils said to be typical of ""high quality hill "tableland country"". The resultant figure of 2431 DSE (it would appear that the exact figure is 2446 being 148.943 ha x 16.42) is described as "DSE needed by Department of Primary Industries figures". * Also on p 24 is a table, headed "Rough estimate of number of head on riverflats through the year" with figures beneath, as follows: * July, August and September - 240 each month * October - 250 * November and December - 280 each month * January - 250 * February - 200 * March - 150 * April - 25 * May - nil * June - 180 By calculation, over a 12 month period the average stock carried per month was 195 head. * On p 24 of the Court Book Mr Parfett sets out some figures which shows steers gaining 1 kg live weight per day will have an annual DSE rating of 10.4. Objections to Mr McMichael's evidence 35The respondent's first objection to Mr McMichael's report was set out in a document filed with the Court on 4 February 2014 claiming that it ""is not relevant to any lawful claim for "market value" of the land taken or "disturbance loss"". A number of reasons were given. Subsequently, a submission, filed with leave after the hearing had been concluded on 18 February, states, in part, 4. The respondent's objections to the evidence of Mr McMichael do not turn upon a strict application of Makita (Australia) Pty Ltd v Sprowles [2001] NSWCA 305. They turn upon more fundamental matters each of which are set out in column 2 of the Objection. The objections in turn are founded upon the fact that his report, whilst acknowledging familiarity with the Expert Witness Code of Conduct Schedule 7 to the UCPR 2005, did not comply with it in the most fundamental respects. Non-compliance the (sic) Code does not of itself necessarily render the report in whole or in part inadmissible: United Rural Enterprises Pty Ltd v Lopmand Pty Ltd [2003] NSWSC 970. However, compliance with the Code is more than just a desirable quality. Substantial non-compliance may result in the evidence having no probative value or it being misleading, confusing or unfairly prejudicial to a party; Ritchie's Uniform Civil Procedure in NSW [31.2 3.30]. This is the case with Mr McMichael's evidence. It is not substantially probative of any issue in dispute, it is irrelevant. 5. Ultimately, Mr McMichael expressed an opinion as to the "value of this parcel of land to him" (viz Mr Parfett) which opinion he expressly stated [Court Book 28] he was not qualified to express: [see objection 4]. The opinion must be irrelevant. 36Having carefully considered the submissions of both the respondent and the applicant I have decided to accept Mr McMichael as an expert in relation to the matters covered by his written and oral evidence. My reasons are as follows: (1)The respondent had ample opportunity to file expert evidence to rebut the conclusions which Mr McMichael reached in his report. The person providing such evidence could have been called as a witness to give oral evidence. (2)The provisions of subsections (1) and (2) of s 38 of the Land and Environment Court Act 1979 which provide: (1) Proceedings in a Class I, 2 or 3 of the Court's jurisdiction shall be conducted with as little formality and technicality, and with as much expedition, as the requirements of this Act and of every other relevant enactment and as the proper consideration of the matters before the Court permit. (2) In proceedings in Class I, 2 or 3 of the Court's jurisdiction, the Court is not bound by the rules of evidence but may inform itself on any matter in such manner as it thinks appropriate and as the proper consideration of the matters before the Court permits. (3)A refusal to hear evidence from persons who have filed reports would be a denial of procedural fairness and would also amount to an error of law; Yates Property Group Pty Ltd (in Liq) v Darling Harbour Authority [1991] NSWLR 156 at 186. (4)In Morris v Danoz Directions Pty Ltd (in Liq) (No 2) [2010] FCA 836 at [13] Perram J observed: The strict application of the dictum of Heydon JA in Makita (Australia) Pty Ltd v Sprowles (2001) 52 NSWLR 705 at 743 - 744 [85] might well lead to the conclusion that this aspect of Mr Benjamin's report would be inadmissible. However, the prevailing view is that that dictum is a counsel of perfection: see Sydneywide Distributors Pty Ltd v Red Bull Australia Pty Ltd (2002) 55 IPR 354 at 356 [7] per Branson J. In the same case Weinberg and Dowsett JJ also analysed Heydon JA's dictum and placed particular emphasis upon his Honour's use of the words "strictly speaking" in the dictum. They observed (55 IPR at 379 [87]: The use of the phrase "strictly speaking"... should not be overlooked. It may well be correct to say that such evidence is not strictly admissible unless it is shown to have all the qualities discussed by Heydon JA. However, many of those qualities involve questions of degree, requiring the exercise of judgment. For this reason it would be very rare indeed for a court at first instance to reach a decision as to whether tendered expert evidence satisfied all of his Honour's requirements before receiving it as evidence in the proceedings. More commonly, once the witness's claim to expertise is made out and the relevance and admissibility of opinion evidence demonstrated, such evidence is received. The various qualities described by Heydon JA are then assessed in the course of determining the weight to be given to the evidence. There will be cases in which it would be technically correct to rule, at the end of the trial, that evidence in question was not admissible because it lacked one or other of those qualities, but there would be little utility in doing so. It would probably lead to further difficulties in the appellate process. (5)While Mr McMichael was "provided with documents and calculations prepared by Mr David Parfett which outline both revenue and expense items from his cattle trading operation on the river flats known as Springlawn" (Court Book p 27). I have come to the conclusion that Mr McMichael did not accept this information without review. (6)In his report Mr McMichael stated "...I have had regard to the Expert Witness Code of Conduct. I acknowledge that I have read the expert witness Code of Conduct pursuant to part 31 rule 23 of the Uniform Civil Procedure Rules 2005 and agree to be bound by it". 37The ultimate question, as foreshadowed in Sydneywide Distributors, supra, becomes what weight is to be given to Mr McMichael's evidence. Mr McMichael's evidence and report 38Mr McMichael relied on information provided by Mr Parfett for various parts of his report. Mr McMichael states, referring to Mr Parfett's statement: The parameters used have been scrutinised by myself and it is agreed that they are fair and reasonable. The weight gains per beast and prices received will obviously be variable from year to year however the parameters used are considered a fair average. By way of comparison I have prepared a document using a different approach to calculating the annual returns that can be expected from "Springlawn". This analysis shows a similar result. 39Mr McMichael selects a DSE rating for Springlawn of 2431 identical with that adopted by Mr Parfett. However, Mr McMichael made allowances for three items of expenditure not included in the spreadsheets of Mr Parfett, namely, freight of cattle to sale and the Meat and Livestock Australia (MLA) levy, at a combined cost of $15 per head, and mortality at .50%. 40Mr McMichael produced no documentary evidence to support his stocking rate (which was based on a simple mathematical calculation of 10.4 DSE per beast), buy in and sell prices per kilogram live weight, and an average weight gain of .95 kg per head per day over a twelve month period all of which, bearing in mind his extensive agricultural consultancy activities, I thought would have been readily available. In addition, he gave evidence that he carries out "parametric analysis" on behalf of clients generally extending over a five-year period which he did not undertake in respect of Springlawn. He did not address the difference between his stocking rate of 234 at any one time, Mr Parfett's "rough estimate" of an average of 195 head at any one time or Mr Parfett's records showing, over the four year period, ending June 2013, an average sale of 580 head per annum from Springlawn. He also made no reference to forward price projections that could have been available from MLA. 41The profitability of the subject business is dependent to a large degree on the weather and the resulting seasonal conditions which are beyond the control of Mr Parfett. While Mr Parfett, because of his breeding operations on other properties can manage, to some degree numbers and entry live weights, sale prices are set by the market. Mr McMichael's evidence was that "The weight gains per beast and prices received will obviously be variable from year to year however the parameters used are considered a fair average." Mr McMichael did not identify the circumstances which create a non-average year, their impact on the profitability of the business or his estimate of their frequency. Findings 42I have had to set aside from serious consideration the previous four years of sale history during which an average of 580 head per annum were sold as no information was provided in respect of the entry weights of those cattle onto Springlawn although the sale weights are shown on Court Book P 26. In the end, I have decided to place equal weight on Mr McMichael's stocking rate of 234 and Mr Parfett's "rough estimate" of 195 thereby adopting an average stocking rate of 215 head at any one time. 43In the Appendix to this judgment I have set out my analysis of the cattle fattening operation on Springlawn prior to the acquisition and other financial data which has enabled me to reach a conclusion that the "Calculated net income per annum (on a percentage basis) attributable to the acquired land" was $5518 which shows a yield of 5.75% based on the "Calculated value of capital invested in the acquired land" of $96,012. Mr Jelbart 44The respondent objected to the receipt of Mr Jelbart's report, firstly, as it is based on the report of Mr McMichael and as this report was claimed to be inadmissible it follows that Mr Jelbart's report is also inadmissible. Secondly, objection was taken to Mr Jelbart's market valuation of the acquired land and his calculations in respect of disturbance loss. 45For reasons which, in essence, mirror those that I have already explained in respect of the report of Mr McMichael, I have decided that Mr Jelbart's evidence should be admitted subject to the normal test of appropriate weight. Quantification of the net income applicable to the acquired land 46Mr Jelbart was the only person to give evidence on this matter. 47Mr Jelbart accepts that the agreed market value of the acquired land at $13,000 per hectare includes, in part, an allowance for the expected net income that the market anticipates would be received from the conduct of a beef fattening operation on the subject property based on its agreed highest and best use. Mr Jelbart endeavours to ascertain the percentage yield the market shows for such use and then compares that yield with what could be expected from the acquired land, calculated on a proportionate basis. 48Mr Jelbart did not obtain any information concerning yields in districts surrounding the subject property or in New South Wales generally but sought to obtain such information from a publication of the Commonwealth Department of Agriculture, Fisheries and Forestry, entitled "Australian Beef: Financial performance of beef cattle producing farms, 2010/2011 to 2012/2013" (the Australian Beef report). The research for this publication was undertaken by the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARE). The report groups beef cattle herds by size and location. The subject property is located in what is described as "Southern Australia" and would be described as "Medium" sized. Southern Australia includes New South Wales, Victoria, the eastern part of Tasmania, South Australia and the southern part of Western Australia. The yield or "return on capital - excluding capital appreciation" on medium sized herds ranges, over the three years surveyed, from 0.3% to 0.7% to 1.1% (P22). The return on capital for large and very large herds are higher; in the case of very large herds the rate of return range from 3% to 3.4% (P33). However, the Southern Australian properties surveyed are spread over the southern half of the continent and have multiple income sources; total farm income includes not only the sale of beef cattle but sheep, lambs, wool and grain. Similarly, there is no comparison between beef breeding and beef fattening. The evidence was that the latter is more profitable. Findings 49Notwithstanding the very general and diversified sample reviewed in the Australian Beef report, Mr Jelbart concludes that an appropriate yield for the subject property, devoted to its highest and best use and managed, it must be assumed by a competent manager, would be 3%. In the absence of more reliable, directly comparable information and doing the best I can with the very limited evidence, I accept Mr Jelbart's conclusion that 3% is a reasonable yield under the circumstances. The calculated yield as shown in the Appendix is 5.75% indicating that the additional yield of 2.75% can be accepted as a reflection of Mr Parfett's skill and experience. On a proportionate basis, for the acquired land, this is $2640 per annum being 2.75% of $96,012. A beef fattening enterprise is a business and the requires active management with decisions, involving risks, having to be made on a regular basis, perhaps weekly, in an environment where profitability is governed to a very large extent by factors outside of Mr Parfett's control. 50Mr Jelbart considered that the appropriate capitalisation rate to obtain the capital value of lost income of $2640 per annum and therefore compensation payable to Mr Parfett, would be 7%. He noted the payback period for an investment capitalised at 7% was approximately 14 years. He made reference to "high-risk or intensive agriculture" and "an intensive agricultural operation being a broiler farm or piggery" where he proffered that a rate of return would be between 10 and 12% (transcript P 182). 51To assess special value it is necessary to address the question: What would the dispossessed owner, as a potential purchaser, be prepared to pay for the acquired land rather than not obtain it? Peter Croke Holdings Pty Ltd and Anors v Roads and Traffic Authority of NSW [1998] 101 LGERA at [38]. I am prepared to accept Mr Jelbart's opinion, as the first step in addressing the question, that a yield of 7% is appropriate as a starting point. However, I consider that notwithstanding Mr Parfett's experience in conducting the beef fattening enterprise on part of the property since 2003 and on the whole of the property since 2006, it would be reasonable for him to allow for income risk arising from issues beyond his control to which I have already referred. I consider that such an allowance would be 25% which when added to the yield of 7% becomes 8.75% which I adopt. 52The final part of the question that needs to be addressed is whether the projected income of $2640 per annum would be quantified by Mr Parfett , as a potential purchaser, by capitalising same at 8.75% or undertaking a present value calculation also using 8.75% over a shorter period; I consider that 20 years would be appropriate. 53Capitalisation produces a sum of $30,171 while the present value calculation produces $24,535. 54Mr Tomasetti drew my attention to decisions in Mir Bros Unit Constructions Pty Ltd v RTA [2006] NSWCA 314 and Beckers (supra) where claims for special value failed. However the facts in both of these cases were entirely different and, for that reason, were of no assistance. I also distinguish the facts in Peter Croke (supra) where a claim for special value was allowed. 55I have decided to adopt the sum of $30,171 as the special value to Mr Parfett of the acquired land. In doing so I have had regard to s 54(1) of the Just Terms Act. In addition, I have followed the orbiter dictum of Dixon J in Commissioner of Succession Duties (South Australia) and Executor Trustee and Agency Company of South Australia Limited and others [1947] 74 CLR 358 at 373: I should like, however, to add for myself that there is some difference of purpose in valuing property from revenue cases and in compensation cases. In the second the purpose is to ensure that the person to be compensated is given a full money equivalent of his loss while in the first it is to ascertain what money value is plainly contained in the asset so as to afford a proper measure of liability to tax. While the difference cannot change the test of value, is not without effect upon a court's attitude in the application of the test. In the case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate. 56If I had been satisfied that the claim made for business disturbance for loss of profits under s 59(f) should have been dealt with under that section I would have awarded compensation in the same sum of $30,171. Foregone capital growth 57The amount claimed is $90,099. 58In the applicant's Opening Outline Submissions at [12]: The Applicant has not, however, found any authority applying the lost implied capital growth. Of course, that does not mean it is not available. Rather, it's simply identifies that it is a claim infrequently made. That is because, as will be seen from the discussion below, it can only arise when the highest and best use of the land is also the current use (as is agreed to be the circumstances in this case) because of the language both of s 59 (f) and s 61. 59In his report Mr Jelbart (Court Book P 83) states: As a direct result of the acquisition by RMS Mr Parfett forgoes the right to both an operating return on the land acquired plus any future capital growth that may have been achieved should the acquisition not have occurred. Whilst the land value adopted ($13,000 per hectare) for the land acquired reflects a component of underlying capital growth of the region, it does not reflect the additional returns that may be obtained from capital growth in the future. Mr Parfett, as a direct result of the acquisition forgoes any right to future capital growth by the cessation of land ownership. It is this, together with the operating return that we have calculated a business disturbance loss. In calculating this loss it was necessary to determine what returns may be obtained from the funds received from the acquisition, that is funds that could have been otherwise been invested in the land ($90,000) excluding the $42,000 attributed to the shed and silo replacement. In our opinion it would not be unreasonable to assume that these funds could be deposited into a 2 - 3 year term deposit with a major banking institution at of a rate at a rate of around 4% per annum. Therefore when assessing this component of compensation we have deducted this return of 4% from the total operating and capital growth return received from the land of 13.77% (this figure comprises "Net Return on Total Capital Value of 6.94% and Implied Capital Growth 6.83%"). Utilising these numbers we have concluded a business disturbance claim of $18,689 per hectare which equates to $129,946 over the total area acquired of 6.953 ha. The above total business disturbance can be apportioned between both the pure business disturbance and that attributed to the foregone capital growth assessment. The apportionment is as follows: Business Disturbance $39,847.00 Foregone Capital Growth $90,099.00 60Mr Jelbart (Court Book P73) refers to an analysis that he conducted of 570 transactions covering the sale of properties within the Blaney Shire in excess of 20 ha in size over a 20 year period ending in 2012. Mr Jelbart discarded from his sample a number of sales which he considered to be "outliers". The analysis showed a compound (nominal) growth rate of 6.83% per annum. 61Mr Hopcraft disagreed with Mr Jelbart's conclusions for two reasons. Firstly, (Court Book P 159) it "does not split the data between hobby farms say up to 50 ha and larger rural holdings, nor does it provide and analysed rate per hectare." Secondly, (Court Book P159): Mr Jelbart's graph indicates that value levels have declined from 2003 onwards with the projected growth of 6.83% estimated by Mr Jelbart representative of a much greater time period back to 1992 where in 1999 there were significant increases in value as there were in 2002 and 2003 before showing limited growth/declined through to 2012". Further, (Court Book P 161) " Mr Hopcraft considers that the future potentialities both for capital growth and income are reflected in the current market value of the land as determined by reference to comparable sales. Findings 62There are two reasons why I cannot accept the claim made under this heading. The first reason 63In the Just Terms Act "market value" is a defined term (s 56). It is necessary to consider both words in addressing this issue. Neither are separately defined. Value 64In the highly regarded text "The Principles and Practice of Valuation" Dr J F N Murray (P 62, 3rd edition 1954): Value in the economic sense means the benefit conferred by ownership, which includes not only the possibility of exchange for other commodities, but all the satisfaction that may arise from possession." 65Further, at P 98, he concludes: The value of a parcel of land at any point of time is dependent entirely upon the benefits which may be obtained from the use of that parcel in the future" [his emphasis]. 66It follows that the value of a particular area of land, at a nominated point in time, can be described, in economic terms, as equal to the present value of all the benefits that will flow from its ownership having regard to its highest and best use. Market 67The market is the forum where buyers and sellers interact. It can be in public, such as at an auction where buyers make competitive bids or it can in private, either directly or through an intermediary, where a buyer and a seller discuss what one is offering to pay and the other prepared to accept for a particular property. 68Market value is thus an extension of the concept of value and represents the market's opinion, as evidenced by completed sales, of the ownership benefits expressed in monetary terms. More precisely, it represents the collective opinion of buyers and sellers who are both willing but not anxious, as to the benefits, expressed in monetary terms, that ownership of the particular parcel of land will bring in the future. It follows that the market value of highly fertile arable land will exceed that of hilly non-arable land of low fertility. Similarly, the market value of equally productive land will be higher in an area where the consensus of opinion, in the marketplace, is that capital appreciation is likely to occur in the future. 69In the case of the acquired land the market value agreed, between the parties, is the result of an analysis of comparable sales and thereby takes into account all features including its location, topography, its highest and best use, its productive capacity as well as the likelihood or otherwise of capital appreciation in the future. 70To allow the claim would be an example of "double dipping" as it is colloquially referred to. The second reason 71This relates to the correct interpretation of s 59 (f) see George D Angus v Health Administration Corporation [2013] NSWLEC 212, at [99] to [108]. 72It is clear that financial costs (or losses) of any type unrelated to the "actual use of the land", in this case, for beef cattle fattening, cannot be claimed under s 59 (f). Foregone capital growth could not be described as "the actual use of the land". Orders of the Court 73Pursuant to s 66(2) of the Just Terms Act, the Court determines the objection to the amount of compensation offered by the respondent in the total sum of $183,783.50 made up as follows: Already agreed between the parties $153,612.50 Special value, s 57 $30,171.00 $183,783.50 The exhibits may be returned. E Craig Miller Acting Commissioner Appendix A DISCLAIMER - Every effort has been made to comply with suppression orders or statutory provisions prohibiting publication that may apply to this judgment or decision. The onus remains on any person using material in the judgment or decision to ensure that the intended use of that material does not breach any such order or provision. Further enquiries may be directed to the Registry of the Court or Tribunal in which it was generated. Decision last updated: 05 September 2014