Boland v. Yates Property Corporation Pty Ltd

167 ALR 575

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(Judgment by: Callinan J.)

Boland v Yates Property Corporation Pty Ltd
Webster v Yates Property Corporation Pty Ltd

Court:

Judges: Gleeson CJ
Gaudron J
Gummow J
Kirby J
Hayne J

Callinan J

Hearing date: 3-5 August 1999
Judgment date: 9 December 1999

Canberra

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Judgment by:
Callinan J.

[178] These appeals from the Full Court of the Federal Court raise two questions: whether a firm of solicitors and counsel whom they instructed were guilty of negligence in the preparation and conduct of a claim for compensation in respect of a city property in Sydney that was resumed by a statutory authority; and, whether, if they were, they were entitled nonetheless to an immunity from liability to the dispossessed landowner that they represented. In order to dispose of these appeals it is necessary to review a long chain of events stretching back to August 1981 and to examine the reasons for judgment of two appellate courts, and two judges sitting at first instance on a total of three occasions. It is not without irony that the charge in negligence against the lawyers is in substance that they failed to present part of their client's case on an alternative basis, the foundation for which is, as will appear, not only unsound but also a matter upon which the various justices who have to this point considered it, have themselves been far from unanimous.

Facts and earlier proceedings

[179] One of the respondents, Yates Property Corporation Pty Ltd (Yates), bought two parcels of land at Darling Harbour in August 1981 for $5.1 million. The combined area of the parcels was 1.542 hectares. Yates wished to develop the land for use as a market. There was, already, nearby, another market, Paddy's Market, which the Full Federal Court held was likely to be relocated but which, in fact, as Cripps J explained in his reasons for judgment, would have been likely to continue trading and to offer competition for some time to any market that might have been established by Yates. ^[213] Yates was prepared, if necessary, to trade in competition with Paddy's Market although there were some grounds for hoping that the latter might in due course be removed from the Darling Harbour area.

[180] Yates set out to obtain expressions of interest from potential stallholders in any market which it might develop. Some 40 or so prospective licensees made commitments to Yates by paying about $100,000 in total for licence fees for two months in advance. Those 40 stallholders represented only a small number of the stallholders who would need to make a binding commitment to ensure the viability of Yates' project. However, some hundreds of other potential stall operators expressed interest in the market without making any commitments to take a licence of space in it.

[181] On 3 June 1983 Yates applied for development approval for the purpose of providing retail markets in a steel-framed single storey building of 12,500 square metres to be erected on the land. The building was described in evidence before Branson J by a quantity surveyor, Mr Meredith, as a large shed with a number of services in it. A further application for car parking and storage space was approved on 13 April 1984. Within two months, on 4 June 1984, Yates was notified by the Director of Public Works in New South Wales of the likelihood of the resumption of the land. There was no doubt that Yates was determined to do whatever it could to prevent the resumption. On 8 June 1984 the appellant solicitors who had been engaged to act for Yates delivered a brief to Mr Hemmings of Queen's Counsel to advise what steps might be available to Yates to defeat the proposed resumption. By this time the Darling Harbour Authority Act 1984 (NSW) had been passed. ^[214] The objects of the Authority which was created by that Act were to promote, encourage, facilitate, carry out and control development of land within a designated development area of which Yates' land formed part. Section 12 of that Act empowered the Authority to resume land for the purposes of the Act and made provision for the payment of compensation to be determined under the Public Works Act 1912 (NSW). Section 124 of that Act provided as follows:

For the purpose of ascertaining the purchase money or compensation to be paid, regard shall in every case be had not only to the value of the land to be purchased or taken, but also to the damage (if any) caused by the severing of the lands taken from other lands of the owner, or by the exercise of any statutory powers by the Constructing Authority otherwise injuriously affecting such other lands; and the same shall be assessed according to what is found to have been the value of such lands, estate or interest at the time notice was given, or notification published, as the case may be, and without the amount of the valuation notified to such claimant being binding in any way in relation to the assessment, and without reference to any alteration in such value arising from the establishment of railway or other public works upon or for which such land was resumed ...

[182] Mr Hemmings conferred with the solicitors and Mr Yates, a principal of the company, and offered a rather gloomy prognosis of any possibility of defeating the resumption. He also pointed out that in the event that the land were not resumed regulations governing its use might be so restrictive that Yates would be better off if it were resumed and compensation assessed on the basis of the uses by then notified as permissible by the Sydney City Council.

[183] The consent which was granted by the council was not an unqualified one. It was granted subject to a number of conditions.

[184] On 20 July 1984 Yates obtained a building approval. Again conditions were imposed. Relevantly they were as follows:

Compliance with the conditions of the approval granted by Council on 9 December 1983 and 13 April 1984 ...The hours and days during which building work may be carried out shall be restricted to between 7.30 am and 5 pm Mondays to Fridays and 7.30 am and 3 pm Saturdays with no work being carried out on Sundays....The rights of the adjoining owners shall be maintained....The proposed work shall be constructed in Type 1 construction in accordance with the requirements of Clause 16.7 of Ordinance No 70....A total of 54 car spaces shall be provided on site in respect of the proposed retail stall market use.

[185] To bring itself to this point Yates had made careful and thorough investigations of markets in other places and of the feasibility of a market on the subject land and its likely cost and returns. It had consulted and paid several experts who had prepared applications and plans and had performed other tasks preliminary to the construction of the building to house the stalls. The site had also been cleared. All of the work that was done was specific to the site.

[186] After the building approval was obtained further advice was sought from Mr Hemmings QC which was given in conference on 19 September 1984. The solicitors made notes of the advice which concentrated largely upon ways in which compensation might be claimed and assessed. One possible basis for claiming compensation to which Mr Hemmings QC referred was by reference to the valuation of an income stream which the property when developed might generate. He provided a simple, theoretical example of a valuation of a business based upon its history of an annual, fairly stable income stream.

[187] Mr Hemmings QC discussed the respective abilities of valuers who might be engaged to value the property and to give evidence on behalf of Yates if the matter went to court. Mr Hemmings QC suggested three men. He expressed some reservations about one of them because he thought that he might be too busy to give the matter the attention that it deserved but spoke well of the other two. He also expressed the opinion that "having two valuers would impress [the Valuer-General]". There is nothing in the note of this conference to suggest that the approaches ultimately adopted by the three valuers who were in fact engaged to, and did, give evidence in the proceedings in the Land and Environment Court were not competent valuers. Mr Hemmings QC did say, however, that a compensation court might be loath to act upon a valuation made upon the basis that a notional development undertaken on the land would have produced a certain annual income which, when capitalised, might be taken as a measure of the value of the property after allowance for construction, like costs and outgoings. The note records: "[The] variables in costs, time, etc, come into play which makes [the valuation] difficult to really determine, therefore court decides on how much [an] owner [will] accept for selling potential, ie, no risk."

[188] I interpolate here that most, it not all, of the conferences were attended by Mr Yates whose evidence discloses that he was a sophisticated, energetic investor and property developer who kept himself closely involved in and informed on all matters relating to the claim for compensation, even after the respondent went into liquidation. Indeed, Mr Yates, and not the solicitors, actually engaged two of the valuers, Mr Parkinson in the first place and subsequently Mr Webster on Mr Parkinson's recommendation. The liquidator of Yates retained Mr Egan in July 1988 and in October 1989 the solicitors confirmed Mr Woodley's engagement on the instructions of the liquidator.

[189] Just as Yates looked to a number of valuers for advice, it did not confine itself to one barrister. Mr Tobias QC was briefed on 3 October 1984. He was asked some 14 questions many of which involved the canvassing of matters which had been the subject of advice by Mr Hemmings QC.

[190] Before Mr Tobias QC provided answers to the 14 questions asked of him another meeting took place between the valuers and Mr Yates in Mr Hemmings' chambers on 8 October 1984. The notes reveal a concern, as did the questions asked of Mr Tobias QC, about the way in which property sales in the vicinity of the subject land might influence the value attributable to the land. This was a valid matter of concern for reasons which I will later discuss. One further, understandable matter of concern was the uncertainty of the position in which Yates found itself and consequential and other difficulties that it was experiencing in dealing with its financiers. The possibility of a claim for damages against the resuming authority, as well as for compensation, was discussed and dismissed by Mr Hemmings QC. Mr Hemmings QC was directly asked which was the better position to argue on property valuation: "(a) income capitalised. (b) head lease or management's situation capitalised." Mr Hemmings QC is recorded as responding in this way:

Income capitalised is always regarded with suspicion. A great many assumptions - really depends on the operator - personalities come into it. I have always tried to shy away from it because they are so easy to criticise.

In this passage Mr Hemmings QC is giving Yates and the valuers the benefit of his experience. He cannot fairly be taken to be saying that a method of valuation that relies on capitalisation of income is an impermissible method of making a valuation, or one which might not in some circumstances be the preferred method of valuation. At the time when he was expressing his opinions he was not making comparisons between different methods of making valuations based upon actual figures, and there was not before him any detailed information with respect to what might otherwise be achieved by reliance upon, for example, comparable sales. In response to a question from one of the valuers who attended this conference, Mr Parkinson, whether Yates would be entitled to compensation for its time and preparation "in putting the deal together and developing a concept" Mr Hemmings said: "You cannot have it both ways. If the land has value because of the development approval, you may not add on top of that what you spent reaching that position." Mr Parkinson later in the conference reiterated his suggestion that compensation might be payable in relation to these matters but Mr Hemmings again said that he thought it unlikely that any compensation would be payable in relation to them.

[191] Mr Tobias QC provided his advice during a conference which was held on 7 November 1984. Notes taken by the appellant solicitors of this conference are available. It was attended by Mr Yates and yet another valuer, Mr Meredith, who was not called as a witness in the compensation case. Discussion about the use of comparable sales for the purpose of valuing the land took place. In substance, Mr Tobias QC advised, as had Mr Hemmings QC, of the effect of the application of the Pointe Gourde principle. ^[215] At one stage Mr Tobias QC said that the respondent would be entitled to any special value it could prove, confined, he thought, to any costs incurred in "getting your plans through the council - architects, valuers, etc". This advice was inconsistent with the advice given by Mr Hemmings QC which I have already quoted and which was to the effect that, if the dispossessed landowner were to be paid compensation on the basis of the potential of the land for development, the costs incurred in establishing or proving up that potential would not be reimbursable. Mr Tobias QC rejected any reliance upon "capitalised profit" whereas Mr Hemmings QC had pointed to the difficulties and uncertainties associated with a valuation made upon that basis without ruling it out entirely.

[192] Later during the conference Mr Yates expressly asked Mr Tobias QC what "special value" involved. According to the minutes, Mr Tobias QC answered the question by saying:

Apart from operative expenditure the [property] have no special value because it is for a development. If the government resume it, it is vacant and that is the valuation you get. You do not get loss of future profit.

[193] Question 13 was: "At law which is the better position, to argue on property valuation: (a) income capitalised (b) head lease or management's situation capitalised."

[194] Mr Tobias QC unequivocally answered that neither was available. He rejected the former because of the variables relating to rents, outgoings, capitalisation and rates. Unlike Mr Hemmings QC, Mr Tobias QC was of the view that Yates would be entitled to recoup its costs incurred in time, materials and the like associated with its investigation of the prospects of successfully developing the markets without referring to the possibility, indeed likelihood, that these would already have been accounted for in a valuation which gave effect to the potential of the land which the investigation demonstrated existed. Even allowing for the possibility that the notes of the conferences may not fully capture the sense of the exchanges between the participants, enough appears to show that the issues being discussed were complex and ones upon which experienced, senior counsel were expressing different opinions.

[195] There were further conferences with Mr Hemmings QC, on 28 February 1985 and 28 November 1985. On the former occasion Yates' architect, as well as Mr Yates, attended. Mr Yates displayed the same tenacity as he had earlier on the matter of capitalisation of profits. He emphasised, as the notes of the conference record, that the market operation was going to yield a net income of $4 million to $5 million a year and that was what Yates was "basically fighting for in this exercise". Mr Hemmings QC thought a claim on such a basis would be very difficult to make out, but agreed that the profits that would have been made could be taken into account in assessing value. He drew a distinction between a claim which had regard to these, and one which simply sought to recover (without discount or allowance for contingencies) the sum of the capitalised profits less capital costs and outgoings.

[196] There was also much discussion during the conference of the amount that should be claimed, and how its components might be identified. It was pointed out by Mr Hemmings QC that a subsequent variation of the claim was always possible, and that it would be better to claim lump sums without any dissections of them.

[197] Time was also spent by Mr Hemmings QC in explaining that compensation for Yates' deteriorating financial position could not form any part of an assessment by the court. When Mr Hemmings QC was again asked whether Yates could recoup the costs of and associated with the obtaining of the development approval, he said that the test was, in effect, whether the preparatory work was rendered abortive in the hands of the dispossessed owner, and, if it was, then its cost would be recoverable. He went on to say that if, however, the preparation were part and parcel of the work required to give the property special value then it would not be separately recoverable.

[198] From time to time, so far as the notes disclose, reference was made to "special value". The context sometimes suggests that the word "special" was being used in the sense of "exceptional" or "unusual" or "extra" as opposed to any technical usage.

[199] Later on, during the conference, there was some elaboration upon the meaning of special value. That Mr Hemmings QC may have been referring to special value in the sense suggested appears from his stated preference for the phrase "highest and best use of land". He did go on to say that a special value might be engrafted on to a valuation that reflected the highest and best use, if it were a value unique to the owner. Other topics such as reinstatement, Yates' deteriorating financial position, and the possibility of a settlement without litigation took up much of the time of this conference.

[200] The evidence also shows that Mr Tamberlin QC, another experienced senior counsel, was engaged in or about early 1985 to provide a written opinion with respect to the resumption and compensation.

[201] The resumption of the land occurred on 7 May 1985 and the last time that Mr Hemmings QC conferred with the solicitors and Mr Yates was on 28 November 1985. The notes on this occasion record that Mr Hemmings QC recommended that Yates list matters "of abortive expenditure or reinstatement or disturbance or special value, whatever they are". His reference to these items disjunctively reflects the difficulty that may sometimes arise in distinguishing between them. The last conference with Mr Hemmings QC was apparently held to enable Yates' advisers to be better informed as to Yates' legal rights and the tactics that should be adopted during any conference with representatives of the resuming authority and the Valuer-General. On this occasion Mr Hemmings QC expressly asked that a valuer give him an opinion as to what he thought claimable, so that he could advise whether he agreed with the valuer.

[202] On 18 December 1985, the appellant barrister, Mr Webster, a former valuer and a junior counsel at the Sydney bar who was experienced in compensation matters, was briefed. An application for compensation was prepared and filed in the Land and Environment Court on 2 January 1986. The claim was silent as to amount.

[203] The fortunes of Yates continued to decline and a liquidator was appointed on 10 March 1986. Thereafter much time was taken up in discussions with the liquidator as to the way in which the claim for compensation would henceforth be conducted. The appellant solicitors were finally, on 13 January 1987, retained by the liquidator "to complete the coordination of the legal side of the valuation". Thereafter the appellant solicitors reported weekly to the liquidator. Beyond settling points of claim on 9 October 1987 Mr Hemmings QC seems to have had no further involvement in the case. The points of claim state what the issues will be, and, at the threshold refer to the determination of the highest and best use of the subject land as an issue. The particulars provided did not, however, settle clearly upon any particular use although reference was made in them to "produce markets, and/or commercial development". It is not possible to gain from the points of claim any clear view of the line which its author would have taken had he been called upon to argue the case.

[204] In place of Mr Hemmings QC who returned his brief, Mr O'Keefe, then a Queen's Counsel, was briefed to advise and appear on any trial of the compensation claim. Mr Parkinson, a valuer, completed the first version of his valuation report on 10 May 1989. This version was settled by Mr O'Keefe QC and Mr Webster. In the same month Mr Webster provided some oral advice to Mr Yates and the solicitors in relation to "disturbance and abortive costs". Mr Webster's evidence, which was accepted by the primary judge in the Federal Court, was that he gave advice in these terms:

The only claim you have for disturbance and abortive costs are any moneys that can be claimed as being lost due to the resumption now rendered abortive and [which] do not in any way add to the market value of the land. If they are related in some way to the market value they cannot be claimed as this would be double dipping. If any of the costs relate to other projects and you are claiming that as a loss then that is not claimable. Your own impecuniosity cannot found a claim for disturbance costs. If any of the items expended are items which have contributed to the achievement of the building consent and development application they are also not claimable. I will leave to you (Schwaiger) the responsibility of assessing any disturbance or abortive costs.

[205] Mr O'Keefe's involvement in the matter turned out to be short. Apart from settling an agreed statement of facts in July 1989 he took no further part in the matter and returned his brief in July 1989 when Mr Simos QC, as he then was, replaced him.

[206] In about November 1989 Messrs Simos QC, and Webster again, advised in relation to abortive expenditure. Their advice was in substance the same as had earlier been given by Mr Webster and which I have quoted.

The first hearing in the Land and Environment Court

[207] Throughout November 1989 and January 1990 Messrs Simos QC and Webster were almost exclusively involved in their working hours in preparing the case. They conferred at length with the three valuers who were to give evidence. The trial in the Land and Environment Court constituted by Cripps J commenced on 30 January 1990 and occupied 43 sitting days.

[208] Before going to the judgment of Cripps J, which was reserved until 1 May 1990, I need only refer to two matters: the opinion expressed by Mr Simos QC at the time that he was preparing for the hearing before Cripps J and some submissions that he made during it. Mr Simos QC's opinion was that at all times Spencer's case ^[216] contemplated that the vendor is to be taken to be either the dispossessed owner, or an hypothetical vendor in the position of the dispossessed owner who wishes to sell the land for the highest price: and that it must be hypothesised that the vendor will do everything it can to assist the hypothetical purchaser to develop the land immediately in accordance with existing planning approvals. During the hearing, in written submissions and orally, Mr Simos QC did, quite properly, notwithstanding the doubts that had been cast upon it and its inherent illogicality, refer to and explain the relevance of the decision of Hardie J in Kennedy Street Pty Ltd v Minister ^[217] to the case he was presenting.

[209] In his reasons for judgment, Cripps J, after setting out the statutory provisions governing the acquisition and the assessment of compensation, discussed the effect of that legislation which is in familiar terms requiring regard to be had, not only to the value of the land taken, but also to severance and injurious affection. ^[218] Neither of the latter was a loss sustained by the respondent here because the whole of the land was taken by the resuming authority.

[210] Cripps J acknowledged that the potential the resumed land may have had for the dispossessed owner may be taken into account in assessing the value of the land to him. His Honour emphasised the phrase "value to the owner". ^[219]

[211] At one stage Yates' intention was that the market have a life span of up to 10 years only. Consultants engaged by Yates had prepared a proposal for submission to the Sydney City Council for a different building to be constructed on the land after a decade. Accordingly there was also evidence before Cripps J as to the utility, cost and returns from such a building to be constructed after the expiration of that period. This was a factor which complicated the valuing of the land and was another of the many complexities confronting the valuers and the lawyers on both sides, as well, of course, as Cripps J.

[212] Six expert valuers were called in the case. Their valuations were over an extraordinarily wide range of $12.74 million to $75 million. It is convenient to quote the summary of them given by Cripps J: ^[220]

On behalf of the Authority, Mr Weir assessed the value at

$12.74 million, Mr Vaughan, valuer from the Valuer-General's Department, $16.75 million, and Mr Gilbert, $16.6 million. The valuers retained by the Authority based their valuations upon comparable sales. Although they assumed that the highest and best use of the site included a market none considered that that use relevantly gave the land any "special value". That is, none accepted that the land had a special value to the owner. Yates' principal submission was that the highest and best use of the subject land was for a market for an indefinite period. It also submitted, in the alternative, that the highest and best use of the land was for a market for 10 years and thereafter commercial development with a 7-8:1 floor space ratio with no height restriction. As will be seen, one valuer called on behalf of Yates, Mr Woodley, assumed in one of his approaches a floor space ratio for a commercial building of 5:1 or 7:1 above a ground level market development having a floor space ratio of 1:1.Three valuers were called on behalf of Yates. Mr Parkinson fixed compensation at $75 million. He added $22 million for what he described as "special value" to what he described as the "market value" of $53 million. Mr Woodley's valuation fluctuated between $33 million (which, I think, excluded "special value to the owner") and $60.6 million which included it. Mr Egan fixed a land value based on comparable sales of $27 million. To this he added an additional $10.5 million or $10.8 million (depending upon assumptions he made) for "special value". Mr Parkinson said he fixed a "primary market value" at $30.036 million.It would seem to me that Mr Egan (with respect to his notion of "special value"), Mr Woodley and Mr Parkinson have misunderstood their valuation function in the approaches they have taken in the present case. Mr Woodley does not appear to opine a land value for the cleared site because he assumed, conformably with his understanding of the law, that he was required to assume that the markets had been built and were operational.In my opinion, it is not appropriate for me to value the land on the assumption that markets were built on the subject site. The land was vacant and cleared as at May 1985. The land had potential for use for a market. Whether that potential gave the land added value to its owner is a matter I will deal with later. However, "the value to the owner" principle does not require me to assume the markets were built and functioning. Mr Woodley attaches significance to the circumstance that in June 1984, the Authority wrote to Yates informing it that the land was to be resumed. It was not resumed until May 1985. Mr Woodley believed he was required by law to assume that the markets were built and functioning because, had Yates not been advised of the proposal to resume, it would have constructed the market and would have commenced trading well before May 1985. I do not think Mr Woodley really addressed the question he should have addressed, viz, what was the value to the owner of the land resumed in May 1985. On that day, the land was cleared and vacant with a development consent and (I think it can be said) building approval for a market. No claim is made by Yates for abortive expenditure. Its claim is that the land should be valued on the basis of its value to it bearing in mind its potential for market use.Mr Egan, Mr Woodley and Mr Parkinson in their application of the "special value" principle have failed, in my opinion, to apply the correct method or to adopt the correct approach. Their understanding of the concept is, in my opinion, in each case in conflict with the decisions of the High Court and the Court of Appeal which make it clear that the "special value", if any, cannot be assessed as they have sought to do. If the land has special value to the owner that circumstance must be taken into account in assessing compensation pursuant to the provisions of ss 101 and 124. The question is, did the resumed land have special value to Yates and, if so, how should it be taken into account in assessing compensation?There is, of course, no occasion to apply what is referred to as the "reinstatement principle" for the purpose of assessing the compensation to be paid to Yates. At the resumption date, the Harbour Street property was vacant land. For reasons which I shall refer to in due course, although Mr Woodley does not describe his valuation by reference to the reinstatement principle, it seems to me that that is what in effect it is. His valuation is the reinstatement of a notional development. However that may be, I am of the opinion that the approach that I should take in the present case is the "willing but not anxious sale": see Spencer v Commonwealth . ^[221] In my opinion, there was a market for the subject land and the most reliable method of compensating the applicant is to approach the matter in accordance with Spencer's case, taking into account the special value, if any, the land had to Yates.

[213] It is not difficult to see from this summary why Yates and those who advised it were anxious to find some method other than a method of valuation that depended simply upon comparable sales. The best that could be achieved upon that basis exclusively, if the valuers called by the resuming authority were correct, was $16.75 million only, and, if Mr Egan were correct, $27 million as against $75 million contended for by Mr Parkinson on another basis.

[214] It is not easy to understand fully the basis of Mr Parkinson's valuation. He apparently assessed a market value of $53 million but added to it $22 million for what he described as "special value". In any event it is clear that he did turn his mind to special value and did take into account the full potential of the site calculated by reference to the notional earning power of a completed development. Mr Egan thought himself able to advance a land value of $27 million based upon comparable sales. There is no satisfactory explanation why his value on this basis should be so much greater than the maximum of $16.75 million on the same basis advanced by one of the valuers called by the resuming authority.

[215] There is one sentence in the reasons which I have set out of Cripps J of particular importance which should be emphasised: ^[222]

No claim is made by Yates for abortive expenditure. Its claim is that the land should be valued on the basis of its value to it bearing in mind its potential for market use.

This sentence reflects the effect of the advice which was given by Messrs Simos QC and Webster. It is not inconsistent with the conservative opinions which were given from time to time by Mr Hemmings QC.

[216] Earlier I suggested that on occasions here, and elsewhere, there may have been non-technical usage by professional advisers and perhaps others of the term "special value". The reasons of Cripps J ^[223] and other judges in other cases show this to be so. The former quoted passages from a number of cases including Commonwealth v Reeve . ^[224] There Latham CJ said that "if the land has some special value by reason of a potential use , that is a matter to be taken into account in assessing compensation". ^[225] Clearly there Latham CJ was not using "special value" in any technical sense.

[217] Cripps J referred to a submission by Mr Simos QC that it should be assumed that the buildings for the market had been erected and that the markets were operational. ^[226] Mr Simos QC was no doubt pitching his client's case as high as he could at that point. But Cripps J was entitled to find, and did find, that although compensation should have regard to the potential for such a use it should not be assumed that the use was actually in existence.

[218] In essence I take his Honour to be saying that there were uncertainties and contingencies to which he was bound to have regard, including the possibility of continuing competition from Paddy's Market, the restricted operating hours of the market imposed by the conditions of the building approval, uncertainties regarding the availability of car parking on nearby land and the number of stalls which might be permitted (896 or 1000). Furthermore, as his Honour said, there were doubts about precisely how many stallholders would have entered into binding licence agreements and what the balance would actually have turned out to be between outgoings and rentals.

[219] His Honour's conclusion on all of these matters was that a prudent purchaser would have considered that there was some potential for a successful market and that there was a possibility that such a market would be highly successful. Such a purchaser would also be aware that there was a risk of failure and a high risk that the markets would not function at anything like the level of profits forecast: ^[227]

Yates had to compete with Paddy's. Although Paddy's future may have been uncertain, the stallholders had demonstrated that they had sufficient political clout to keep Paddy's in the area at least in the short term.

[220] His Honour then went on to reject a submission by the Authority that it was a relevant factor that Yates might have had only slight prospects of obtaining finance to undertake the market venture.

[221] Cripps J criticised in some detail some of the methods adopted by the respondent's valuers and the amounts derived as a result of them. He thought all of the valuations were flawed in some way. There was evidence before his Honour which entitled him to conclude, as he did, that the income streams assumed by the valuers, particularly Mr Parkinson, were excessive. His Honour said this: ^[228]

As will be seen, I have fixed compensation by reference to a rate per square metre derived from comparable sales. In arriving at my conclusion, I have had regard to relevant comparable sales and to what I find to be the special value of the land to Yates. Yates had available a large area of land which had the potential for use as a market ... It presented Yates with an opportunity to establish a profitable market of the type proposed. It is true that in part the opportunity available to Yates was the result of the entrepreneurial skills of Mr Yates ... I can make no allowance in favour of Yates for this.

[222] There may perhaps be a contradiction in what his Honour said, because, in holding that he should have regard to the potential that the land had for use as a market he had already, in a relevant sense, given credit for the entrepreneurial skills of Mr Yates on behalf of the respondent, for, it was only because of those skills that the potential was able to be demonstrated. The apparent contradiction may perhaps be explicable on the basis that the expression "special value" was being used by his Honour in the same non-technical sense as Latham CJ used it in Reeve ^[229] in the passage I have quoted. I also remark in passing, that Cripps J in the course of his reasons referred to Kennedy Street which had been the subject of submissions by both parties.

[223] In the result his Honour fixed compensation in the total sum of $22,334,500, and, as he had made clear, did so by looking in the first instance at comparable sales but making adjustments for the potential that the site had for a market.

The appeal to the Court of Appeal of New South Wales

[224] Both the resuming authority and the respondent appealed to the Court of Appeal. It was accepted by both parties that Cripps J had overlooked that a claim had been properly made for $217,443.78 and that to that extent the appeal had to succeed. One ground of appeal was that his Honour had failed to give sufficient reasons for his judgment. Although the majority rejected this it was part of their reasoning that one matter remained to be determined and that was Yates' entitlement to compensation for special value. On this issue Kirby P and Handley JA were of the view that it should have been. Mahoney JA, the other member of the court, dissented. The principal judgment for the majority was written by Handley JA. In the course of his reasons, his Honour coined the novel term "head start". He said this: ^[230]

The existence of the appellant's work etc may have given the appellant an advantage or head start over other purchasers in the development of markets on this land. The judge made no finding to that effect. If such an advantage or head start did exist it would generally be worth money to a developer in the position of the owner. Hence it would generally give rise to some special value. These issues raise questions of fact.

[225] Accordingly his Honour was of the view that the case should be remitted to Cripps J to give further consideration to the issues of special value and abortive expenditure. His Honour added that the effect of the order of the Court of Appeal was not that the trial should necessarily be reopened to enable the parties to lead further evidence.

[226] Kirby P who was in substantial agreement with Handley JA said that Cripps J erred in dealing with the claim for special value which should now be recalculated. ^[231] But his Honour added that that recalculation should avoid double-counting of abortive expenditure to which Yates might be entitled.

[227] His Honour then discussed special value in terms with which I would in general agree except that I do not think that instances of special value are necessarily confined to situations of actual usage at the relevant date: ^[232]

Special value can only arise where, at the time of compulsory acquisition, the owner is actually putting the property to some use for which it is especially well suited. It is a term of art used to describe a characteristic ... of economic value to the owner but which would not enhance the market value of the interest and hence would not be included in the "market value" component as the compensation to which the statute entitles the owner following resumption.

[228] Mahoney JA was of a different opinion from the majority. His Honour stated that the matters which were said to go to a special value related to the land itself, these being its size and location, and the steps which had been taken by the respondent to bring into existence the use that it proposed to make of the land. ^[233] He said: ^[234]

Three things may be said about what the judge did: that a conclusion that, in such a context as this, land has special value to the owner is a conclusion of fact; that the facts which the learned judge found warranted the conclusion that the land had a special value to Yates; and that the special value in question was one going to the value of the land itself and not to, as it has been described, a collateral matter.

His Honour concluded therefore that there was no error on the part of Cripps J in the way in which he had dealt with these matters.

[229] On 1 August 1991 an application by the respondent for special leave to appeal to the High Court was filed and was subsequently discontinued.

The second hearing in the Land and Environment Court

[230] When the matter came back before Cripps J on remitter from the Court of Appeal the respondent, represented by Messrs Simos QC and Webster, applied to reopen the respondent's case and adduce further evidence.

[231] The nature of this further evidence is outlined in written submissions made on behalf of Yates by the appellant barrister and Mr Simos QC. One head of claim was for "special value arising from [Yates'] work in relation to the land by way of ascertainment of stallholder's interest and the collection of prepayment of rents and the like".

[232] There was another head of claim for "special value arising from the advantage or head start (which [Yates] had) over other purchasers in the development of markets on the land". What were then set out in the written submission were items which might more appropriately, it seems to me, have been characterised as "disturbance" or perhaps "reinstatement" costs. The contention was that compensation should be paid in respect of delay in finding an alternative site, holding and related costs to Yates during that period of delay, elimination of risk and costs associated with the acquisition of another site.

[233] In ex tempore reasons of 19 March 1992 Cripps J rejected the application to adduce evidence:

This matter was listed before me today for the purpose of determining whether or not I should allow additional evidence to be adduced prior to hearing further submissions concerning what compensation I would award following the majority decision of the Court of Appeal in this matter.I have determined that I will not receive further evidence in the proceedings. Mr Webster on behalf of Yates has asked me to - he has outlined the nature of that evidence which is included in his submission. He has asked me to defer determining this matter until some affidavit or some document could be put on further, identifying or enlarging upon that matter. As he has made plain, the additional evidence he wishes to call arises out of what might be a claim for special value, if I can use those terms still, under the doctrine annunciated and adopted by the Court of Appeal in Kennedy Street .The reason why I am not permitting further evidence to be given in this matter concerns the important need to terminate litigation if that can be done fairly and as quickly as possible. This litigation has been wallowing through the judicial system now since about 1985. As [Handley J] pointed out in his judgment that the appeal that was allowed on an issue of special value and associated issue of aborted expenditure which I am told now has been resolved, although the details of that may be relevant to the question of what is special value, these were relatively minor issues in the context of the whole proceedings and the totality of issues that were litigated before the trial judge.What emerges from Mr Webster's submissions is this. It is clear when one looks at the way the matter proceeded before me and what took almost all of the time in the Court of Appeal or at least a great part of the time in the Court of Appeal was whether or not one of the three I think or at least two valuations of Yates' valuers should be adopted. And in those circumstances, as Mr Webster has conceded, the sort of material that he would now be concerned with on the issue of special value would not loom large and perhaps not a lot of attention was paid to it. Nonetheless, that was the way the trial was conducted and it was conducted upon a basis that even if that were wrong, there was still a special value component within the meaning of Kennedy Street . So I am not persuaded that Yates has not had all the opportunity it needs to put all evidence before the court. Nothing in the Court of Appeal decision persuades me that the Court of Appeal is of the opinion I cannot determine this matter without further evidence. On the contrary, the suggestion being made by [Handley J] is that nothing that has been stated in this requires me as he said to, I think the words are, reopen the case or have further evidence adduced. It does not necessarily reopen the trial and entitle the parties to lead further evidence. Obviously of course the trial will be reopened because I ... heard further submissions by the parties as to what I ought to do. But I do not think a case has been made out as to why I should allow further evidence. This litigation will never finish - well, perhaps that is wrong, but in all the circumstances I think it is desirable that this matter proceed to a conclusion as expeditiously as possible and I am not persuaded that fairness to the Yates Corporation requires that the case be reopened, because everything that has been put before the court on the previous - on the previous occasion it had the opportunity to put everything before the court that was relevant to determination. That is my decision.

[234] His Honour subsequently heard argument in relation to "abortive expenditure" and gave reasons on 1 April 1992 why he would not increase his award on the basis of a claim under this head. It had been argued that the respondent was entitled to an amount of money to compensate it for the cost and delay of putting itself into the position "in respect of an alternative site as it was in respect of the resumed site", a claim, as some of the cases and texts put it, on a reinstatement basis. ^[235]

[235] After argument his Honour said that he would indicate that he had already fixed a special value component of the compensation in the sum of approximately $500,000 being the amount of money over and above the "market value" a person in the position of the respondent would have paid sooner than not obtain the land because of the special value the land had to the respondent by reason of the work done and expenditure incurred by Yates and referred to in the decision of Handley JA. The compensation fixed as a result of the addition then of the sum of $217,443.78 (which it was agreed had been overlooked) became $22,551,944.

The respondent settles a second appeal commenced in the Court of Appeal

[236] The respondent was not satisfied with this result and again appealed to the Court of Appeal. The retainers of all of the appellants and Mr Simos QC were then withdrawn.

[237] However, the respondent still succeeded in obtaining an advantageous settlement of the appeal. The resuming authority for its own reasons was prepared to pay a further $1.25 million to the respondent. It is important to notice that this amount was not paid, as seems to have been assumed by the Full Federal Court, to the respondent as compensation for the work done and expenditure incurred in bringing the site "to a state where it was capable of immediate implementation". The circumstances in which the payment was negotiated and the items making it up are set out in the affidavits of Mr Simos QC whose evidence Branson J at first instance unreservedly accepted. The sum of $1.25 million (the settlement sum) was a sum paid on account of legal expenses, interest and stamp duty that the respondent would have incurred in relation to the acquisition of an alternative site. That was in substance a payment by way of reinstatement and was in no way calculated by reference to the value of any so-called "head start".

The claim in professional negligence in the Federal Court

[238] The respondent next commenced proceedings in the Federal Court against the appellants and Mr Simos QC. The claim against each of them was framed in negligence, deceptive conduct contrary to s 52 of the Trade Practices Act 1974 (Cth) and breaches of the analogue of that provision in the Fair Trading Act 1987 (NSW). Neither deceptive conduct nor breach of the Fair Trading Act was pursued in the Full Federal Court and it is not entirely clear how vigorously the former was ultimately litigated at the trial in the Federal Court at first instance.

[239] At the outset of the trial in the Federal Court questions were raised as to the jurisdiction of the court. The questions were what was the jurisdictional basis of the federal claim for breach of s 52 of the Trade Practices Act as none of the appellants were corporations, and whether as solicitors and barristers they were engaged in trade and commerce. The bases pointed to in this case, having regard to the facts identified by the respondent to establish them, appear at best slight. So far as the solicitors were concerned it was said that the Trade Practices Act applied because they had posted or sent by facsimile transmission ^[236] two letters of advice, in September 1985 and July 1986, which contained advice that was deceptive because, among other things, they contained no reference to some advice which had been given by Mr Hemmings QC and Mr Tobias QC, and they sent letters weekly to Yates which similarly were silent as to relevant advice. All that could be pointed to in respect of the appellant barrister was that he settled one letter, in July 1986, which he provided to the solicitors who in turn sent it either by post or facsimile transmission. As to the other matter, whether the appellants were engaged in conduct in trade or commerce, counsel for the respondent quite properly conceded in this court that that question was an even more controversial one. ^[237] No doubt the respondent was anxious to find and pursue if possible statutory claims to which any immunity of lawyers in negligence suits might not provide an answer. These matters need not, however, be explored now because no ground of appeal either to the Full Federal Court or this court raises any jurisdictional point.

[240] It is necessary to refer to some of the matters which were alleged against the appellants in the pleadings in the Federal Court. After setting out a number of factual matters, including that the respondent would have been able to borrow sufficient money to undertake the development of the proposed market on the land, it alleged that by reason of this and other matters it was in a superior position at the resumption date to any other prospective purchaser of the land wishing to build markets on it. Particulars of this allegation were given, which, in substance were that it would be necessary for any other person, including a prospective purchaser, to repeat all of the steps taken by the respondent, such as the obtaining of the planning and building approvals, the securing of finance and the ascertainment of potential stallholders. The particulars also alleged that, unlike any other owner, the respondent would not have to pay or outlay on the market value of the land, as at the resumption date, holding costs during the period of placing itself in a position to establish the markets, and was also relieved of any uncertainty arising from any future changes to building regulations and conditions of consent. Other matters were alleged in the particulars such as possible increases in building costs and changes in car parking requirements which would not apply to Yates.

[241] The pleading also took up a claim by the respondent that it had intended to create a public unit trust to purchase 50% of the equity in the markets on their completion, and that the respondent should have been compensated for the financial disadvantages flowing from its inability to realise its scheme for the creation of such a trust. This, together with other claims said to relate to the "head start", were asserted to have been lost to the respondent by reason of the conduct of the appellants. The pleading, among other things, contended that the barristers failed to have regard to, or were unaware of, two decisions in New South Wales, Kennedy Street Pty Ltd v Minister ^[238] and Baringa Enterprises Pty Ltd v Manly Municipal Council ^[239] whose application, it was said, was called for, so as to entitle the respondent to a "special value" not accounted for in the awards made by Cripps J.

[242] Evidence called by the respondent in the Federal Court included evidence from Mr Hart, a property consultant, who said that the respondent would have had an advantage of 20 months over any other owner of the land in deriving income from a market on the site. However, none of the matters said to give rise to this temporal advantage which he claimed could be translated into financial advantage (as well they might be if they really existed) were in truth likely to be unavailable to a purchaser of the land or unable to be exploited by such a purchaser in any development of it. There would be every reason why a prudent vendor would transmit all relevant materials to the purchaser in order not only to induce a purchaser to buy but also to induce him or her to pay a price which had regard to them. It is not difficult to see why her Honour obviously did not consider this evidence to be persuasive.

[243] Branson J in the Federal Court made important findings of fact only one of which (relating to the respondent's financial capacity) was inconsistent with the findings of Cripps J in the Land and Environment Court.

[244] Her Honour repeated in detail the steps which were taken by the respondent to investigate the feasibility of, and to obtain a planning approval for, a retail market with numerous stallholders on the subject land. Before her Honour, the respondent's financial capacity at the material times to undertake the development was an issue which assumed much more significance than it did before Cripps J, and this probably explains why on this issue her Honour's conclusion differed from that of Cripps J who had found that on the balance of probabilities funds would have been available to the respondent in 1984 and 1985 for the markets. ^[240] Her Honour expressly held that the respondent did not at that date have the financial capacity to erect the markets immediately. As she pointed out, Cripps J had not been concerned with the issue of the so-called "head start" when his Honour discussed the respondent's financial capacity to undertake the development.

[245] Branson J did not think it possible on the evidence before her to reach a conclusion as to precisely how long a period might have been involved in the securing of finance but she was satisfied that it would have been a period of some months at least.

[246] Another issue of either no, or limited, significance in the proceedings before Cripps J had to be determined by Branson J and that was whether the respondent would in fact have been likely to realise a plan that it was developing for the establishment of a public unit trust to hold either wholly or in part Yates' investment in the market, and the additional financial benefits (if any) that might flow to the respondent if such a trust had been created. On this issue the respondent again failed for reasons which are explained by her Honour and which do not need repetition here, although it is relevant to note that she formed an adverse view of the reliability of the evidence of Mr Yates.

[247] Notwithstanding that the respondent company was in liquidation for many years and while the proceedings in the Land and Environment Court were conducted, the liquidator allowed Mr Yates to play a role in the preparation of the case and the giving of instructions for its conduct. Branson J found that Mr Yates attended a major proportion of the conferences with counsel concerning the matter and received copies of their written advices. He was a contributory of the company. The company in fact came out of liquidation as a result of an order of Brownie J in the Supreme Court of New South Wales on 24 April 1992.

[248] In her discussion of the case as it had been conducted in the Land and Environment Court, Branson J said that Mr Yates was meticulous in ensuring that each of the valuers was familiar with the work that had been done by or on behalf of the respondent to advance its proposal for a market on the land. After outlining the contents of the valuations of the valuers called by the respondent in the proceedings before the Land and Environment Court her Honour drew attention to the fact that one of them, Mr Parkinson, "indicated that his calculations allowed six months to get the building up and the markets running", ^[241] and in consequence his valuation contemplated the deferral of the receipt of rents from the development for that period. On the other hand, as her Honour pointed out, another of the valuers, Mr Woodley, had expressed his opinion that it was appropriate for the purpose of assessing compensation to assume that the approved first stage of development would have been in operation at the date of resumption had it not been for prior action taken by the resuming authority.

[249] Branson J then discussed the two cases of Kennedy Street Pty Ltd and Baringa Enterprises Pty Ltd which had been much relied upon by the respondent. Her Honour was of the opinion that the evidence of Mr Simos QC provided a complete answer to the submissions based upon these cases and the other submissions of the respondent. The particular evidence to which her Honour referred was given in an affidavit by Mr Simos QC in these terms:

1.

At the time of preparation for the original proceedings it was, and still is, my view that there was no basis, having regard to the particular facts of the case, upon which it would have been hypothesised in the original proceedings that the hypothetical purchaser in the position of the owner had a head start in developing the land as compared with the ordinary hypothetical purchaser. That is because it was and still is my view that Spencer's case required it to be hypothesised that the vendor is either the dispossessed owner or a hypothetical vendor in the position of the dispossessed owner who wishes to sell the land for the highest price obtainable and that, to that end, the dispossessed owner or the hypothetical vendor in the position of the dispossessed owner must be hypothesised to do everything it can to assist the hypothetical purchaser to be in a position to develop the land immediately in accordance with the existing BA and DA (which reflects its highest and best use), and therefore will include in the subject matter of the sale, or otherwise make available to the hypothetical purchase, in connection with the sale, all information and other material which the dispossessed owner or the hypothetical vendor in the position of the dispossessed owner might have, which might be of advantage to the hypothetical purchaser in enabling it to develop the land immediately and otherwise to maximise the value to it of the land, thereby increasing the price it would be prepared to pay for it. This would include all information and other material which might assist the hypothetical purchaser to develop the land in accordance with the building approval immediately, it being borne in mind that Spencer's case requires it to be hypothesised that the hypothetical purchaser is a purchaser who is purchasing the land for the purpose of exploiting its highest and best use (that is, purchasing it "for the most advantageous [purpose] for which it was [adapted]": per Isaacs J at 441 in Spencer's case) and who therefore must be hypothesised to be a hypothetical purchaser who is buying the land with a view to its immediate development in accordance with the existing building approval (which was held to be the land's highest and best use). Moreover, as Isaacs J held in Spencer's case (at 441):"We must further suppose both to be perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially ..."

2.

In this connection it was, and still is, my view that Spencer's case required it to be hypothesised that the dispossessed owner or the hypothetical vendor in the position of the dispossessed owner, would make available to the hypothetical purchaser, inter alia, details of all work done by YPC, in relation to the land, including the names and addresses of the 718 persons who each paid $50 to register their interest in the proposed new market, as well as the names and addresses of those 40 persons who pre-paid rent, as well as doing everything else in the power of the dispossessed owner, or the hypothetical vendor in the position of the dispossessed owner, to maximise the value of the land to the hypothetical purchase, including, for example, assisting in securing for the hypothetical purchaser, the benefit of the proposed building contract for the construction of the market which YPC was negotiating.

[250] Her Honour accepted that the views expressed by Mr Simos QC were to some extent in conflict with the approach taken by Handley JA in the Court of Appeal. Her Honour did not think it necessary to resolve this conflict because the issue before her was whether the appellants were negligent in forming the views which they did and in expressing them as they did. In considering this issue her Honour referred to expert evidence which had been called on both sides. She said that it was recognised on all sides that valuation law can be a matter of some complexity. Her Honour referred to some observations which had been made by Kirby P in the Court of Appeal ^[242] to this effect. In the end her Honour held that, having regard principally to the expert evidence, but attaching weight also to her own reading of the authorities, no negligence had been established against any of the appellants and Mr Simos QC in connection with the alleged head start claim of the respondent.

[251] Her Honour dealt with another complaint that had been made by the respondent, that Mr Yates should have been called to give evidence, by holding that there were valid reasons to support the decision of the appellants not to call him in the compensation proceedings. Some other complaints which were made by the respondent were similarly dismissed by Branson J and need not be repeated here. Nor is it necessary to discuss another claim of the respondent, belatedly formulated, which her Honour dismissed, that there had been a breach of fiduciary duty on the part of the appellants and Mr Simos QC.

[252] It was strictly unnecessary therefore for her Honour to consider the application of Giannarelli v Wraith ^[243] but she did nonetheless do so, and would have found that that case applied to entitle the appellant barrister and Mr Simos QC to immunity, because, on a realistic analysis their conduct related either to work done in court, or to work done out of court which led to decisions affecting the conduct of the compensation proceedings in court. Her Honour gave the appellant solicitors' position separate consideration but held that in the circumstances they too would have been entitled to an immunity for the same reason if they had been negligent.

The Full Federal Court

[253] From that judgment the respondent appealed to the Full Court of the Federal Court (Drummond, Sundberg and Finkelstein JJ). Mr Simos QC was not a party to the appeal. The main grounds of appeal were as follows:

3.

The learned trial judge erred in failing to find that the approaches of valuers Messrs Egan, Parkinson and Woodley were contrary to fundamental principle in that their valuations had the effect of valuation of the property on the assumption that the markets had been built and were operating as a going concern as at the resumption date.

4.

The learned trial judge erred in failing to find that the approaches to valuation taken by Messrs Egan, Parkinson and Woodley in their evidence to the Land and Environment Court in substance amounted to an impermissible attempt to apply the reinstatement principle of valuation.

...

6.

The learned trial judge erred in failing to find that the valuation approach to market value and special value presented to the Land and Environment Court on behalf of the appellant, in so far as it was based upon capitalisation of income to be received from markets yet to be established on the resumed land was an approach which involved considerable risk of rejection by reason of difficulties of proof of establishing the net income to be received and/or amounted to an impermissible use of the capitalisation of income method of valuation.

...

Particulars of risk factors

The valuation approaches were novel and/or involved the risk of rejection on the grounds of being contrary to accepted legal principle in that they:

(i)

involved or were based on an impermissible use of the reinstatement principle;

(ii)

involved or were based on capitalisation of income streams in circumstances where such approach was inappropriate;

...

(iv)

involved or were based on assessment of value of the land in its developed state and not in the state in which it was at the date of resumption.

The valuation approaches involved difficulties of proof and/or involved the further risk of rejection by reason of the fact that they:

(i)

involved or were based on estimates of income which would have been derived had the markets been constructed and there had been no resumption;

(ii)

involved or were based on inadequate allowance for risk and/or profit.

8.

The learned trial judge erred in failing to find that all of the respondents or any one or more of them was negligent in failing to advise that a claim for special value ought to be made on the basis of the relationship which existed between the appellant and the resumed land and in particular the value to the appellant of the knowledge which it had gained with respect to the development and use of the site as a retail market and car park such knowledge giving advantage to the appellant by reason of savings in holding costs, avoidance of escalation in building costs and avoidance of risk if it were not dispossessed of the site. (The value of knowledge acquired giving rise to savings and the avoidance of risk is hereinafter called "the head start concept".)

9.

The learned trial judge erred in placing reliance and/or placing undue reliance on expert evidence or the absence of expert evidence (as the case may be) on the following issues:

(i)

The negligence of the respondents in failing to advise and pursue a claim for special value based on the head start concept.

...In each case the issue was a matter of law for the court.

...

15.

The learned trial judge erred in holding that in the circumstances the second and third respondents were respectively entitled to immunity from liability in negligence.

...

17.

The learned trial judge erred in holding that advocate's immunity applied to claims made pursuant to s 42 of the Fair Trading Act 1987 (NSW) and s 52 of the Trade Practices Act 1974 (Cth).

18.

The learned trial judge erred in holding that advocate's immunity exists in law. On the hearing of this appeal the appellant will concede that the learned trial judge was constrained to follow Giannarelli v Wraith ^[244] and will not pursue this ground of appeal beyond reserving the right to argue in the High Court of Australia that Giannarelli v Wraith was incorrectly decided or should no longer be followed.

...

21.

The learned trial judge erred in determining the issue of when the appellant would have had construction finance available to it when such issue was contested before and determined by Cripps J in the Land and Environment Court and the claim was for damages for loss of a chance including the chance that such finding would have been made.

...

23.

The learned trial judge erred in failing to award damages to the appellant on the basis of the loss of a chance to receive greater compensation (than was in fact awarded in relation to special value) assessed in accordance with the head start concept and assessed on the evidence of savings in holding costs, savings in connection with escalated building costs, and avoidance of risk called by the appellant in this action.

[254] After broadly sketching some of the facts and referring to the earlier proceedings, their Honours stated that it was not necessary to express any opinion whether the Court of Appeal was correct in its finding that the approach taken by the valuers was contrary to law. They noted that Mr Hemmings QC had advised on the risks associated with the approaches which were adopted by the respondent's valuers and said that it appeared that his advice was not passed on to the solicitors or junior counsel. Their Honours made no reference to the fact that, as the notes of the various conferences with Mr Hemmings QC show, Mr Yates was present at them and must have been fully conversant with the advices tendered from time to time by Mr Hemmings QC. Nor did they refer to what Mr Hemmings QC had said regarding the possible use of projected earnings for valuation purposes of a site ripe for redevelopment as this one was. Their Honours did, however, refer to two Canadian decisions, City of Halifax v S Cunard & Co Ltd ^[245] and Municipality of Metropolitan Toronto v Loblaw Groceterias Co Ltd , ^[246] which they thought provided support for the approach taken by the valuers in arriving at their value of the resumed land as a vacant site. They discussed a number of other cases and then referred to the advice of the Privy Council delivered by Lord Moulton in Pastoral Finance Association Ltd v Minister : ^[247]

The appellants were clearly entitled to receive compensation based on the value of the land to them. This proposition could not be contested. The land was their property and, on being dispossessed of it, the appellants were entitled to receive as compensation the value of the land to them whatever that might be.

[255] The Full Federal Court said that the measure of compensation must take account of the peculiar value to the owner of the property compulsorily acquired and that the peculiar value to the owner is commonly referred to by the shorthand expression "special value". The Full Federal Court acknowledged that, as Dixon CJ had said in Turner v Minister of Public Instruction , ^[248] the value of land is necessarily affected by all the advantages it possessed which might be a matter of future, or even contingent, enjoyment. Their Honours then discussed the concept of special value further. They said this: ^[249]

Land will have special value if it has some special suitability for a business or an activity carried on or to be carried on by the owner. That special suitability need not arise from any physical or legal attribute of the land. ^[250] While it may arise from some physical or legal attribute it can also arise from some use made or to be made of the land. However, the special suitability must be peculiar to the dispossessed owner . ^[251] The reason why the special suitability must be peculiar to the dispossessed owner is that if it is not peculiar to him then the advantage should be reflected in the market price of the land, it being a requirement that the market price be ascertained by reference to its highest and best use [emphasis added].

[256] A little later the Full Court said this: ^[252]

There will be many cases where the dispossessed owner is well advanced in the planning of and preparation for the realisation of the potentiality of the resumed land to the point where that potential use is imminent. Further, the dispossessed owner may have incurred considerable expenditure in reaching that point. In principle there is no reason why the dispossessed owner should not be compensated for the planning and preparation that has resulted in the imminent realisation of the potentiality of the resumed land. Prima facie it should be assumed that this planning and preparation is of economic value to the dispossessed owner and should be the subject of compensation as a consequence of the compulsory acquisition of his land.

Next the Full Federal Court accepted that, if the planning and preparation could be of advantage to an hypothetical purchaser of the land using it in the same general way as the owner, then it should be included in the market value of the land. ^[253]

[S]o long as double recovery is avoided it will usually be of no practical consequence whether the dispossessed owner recovers his compensation as market value or as special value provided he does in fact receive compensation for the advantage resulting from bringing a proposal to a state of imminent development.

[257] The Full Court thought it necessary to make some observations about the manner in which the parties had conducted their case before Branson J. Their Honours said that it seemed to them that the parties lost sight of the real issue that required determination. Further to this observation the Full Federal Court said that it was apparent that both sides proceeded on the assumption that, if the respondent were in a position to develop the market immediately by reason of the work undertaken before resumption, that resulted in an advantage that was of economic value and for which it was entitled to receive compensation. It was said that the difference between the parties was that the respondent submitted that the economic value of the advantageous position formed part of the special value of the land and the appellants asserted that it should form part of the market value of the land. The Full Federal Court thought that the unfounded assumption made by the respondent was that if its advantageous position was not compensable as special value it was not otherwise compensable; the unfounded assumption of the appellants was that the Land and Environment Court was in a position to assess that advantageous position as part of the market value of the land. The Full Federal Court held that this latter assumption was unfounded because no evidence "had been led to properly identify or quantify the economic value of being in a position to immediately commence the development of a market". ^[254]

[258] It is relevant to refer to another passage in the judgment of the Full Federal Court. Their Honours said that the work undertaken and knowledge acquired here would be taken into account in determining the market value of the land if they could be of advantage to any hypothetical purchaser, but that if the hypothetical purchaser were willing to pay a higher price for the land in order to obtain, for example, plans and the services of a builder engaged by the hypothetical vendor the purchaser would be paying a price for the plans (and the introduction of the builder) in addition to paying for the land. ^[255]

[259] Their Honours thought that both Kennedy Street and Baringa were applicable, correctly decided and that their application here would have meant that the respondent would have been entitled to recover in the Land and Environment Court a component for special value based upon the so-called "head start" principle. They did not think that they could quantify the value of this and ordered that the case be remitted to a judge of the Federal Court for assessment of damages. In discussing Kennedy Street and Baringa , as they did at some length, their Honours omitted any reference to the fact that the barristers had made detailed submissions in respect of the former at least and Cripps J had considered its possible application and that of Pastoral Finance upon which, to some extent, it depended, in his reasons for judgment following the first hearing. They also reached a different conclusion on the application of Giannarelli v Wraith from that of the primary judge and held that the appellants were not entitled to any immunity from suit for their negligence, which, the court said, lay in the lawyers' failure to advise in respect of and present a case claiming compensation by way of special value for the "head start".

[260] I also mention that the Full Federal Court decided without hearing him, indeed without any notice to him, and notwithstanding that he was not party to the appeal (and contrary to the order in his favour by Branson J) that Mr Simos QC should be held to be disentitled to his costs of the trial. ^[256] As justification for this their Honours cited Ritter v Godfrey . ^[257] That order is the subject of a separate appeal by Mr Simos QC to this court.

The appeal to the High Court

[261] Against that decision the appellants appealed to this court.

[262] The appellant barrister advanced numerous grounds of appeal, some only of which need be stated:

2.

The Full Court erred in treating as an aspect of special value and/or market value the "head start" or "time related" advantage, which [Yates] claimed to have by virtue of work undertaken by it in the nature of preparation for the development of the land.

3.

The Full Court erred in failing to hold that the award of compensation made in favour of Yates in the Land and Environment Court had taken into account any aspect of Yates' entitlement to compensation properly falling within the Full Court's concept of special value and/or enhanced market value by reason of "head start" or "time related" advantage.

4.

The Full Court erred in the view it took that the ratio decidendi of [ Spencer's case] was limited to the "nature and quality of the land".

5.

The Full Court was in error:

(a)

in the view which it took of the entitlement to compensation contemplated by the decisions such as Kennedy Street Pty Ltd v Minister ; ^[258] ...

6.

The Full Court erred:

(a)

in finding that Yates was in a position where it could commence its development of the market almost immediately, in circumstances where the trial judge had found that Yates did not have the financial capacity then to do so; and

...

(d)

in holding that loss resulted from not advancing such a case.

7.

The Full Court erred in failing to consider whether the opinion held by the appellant, namely, that Spencer's case properly understood had the consequence that special value based on a "head start" was not available as a matter of law, was an opinion capable of being held by a barrister acting competently in the preparation and presentation of a claim for compensation.8. In finding that the appellant was negligent, the Full Court erred as follows:

(a)

in not taking into account the absence of any advice or opinion expressed by any of the senior counsel or expert valuers retained on behalf of Yates as to the existence of any entitlement to compensation of the kind held by the Full Court not to have been awarded to Yates by the Land and Environment Court;

...

(c)

in failing to pay any or any sufficient regard to the expert testimony adduced at the trial to the effect that the views adopted by the appellant for the purposes of his engagement in the preparation and presentation of Yates' claim for compensation could reasonably have been held by junior counsel who practised in valuation law at that time, and that Yates adduced no expert testimony to the contrary;

(d)

in finding that at one stage Mr Yates inquired of the appellant whether any special value might be attributed to the resumed land on the basis that Yates had an advantage over a hypothetical purchaser because of the advanced state of the proposed development ... when no evidence to such effect was before the trial judge;

(e)

in finding that the appellant had not considered Kennedy Street Pty Ltd v Minister ^[259] and Baringa Enterprises Pty Ltd v Manly Municipal Council ^[260] when assisting with the preparation and presentation of the compensation proceedings before Cripps CJ.

...

11.

The Full Court erred in failing to recognise, as was the fact, that Yates in the compensation proceedings before Cripps CJ led evidence as to the alleged state of readiness of Yates to proceed with the development of the site (albeit not for the purpose of assessing a "head start' related advantage) which evidence was taken into account by Cripps CJ in assessing special value.

...

13.

The Full Court erred in holding that the appellant's alleged negligent conduct was not subject to immunity from suit, by reason of:

(a)

the complex nature of claims in law for special value and the relationship with such claims with market value, particularly those involved in the proceedings before the Land and Environment Court;

(b)

the practice in resumption compensation cases as to the preparation and presentation of valuations of expert valuation witnesses, and the role of counsel thereto, particularly in the circumstances of the subject proceedings for compensation.

[263] The appellants also annexed two lists to their notices of appeal, one of 12 findings of fact made by the Full Federal Court which, it was argued, were inconsistent with the evidence, and the other which, it was submitted, was a catalogue of findings made by the primary judge, Branson J which the Full Federal Court ignored, or effectively and without any good reason expressly or impliedly contradicted. I will deal with these matters later but for present purposes it is enough to say that the arguments and submissions in relation to most of them are substantially correct.

[264] Before dealing specifically with particular matters raised by the grounds of appeal there are some matters bearing upon the outcome of this appeal which require discussion.

Statutory compensation

[265] All statutes authorising resumptions in Australia effectively require that the relevant compensation court calculate the value of resumed property as if it were sold on the date of its acquisition by the resuming authority. ^[261] Necessarily, the exercise to be undertaken by the valuers and lawyers representing the parties and the court in finding the likely price on such a notional sale is a highly artificial one, involving many uncertainties and matters of judgment upon which professional and lay minds may and frequently differ, as the varying judgments and different reasoning so far in this case dramatically demonstrate. The exercise undertaken in the courtroom is not only highly artificial but also entirely theoretical and divorced from the sentiment and emotion which can play a part in a decision to buy or sell, even occasionally a decision by a successful investor or business person. Sometimes some people very effectively, and perhaps without being able to offer rational reasons for doing so, will intuitively make successful investments in property. Others may rely entirely upon detailed economic investigations and projections. Corporations proposing to make investments in land or other property would certainly be expected by their shareholders and financiers to make feasibility studies which involved such investigations and projections.

[266] In Australia it has long been accepted that the various statements made by justices of this court in Spencer's case ^[262] correctly formulated the principles to be applied in compensation courts. The most frequently quoted statement is that of Griffith CJ: ^[263]

In my judgment the test of value of land is to be determined, not by inquiring what price a man desiring to sell could actually have obtained for it on a given day, that is, whether there was in fact on that day a willing buyer, but by inquiring "What would a man desiring to buy the land have had to pay for it on that day to a vendor willing to sell it for a fair price but not desirous to sell?" ... The necessary mental process is to put yourself as far as possible in the position of persons conversant with the subject at the relevant time, and from that point of view to ascertain what, according to the then current opinion of land values, a purchaser would have had to offer for the land to induce such a willing vendor to sell it, or, in other words, to inquire at what point a desirous purchaser and a not unwilling vendor would come together.

[267] I would emphasise the important phrase in his Honour's judgment "persons conversant with the subject". The formula suggested by Griffith CJ contemplates a prudent purchaser and one who would make a point of informing himself or herself of all of the relevant attributes and advantages that the property enjoyed so as to make that purchaser "conversant" with the subject, meaning thereby not just the land in its existing state but also any profitable uses to which it might be put.

[268] Isaacs J put the matter even more strongly. His Honour said that the hypothetical parties should be regarded as not anxious to trade and as being: ^[264]

perfectly acquainted with the land, and cognisant of all circumstances which might affect its value, either advantageously or prejudicially, including its situation, character, quality, proximity to conveniences or inconveniences, its surrounding features, the then present demand for land, and the likelihood, as then appearing to persons best capable of forming an opinion, of a rise or fall for what reason soever in the amount which one would otherwise be willing to fix as the value of the property.

[269] The comprehensive language used by Isaacs J is clearly capable of embracing matters with which perhaps courts of today have become more familiar, such as the value of highly restrictive or very advantageous planning approvals, the changing value of money over time and opportunity cost. So too computerisation has in modern times enabled the testing of financial projections to different sensitivities, of time, interest rates, changing values of money, different occupancy rates and other contingencies both favourable and unfavourable relatively easily and inexpensively.

[270] Engrafted upon the propositions in Spencer's case are several other principles which are frequently applied and which I take to be sound in law. Each deserves some separate consideration.

Highest and best use

[271] It is now settled, and for good reason, that a dispossessed landowner should be compensated for the value of his or her land on the basis of its highest and best use. In current times, except in the case of non-controversial uses such as perhaps a single dwelling in a residential zone or a corner shop on a site zoned for that purpose, many uses, and most commercial ones, require the prior approval of vigilant planning authorities, compliance with often stringent planning controls and the need to meet and refute objections by objectors, including commercial, competitive objectors in political, administrative and legal forums. These may not be the only hurdles that a developer has to leap. It is now a well-established planning principle that a planning authority may take into account the likelihood that a particular development will cause blight to other existing developments ^[265] and the related consideration that before an approval may be granted an applicant for it demonstrate a need for the proposed development. Many other considerations may be relevant. A developer may also need to show, for example, that the development can be undertaken without intrusion upon, or nuisance to, or indeed in some cases even inconvenience to adjoining owners and others.

[272] An intending prudent developer of a project such as the respondent here had in mind would inevitably require investigations, studies, plans and information of the kind to which I have referred and which would necessarily involve the services of professionals such as town planners, engineers and others, not only perhaps to obtain, or enhance, the chances of obtaining planning approval but also to place itself in a position to satisfy financiers, if it has to borrow to complete the development, and prospective tenants or licensees that a tenancy or a licence in it would be an obligation worth incurring.

[273] I mention these matters simply to show that there was nothing remarkable, or indeed, to use the word which I think has been variously used in these proceedings so far, "special", about what the respondent did before the resumption. What it did it would have had to have done to gain planning and building approvals, and to attract licensees. In short what was done was necessarily done to demonstrate that the highest and best use of the resumed land was its development as a market. If what the respondent did had not been done, then it would be unlikely that any purchaser would pay a price which included a component for the by now demonstrable, realisable, potential of the property for its highest and best use as a market. And a purchaser would have been in as good a position to take advantage of the site in its cleared state as the respondent. None of this is in disparagement of the respondent's efforts. But their site-specific nature meant that Yates would have no interest in withholding their fruits from a purchaser and every reason to provide them to "talk up" the price of the land.

[274] Any vendor who failed to capitalise on this work by not extolling to a purchaser its consequential, demonstrable, realisable potential would be highly imprudent. And any reasonable purchaser would expect, and know, that the price would reflect this potential. It is not a case of the purchaser's buying, as it were, the plans and the work done in respect of proving up the potential as one of the examples given by the Full Federal Court would suggest. It is merely that, to use the language of Griffith CJ in Spencer's case, each party to the transaction should be regarded as being fully conversant, or as Isaacs J said, perfectly acquainted, with the subject, that is to say, the subject land with all of its potential. It follows that the more work, the more proving up that is done by the vendor before the sale, the more any uncertainty as to the realisation of the potential will be reduced, and the higher the price will be. This fundamental concept the Full Federal Court touched upon in the passages I have quoted but failed to apply. What was described as special value by the Full Federal Court and by Handley JA in the Court of Appeal of New South Wales as the "head start" advantage was no more than an element of the highest and best use of the land and a factor to be taken into account in assessing its value on that basis. A purchaser who made himself or herself conversant or perfectly acquainted with the property in the way in which he or she should be taken to do so as contemplated by this court in Spencer's case would have been in no inferior position to exploit the planning and building approvals, the clearing work that had been done and the investigation of the demand for licences than the respondent.

[275] This is in essence how Mr Simos QC and Mr Webster both said they regarded the situation and which Branson J held to be a reasonable view of it. It was also consistent with much of what Mahoney JA said in his dissenting judgment in the Court of Appeal. ^[266] Branson J was right in this regard and the Full Federal Court therefore fell into error in taking the view that what the respondent had done gave rise to any special value. In short, in my opinion the approach adopted to the case by the lawyers was the appropriate one and such as to offer the best prospects to the respondent. And if I should be wrong about this, the approach on any view was an available one, and such that no lawyer exercising a professional judgment could be regarded as negligent in adopting.

Relationship between the valuers and the lawyers and their respective roles

[276] The approach of the Full Federal Court was coloured by a misapprehension as to the relationship between the experts called in this case and the lawyers. Most professional experts do encounter and have to deal from time to time with matters of law, or mixed facts and law. Engineers and architects may be called upon to construe building codes and building and engineering standards. But apart perhaps from town planners who almost daily will be called upon to construe long and complex planning instruments, there would be few non-legal disciplines requiring knowledge and consideration of legal principles to the extent that a valuer must in his or her ordinary practice. As I observed in Commonwealth v Western Australia , ^[267] the Privy Council in Melwood Units Pty Ltd v Commissioner of Main Roads ^[268] referred to valuation principles and principles of law as if they were interchangeable. Questions of law, fact and opinion do not always readily and neatly divide themselves into discrete matters in valuation cases and practice.

[277] It should also be firmly kept in mind that valuation practice, like legal practice, cannot be an exact science. Both require the exercise of judgments and the forming of opinions, often on matters in respect of which certitude is impossible and uncertainty highly likely.

[278] In Kelly v London Transport Executive ^[269] Lord Denning MR said that solicitors and counsel must not "settle" the evidence of medical experts as they did in Whitehouse v Jordan . In the latter case Lord Wilberforce said: ^[270]

[E]xpert evidence presented to the court should be, and should be seen to be, the independent product of the expert, uninfluenced as to form or content by the exigencies of litigation.

[279] What the Master of the Rolls categorically said in Kelly , in my opinion, goes too far. But in any event the passage from Whitehouse v Jordan quoted does not support as far-reaching a proposition as that propounded by Lord Denning. For the legal advisers to make suggestions is a quite different matter from seeking to have an expert witness give an opinion which is influenced by the exigencies of litigation or is not an honest opinion that he or she holds or is prepared to adopt. I do not doubt that counsel and solicitors have a proper role to perform in advising or suggesting, not only which legal principles apply, but also that a different form of expression might appropriately or more accurately state the propositions that the expert would advance, and which particular method of valuation might be more likely to appeal to a tribunal or court, so long as no attempt is made to invite the expert to distort or misstate facts or give other than honest opinions. However, it is the valuer who has to give the evidence and who must make the final decision as to the form that his or her valuation will take. It will be the valuer and not the legal advisers who is under oath in the witness box and bound to state his or her opinions honestly and the facts accurately. The lawyers are not a valuer's or indeed any experts' keepers. The Full Federal Court failed to recognise the different roles of the valuers and the appellants in this case and treated the appellants as if they were almost exclusively or exclusively the final arbiters of the way in which the property should be valued. And although the Full Federal Court held that the appellant solicitors were not entitled in this case to shelter behind the barristers and to delegate responsibility to them, it failed to look carefully at the different relationships involved. In a functionally divided profession as in New South Wales, the barristers do not engage the valuers. Nor for that matter do the solicitors necessarily do so. Here the respondent was actively and closely involved in these matters. There were times when the reasons of the Full Court implied, indeed even assumed, that the lawyers especially the barristers were personally responsible for the engagement of the valuers and the valuers' opinions. Moreover it is not as if Branson J made any findings that the appellants overbore the valuers and Yates or insisted that the valuers adopt methods of valuation that were impermissible or inferior to some other method. For these reasons also the appeals to this court would have to succeed.

Methods of valuation

[280] In one important matter the approach of the Full Federal Court is to be preferred to that of the Court of Appeal of New South Wales, although recourse to North American authority, ^[271] if relevant, was not necessary to make good that approach, as local experience is to a similar effect. The approach of the Court of Appeal would seem to exclude altogether the possibility of a sound valuation based upon, or having regard to, the profits that the property if developed might yield. There is no legal principle that purports to, or could, close for all times the categories of methods of valuation which might be acceptable in a particular case. Rodbertus ^[272] observed that in its early stage almost every civilisation was marked by two factors, agriculture and slavery. These, Seligman wrote, lead to a fundamental distinction between ancient and modern economic theory. ^[273] The former was a simple one, and, taken with a general community knowledge of the productivity of land and the fact that valuations were usually required only for the purpose of levying taxation, meant that early valuations were simple and relatively unsophisticated exercises. Valuation practice is, however, like legal practice an evolving discipline.

[281] As time has passed different types of businesses, different uses to which property may be put, changing financial markets, and more sophisticated and different methods of obtaining financial information and applying financial criteria call for flexibility, resourcefulness and different methods of making valuations. Two typical examples should suffice. Large "drive-in" shopping malls containing discount department stores, speciality shops, municipal libraries, restaurants, cafes, department stores, large supermarkets and numerous picture theatres were unknown when Spencer's case was decided. To value one, either when fully developed or in prospect, requires that the closest consideration be given to the income stream that such an establishment could be expected to generate and for how long it might do so. Similarly sophisticated techniques may be involved in the valuation of large city buildings or sites approved for their erection taking account of incentives offered to tenants and the incidence of tax payable by both parties. Often the owner of land which has been approved for a development will not undertake the development but will sell it to an investor or developer. The point is that the land with the approval attached to it becomes the prize and it would be unthinkable that the price for the prize would not be fixed in such a way as to reflect the return that the development when completed would yield. There is no reason to suppose that the price for the site of an approved but as yet undeveloped market should be very differently calculated.

[282] It is not as if the valuation of a notional capital asset by reference to its expected income-generating capacity is by any means a novel concept in the courts. Daily, courts in this country and elsewhere value what has been described as something in the nature of a capital asset, a person's capacity to earn income, by reference to his or her likely earnings over a period in the future taking account, subject to discount for contingencies, of that person's as yet unrealised but realisable prospects in life. ^[274]

[283] Wells J recognised the availability of different methods of valuation in Bronzel v State Planning Authority : ^[275]

... I am not disposed to reject any method of valuation adopted by either valuer on the ground that it is not worth considering; it seems to me that if Spencer's case ... is to keep its practical worth in this jurisdiction, this court should be slow to reject any method that, in expert hands, is capable of yielding a result within bounds that are not unreasonable. The limitations of every method must, of course, always be kept clearly in mind. I am of the opinion that the approach likely to result in the most direct and reliable resolution of the outstanding differences between the valuations is to consider the particular features of each valuation that are capable of yielding to adverse criticism.

[284] It is unlikely that in 1907 courts would have encountered a discounted cash flow method of valuation, another method which looks to, among other things, net proceeds receivable in the future from a development not as yet undertaken. Its availability was acknowledged by Jacobs J in this court in Albany v Commonwealth . ^[276]

[285] If a court is prepared to entertain, as this court did in Eastaway v Commonwealth , ^[277] a claim for compensation on the basis of increased hypothetical profits from a proposed modernisation and enlargement of the claimant's business, there is no reason why a claim based upon the likely net returns from a proposed but as yet unconstructed development should not similarly be entertained.

[286] This court itself has in any event clearly accepted what has been described as the hypothetical development method of valuation. ^[278] The method was described by Starke J in Australian Provincial Assurance Association Ltd v Commissioner of Land Tax : ^[279]

In the present case the valuation has been made on what has been variously described as the hypothetical building or development basis. The parties agree that the building upon the land does not return the rental that might reasonably be expected from it. So the rental from that building is discarded, and it is assumed that the land is vacant. The erection of a new building on the land is envisaged, providing office accommodation, which is the best method of obtaining the advantages that the land possesses. Accordingly a building is planned to obtain the full benefit of those advantages. Its cost is estimated, the gross annual rentals or receipts from it are estimated, and from these rentals or receipts are deducted various annual outgoings and interest charges which are also estimated to obtain the net receipts. The capital value of the land is then ascertained by capitalising the net receipts at some given rate of interest, and in this case, I may add, the parties were content to work upon a 4.5% basis. The unimproved value of the land is then deduced by deducting from the capital value so obtained the cost of the erection of the building. Adopting this method of ascertaining the unimproved value of the assessed land, I find as a fact that its unimproved value on 30 June 1939, was the sum of £76,154.

[287] The method is neither novel nor especially difficult, and, as with all methods, requires the making of value judgments.

[288] In Turner v Minister of Public Instruction ^[280] all the members of the court (Dixon CJ, Williams, Fullagar, Kitto and Taylor JJ) accepted the appropriateness of a like method in the case of resumed subdivisible, but as yet unsubdivided, land.

[289] It is therefore quite impossible to say that valuers and lawyers preparing a compensation case were negligent simply because they were in favour of advancing what was in fact an already well accepted method, the hypothetical development method of valuation. It is plainly an available method in an appropriate case and a familiar one to those who have practised in this area.

[290] It was not necessary therefore to look for foreign authority on this point but it is right, as the Full Federal Court suggested, that there are Canadian cases which contemplate the method of valuation adopted by the respondent's valuers in this case. In Canada the method of valuation is apparently called the land residual method. ^[281]

[291] The valuers called by the respondent were not in error to adopt the methods that they did here. Nor were the appellants in any way negligent in not advising them to adopt some different method. The error, if any, that was made by the valuers was to misdescribe, in the circumstances of this case, any component of their valuation as special value either to the owner or otherwise. It may be, however, as I have suggested, that they were not using "special value" as a term of art of the kind, as Kirby P pointed out, it should be ^[282] but merely acknowledging that the method that they were using was an unusual or indeed, as they thought, a rather special one.

Disturbance and special value to the owner

[292] I group these two topics together because although they are separate they are related concepts. 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. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. ^[283] Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.

[293] The Australian Law Reform Commission report Lands Acquisition and Compensation , with some slight adaptations goes some way towards correctly defining special value as "that additional economic advantage which the owner obtains, by reasons of his ownership ... and which is not reflected in the market value". ^[284] The example which I have given answers this description. What Handley JA in the Court of Appeal regarded as special value in this case does not.

[294] Disturbance was discussed not entirely unambiguously by Dixon CJ and Kitto J in Commonwealth v Milledge . In doing so their Honours adopted language that was used by the Privy Council in Pastoral Finance Association Ltd v Minister ^[285] in referring to special value: ^[286]

[I]t must always be remembered that disturbance is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of his land lies in the fact that the compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner, that is to say, with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land . But a prudent purchaser in the position of the owner would not increase his price on account of the special advantage he would get by not having to move his business, unless the amount he would have been prepared to pay apart from that special advantage was the value of the land considered as a site for that kind of business. Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date. ^[287]

By contrast the Australian Law Reform Commission report defines, correctly in my opinion, disturbance as "cover[ing] economic losses which result naturally, reasonably and directly from acquisition. It may include such items as removal expenses, costs of necessary replacement of furniture and fittings, legal and other costs of purchasing [an alternative site] and loss of local goodwill." ^[288] Some of these items may, however, also fall under the head of valuation previously referred to as reinstatement. ^[289]

[295] I would merely add that compensation for disturbance may not be available if the claims for it are too remote ^[290] as I think the settlement sum may well have been here.

[296] In most Australian jurisdictions each of disturbance and special value is a separate statutory head of compensation. ^[291]

[297] While it must be accepted that there will be cases in which the distinction between special value and disturbance and perhaps "reinstatement" ^[292] may not be clearly drawn, no difficulty in that regard arises in this case because, for the reason which I have discussed, a claim for special value in the sense in which it is properly used as a term of art was not available in this case. ^[293] In T & P Holdings Ltd v Municipality of Metropolitan Toronto ^[294] Aylesworth JA recognised, and I agree, that proof of special value will often be difficult to substantiate.

Head start principle

[298] In my opinion there is no such principle as a head start principle in the law of valuation. It may owe its coinage by Handley JA to a misconceived importation from the law of the obligation of confidence, of a principle akin to the springboard principle by which the duration of the equitable obligation of confidence is fixed. ^[295] But that principle has nothing to say about the materials with which the respondent's efforts had rewarded it in this case and which it was very much in its interests to make available to any purchaser. It may be that in some cases a particular developer may possess some very unusual advantage that might enable him or her to undertake some development more quickly than an hypothetical purchaser acquiring the site. An example of such a situation might be one in which the developer is both developer and builder, and has particular plant and equipment on site which might otherwise be idle and which he or she would be able to utilise immediately in constructing the development at marginal cost. The developer's equipment, the developer's occupation of buildings, its location on the land, and the suitability of the land for its utilisation all combine in such a case to give the land a special value to that developer. However, that is not this situation. The formula which Spencer's case prescribes, of fully conversant parties and a prudent vendor seeking to maximise price (by getting a premium for his or her own efforts and expenditures in getting to the point of selling the land approved and ripe for development) negatives the possibility of any "head start" advantage in this case.

Serious error of fact or process

[299] In this case, in which there were critical issues of fact to be decided, the Full Federal Court made a number of factual findings for which there was no, or no sufficient, evidentiary basis, and also, without any explanation for doing so, findings which were both explicitly and implicitly in conflict with those of Branson J. If a court (at first instance or on appeal) makes a serious error or errors of fact in a case of this kind, in which numerous facts are in controversy, or decides to pursue an issue or issues different from those the parties raise, or otherwise fails to proceed fairly or in accordance with proper process, an appeal court hearing an appeal from a decision flawed in one or more of those ways should not be too ready to preserve other parts of the decision, which, if taken in isolation, may not necessarily appear to be wrong. Any attempt at surgical excision by an appellate court of clear and relevant factual error, or error of process, to leave other controversial factual findings intact will usually be unsatisfactory and unconvincing, and not such as to attract the confidence of the public and the losing litigant.

[300] Errors of the kind I have described were matters of concern in State Rail Authority of New South Wales v Earthline Constructions Pty Ltd (in liq ). ^[296] And a further example is provided in the joint judgment of McHugh, Kirby and Callinan JJ in Walsh v Law Society of New South Wales : ^[297]

In particular, there was no justification for adverse findings, or comments (if that they be), concerning Mr Walsh's sisters. Powell JA misdirected himself, in our respectful opinion, in stating that the sisters "were prepared so to act as to obtain an improper advantage for themselves" and in criticising the sisters on the basis that they were not revealed "in any favourable light" for their action in dividing the personal assets of their mother with Mr Walsh. They were not parties and were not before the court. The court was not called upon by any of the issues before it on any of the complaints to hear and determine the propriety of their conduct [footnotes omitted].

[301] In this case there were several errors of fact and in defining the real issues. However, their number makes it unnecessary to identify any one of them for the purpose of determining the appeals on the basis of it alone.

Basis for payment of the settlement sum of $1.25 million

[302] It will be recalled that after Cripps J refused to increase the compensation (apart from allowing the agreed additional amount which had been overlooked) the respondent appealed again to the Court of Appeal. Before the hearing the resuming authority settled the appeal by paying $1.25 million to the respondent. The way in which the Full Federal Court dealt with this payment is a further instance of factual error by that court. Their Honours said that the settlement sum was wholly attributable to special value, as compensation for the advantage to Yates of the work and expenditure incurred in bringing the proposed market to a state in which it was capable of immediate implementation, that is, as compensation for special value under the so-called "head start" principle. That is simply not so. The uncontradicted evidence of Mr Simos QC was that it represented a payment in respect of legal expenses, and interest and stamp duty that would have been incurred in relation to the purchase of an alternative site. It had nothing to do with the so-called "head start". In truth, these items if they represented anything reimbursable at all may have been regarded as aspects of disturbance or perhaps reinstatement costs. They are certainly not matters going to special value. It may also be that the respondent was fortunate to receive a payment of this amount for these items. It may well have been arguable that the claims for them were too remote. ^[298] They have an appearance of remoteness because every investment, whether following an involuntary transfer or resumption, or a sale in the ordinary course, made by an investor or business person, if such a person decides to embark upon the same sort of investment, will involve the payment of charges and costs associated with it. It is understandable, however, that the resuming authority might have paid money over and above its strict obligation to do so to this tenacious respondent in the interests of bringing this prolonged and no doubt distracting litigation to finality and in order to save further legal costs.

Expenditure by the respondent

[303] There is this further matter of importance to which reference should be made.

[304] The respondent bought the site in August 1981 for $5.1 million. Thereafter it expended $217,443.78 and a further questionable amount of $2.7 million making a total of $8,017,443.78 over a period of about 45 months. Nonetheless Yates and its advisers were ultimately able to achieve total compensation payments to the respondent in the sum of approximately $24 million made up of $22,334,500 compensation originally assessed by Cripps J, $217,443.78 initially overlooked and added by his Honour by consent, and the settlement sum of $1.25 million paid on the settlement of the second appeal to the Court of Appeal. No one would suggest that expenditure is necessarily equivalent to value. It will often be more, and sometimes it will be less, but it may on occasions be a guide to value when the expenditure has been made in the relatively recent past. Such an outlay here of approximately $8 million for a total return of approximately $24 million does not immediately strike one as the product of glaringly negligent conduct. I use the word "glaringly" because the Full Federal Court took the view that what the appellants had done or failed to do was obviously negligent.

[305] The result that was achieved would have been unlikely to have been achieved by an exclusive method of comparing sales of like pieces of land, a summation method or any of the other simpler methods of valuation which are sometimes used. To achieve it must have called for a degree of ingenuity on the part of the respondent's advisers and that ingenuity is reflected in the methods of valuation actually adopted, fraught as they may have been with the difficulties to which Mr Hemmings QC alluded in his early advices. Heavily discounted as any numbers based upon hypothetical cash streams which might be generated by the development when completed may have been, the total amount awarded must nonetheless in part at least have been derived from the valuations presented on the generally uniform basis that they were by the three valuers called on the behalf of the respondent. And it is difficult to see how any other methods could have been nearly as productive as the one adopted.

The duty of care

[306] Litigants will frequently be disappointed by the outcome of litigation. The legal process cannot guarantee perfect outcomes. People's expectations will often exceed their entitlements. Whether a duty of care has been duly fulfilled cannot be decided just by looking at the outcome of the efforts of a professional person. Cases will be lost, and regrettably patients will not be cured, notwithstanding that their lawyers and doctors have been diligent and careful.

[307] The nature and scope of the duty of lawyers to exercise reasonable care, particularly when litigation is in prospect or being, must be assessed in the knowledge that litigation always involves some uncertainties. Matters for judgment, for example, whether to examine or cross-examine in a certain way, how precisely to respond to a question from the bench, whether to object or not to object to a question, and how to frame a particular submission, in practice arise momentarily. No matter how comprehensive a judge's reasons may be, it will practically never be possible for him or her to set out all of the matters that have impressed or failed to impress the court.

[308] This was a difficult and complex case. How it was conducted depended upon many factors. The first was the obvious and inherent difficulty of establishing compensation in anything like the amount for which the respondent was hoping and contending, more than $70 million if one of its valuers were to be accepted. A nice judgment had to be exercised upon the question whether the claim should be presented on a single basis or upon an alternative, and if any, what alternative basis. A decision had to be made whether, as somewhat unusually occurred here, three or some fewer number of valuers should be called: was there a risk that other valuers or indeed other bases of valuation put in the alternative might contradict or weaken the force of valuations derived from the method adopted? These are the sorts of decisions which had to be made in this case and Mr Yates' involvement in them seems to have been considerable. As Branson J correctly found, there is no reason to suppose, however, that any of them were made negligently by the lawyers here.

[309] In determining whether, in giving an opinion or advice on the conduct of a case, lawyers have been negligent it will not necessarily be a proper basis for criticism that they have recommended or acquiesced in an approach which might have seemed to some to be novel in law or one upon which minds might differ. So too, as counsel for the respondent submitted, regard has to be had to what the law might reasonably be perceived to be at the time that the conduct in question occurred.

[310] In the last 20 years it is possible to point to many changes in legal thinking in and as a result of decisions of this court. ^[299] There are also a number of decisions of this court on important matters in which different justices have taken diametrically opposed views. ^[300] All of this is to highlight the increased difficulty which lawyers face in making decisions as to the way in which to conduct some complex cases and to advise their clients.

[311] There is no doubt that Branson J sought to apply the correct test in this case and in my opinion did apply it correctly. There is another important policy consideration which may eventually turn out to be of relevance in any discourse about professionals and other service providers performing vital work and that is the one adverted to by McHugh J in Esanda Finance Corp Ltd v Peat Marwick Hungerfords ^[301] in discussing the conduct of auditors and their possible liability for large sums of money to indeterminate classes of people:

First, whether or not imposing a duty in favour of third parties will deter auditors from being careless, extending liability will probably reduce the supply of their services. Courts often assume ^[302] that insurance against extended tort liability is readily obtainable and that the increased cost of an extension of liability can be spread among clients by the payment of additional premiums for insurance. But insurance in this field may not be as readily obtainable as courts assume. Insurers are reluctant to insure against risks which are difficult to quantify, as they usually are when the number and amount of the claims arising from the risk are difficult to estimate ...Extending the liability of auditors for negligent misstatements may also reduce the demand for their services. Even when insurance is obtainable, increasing fees to pay for the cost of additional insurance may result in a reduction of demand for audit services in cases where the law does not require regular audits. Experience in the United States suggests that some of the smALL ER accounting firms may be forced out of business ^[303] ...Secondly, no examination of the public interest should overlook the effect of an extension of auditor's liability on the administration of the court system.

[312] I emphasise that his Honour's remarks were made in the unique context of a claim in negligence for pure economic loss by an indeterminate group of people but their application as a matter of policy beyond that may arguably need to be considered if unduly high standards come to be imposed upon professional and other service providers who are required in their callings to exercise value judgments on a daily basis.

Factual errors in the Full Federal Court

[313] In their judgment their Honours said that the Government of New South Wales had announced before the resumption that Paddy's Market would be relocated. ^[304] This is to misstate the true position which was the subject of very careful consideration and explicit evidence before Cripps J, who, in some detail, explained why Paddy's Market would be likely to remain a real competitor to the respondent's development so far as was known at the time of the resumption. ^[305] Branson J in her judgment quoted from Mr Woodley's valuation report facts which do not appear to have been in dispute: that Paddy's Market was only later (than the resumption) sold; and that it either was developed, or was to be developed in such a way as to incorporate new markets. There was no evidence to any different effect to support the Full Court's finding to the contrary. There was therefore no reason why the Full Federal Court should have taken a different view of this factual matter from that of Cripps J and Mr Woodley's evidence.

[314] The Full Federal Court held that the respondent was in a position by 20 July 1984 to enable it to commence its development of the market almost immediately. ^[306] That finding overlooks that it would take some time for the respondent to find and obtain binding commitments from its other 800 or so licence holders, and for the development to yield income when it was completed, and it also overlooks explicit findings made by Branson J, on a consideration of all of the evidence, including that of Mr Yates whom she thought an unsatisfactory witness, that finance would not be available for a number of months to enable the respondent to commence the work.

[315] It was also held by the Full Federal Court that the respondent had carried out work which would enable it to construct a market on the land more quickly than any hypothetical purchaser. ^[307] I have already explained why this was not so.

[316] The Full Federal Court said that the appellants had accepted that it was obvious that the respondent was entitled to be compensated for the advantageous position it was in at the date of the resumption. ^[308] A related finding was that Mr Simos QC had given evidence that it was obvious that the respondent was entitled to be compensated for the work done in bringing the proposed development to a stage at which it could proceed immediately. These findings misstate the effect of the evidence of the appellants and Mr Simos QC. As the evidence of Mr Simos QC shows, what he and the appellants were saying was that that compensation should be, and was, reflected in an hypothetical price based upon the potential that the land had, and the time within which that potential could be realised by an (that is, any) owner of the land.

[317] Another finding of the Full Federal Court was that the advanced state of the development should be reflected in the value of the land but that the case was not being prepared on that basis. ^[309] Because the Full Federal Court misunderstood the nature of the exercise being carried out by the valuers and the proper application of Spencer's case this was simply not so. Furthermore, the development could not be regarded as being in an advanced state. Much had no doubt been done to enable the potential to be realised but much more needed to be done including the attraction of and commitment by a further 800 or more stallholders, and the actual construction of the works.

[318] All of these are factual errors going to important matters and would of themselves require that the appeals be upheld.

[319] But they do not stand alone. Important factual findings of Branson J which her Honour was entitled to make were inexplicably either ignored or put aside. Some of them overlap matters to which I have already referred. It is unnecessary to repeat all of these but some of the more important ones are the following.

[320] Her Honour discussed Mr Yates' attitude to and capacity to influence the evidence to be called before Cripps J. She made this finding: ^[310]

[O]nce satisfied, as I find [the liquidator] was, that there was no reasonable likelihood of the creditors not being paid in full from the fruits of the compensation claim, he would, I find, have given considerable weight to the views of Mr Yates. I find that Mr Yates would have been strongly resistant to the idea of abandoning the approach to the valuation of the subject land adopted by Mr Parkinson.

[321] Her Honour gave careful attention to Yates' financial capacity. Her finding was in these terms: ^[311]

I am not satisfied that as at the date of resumption of the subject land (that is, 7 May 1985) [Yates] had confirmed finance available to it to allow it to proceed promptly with the erection of the markets. Indeed, I find positively that it did not as at that date have the financial capacity immediately to erect the markets.

[322] The next finding to which I would refer was of great importance: ^[312]

In my view, it would be a rare case in which it could be said that a prudent purchaser who would not repeat the steps previously taken by the vendor could not reasonably be hypothesised. I do not regard the subject land in 1985 as such a case.

[323] It is difficult to understand why the Full Court attached no weight to a finding in the following terms: ^[313]

The evidence before me shows that Mr Yates was meticulous in ensuring that each of the valuers was familiar with the work that had been done by or on behalf of [Yates] to advance its proposal.

[324] This finding underlines again the role, indeed the effective control perhaps, that Mr Yates was exercising over the valuation methods. It is also indicative of Mr Yates' likely understanding of the use to which the valuers were putting the work that Yates had done on the project. The last of the factual errors of the Full Court related to the critical issue of judgment. Her Honour had made a finding in these terms: ^[314]

The special value claims which [the valuers] respectively identified were based on premises inconsistent with such claims and, if accepted, had the apparent potential to lead to higher levels of compensation to [Yates] than the head start claim now identified by [Yates].

[325] In short a choice was made to pursue a particular, and it was thought, more promising line of attack than a claim for what Handley JA would come to describe as a "head start", a choice which, in view of her Honour's other findings, was one to which the respondent in all likelihood assented. The Full Court was not entitled to ignore or make findings in contradiction of her Honour's finding on this matter.

[326] The next matter is one of omission on the part of the Full Court. As I have said the Full Court took the view that the conduct of the appellants was obviously negligent, and that this was so because any competent practitioner in the field would have been aware of the "head start" principle giving rise to an item of separate compensable, special value. Even if it were to be accepted (contrary to what was the actual position) that this was part of the law of valuation at the time of the relevant conduct, the court should have taken into account that its existence must have been very obscure for it was not apparent to the authors of the major texts and competent practitioners in the field.

[327] No textbook as at 1990 had cited Kennedy Street or Baringa as examples of the application of a head start principle. ^[315] No judge before Handley JA in Yates had cited Kennedy Street or Baringa as authority for the proposition referred to by the Full Court.

[328] Before the appellants' retainer, Queen's Counsel were retained by Yates to advise in relation to its entitlement to compensation and never advised that a claim for "head start" should be made. Mr Hemmings QC was briefed on 8 June 1984 to advise Yates in relation to the resumption proceedings and continued to do so from time to time until late 1987. Mr Tobias QC was briefed to advise and gave advice in conference on 7 November 1984. Mr Tamberlin QC gave advice in writing to Yates in or about early 1985. Mr O'Keefe QC was retained in January 1988 on behalf of Yates until about mid 1989. And none of Messrs Parkinson, Woodley and Egan, who were regarded as foremost in their field as valuers, purported to assert an entitlement to special value based on any notion of a head start.

[329] The Full Court had no regard to these matters. They may or may not have been decisive but they were relevant and important as showing that the principle that was said to be obvious, the "head start" principle, was not obvious to a body of well qualified and experienced text writers and practitioners. The Full Court should have considered them and dealt with them. The court's failure to do so is another reason why the appeals must be upheld.

Errors of law

[330] It was said by their Honours in the Full Federal Court that the work done and knowledge acquired by the dispossessed owner were not connected with the character or quality of the land and that it therefore had a special value to the respondent. ^[316] The knowledge acquired by the respondent was connected with the character and quality of the land. That knowledge (and the approvals to which it led) and its application to the land gave the land the character or quality of making it developable for a market which could be constructed upon it and in respect of which a number of licensees had made commitments.

Should Kennedy Street and Baringa be applied?

[331] Something should be said about the two cases upon which the Full Federal Court relied and which it thought applicable to the situation here. The first is Kennedy Street Pty Ltd v Minister , ^[317] a decision of Hardie J in the Land and Valuation Court of New South Wales.

[332] The business of the plaintiff company there was the acquiring, subdividing and selling of land. After agreeing to purchase a parcel of land for £18,000, paying a deposit of £1800 upon it, preparing a survey plan, applying to the local council for and obtaining an approval in principle upon conditions and undertaking some other work with a view to the implementation of the approval, the plaintiff was notified that the land would be resumed. The plaintiff claimed compensation in the sum of £18,638. The resuming authority served upon the plaintiff a notice valuing the claim at £18,000 "freehold value - including all interests". A similar notice was also issued to the unpaid vendor and no attempt was made at that stage to value the respective interests of the plaintiff and the vendor. Shortly before the hearing the defendant gave a formal notice of valuation to the plaintiff in the sum of £4000 in respect of the plaintiff's interest as purchaser under the contract.

[333] The plaintiff claimed at the hearing that compensation for its estate or interest should be assessed at between £10,000 and £12,000, or, alternatively, on the basis of a special value to the plaintiff of between £13,000 and £15,000.

[334] Hardie J held that the market value of the land should be determined at £19,500 and that in the circumstances the land did have some special value for the plaintiff who, were it the purchaser, would have paid an additional sum of £2500 over and above its market value.

[335] Hardie J said that the matters that caused him to make a finding of special value in favour of the plaintiff were that the plaintiff had given close and careful consideration to the problems associated with the proposed subdivision; it had paid stamp duty to acquire it; it had also paid survey fees and engineering fees, and the council fee in relation to the subdivision application. His Honour went on to say: ^[318]

The knowledge and experience acquired [by one of the principals of the plaintiff] and the time spent by him in examining the land and taking the steps appropriate to ensure an expeditious approval of the subdivision were, in the event that happened, of no value to the company.

[336] To regard these matters as ones entitling the plaintiff to an allowance for special value is to ignore or misunderstand the formulation in Spencer's case of the principles to be applied in assessing compensation. A vendor armed with the relevant materials, an approval and information which might enable a property to be profitably subdivided would be foolish not to seek and to insist upon obtaining full value for the land or any estate or interest in it having regard to those matters, from any purchaser. And a prudent purchaser would need to be prepared to pay a price accordingly as the utilisation of those materials would enable that purchaser to realise the highest and best use of the property. Everything the plaintiff had in its possession in Kennedy Street was, as is the situation in this appeal, readily transmissible to, and of value to, any purchaser coming into possession of the property.

[337] In Kennedy Street Hardie J went on to say that the resumption deprived the plaintiff of a profitable venture and that the plaintiff's profit-earning potential was diminished. One factor, his Honour said, that was operating in diminution of the potential was the length of time that might be required by the plaintiff to re-equip itself for this type of business. He thought it relevant that the plaintiff, instead of taking steps to acquire other subdivisible land for sale, took a position with another company which kept him fully occupied in the next few months. Only then was other property purchased by another private company of which he was the principal. His Honour said that on the somewhat meagre evidence before him he had formed the opinion that a period of some two or three months should be allowed and in some way compensated for in the assessment of compensation under the heading of special value.

[338] This was to overlook that the plaintiff's business was to sell property. To be offset against any possible delay in finding a replacement property would have to be, but was not, taken into account by the trial judge, the advantage of an early, accelerated (notional) sale by the plaintiff on the resumption date, the profit accruing on the small outlay of £1800 and other expenses, and the elimination of the risks of actively undertaking the subdivision. What Hardie J did was to misunderstand Spencer's case. The land which was resumed was not acquired for subdivision and sale over an indefinite or infinite period. It was acquired for sale and its subdivision would be undertaken only to achieve that end. Its subdivision and sale would have constituted one project which would have required time for its completion. When that land was sold it would have been a matter for the plaintiff whether it wished to embark upon another such project. If it did it would have to find another parcel of land and undertake another separate project. The location and the acquisition of another piece of land would no doubt have taken some time, whether the subject land had been resumed, or sold in subdivision in the ordinary course, and were matters that were quite irrelevant to the resumption. This is an entirely different situation from the one that the Privy Council considered in Pastoral Finance . ^[319]

[339] Properly analysed, Kennedy Street can be seen to be not a case to be applied or followed. On any view it states no principles of any relevance to this case.

[340] Baringa Enterprises Pty Ltd v Manly Municipal Council ^[320] is another decision of Hardie J. In that case his Honour again assessed compensation by including a component for special value based upon what he thought to be a better chance that the plaintiff would have had of obtaining a renewed building approval and successfully undertaking a development than would a purchaser at the time of the resumption.

[341] By the time of the resumption, worthless structures that had been on the land had been demolished and approval in principle had been obtained from the planning authority for the construction of a substantial building to contain shops and flats. Plans had been prepared by architects who had called and received tenders for the construction of the building. The plaintiff had also sought unsuccessfully to obtain finance to construct the building. At that stage it was contemplating the possibility of a less ambitious development because the approved one had proved to be beyond its financial capacity.

[342] His Honour said ^[321] the test to be applied in determining special value is that laid down by the Privy Council in Pastoral Finance Association Ltd v Minister . ^[322] Again his Honour thought that because of the information that the plaintiff had at the date of resumption it would have had a better chance of obtaining the fresh building approval which it would have been necessary for it to obtain because the earlier, more ample building approval could not be implemented. His Honour thought that the plaintiff's information and the approval it could not utilise were matters that should sound in special value. His Honour said: ^[323]

Looking at the matter from all aspects and bearing in mind the plaintiff's substantial expenditure on the project over and above the cost of the land, some of which gave the land an added value in its hands, and some of which was not reflected in added value, I am of the opinion that ... a prudent purchaser in the position of the plaintiff company would have been prepared to pay for the subject property a sum of £8500 over and above its market value.

[343] On this occasion his Honour acknowledged in effect that some at least of what had been done by the plaintiff would be of utility and value to a purchaser. But his Honour made no attempt to explain what in fact would have been of utility and what would not have been of utility to a purchaser. His Honour's statement of the facts does not reveal why a fully conversant purchaser could not, and would not, have been put in possession of all of the information and advantages that the plaintiff was said to have. And indeed there is much in the statement of the facts to suggest that the plaintiff had expended money that not only would a purchaser have been unable to recoup, but also the plaintiff should have been taken to have thrown away because of supervening events quite unrelated to the resumption, such as credit restrictions imposed by the government, changes in the policy of the planning authority, the plaintiff's inability to obtain finance and a consequential need to contemplate a significantly scaled-down project. Nor did his Honour explain why the highest and best use might not have been for the construction of a building that had been approved and was beyond the dispossessed landowner's means. If that were the highest and best use there would have been no need for a notional purchaser to seek an approval for a smALL ER building.

[344] Baringa too is a highly questionable decision and on no view can have any valid application to this case.

[345] The evidence that the appellants sought to lead on behalf of the respondent when the compensation case was remitted to Cripps J by the Court of Appeal for further consideration was designed in part to exploit the reasoning of Hardie J in Kennedy Street and Baringa . This was understandable because of the way in which the Court of Appeal had dealt with the appeal. Indeed the Court of Appeal had effectively forced this course upon the parties. The attempt to lead the evidence failed for the reason that Cripps J was satisfied that all allowance that could have been made for special value had been made. Additional reasons why it could not avail the respondent were that Kennedy Street and Baringa had no application and such of the claims as were embraced by the evidence and were not covered by value assessed by reference to highest and best use were probably too remote.

[346] Kennedy Street and Baringa received some passing reference by Mahoney JA in the Court of Appeal of New South Wales in Housing Commission of New South Wales v Falconer . ^[324] His Honour was the only member of that court (Hope and Mahoney JJA; Glass JA dissenting) who referred to them and the case cannot be taken to be, as was submitted by the respondent, an endorsement of them.

[347] Kennedy Street has been referred to in numerous other cases. Walsh J in Rosenbaum v Minister for Public Works ^[325] thought it might require reconsideration. It was applied in Chapman v Minister , ^[326] but the reasoning in that decision is itself unconvincing, particularly that of Jacobs and Asprey JJA ^[327] where their Honours allowed some special value in respect of the incorporation of a company for the purposes of carrying through the proposed subdivision by the dispossessed landowner. Barber J in Altona Estate Pty Ltd v Shire of Altona ^[328] declined to follow it. Hardie J himself distinguished it in Parkes Development Pty Ltd v Burwood Municipal Council . ^[329] In Queensland Mr Dodds, a member of the Land Court in that State in Consolidated Development Pty Ltd v Commissioner of Main Roads ^[330] after referring to Pastoral Finance applied Kennedy Street , ^[331] and in Yarn Traders Pty Ltd v Melbourne and Metropolitan Board of Works ^[332] Starke J stated that, whether special value existed was a question of fact, without expressing any disapproval of Kennedy Street to which he referred. In Arkaba Holdings Ltd v Commissioner of Highways Bray CJ ^[333] voiced doubt about its correctness, while in Tasmania in Fisher v Minister ^[334] Nettlefold J accepted its application there. Cripps J applied Kennedy Street in Wimpey Construction UK Ltd v Minister ^[335] but the facts before his Honour may have justified the inclusion in the compensation of a component for special value without reference to Kennedy Street . In Polegato v Griffith City Council ^[336] Stein J referred to Kennedy Street with approval. The last case in the line appears to be Nahum v Roads and Traffic Authority of New South Wales , ^[337] in which, in my view, Bignold J correctly held that Kennedy Street did not establish any principle of valuation law.

[348] Kennedy Street was not, in my opinion, correctly decided and it should no longer be applied.

[349] In reaching the conclusions that Hardie J did in the two cases, his Honour thought that he was applying Pastoral Finance . ^[338] Unlike the plaintiffs in Kennedy Street and Baringa , the appellant in Pastoral Finance had been carrying on its business at the one location for many years and intended to continue in that business indefinitely either there or elsewhere. It found that its activities were expanding beyond the capacity of the existing site to accommodate them. It acquired a very suitable site on Darling Harbour and procured plans and estimates for buildings adapted to its needs there. Before the new premises could be constructed notice of resumption was given.

[350] What was accepted by all parties in Pastoral Finance was that the resumed site had a special suitability for the use to which the appellant proposed to put it. The case was tried at first instance by a judge sitting with a jury who returned a verdict for £23,550 with a rider, added of their own accord, that they valued the land at £9950. His Honour entered judgment for £23,550. The Full Court of New South Wales on appeal reduced the verdict to £9950.

[351] The Privy Council was of the opinion that the appellant was entitled to receive compensation based on the value of the land to it. Their Lordships, unlike the Full Court of New South Wales, thought it irrelevant that the appellant's premises had not been constructed by the date of the resumption. But they had great difficulty in arriving at the meaning of the rider volunteered by the jury. All they could say was that it was a figure at which the jury had arrived with regard to some matter the nature of which could not be ascertained from the language used by the jury.

[352] Their Lordships said this: ^[339]

It would appear that the evidence of prospective savings and additional profits given at the trial was put forward in support of a claim that the capitalised value of the increase in the profits of the business due to them should be added to the market value of the land.

[353] Their Lordships did not think that such a claim could properly be made notwithstanding that the respondent had accepted its availability. It was because the respondent had not urged to the contrary that their Lordships advised that the appeal should be allowed, and the judgment entered at first instance be restored. In these circumstances it is difficult to see how Pastoral Finance can be regarded as a complete exposition of the law relating to special value, or as a case which holds that the possibility that the owner might make certain profits from the land but for the resumption is to be treated as irrelevant. So to regard it would be to cast doubt on the availability of the hypothetical building method and also the discounted cash flow method of valuation in any circumstance, and upon the correctness of Eastaway v Commonwealth , ^[340] Australian Provincial ^[341] and Dymocks ^[342] and the established practice in compensation courts in this country to receive and act upon such matters. As to the latter, their Lordships did accept that savings and additional profits are relevant matters in the assessment of compensation, just as they would be if the dispossessed owner were purchasing the land: the availability of these savings and profits would guide such a person in determining the price which he should pay for it. The case is no more than an authority for this, and for the proposition that one way of testing whether there is "special value" is to ask what the dispossessed owner would pay if he or she were the hypothetical purchaser. This is not the only way of defining or calculating special value and their Lordships do not suggest it is.

[354] There is another respect in which Pastoral Finance may need explanation. The concept of a price that a dispossessed owner would pay over and above the market price (if he or she were the purchaser) rather than lose the land may not be an entirely reliable guide to what the special value to the dispossessed owner is. In theory all that the notional purchaser need pay is a dollar more than the next available purchaser (without a special interest in the matter) would pay. In the highly artificial construct that the law requires in resumption cases, the formulation of the Privy Council in Pastoral Finance may only become workable if the dispossessed owner as notional investor be regarded as having a right to bid or fix a price which included special value. Another way of viewing the formulation of the Privy Council in Pastoral Finance is to regard it as a means of ascertaining the value of the property to the owner. ^[343] Part of the difficulty arises from a need or desire to ensure that an owner is compensated for the loss of value of the property to the owner , a value which may not always be the same as the value which the unqualified application of Spencer's case, an exchange value or sale in the marketplace, would yield. Sometimes such a need will involve a calculation of what might properly be called special value. The requirement, and I would regard it as a requirement now long accepted by the courts, of the various statutes providing for compensation on resumption, that an owner be paid the value to him or her, may mean that in some cases the direct and exclusive operation of Spencer's case may not be possible. No doubt that case will cover most situations because, although it assumes a willing vendor (the dispossessed owner), it does not contemplate one who would lightly relinquish a property which had a particular value to him or her for less than that value. Speaking of the provisions of the Lands Acquisition Act 1906-1936 (Cth) Dixon J in Moreton Club v Commonwealth ^[344] said: "It must, however, be steadily borne in mind that compensation depends upon the value to the owner dispossessed."

[355] It should also be pointed out that in Spencer itself, Isaacs J noted that the "claim for compensation was solely for the value of the land itself, and did not include any claim for damage otherwise". ^[345] This was a reference to s 19 of the Property for Public Purposes Acquisition Act 1901 (Cth) which permitted the inclusion of claims for damage caused by severance from other land of the claimant, and by the exercise of any statutory powers otherwise injuriously affecting that other land.

[356] I would respectfully agree with what Dixon J said in Commissioner of Succession Duties (SA) v Executor Trustee and Agency Co of South Australia Ltd : ^[346]

[T]here is some difference of purpose in valuing property for 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 this difference cannot change the test of value, it is not without effect upon a court's attitude in the application of the test. In a case of compensation doubts are resolved in favour of a more liberal estimate, in a revenue case, of a more conservative estimate.

[357] There are two other respects in which the Full Federal Court fell into error. Let it be assumed for present purposes that there was such a principle as a head start principle and that it gave some special value to the respondent. When the matter came back before Cripps J on remitter from the Court of Appeal his Honour said this:

When I determined the case, I took into account expressions of interest etc referred to by Handley JA in his judgment ... Thus, I have done that which the Court of Appeal said I was entitled to do. I also had regard to the size of the land and its location. As I understand the Court of Appeal, those attributes go to "market value" and not to "special value". I took into account the size of the land and its location, among other matters, in determining what was the "value to the owner". That is, these matters were taken into account in deciding what a person in the position of Yates would have paid for the site sooner than not obtain it. I did not, however, take it into account twice. I accept that I did not adequately disclose my reasons in the judgment.

A little later his Honour went on to say that in an endeavour to put an end to the litigation, he would indicate that he would fix (and did fix) the sum of approximately $35 per square metre on the Harbour Street property as the:

"special value" component of the compensation. That amounted to approximately $500,000 being the amount of money over and above the "market value" a person in the position of Yates would have paid sooner than not obtain the land because of the special value the land had to Yates by reason of the work done and expenditure incurred and referred to in the decision of Handley JA.

[358] As I have already said, this was an item which appropriately in this case should have been treated as a component of a sale price on the basis of highest and best use of the land. However, his Honour chose to treat it as a component of special value. He had therefore already done precisely what the majority in the Court of Appeal had held should be done. There was not the slightest reason to suppose that his Honour had not therefore allowed special value. The Full Court was not sitting on appeal from Cripps J. There was no appeal heard from Cripps J on this second occasion and the compromise which was effected of the appeal that was actually filed but not decided, was, as I have already explained, effected having regard to matters which had no connection with special value properly so called. The Full Court effectively ignored what his Honour Cripps J had done and misunderstood the basis of the settlement of the second appeal to the Court of Appeal.

[359] I have previously mentioned the passage in the reasons of the Full Court in which their Honours say that the parties lost sight of the real issue between them. ^[347] I do not think that they did. It is not for a court to invent, or find, issues which the parties have not invited it to decide or which it is unnecessary for a court to decide. What Barwick CJ said in Ratten v R ^[348] in the context of a criminal trial is no less true of a civil trial:

Each [of the protagonists] is free to decide the ground on which it or he will contest the issue, the evidence which it or he will call, and what questions whether in-chief or in cross-examination shall be asked.

Lawyers' immunity

[360] It only remains to refer to the way in which the Full Court dealt with the appellants' submissions that they were in any event entitled to rely upon the decision of this court in Giannarelli v Wraith . ^[349] That can be done briefly.

[361] As Branson J held at first instance, that case was applicable. In doing so her Honour was impressed, as I am, by a statement of Gleeson CJ in Keefe v Marks ^[350] in which his Honour stated that:

action or inaction prior to the commencement of the hearing it concerns [is] a matter ... intimately connected with the work ultimately done in court, that is to say, the presentation of [the case] and any consequential relief to which [a party] was also entitled [and]

attracted the immunity of which Mason CJ in Giannarelli said: ^[351]

[T]he common law has for a very long time recognised that the barrister is not subject to ... a general duty of care. The immunity ... is supported by powerful authority, ancient and modern, in England, Scotland and Ireland. ^[352]

[362] As Mason CJ also pointed out: ^[353] "[T]he exception which the law creates is not to benefit counsel but to protect the administration of justice."

[363] Giannarelli is a recent decision of this court. It is based on sound policy and legal grounds. No occasion arises for its reconsideration now. It would be applicable here as Branson J held. The Full Court seems to have assumed that, simply because the work the lawyers did was done over a long period of time, that in some way divorced it from work done closer in time to the hearing even though the former answered the description of work intimately connected with the forthcoming trial.

[364] The respondent's case against the lawyers purported to be not only in negligence but also in deceptive conduct and breach of the Fair Trading Act. Subsequently a further claim for breach of fiduciary duty was somewhat unconvincingly articulated. All were rejected by Branson J. The last three as I have earlier suggested probably owed their assertion in this case to a perception that the immunity might only apply to a claim in negligence. Such a perception is not well founded.

[365] In MacRae v Stevens , ^[354] Beazley JA, with whom Meagher JA and Priestley JA agreed, said that collateral challenges designed to circumvent Giannarelli must fail. Accordingly in this case had any of the causes of action other than negligence in fact been made out against the appellant barrister they too would not have succeeded because the immunity as a matter of public policy would extend to him, and a proper construction of the two statutes involved dictates no different a result.

[366] Because the solicitors were not negligent or in breach of the Trade Practices Act (assuming it applied to them) or the Fair Trading Act it is unnecessary to consider whether they too were entitled to immunity in the circumstances; or the other point argued by the solicitor appellants, that in terms they limited their obligations under their retainer. ^[355]

[367] These appeals must be allowed. The judgment of the primary judge (with one exception) should be restored and the respondent should pay the appellants' costs of the application for special leave and of this appeal. The exception is this. Branson J made an order that Mr Yates personally be liable for the appellants' costs on an indemnity basis. Mr Yates appealed against this order. It was unnecessary for the Full Court to deal with this appeal because the appeal to the Full Court succeeded. The appeal by Mr Yates with respect to this order should be remitted to the Full Court of the Federal Court for further argument and decision.