Leppington Pastoral Company Pty Ltd v Commonwealth of Australia

[1997] FCA 299
76 FCR 318

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(Judgment by: BEAUMONT J)

Between: Leppington Pastoral Company Pty Ltd - Applicant
And: Commonwealth of Australia - Respondent

Court:

Judges: JENKINSON J

BEAUMONT JLEHANE J

Judgment date: 29 APRIL 1997

SYDNEY

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Judgment by:
BEAUMONT J

INTRODUCTION

The respondent, the Commonwealth of Australia ("the Commonwealth"), acquired land at Bringelly owned by the appellant, Leppington Pastoral Company Pty Limited ("Leppington"). The acquisition, for the purposes of the construction of the Sydney West (Badgery's Creek) Airport, was effected on 11 December 1991 pursuant to the provisions of the Lands Acquisition Act ("the Act"). The Commonwealth acquired an area of 38.14 ha, being part of an area of 579.8 ha ("the Bringelly property") on which Leppington, a company controlled by the Perich family, carried on several pastoral activities, principally a large scale dairy farming operation. Leppington was a major supplier of milk to the Sydney market.

Leppington used the Bringelly property as a "base farm" on which it milked about 1,150 cows throughout the year. About 2,700 calves were reared each year on the property or on an associated farm nearby. At four months of age, the calves were sent to one of Leppington's properties in the Central West of New South Wales. Some later returned to Bringelly as pregnant heifers and potential milkers. Others were sold as steers. The Central West properties were also used for the production of grain as dry feed for consumption at Bringelly. Leppington supplemented this dry feed with brewery grain acquired under an arrangement with Tooth's Brewery and with vegetable waste from a cannery at Bathurst. In a normal season, approximately 65% of the milking cows' food needs were satisfied by imported dry feed; the remaining 35% was provided by "fully" (i.e. throughout the year) irrigated prime pasture; but, at times, it was necessary to rely almost entirely on imported dry feed. Generally speaking, the dry stock grazed the "dry" pasture areas (that is, inferior country), supplemented from time to time by grazing "winter" irrigated pasture (that is, pasture which was not prime pasture and which was irrigated in winter only).

At the time of acquisition, the Bringelly property comprised 159.1 ha of "fully" irrigated prime pasture, 41 ha of "winter" irrigated pasture and 276.4 ha of "dry" pasture. Water storage dams occupied 65.7 ha. Utility areas, including building sites, yards etc. occupied 37.5 ha.

The acquired land comprised 32.4 ha of "fully" irrigated pasture; and 5.8 ha of utility areas, on which were erected the main dairy building and yards, calf rearing pens and sheds, feed store sheds, the main machine areas, the main office and two principal residential buildings.

LEPPINGTON'S CHALLENGE TO THE MINISTERIAL DECLARATIONS

In July 1989, the Minister made declarations under s.22 of the Act that he was considering the acquisition of part of the Bringelly property, having an area greater than 38.14 ha. Leppington sought, pursuant to s.26 of the Act, a reconsideration of the declarations, but the Minister, pursuant to s.27(1)(a), confirmed his decision. Leppington then sought, pursuant to s.28, that the decision be reviewed by the Administrative Appeals Tribunal. The Tribunal stated a case for the opinion of this Court. The questions stated were determined by a Full Court in June 1990 (see Leppington Pastoral Company Pty Limited v Department of Administrative Services (1990) 23 FCR 148). Before the Tribunal resumed its hearing of the matter, the parties entered into negotiations with respect to possible variations of the declarations. They ultimately reached agreement on this issue and reduced their agreement to a form of a deed ("the Deed") dated 21 August 1991. The true construction of the Deed is important for present purposes.

THE DEED

A copy of the Deed is annexed to these reasons. (Its schedules are not annexed). Some of its provisions should be noticed now as follows:

The Deed recited (F) that, following negotiation between them, the parties "have agreed to a variation of the Pre-acquisition Declarations (the varied PAD) on the terms and conditions as set out in this Deed".

By cl.1 of the Deed, the parties agreed that the varied PAD "shall be on the following terms and conditions", that is, those provided in paras. (a) to (e).

By cl.1(a) it was provided that the Commonwealth shall acquire the land being Lot 101 ("the acquisition land") in the subdivision plan, which is also annexed to these reasons. It will be seen that it is there stated that Lot 101 has an area of 38.14 ha.

By cl.1(b) it was provided that the Commonwealth shall acquire an easement over Leppington's land not being acquired, relating to an approach lighting system and a navigational aid system, appurtenant to the acquisition land.

By cl.1(c) it was provided that the Commonwealth shall acquire a restriction as to user relating to the systems mentioned in cl.1(b).

By cl.1(d) it was provided that the Commonwealth shall acquire a restriction as to user relating to the terminal area radar to be constructed on adjoining land owned by the Commonwealth.

By cl.1(e) it was provided that the Commonwealth shall bear the survey and registration costs of acquiring the acquisition land, the easements and the restrictions as to user. Nothing turns on this provision for our purposes.

Clause 2 of the Deed provided:

" The parties shall do all reasonable things in their power to enable the varied PAD ... to become absolute as provided by the Act and to effect the gazettal of the acquisition ... and the easements and covenants ...[` the acquisition' ]."

Clause 3 of the Deed provided for the grant of a lease to Leppington in the following terms:

" On the date of the gazettal of the acquisition ('the acquisition date') the Commonwealth shall grant a lease to [ Leppington ] of the acquisition land on the terms and conditions detailed in the Fifth Schedule and the commencement date of the lease shall be the acquisition date ."

The terms and conditions of the lease specified in the Fifth Schedule included provision for the payment of rent, subject to adjustment by reference to the Consumer Price Index. The amount of the rent, which appears to be accepted by both parties as having been fixed by reference to commercial principles, is not material for our purposes. By cl.9.3 and Item 6 of the Schedule to the lease it was provided that the date of termination of the lease was to be 30 November 1992. Clause 10 then provided for termination by the parties as follows:

" TERMINATION BY LESSOR AND LESSEE

10.1

Notwithstanding any other condition of this lease, the [ Commonwealth ] may at any time during the term of the lease terminate the lease by giving [ Leppington ] twelve (12) months notice in writing expiring at any time provided that the [ Commonwealth ] requires the land for the development and construction of the Second Sydney Airport and in the event that the lease is so terminated [ Leppington ] shall not be entitled to any payment of compensation from the [ Commonwealth ] and shall not otherwise have any claim against the [ Commonwealth ] arising out of such termination .

10.2

Notwithstanding any other condition of this lease , [ Leppington ] may at any time during the term of the lease terminate the lease by giving the [ Commonwealth ] twelve (12) months notice in writing expiring at any time and in the event that the lease is so terminated the [ Commonwealth ] shall not be entitled to any payment of compensation from [ Leppington ] and shall not otherwise have any claim against [ Leppington ] arising out of such termination ."

Clause 14 of the lease provided that Leppington may continue to use the land after the termination date, with the consent of the Commonwealth, by way of a holding over tenancy, terminable on one month's notice.

Provision was made by cl.15 of the lease for the grant to Leppington of an option to take a further lease. By cl.15.1 it was provided that the Commonwealth shall, not less than 9 months prior to the termination date, notify Leppington either that it intends to grant Leppington an option for a further lease for a term of 10 years, to commence on 1 December 1992 (and this has in fact happened); or that it required the land to be vacated by 30 November 1992. By cl.15.2 it was provided that in the event that the Commonwealth granted Leppington the option for the further lease, Leppington, if (as in fact happened) it wished to take it, shall notify the Commonwealth of such wish not less than three months prior to the termination date. By cl.15.5 it was provided that in the event that the Commonwealth failed to give notice under cl.15.1, Leppington shall only be required to vacate on receiving nine month's notice.

To revert to the Deed itself, cl.5, which is important for our purposes, was as follows:

5 . ( a) If the varied PAD becomes absolute and the acquisition is effected as aforesaid the Commonwealth agrees to pay compensation to [ Leppington ] for the acquisition in accordance with Part VII of the Act and shall pay an initial advance of compensation monies to [ Leppington ] in the sum of four million two hundred thousand dollars ($ 4,200,000.00) subject to [ Leppington ] executing such Deed of Release in respect of such amount as the Commonwealth considers appropriate .

(b)

Subject to the Act, the Commonwealth acknowledges that it shall, in assessing the amount of compensation payable to [ Leppington ], take into account, amongst other things, the cost involved in carrying out the work and adopting the farming practices specified below :-

(i)

the relocation and reconstruction on the remaining land of [ Leppington's ] buildings, plant, equipment and other material presently located on the acquisition land ('the Farm Buildings') necessary for [ Leppington's ] operations as are manifest at the acquisition date ; (emphasis added) and

(ii)

the redesign of the remaining land as may be necessitated by the relocation and reconstruction of the Farm Buildings taking into account such matters as the possible need for alteration to or replacement of the fencing, paddock subdivisions, irrigation system, sullage pits, electricity, town water supply, roads and all infrastructure improvements existing on [ Leppington's ] land at the acquisition date ; and

(iii)

the adoption of new or varied farming practices that may be required to enable [ Leppington ] to continue its operations at the same standard and degree of efficiency as are manifest at the acquisition date as a result of the alteration to the irrigation system where such alteration is necessitated by the re-routing of the Northern Road as detailed in clause 6 hereof or the acquiring of the easements and covenants ;

PROVIDED HOWEVER that when making a claim for compensation [ Leppington ] shall in addition to complying with the requirements of Section 67 of the Act specify and itemise the amounts of compensation claimed for the items detailed in this sub-clause and the basis on which those amounts have been calculated .

(By s.67(1), it is provided that a person who considers that he or she is entitled to be paid compensation may make a claim for compensation. By s.67(2), it is provided that a claim (a) shall be in the form approved by the Minister; and (b) shall specify (i) the interest of the person that has been acquired; and (ii) the amount of compensation claimed).

(c)

[ Leppington ] acknowledges that it intends to relocate and reconstruct the Farm Buildings on the remaining land and agrees that in consideration of the Commonwealth agreeing to vary the [ PAD ] resulting in the Commonwealth acquiring a lesser portion of [ Leppington's ] land than as detailed in the [ PAD ] and in consideration of the Commonwealth making the acknowledgments detailed in sub - paragraph (b) above the compensation payable to [ Leppington ] for the acquisition shall be determined as if it had relocated and reconstructed the Farm Buildings and continued its operations on the remaining land as are manifest at the acquisition date whether or not [ Leppington ] does in fact so relocate and reconstruct ."

Clause 6 of the Deed provided for continued access by Leppington to all parts of the property, subject to the lease, in the event that it was necessary to re-route the Northern Road along the acquired land. Such access, if necessary, was to be provided by the Commonwealth by means of a tunnel under or across the re-routed road.

THE ACQUISITION

As has been noted, the Commonwealth resumed the interest in the property by notice of acquisition published in the Government Gazette dated 11 December 1991.

THE LEGISLATIVE SCHEME

The relevant provisions of Part VII of the Act, dealing with "Compensation for Compulsory Acquisition of Interests in Land", should be noticed.

Division 1 of Part VII (ss.52-3) deals with "Entitlement to Compensation". By s.52 it is provided that a person from whom an interest in land is acquired by compulsory process is entitled to be paid compensation by the Commonwealth in accordance with Part VII in respect of the acquisition.

Division 2 of Part VII (ss.54-63) deals with "Amount of Compensation - Interests other than Mortgage Interests".

By s.55(1) it is provided that the amount of compensation to which a person is entitled under this Part in respect of the acquisition of an interest in land is such amount as, having regard to all relevant matters, will justly compensate the person for the acquisition.

By s.55(2) it is provided that in assessing the amount of compensation, regard shall be had, inter alia , to the following:

(a)

The market value of the interest on the day of the acquisition;

(The meaning of "market value" for the purposes of Division 2 is defined by s.56 as the amount that would have been paid for the interest if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer).

(b)

Any reduction in the market value of any other interest in land held by the person that is caused by the severance by the acquisition of the acquired interest from the other interest;

(c)

Where the acquisition has the effect of severing the acquired interest from another interest, any increase or decrease in the market value of the interest still held by the person resulting from the nature of, or the carrying out of, the purpose for which the acquired interest was acquired.

(d)

Any loss, injury or damage suffered, or expense reasonably incurred, by the person that was, having regard to all relevant considerations, including any circumstances peculiar to the person, suffered or incurred by the person as a direct, natural and reasonable consequence of the acquisition.

Division 4 of Part VII (ss.67-77) deals with "Claims for, and Offers of, Compromise".

Claims for compensations are dealt with by s.67 in the manner previously mentioned.

By s.70 it is provided that the Minister is either (1) to accept the claim, and offer compensation; or (2) to reject the claim.

By s.75 it is provided that the claimant may (1) accept the Minister's offer; or (2) reject it and inform the Minister of the amount of compensation claimed.

By s.76 it is provided that on receipt of a notice under s.75(b), the Minister shall reconsider the question and make a final offer; and by s.77 the claimant may accept or reject the Minister's final offer of compensation.

Division 5 of Part VII (ss.78-84) deals with "Determination of Compensation Payable".

Compensation may be determined by agreement between the Minister and the owner made pre-acquisition (s.78) or post-acquisition (s.79).

The Minister and the owner may agree that the amount of compensation be settled by arbitration or be determined by an expert (s.80). The Administrative Appeals Tribunal (s.81) and this Court (s.82) may determine the amount of compensation.

Division 6 of Part VII (ss.85-92) deals with "Payment of Compensation".

By s.85(2), it is provided that where the Minister has accepted a claim and has made an offer, the Minister shall, on behalf of the Commonwealth, make an advance on account of compensation. An advance shall not be less than 90% of the offer (s.85(3)). The mere receipt of an advance does not constitute an acceptance of any offer made by the Minister (s.85(4)).

Where - (a) a person is entitled to be paid compensation; (b) the amount of the compensation has been determined in accordance with Division 5; and (c) title has been proved as required - the Commonwealth shall pay to the person the amount of compensation so determined (s.87(1)).

Where - (a) the Commonwealth is required to pay compensation to a person under Part VII; and (b) the total amount paid as advances exceeds the amount of compensation - the person is liable to pay to the Commonwealth the amount of the excess (s.88(1)).

For completeness, although as will be seen, in my view of peripheral significance here, reference should be made to a claimant's statutory entitlement to interest. Where the Commonwealth is liable to pay compensation to a claimant under Part VII, the claimant is entitled to interest from the day of acquisition until the day on which the compensation is paid, or where payment is delayed through a default or delay of the claimant, until the day on which the compensation would have been paid but for the default or delay (s.91(2)). For the purposes of s.91(2) if - (a) the Minister made an offer of compensation to the claimant; (b) the claimant rejected the offer; and (c) the amount of compensation determined under Part VII is less than the amount of the offer - the payment of the compensation shall be taken to have been delayed through a delay of the claimant, and the day on which the compensation would have been paid but for that delay, shall be taken to be the day on which the claimant received notice of the offer (s.91(3)).

If, on the day following the end of the period of three months that commenced on the day of the acquisition or/any succeeding period of three months, the interest payable to the claimant under s.91(2) in respect of the period has not been paid, Part VII has effect as if, on that day, the amount of compensation payable were increased by the amount of the unpaid interest (s.91(4)).

Interest is not payable otherwise than in accordance with s.91 (s.91(5)).

Section 93, in Division 7 of Part VII, provides that in any case where the High Court, or this Court, is of the opinion that the application of any of the provisions of this Act would result in an acquisition having been made otherwise than on just terms, the High Court, or this Court, may determine such compensation or make such order as, in its opinion, is necessary to ensure that the acquisition is on just terms.

THE PROCEEDINGS

Leppington claimed compensation; the parties negotiated but were unable to agree an amount. Both parties then commenced proceedings in this Court. By s.82(1) of the Act, previously mentioned, where a person has made a claim for compensation, the person or the Commonwealth may institute proceedings in this Court for a determination of the amount of compensation to which the person is entitled. This amount is the amount that the Court determines (s.82(3)).

By its further amended statement of claim, dated 8 July 1994, the Commonwealth claimed that Leppington was entitled to just compensation in respect of the acquisition in the sum of $6,581,575 comprising (a) "market value" of the resumed land without improvements, assessed at $833,000; and (b) a "special value" component, described as follows:

"( b) Special value :

Cost as at the relocation day of relocating and reconstructing the improvements on the resumed land on the land contiguous to the resumed land owned by [ Leppington ]:

(i)

Preliminaries $ 750,000

(ii)

Site works $ 2,832,000

(iii)

Office and Maintenance Complex $ 736,900

(iv)

Residences $ 543,900

(v)

Dairy Complex $ 3,460,700

(vi)

Consultant fees $ 800,000

(vii)

Statutory Authority Approvals $ 89,000

(viii)

Other $ 150,000

Sub-total $ 9,362,500

Less deduction to allow for the fact that [ Leppington ] has continued to occupy the resumed land since resumption day and will not incur the 'disturbance loss' unless and until it can no longer occupy the resumed land .

Present value of $ 9,362,500 deferred for, say 10 years from the resumption day, using 5.6 % discount factor ($ 9,362,500 x . 58 ) (Emphasis added).

$ 5,430,250

TOTAL [ of (a) and (b )] $ 6,263,250 "

The Commonwealth further claimed that it had paid Leppington $9,499,100 by way of advance under s.85 of the Act, and that such amount should be deducted, it claimed, from the compensation found to be due to Leppington. (By s.85, as has been said, it is provided that where the Minister has accepted a claim for compensation and made an offer of compensation to the claimant, the Minister shall, on behalf of the Commonwealth, make an advance on account of compensation).

The Commonwealth added, in para. 6 of its statement of claim:

" 6. If the amount already paid to [ Leppington ] exceeds the amount found by this Honourable Court to be the amount of just compensation the [ Commonwealth ] claims the balance as a debt due to the [ Commonwealth ] pursuant to section 88 of the ... Act 1989, together with interest from the date of payment by the [ Commonwealth ] until the date of judgment at pre-judgment interest rates equivalent to the statutory rates of interest prescribed pursuant to the ... Act, or such other rate as the Court may determine ."

(It will be recalled that by s.88(1), it is provided that where (a) the Commonwealth is required to pay compensation to a person; and (b) the total amount paid as advances exceeds the amount of compensation; the person is liable to pay to the Commonwealth the amount of the excess).

By its statement of defence, dated 5 July 1994, Leppington disputed the amount of compensation claimed by the Commonwealth to be due; Leppington claimed an entitlement to compensation in the sum of $52,240,816 together with interest. Leppington claimed the market value of the resumed land to be $1,270,000. In addition, Leppington claimed "special value" in the sum of $46,971,200.

Leppington gave the following particulars of its claim:

"(a)

Market value of the resumed land : $ 1,270,000

(b)

Special Value :

Cost of relocating and reconstructing the improvements on the resumed land on the land contiguous to the resumed land ...

(i)

Site works $ 28,806.500

(ii)

Office and maintenance complex $ 1,060,000

(iii)

Residences $ 1,047,100

(iv)

Dairy Complex $ 6,883,600

(v)

Consultant services $ 3,315,600

(vi)

Contractors, preliminaries and

statutory approvals and costs $ 2,938,000

(vii)

Other related costs $ 2,920,400

Subtotal $ 46,971,200

(c)

Damages sustained as a result of resumption : $ 3,999,616

(d)

Loss of income during period of

relocation and reconstruction : To be assessed

(e)

Interest

$ 52,240,816 "

It appears that the claims in items (c) and (d) above are not now pressed.

THE CASE SOUGHT TO BE MADE BY LEPPINGTON IN THE PRINCIPAL PROCEEDINGS

In his affidavit sworn 5 August 1994, Anthony Mark Perich, Leppington's managing director said that, as a result of the acquisition:

" 53. It will be essential to re-establish all buildings, irrigation lines, fences, facilities and roads, in parallel with those presently existing, in a comparable location and with comparable topography. This has to be completed by the change over date in order to avoid shut down of the dairying operations and possible risk to [ Leppington's ] dairy quota .

54. As a result of the acquisition of 38.14 hectares of land it will be necessary to redesign almost the entire area as a new farm layout .

55. Because of the loss of the land, it will be essential to replace the land lost with other land which will require substantial recontouring, soil improvement, and additional irrigation areas .

56. There will be a substantial transitional change to the dairy operation and its productivity during the first 5 years. This change will essentially come from the construction and change over in the sense of disturbance to the dairy herd in readjusting to the new layout ; the loss of the use of paddocks during this period ; the creation of temporary areas of pasture and the relocation of plant and equipment ."

Mr Perich went on to state:

" 57. I have given careful consideration to the appropriate site for the relocated dairy farm area and I consider that the location selected and shown on the plan exhibited to me at the time of swearing this, my Affidavit, and marked " LP4 "[ later, as amended, described as " LP4A "] is the appropriate one. My view, however, has always been that the location of the dairy farm, as existed pre-acquisition, was the ideal and best location for the dairy area. I consider that the new location, although appropriate, is inferior to the original pre - acquisition location of the dairy area, in particular :

(a)

The distance from the main road is almost double the distance pre-acquisition .

(b)

It is closer in proximity to the re-aligned road which means that more people will see the dairy and possibly be disturbed by the odours .

(c)

It will require substantial change in fences to enable efficient operation of the new facilities and new and remaining paddocks ."

The plan LP4A (being a version of LP4 amended in circumstances to be described later) is annexed to these reasons.

In his affidavit sworn 5 August 1994, Ronald Perich, another director of Leppington, said:

"(a)

The location of the new dairy complex and facilities [ as shown in LP4 ] is in the next best location to that existing pre - acquisition. It is centrally located in relation to the prime pastures. The intensively used cattle areas which generate large amounts of manure and other effluent such as the dairy access yards and the hardstand feed area drain away from the Northern Road into settling ponds to the west .

(b)

The pastures are well laid out in proximity to the dairy complex. The paddocks are of appropriate size and they are well designed for travelling irrigators in that they are of regular shape and adequate length .

(c)

The roads are well laid out in a regular configuration and will be of satisfactory width and construction .

(d)

The laneways and roads enable access to pastures by the dairy herd and vehicles .

(e)

The fences and pipelines are straight and well laid out and do not restrict the efficient use of the paddock by splitting the paddocks up. The irrigators can be managed having regard to the dimensions of the paddocks and gradients .

(f)

The areas of prime irrigated pasture, winter irrigated pasture, dry land areas and utility areas will allow the same balance [ as existed prior to acquisition and ]... which will enable the same productive output ."

In his affidavit, Mr Ronald Perich also commented on expert evidence given on behalf of the Commonwealth by Robert John Doyle in his affidavit sworn 1 July 1994.

In his affidavit, Mr Doyle said that he had been asked to give an opinion on the following questions:

"(a)

What are the matters which should be taken into account in determining the optimum location for the present infrastructure on the remaining land to ensure that the new dairy farm on the remaining land will have the same capacity in terms of litres of milk (" the productive capacity ") as did the old farm notwithstanding the land area reduction ;

(b)

If the criteria identified in (a) are taken into account what is the optimum location or locations for the present infrastructure on the remaining land (" the optimum plan "); and

(c)

How the optimum plan can best be effected ."

Mr Doyle went on to say:

" 19. The basis on which I have been asked to advise on the optimum relocation plan is the preservation of the productive capacity of the farm. There are two main ways in which this can be achieved. First one could increase the percentage of hard feed relative to the quantity of pasture feed consumed by the cows, or one could preserve approximately the same ratio as presently obtains by converting non-irrigated pasture on the remaining land to fully irrigated pasture ... If one adopts the latter course the same irrigated area which presently exists on the farm land, namely 156 hectares of fully irrigated pasture and 42 hectares of winter irrigated pasture ... should be preserved. The choice is a matter of farm management. As the farm is currently operated on the basis of 156 hectares of fully irrigated pasture and 42 hectares of winter irrigated pasture I have made the same provision in the optimum plan .

The optimum location for the new infrastructure (` the optimum plan' )

20. In my opinion the optimum location for the new infrastructure is as set out in a diagram a true copy of which is exhibited to me at the time of swearing this my affidavit and marked ` CW7 / 1' . In assessing the location for the new infrastructure I have taken into account matters of good farm management and good animal husbandry as well as cost ."

In his affidavit, Mr Ronald Perich said:

" 31. I have considered the plans exhibited to the Affidavit of Robert John Doyle sworn 1st July, 1994, and filed on behalf of the applicant herein and I make the following comments :

(a)

A number of paddocks, namely the old hardstand feed area, the new prime pasture to the south of the old hardstand feed area and some of the remaining paddocks around the easement area are irregular in shape and it is impractical to efficiently irrigate them .

(b)

Some of the south western new winter irrigation areas and newly converted prime irrigated pastures will be under water from the main dam on the base farm .

(c)

Inadequate irrigated pasture has been provided to make up for the prime pasture lost and the resulting losses in dry land as a result of relocation due to the acquisition .

(d)

The new feed lot position is on top of a ridge and is therefore completely exposed to the prevailing westerly winds. It is also placed on top of the existing silage pits which in my opinion cannot be relocated whilst in use .

(e)

The new water tower placed next to the principal residence is not in the most suitable position .

(f)

The dimensions of a number of the roads are totally inadequate to operate efficiently and to permit two way traffic .

(g)

The lack of new laneways and roads will result in inadequate access to new and existing pastures by the dairy herd and vehicles .

(h)

The optimum plan CW7/1 does not produce the same amount of pasture feed as the base farm did pre-acquisition and as such , [ Leppington ] will be unable to maintain the same productive output (in terms of milk) which previously existed ."

Leppington relied on expert evidence from David William Tayler who also commented on Mr Doyle's proposal. Mr Tayler said:

" 46. The process suggested to convert existing utility areas to pasture is questionable and certainly does not reflect the importance [ Leppington ] attributes to the roles of their soils and pasture production, nor the investment made by [ Leppington ] into their high quality fully irrigated pastures. Broken up hard surfaced shale is not the same as the pastures being resumed. The shale in the soil will present major difficulties in the future management of these areas. The shale will affect the soil structure which in turn will lead to changes in moisture infiltration and will not bear up to the compaction caused by animal trampling in the future. The shale has been placed on the soil to form a hard stand. Consequently, this soil has not had the opportunity to build up the organic matter levels found in the fully irrigated pastures that have been resumed. It is suggested that the shale will have to be physically removed from the area, and it is expected that a number of years of organic fertilizer application will be required to bring the soil up to the same soil physical and chemical qualities as that shown on the fully irrigated pastures elsewhere on the base farm. It is, in my opinion, simplistic to suggest a change in soil qualities as easily as presented by Mr Doyle ."

Leppington also called expert evidence from Ian McDonald Gibb.

In his affidavit sworn 3 August 1994, Mr Gibb said:

" 10. As a result of the acquisition by the Commonwealth the following matters become apparent :

(a)

31.24 hectares of the best prime irrigated pasture on the base farm pasture has been lost .

(b)

6.90 hectares of the utility areas have been lost .

(c)

An additional 13.62 hectares has been isolated as a result of the acquisition and re-alignment of the Northern Road .

(d)

The land over which the easement for the high intensity lighting system has been taken comprises ... a ... quadrilateral area of about 4.93 hectares which has been rendered unsuitable for prime pasture due to the terms of that easement .

(e)

The utility areas and facilities have effectively been severed and will need to be reconstructed on the existing residual pasture area of the base farm .

(f)

Three (3) cottages on the base farm need to be reconstructed on relocated sites due to noise constraints .

(g)

The areas above referred to as lost or reduced in usefulness will have to be re-established on other parts of the base farm, thereby taking up pasture already in use .

(h)

Other residences need to be reconstructed in relocated sites .

(i)

As a result of the loss of the 38.14 hectares referred to in 10(a) and (b) above, it is necessary to provide an additional 32 hectares of prime pasture on what was previously dry land. This is in addition to the 31.24 hectares of prime pasture lost. The 6.90 hectares of utility area lost as part of the acquisition must be re - established on prime pasture area because that is the only land available for relocation of the dairy complex in the next most suitable position .

(j)

After acquisition and prior to reformation and re - establishment, I am informed by the respondent and I verily believe, that the break-up of the land is as follows :

(i)

124.46 (155.7 - 31.24) hectares of prime pasture

(ii)

36.7 (43.6 - 6.9) hectares of utility areas ;

(iii)

41.9 hectares of Winter irrigated pasture (no change )

(iv)

264.2 hectares of dry land (no change ); and finally

(v)

76.6 hectares of water storage (no change ).

Making up a total area for all of the above sections of 543.86 (582 - 38.14) hectares after acquisition .

11. In my opinion, the pasture areas lost as a result of the acquisition comprised the best prime pasture areas on the whole of the dairy farm .

12. Exhibited to me at the time of swearing this my affidavit and marked " LP4 " ( Plan 4) is a ... plan ... which in my opinion represents the most practical and reasonable layout for the dairy facilities and pastures from a dairy farming operational and management viewpoint after acquisition ...." (As has been noted, this plan was later amended to become LP4A).

In this affidavit, Mr Gibb also criticised Mr Doyle's proposal in a number of respects. Amongst several other specific comments, Mr Gibb said:

" 25 .... Mr Doyle defines ` productive capacity' as the same capacity in terms of litres of milk. In my opinion that is a narrow and restrictive definition of productive capacity. The ultimate measure of the business is profit. Risk and business opportunities also need to be taken into consideration. The overriding principle in my opinion is that [ Leppington ] needs to be put back as near as possible to the position they were in pre-acquisition both in terms of production and productivity ."

In his affidavit sworn 21 October 1994, Mr Gibb amended Plan LP4 to become Plan LP4A, and consequentially amended corresponding portions of his earlier affidavit to read as follows:

" 15. From a dairy operational point of view the direct effect of the acquisition is that 31.85 hectares of prime pasture land is directly lost to the Commonwealth. In addition, because it is necessary to relocate the dairy complex and utility areas onto existing prime pasture land, a further area of prime pasture, namely 14.87 hectares is lost. Furthermore, an area of 3.6 hectares (being part of the site of the easement) and ancillary areas totalling 1.6 hectares are rendered unsuitable for prime pasture. This makes a total loss of prime pasture area of 51.92 hectares .

16. In order to restore post acquisition, the pre-acquisition amount of prime pasture, it is necessary to provide for 51.92 hectares of prime pasture on the residue of the original farm area .

17. The 51.92 hectares of prime pasture must be found on either existing winter irrigated or dry land. There is then, in turn, a loss of either winter irrigated pasture or dry land. More prime pasture is then required to compensate for this loss and therefore maintain productive capacity. This continues by a process of iteration with the end result that in addition to the 51.92 hectares referred to above there is a need for approximately 31 hectares of further prime irrigated pasture in addition to the pre-acquisition prime pasture of 159.1 hectares to make a total area of available prime pasture of 189.4 hectares .

This post acquisition prime pasture area of 189.4 hectares will be necessary on the residual land to provide the same productive capacity as existed pre-acquisition. This means that the farming operation is substantially more intensive than it was prior to acquisition ."

Mr Doyle, in his affidavit sworn 24 November 1994, joined issue with Messrs Tayler and Gibb's evidence and that of Messrs Perich in a number of respects. With respect to LP4A Mr Doyle said:

" 48. To achieve the proposed layout depicted in exhibit LP4A requires vast earthworks. In my opinion no prudent farmer would contemplate embarking on such earthworks when the existing slopes are presently workable ."

In response, in his affidavit sworn 7 April 1995, Mr Gibb said of para. 48 of Mr Doyle's affidavit:

" Whether the present slopes are ` workable' as stated by Mr Doyle is not the relevant question. The slopes are not equivalent to those enjoyed by [ Leppington ] in the area that has been acquired. The earthworks are a function of restoring equivalent slopes. This is not a choice that has been made voluntarily by [ Leppington ], it is a situation forced upon it by the acquisition ."

THE PRELIMINARY ISSUES RAISED FOR DETERMINATION

In giving directions for the final hearing of the proceedings, and in recognising the apparent complexity, at least in technical terms, of the issues for trial at the final hearing, Wilcox J. ordered that several preliminary issues be determined, as follows:

" 1. Do the provisions of the [ D ] eed ... require the application of any special principle or approach to the determination of Leppington's claim for compensation and, if so, what ?

2. In particular, does that [ D ] eed, on its proper construction, mean no more than the Commonwealth is precluded from asserting that Leppington is not entitled to 'special value compensation' for the resumed land in excess of the market value of that land on the acquisition date ?

3. Is the determinative factor of the expression 'operations as are (were) manifest at the acquisition date' :

(a)

the maintainable net profitability of those operations ; or

(b)

the manner in which Leppington was on the acquisition date carrying out those operations ?

4. Having regard to the [ D ] eed ... and the ... Act is the Commonwealth obliged to pay compensation in an amount equal to the cost of relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices in the manner set out in the plan marked 'LP4A' regardless of :

(a)

whether or not Leppington intends to carry that plan into effect ; and

(b)

whether or not the expense which would be incurred by Leppington if it were to carry that plan into effect would be a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land ?

5. If the answer to 4 is 'no', according to what essential criteria are the expenses (to be) incurred by Leppington in relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices as a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land (and the Commonwealth's resultant liability to pay compensation) to be assessed ?

6. By what amount, if any, should the cost of relocation and reconstruction as at the resumption day , ( being an element of the special value to form part of the compensation payable to the dispossessed owner) be discounted to reflect the period after resumption day during which Leppington may remain on the resumed land pursuant to a lease granted by the Commonwealth until the time at which Leppington will or may incur the costs of relocation ?"

It appears that his Honour, and the representatives of the parties, had formed the view, understandably, that if these preliminary issues or at least some of them, could possibly be resolved, the final hearing time might be reduced and legal costs saved.

THE COURSE OF THE PROCEEDINGS AT FIRST INSTANCE

The proceedings at first instance on the preliminary issues extended over six days. In addition to the extensive affidavit evidence already mentioned, further affidavits were read and substantial oral evidence was adduced in chief and in cross-examination. It is neither practicable nor necessary to attempt to summarise this material. Much of it will no doubt be relied upon at the final hearing when it will be necessary to examine it in its detail.

THE REASONING AT FIRST INSTANCE

Wilcox J. classified the six preliminary questions into three groups: (1) Questions relating to the interpretation of the Deed - issues 1-3; (2) Questions relating to Plan LP4A - issues 4 and 5; and (3) The question whether there ought to be a discount applied to the cost of relocation and reconstruction - issue 6.

(a) Issues 1-3 (concerning the interpretation of the Deed):

Wilcox J. noted that there was some common ground between the parties regarding the effect of the Deed. It was accepted by the Commonwealth that Leppington wished to continue its farming operations, including operations upon the acquisition land, as long as possible. It was common ground that one effect of the Deed was to preclude the Commonwealth from arguing that Leppington's delay in relocation meant that compensation be assessed only on a market value basis.

The parties also accepted that the Deed eliminated the possibility of an argument, put successfully by the Commonwealth in Banno v Commonwealth (1993) 45 FCR 32, that compensation ought not be assessed on a reinstatement basis, because the cost of the reinstatement would exceed the value of the claimant's business.

Wilcox J. further noted that the parties agreed "in a general way" that the Deed "manifested a mutual intention that the compensation payable to Leppington would take into account the effect of the resumption upon the remaining land; in particular, upon Leppington's dairy operations".

His Honour observed:

"... from Leppington's point of view, the acquisition area was significant, not so much in proportional terms (it constituted only 6.7 % of Leppington's land ), but because it contained most of the farm buildings and substantial hard-standing areas. If dairying operations were to continue, those buildings and areas would have to be relocated on the remaining land. Given the likely cost of relocation, it is understandable that Leppington wished to be assured that its compensation claim would be assessed on a relocation basis. I think cl.5(b) was designed to achieve this end. But the sub-clause is of limited scope ."

The learned primary Judge noted that para. (iii) of cl.5(b):

"... is concerned with the cost of new or varied farming practices only insofar as they arise out of the alteration to the irrigation system necessitated by the re-routing of the Northern Road. However, this limitation seems unimportant. No doubt, para .( i) would include the cost of a variation in farming practices that was incidental to the relocation and reconstruction of one or more of the physical items referred to in that paragraph : ` buildings, plant, equipment and other material ... located on the acquisition land'. Primarily, however, sub - clause 5(b) is concerned with the cost of relocating those items ."

His Honour went on to say:

" I accept most of Leppington's submissions in relation to the construction of the [ D ] eed. I agree that cl.5(b) contains a concession by the Commonwealth that the items listed in paras .( i ), ( ii) and (iii) are compensable. The clause precludes any argument that the cost of these items is not a direct, natural and reasonable consequence of the resumption. But the monetarily significant items are those included in para .( i ), and these items are limited by the words 'necessary for the Company's operations as are manifest at the acquisition date' ; so the critical question is the meaning in this context of the word 'operations'. I agree with Leppington's submission that at acquisition date, the relevant operations included the milking of some 1,150 cows, the rearing of some 2,700 calves per annum and the collection, preparation, storage and sale of organic fertiliser. But I do not agree that the 'operations' referred to in the [ D ] eed comprised each management element in the production program. The milking and rearing of cattle necessarily involved their feeding. But the feeding of the cattle was incidental to the commercial operations being conducted on the property ; it was not an end in itself. To tie the word 'operations' to the particular practices in place at acquisition date would be to disregard the farm's dynamic nature ..."

Wilcox J. later added:

" There is no reason why the parties would have intended that the assessment of compensation be fixed to each management element. Leppington was concerned at the loss of a significant part of its land. It obviously wished the Commonwealth to meet the cost of reorganising its activities in such a manner as to ensure that there was no loss of productivity or profit. The company had no interest in perpetuating whatever precise method of operation might happen to exist at acquisition date. The [ D ] eed itself recognised that relocation would necessarily involve management changes ."

Accordingly, in answer to issues 1 to 3, Wilcox J. held that the Deed required a "special principle or approach" to the determination of Leppington's claim for compensation, and that such an approach required:

"... the assessment of compensation [ must ] take account of the cost of relocating and reconstructing the buildings, plant, equipment and other material located on the resumed land at acquisition date as may be necessary to maintain the commercial operations then being undertaken (the production of milk and calves and the organic fertiliser business) and to maintain those operations at a level of productivity and profitability similar to that achieved at that time ." (Emphasis added).

However, his Honour rejected the view advanced by Leppington that the assessment of compensation related to "any particular management practice or method of feeding the cattle." Wilcox J. found that any relocation and reconstruction steps required to maintain commercial operations "at a similar level of productivity and profitability" were to be determined by reference to the "criterion of reasonableness". By reference to that criterion, the primary Judge determined that it was not reasonable for compensation to be paid representing the cost of converting dry land to prime pasture for the purpose of maintaining the pasture/dry feed ratio which existed on the day of acquisition, since the cost of purchasing additional dry feed was considerably less than the cost of conversion to prime pasture. His Honour said:

" Contrary to the submission of counsel for Leppington, the substitution of additional dry feed for the 305 tonnes of pasture feed lost by the reduction of dry grazing land would not dramatically change the balance between pasture feed and imported dry feed. Using Mr Gibb's figures, the property presently produces about 5,567 tonnes of pasture feed each year (159.1 ha at 18 tonnes per hectare, 41.0 ha at 12 tonnes per hectare and 276.4 ha at 8 tonnes per ha ). A loss of 305 tonnes represents a loss of about 5 % of that figure. Adopting a ratio of two units of imported dry feed to one of pasture, as reflected in the estimate of 65 % imported feed in normal seasons, this equates to about 2-3 % of the amount of dry feed bought by the company, less in poor seasons. Such a change does not fundamentally alter the nature of the company's operations ."

(b) Issues 4 and 5 (Plan LP4A)

It will be recalled that issue 4 was whether the Commonwealth was obliged to compensate Leppington for the cost of relocation and reconstruction in accordance with Plan LP4A: (a) regardless of whether Leppington intended to carry the Plan into effect; and (b) whether or not the expense of carrying out the Plan would be a "direct, natural and reasonable consequence" of the acquisition.

With respect to issue 4(a), Wilcox J. noted that there was no direct evidence as to Leppington's intentions in this regard; but his Honour held that such intention was irrelevant, Leppington being relieved by the terms of cl.5(b) of the Deed of the ordinary burden of proving an intention to reinstate or relocate.

With respect to issue 4(b), Wilcox J. held that the question whether the cost of carrying the Plan into effect was, or was not, a "direct, natural and reasonable" consequence of the acquisition, was a relevant consideration. Four features of the Plan called for consideration.

First, on the question of the area of prime irrigated land to be provided, his Honour rejected Leppington's argument that it should be compensated for the expense of converting the additional 30.5 ha to prime irrigated pasture. His Honour found that the compensation should be assessed on the footing that 159.1 ha prime irrigated country remain, but that Leppington receive a capital sum sufficient to provide an annuity to buy additional dry feed equivalent to the pasture produced by 32.4 ha of dry land.

Secondly, his Honour considered the "acceptable paddock slope standards" which affect the efficiency of travelling irrigators used on the land. Wilcox J. noted that the experts had agreed that the irrigators required a slope of no steeper than 1:25 for the first 30 metres of the irrigator run, but thereafter a slope up to 1:10. His Honour accepted this evidence.

Thirdly, the learned primary Judge preferred the evidence of Mr Gibb, the expert called by Leppington, on the kind of action required to convert hardstanding areas to pasture land, and the reverse, rather than the "minimalist" approach of Mr Doyle (for the Commonwealth).

Fourthly, Wilcox J. accepted Leppington's submissions on the need to relocate a "Harvestore" food storage bin. His Honour agreed that the bin was an item which fell within cl.5(b)(i) of the Deed.

In dealing with these four reconstruction issues, Wilcox J. said that he did not regard the assessment of compensation as being "simply an exercise in adding up reconstruction cost items". The relocation expenses were "relevant only as a guide as to what a prudent person in the position of the resumee would have paid for the land than have failed to obtain it"; the overriding statutory imperative of s.55(1) of the Act is that "at the end of the day a judgment must be made" to achieve "just" compensation, having regard to all relevant matters. His Honour concluded:

" It follows that it would be erroneous to assess compensation by adding the market value of the acquired land to the cost of doing everything necessary to bring the remaining land to a level of productivity and profitability equal to that of the whole property before the resumption. The relevance of the latter cost is that it indicates the value to Leppington of the acquired land. To add the general market value, would be to overcompensate Leppington. It would have both ` the money and the box' ; both a payment for the lost land and an asset as valuable as before ."

(c) Issue 6 (discount)

Wilcox J. accepted, in principle, the Commonwealth's argument that, as Leppington had leased the land back under the Deed, so that the costs of relocation would be delayed, some discount on the compensation payable to Leppington was appropriate. However, his Honour rejected the Commonwealth's submission that that discount should be calculated by reference to a delay of five years, being the minimum period suggested between resumption day and the time when Leppington will have to expend "the relocation moneys". Wilcox J. said that while it is rarely possible to assess compensation on resumption day, compensation must be assessed as at that day. His Honour concluded:

" At acquisition day it was known that Leppington could not be forced to vacate the acquired land for at least 12 months. So it was known that relocation could be postponed for at least that time. But there is no evidence, whether concerning objective facts or the intentions of Commonwealth officers, that enables me to say it was predictable there would be a longer delay. An assessment made as at acquisition day should allow a discount for 12 months, but not more ."

However, Wilcox J. added that it would be "absurd" to construe cl.5(c) of the Deed according to Leppington's contention, namely that compensation should be assessed as if the relocation and reconstruction had occurred as at the date of resumption. His Honour held that nothing in the Deed would exclude a twelve month discount factor.

LEPPINGTON'S GROUNDS OF APPEAL

Pursuant to leave to appeal granted by Wilcox J., Leppington now appeals on the following grounds:

(1)

That his Honour erred in holding, in answer to issue 3, that "operations" meant commercial operations being the production of milk and calves and the organic fertilizer business; and in holding that, upon the true construction of the Deed, there was a requirement in the assessment of compensation to maintain the commercial operations at a level of productivity and profitability similar to that achieved at the time of acquisition.

(2)

That his Honour should have held that, upon the true construction of the Deed, compensation was to be assessed taking into account all of the operations carried out at the date of acquisition for the purpose of the businesses of the production of milk and calves and the organic fertilizer business; and that his Honour should have held that, upon the true construction of the Deed, "operations" meant each and every physical component of the operations as was manifest at the date of acquisition.

(3)

That his Honour should have held that, upon the true construction of cl.5(b), Leppington was entitled to maintain the same pasture/dry feed ratio as applied at the acquisition date.

(4)

That his Honour erred in holding that the purchase of dry feed in lieu of the provision of additional irrigated pasture land would not fundamentally alter the nature of Leppington's operations at the acquisition date.

(5)

That his Honour erred in holding that, on the true construction of the Deed, nothing obliges the Commonwealth to meet the cost of incurring an expense that is not the "direct, natural and reasonable" consequence of its acquisition of the resumed land and of the relocation and reconstruction of the buildings etc., necessary for maintenance of Leppington's commercial operations to a similar level of productivity and profitability.

(6)

That his Honour should have held that, upon the true construction of the Deed, the Commonwealth was obliged to meet the cost of the components in cl.5(b)(i), (ii) and (iii) to maintain the same level of on-farm feed production as at the acquisition date.

(7)

That his Honour erred in holding that the market value of the acquired land should not be added to the cost of doing everything necessary to bring the remaining land to a level of productivity and profitability equal to that of the whole property before resumption; and that his Honour should have held that, where improved land is resumed, the dispossessed owner is entitled to the market value of the land, plus the value of the improvements, or the cost of relocating those improvements.

(8)

That his Honour erred in holding that compensation for the compulsory acquisition of land can be discounted to take into account the opportunity of profitably investing that money before it is expended; and in holding that nothing in the Deed excluded the adoption of a twelve month discount factor.

THE COMMONWEALTH'S CROSS-APPEAL

The Commnwealth cross-appeals from the answer given by Wilcox J. to Q6.

The grounds of the cross-appeal are as follows:

" 1. His Honour erred in holding that there was no evidence which would enable a finding to be made that it was predictable at acquisition day that there would be a delay longer than twelve months .

2. His Honour should have found that the costs of relocation would not be incurred by the cross-respondent within a period of five years from the acquisition day and may have been incurred within a significantly longer period having regard to the cross-respondent's desire to remain on the resumed land and the cross-appellant's plans for the construction of the airport which, as at acquisition day, envisaged that the resumed land would only be required for the last stage of the airport development, namely the construction of the 4,000 metre runway ."

The Commonwealth contends that Q6 should be answered "by reference to a period longer than five years".

CONCLUSIONS ON THE APPEAL AND THE CROSS-APPEAL

It will be convenient to approach the matter in stages: first, by considering what the position would have been apart from the operation of the Deed; and then to consider what impact, if any, the Deed has upon the position.

(a) The position apart from the operation of the Deed

Compensation for compulsory acquisition does not form part of the common law (see, e.g., Commissioner for Highways v Shipp Bros Pty Limited (1978) 19 SASR 215 per Wells J. at 218). It follows that, ultimately, the present question is to be determined exclusively by reference to the material provisions of the Act, viewed against the background of the constitutional requirement of "just terms" embodied in the provisions of ss.55(1) and 93 of the Act. In this country, the land acquisition statutes have not only retained the English concept of the market value of land, but have gone further: our legislation provides for other factors to be taken into account which an ordinary seller of land would not be able to obtain from an ordinary buyer; so that it is well understood here that the dispossessed owner may be entitled to a claim for "disturbance" or a "solatium", over and above the ordinary sale price of land (see Douglas Brown, Land Acquisition, 4th ed. at 8).

As has been noted, the general rule for present purposes, as declared in s.55(1) of the Act, is that the amount of compensation is to be "such amount as, having regard to all relevant matters, will justly compensate the person for the acquisition"; and specifically in this connection, s.55(2) directs that "regard shall be had" to "all relevant matters" including the "market value" of the interest at the acquisition day (s.55(2)(a)(i)), together with any loss, injury or damage suffered, or expense reasonably incurred, by the person that was, having regard to all relevant considerations, including any circumstances peculiar to the person, suffered or incurred as a "direct, natural and reasonable consequence" (emphasis added) of the acquisition (s.55(2)(c)).

In Harvey v Crawley Development Corporation [1957] 1 QB 485, a householder whose home had been compulsorily purchased claimed as "compensation for disturbance" surveyors' fees, legal costs and travelling expenses incurred first, in an abortive proposed purchase of a new home and, secondly, in the purchase of a new home. By s.2 of the Acquisition of Land (Assessment of Compensation) Act, (1919) (U.K.) it was provided, inter alia , that in assessing compensation no allowance shall be made on account of the acquisition being compulsory (s.2 (rule 1)); that the value of land shall, subject as thereinafter provided, be taken to be the amount which the land, if sold in the open market by a willing seller, might be expected to realise (s.2 (rule 2)); and that the provisions of rule (2) shall not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land (s.2 (rule 6)). It was held that the householder was entitled to the costs claimed as compensation for "disturbance". Denning LJ. (with the agreement of Romer LJ. and Sellers LJ.) said (at 493):

" Rule (1 )... leaves untouched the rule that everything which is a direct consequence of the compulsory acquisition can be recovered under the head of ` compensation for disturbance'. Instances were given in this very case. Mrs Harvey gets compensation for having to move out her furniture and put it into the new house : she gets compensation for having to alter the curtains and carpets and remake them to fit the new windows and floors. Take business premises where fixtures and fittings have to be moved ; or where there is loss of business through being turned out ; or loss of goodwill. All that loss and expense is the proper subject of ` compensation for disturbance' in addition to the open market value of the land ." (Emphasis added).

Denning LJ. went on to say (at 493-4):

" I would therefore say that this money which has been expended, this [ sterling ] 200 odd, which is the direct consequence of Mrs Harvey being turned out of her house, is properly to be regarded as compensation for disturbance. But I would not like this to be taken too far. Cases were put in the course of the argument. Supposing a man did not occupy a house himself but simply owned it as an investment. His compensation would be the value of the house. If he chose to put the money into stocks and shares, he could not claim the brokerage as compensation. That would be much too remote. It would not be the consequence of the compulsory acquisition but the result of his own choice in putting the money into stocks and shares instead of putting it on deposit at the bank. If he chose to buy another house as an investment, he would not get the solicitors' costs on the purchase. Those costs would be the result of his own choice of investment and not the result of the compulsory acquisition. Another case was put in the course of the argument. If an elderly man and wife owned and occupied a house which was compulsorily acquired and they thought to themselves : ` We do ` not think we need to get another house ; we will go into a guest-'house,' they would not get the costs of moving into a new house when they had not incurred them. Nor would they be able to claim the cost of living in a boarding-house for the rest of their days. They would only get the market value of their former home. These illustrations show that the owner only recovers costs of the present kind in a case where a house is occupied by an owner living there who is forced out and reasonably finds a house elsewhere in which to live. If he pays a higher price for the new house, he would not get compensation on that account, because he would be presumed to have got value for his money : but he does get the costs which he has to pay a surveyor and lawyer to get it. It seems to me that the costs are then the subject of compensation under the heading of ` disturbance' as specified in rule (6) of section 2 ."

By s.2 (rule 5) it was provided that where land is, and but for the compulsory acquisition would continue to be, devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, the compensation may, if the official arbitrator is satisfied that reinstatement in some other place is bona fide intended, be assessed on the basis of the reasonable cost of equivalent reinstatement.

In Harvey, Denning LJ. said (at 492-3):

" It seems to me that, as these costs of [ sterling ] 241 10s 1d. were reasonably incurred by Mrs Harvey in getting another house, they can fairly be regarded as a direct consequence of the compulsory acquisition. Prima facie, therefore, they fall within the heading of compensation for disturbance. But it is said that they are not properly compensation for disturbance, but only compensation for reinstatement : and that the cost of reinstatement of a person in other premises can never be the subject of compensation ; and rule (5) of section 2 was relied on. I do not think that rule (5) supports that proposition. It is only dealing with the value of land when there is no market for it. Take, for instance, a church, for which there is no market. Under rule (5) you can sometimes get the cost of buying another piece of land and putting up a church on it. The fact that the cost of reinstatement is there specifically allowed does not mean that in every other case anything in the nature of reinstatement is to be disallowed. It all depends on whether it comes properly within ` compensation for disturbance' ." (Emphasis added).

Romer LJ. said (at 495):

" The fact that in some sense reinstatement or replacement may be involved does not appear to me to disqualify the claim under rule (6 )..."

Sellers LJ. said (at 495):

"[ It was argued that the cost in question ] was not recoverable because it was in its nature a payment in respect of reinstatement or replacement of herself and her furniture in other premises. In support of the contention that that was not recoverable reliance was placed on section 2, rule (5 ), of the Acquisition of Land (Assessment of Compensation) Act, 1919 ; but, for the reasons given by my Lords in dealing with the interpretation of that rule, I agree that that does not preclude a claim for disturbance which may include an element of reinstatement. Rule (5) is only a provision directed to the assessment of the appropriate compensation where there is no general demand or market for the land which has to be assessed ." (Emphasis added).

His Lordship went on to say (at 496):

"[ I ] t becomes in any given case a question of fact for the tribunal whether any particular item of expenditure does come within their terms. The evidence in this case would seem to show that the tribunal were entirely justified in saying that this particular expenditure in relation to the acquirement of new premises - it may be that the abortive expenditure was a misfortune, but no distinction is made between the two - is expenditure which was directly arising from the circumstance that this lady had to find another house in which to live by reason of being compulsorily dispossessed of her home ." (Emphasis added).

In Keogh v Housing Commission of Victoria (No.1) [1969] VicRp 102; [1969] VR 809, Barber J. said (at 812):

" It has always been the practice of tribunals charged with the duty of assessing compensation for compulsory acquisition to assess not only the market value of the land, but to take into account such other factors as severance, disturbance and injurious affection in favour of the claimant, and enhancement against the claimant in favour of the acquiring authority. In particular, disturbance has been treated as part of the total compensation payable ..."

His Honour went on to say (at 812):

" Perhaps the best illustration of the proper view of disturbance as an element in compensation for acquisition is to be found in a passage from Horn v Sunderland Corporation, [1941] 2 KB 26, at p.33 ; [1941] All ER 480, a passage which is cited with approval in Milledge's case and Crisp and Gunn's case. That passage reads : ` The broad principle was that the price should be fixed on the basis of the value to the owner and this involved taking into consideration a number of matters which I need not mention as they are well known. But one element which the jury was entitled to take into consideration was the damage suffered by the owner from disturbance, for example, of his business. It is important in considering the present case to remember that this was not a separate head of compensation such as compensation for injurious affection, but merely one of the elements going to build up the purchase price to which the owner was fairly entitled in all the circumstances of the case.' "

In Keogh v Housing Commission of Victoria (No.2) (1969) 18 LGRA 295, Barber J. (at 299) approved observations of Davidson J. in Grace Bros Pty Ltd v Minister of State for the Army (1944) 45 SR (NSW) 206 (at 211) as follows:

" If it became essential to purchase instead of leasing other premises [ there may be taken into account , inter alia] the expense of placing the new premises in a condition of equal value to those which were taken : A & B Taxis Ltd v Secretary of State for Air. But that authority makes it clear that each case depends upon its own circumstances and whilst the cost of purchasing new premises would have to be considered as an element of damage it should not necessarily be allowed in full. It would have to be determined whether the premises were larger or more commodious than those that were requisitioned ." (Emphasis added).

In Shipp Bros., above, Wells J. said (at 218-9):

"[ The owner ] has not participated in a voluntary sale. Deprivation and consequential loss is forced on him by executive act. Whatever Spencer's case may say about fixing compensation for the land simpliciter, all reasonable and natural consequences of the taking would seem logically to warrant consideration if they or some of them represent financial loss to the owner - in particular, where he is faced with the practical necessity of expending moneys that he would not have been constrained to expend if the acquisition had not taken place .

Judgments delivered in many cases decided, both in Australia and in England, under various forms of legislation conferring and controlling the power to take land compulsorily, accord generally with the approach foreshadowed above, and unite in recognizing that such consequences may embrace the owner's decision to incur the costs of re-locating a business previously conducted on the land taken. For to make such a decision and to seek to act on it, may, in certain circumstances, be reasonable, and be the direct consequence of the expropriation. The costs of re-location may then fairly be regarded as having a direct bearing on the measure of the owner's loss .

Put another way, those costs may be said to represent what the owner would be prepared to pay rather than be forced to transplant his business in order to save it ... But, of course, not every case rationally requires an assessment of loss on such a basis. Where the natural consequence of the expropriation is not, or could not have been, a firm and bona fide intention to relocate, leading to the formulation of reasonable and feasible proposals for that purpose, it would seem that the acquisition cannot have naturally caused a decision to relocate or have led to the practical necessity of laying out money for that purpose ; loss assessed according to costs of re-location can not, then, be characterized as loss suffered ` by reason of the acquisition' ." (Emphasis added).

Wells J. went on to say (at 221):

" 8. Some of, but by no means all, acceptable kinds of relocations are exemplified or referred to in reported cases. For example, if the costs of available relocation plainly and substantially would exceed the value of the business as a going concern (after making due allowance for retained moveable assets) it would not be the reasonable and natural consequence of expropriation to incur such costs, and hence compensation could not justifiably be assessed by reference to them ... Again, the law could not allow the claimant to be compensated for the cost of land, buildings, and immoveable plant, that would be plainly superior in value and construction, when something more modest, and reasonably comparable to what was taken, could be found or built ... Even if the claimant has no alternative to obtaining new fixed assets that are more expensive and commodious than those he has lost, the Court may well make some allowance against the claimant in recognition of that enhancement ..." (Emphasis added).

Wells J. added (at 221-2):

" 9. The profitability - the net maintainable profits of the business affected by the acquisition must always be weighed but need not be decisive. Causation remains the test. For the purposes of cases such as the one before me, the court is not assessing the standing of the subject business in the market as a possible investment ; it is determining whether the claimant is acting reasonably in seeking to transplant his business ." (Emphasis added).

In Director of Buildings & Lands v Shun Fung Ironworks Limited [1995] 2 AC 111, a Hong Kong appeal, Lord Nicholls, speaking for the Privy Council, said (at 124-5):

" The legislative code in England relating to compensation for compulsory acquisition contains no express provision corresponding to section 19(2 )( d ). Despite this difference in all respects relevant in the present case the principles applicable under the two codes are the same. The Lands Clauses Consolidation Act 1845 (8 & 9 Vict. c. 18) provided that regard should be had to the value of the land taken and to the damage sustained by severance : section 63. The Act contained no express provision for disturbance losses, either regarding businesses or generally. However, by judicial interpretation the value of the land was taken to mean the value of the land to the claimant and, hence, to embrace such personal losses : see the classic exposition of Scott L.J. in Horn v Sunderland Corporation [1941] 2 K.B. 26, 43-49 ). The Acquisition of Land (Assessment of Compensation) Act 1919 set out rules for the assessment of compensation. In section 2, rule (2) provided, in short, that the value of the land should be its market value, but rule (6) stated that this should ` not affect the assessment of compensation for disturbance or any other matter not directly based on the value of land'. These provisions are now reproduced in the Land Compensation Act 1961, section 5(2 )( 6 ), and the Compulsory Purchase Act 1965, section 7 .

In Hong Kong the legislative history is slightly different but the end result is the same. Section 8 of the Crown Lands Resumption Ordinance 1889 (No. 23 of 1889) corresponded to section 63 of the Act of 1845. In 1921 this section, reproduced in section 10 of the Crown Lands Resumption Ordnance 1900 (No.10 of 1900 ), was amended by the Crown Lands Resumption Ordinance 1921 (No. 14 of 1921) by adding a provision that the value of land resumed should be taken to be the price it would fetch in the open market. The entitlement to compensation for damage to a business was preserved not, as in the United Kingdom, by a saving proviso to that effect, but by adding into section 10 an express provision for the payment of such compensation ."

His Lordship, after noting that the purpose of these provisions is to provide "fair" compensation, which is "sometimes described as the principle of equivalence", said (at 125):

" Land may, of course, have a special value to a claimant over and above the price it would fetch if sold in the open market. Fair compensation requires that he should be paid for the value of the land to him, not its value generally or its value to the acquiring authority. As already noted, this is well established. If he is using the land to carry on a business, the value of the land to him will include the value of his being able to conduct his business there without disturbance. Compensation should cover this disturbance loss as well as the market value of the land itself. The authority which takes the land on resumption or compulsory acquisition does not acquire the business, but the resumption or acquisition prevents the claimant from continuing his business on the land. So the claimant loses the land and, with it, the special value it had for him as the site of his business. The expenses and any losses he incurs in moving his business to a new site will ordinarily be the measure of the special loss he sustains by being deprived of the land and disturbed in his enjoyment of it. If, exceptionally, the business cannot be moved elsewhere, so it simply has to close down, prima facie his loss will be measured by the value of the business as a going concern. In practice it is customary and convenient to assess the value of the land and the disturbance loss separately, but strictly in law these are no more than two inseparable elements of a single whole in that together they make up the value of the land to the owners ..." (Emphasis added).

Lord Nicholls then, in essence, explained (at 126) that, to be compensable, a loss must be (1) caused by the resumption; (2) not too remote; and (3) reasonably incurred.

His Lordship went on to say (at 127-8):

" Compensation is not intended to provide a means whereby a dispossessed owner can finance a business venture which, were he using his own money, he would not countenance. However, when considering these matters the tribunal or court might allow itself a moderate degree of latitude in approving as reasonable the relocation of a family business, for the reasons set out by Wells J. in Commissioner of Highways v Shipp Bros. Pty Ltd (1978) 19 S.A.S.R. 215, 222 .

The same result can be arrived at by reasoning expressed in other language which accords more directly with the basic principle that compensation is payable for the value to the claimant of the land in question. When determining that value the tribunal is in effect assessing how much a prudent person in the position of the claimant would himself have been prepared to give for the land sooner than lose it : see Pastoral Finance Association Ltd v The Minister [1914] UKPC 77; [1914] A.C. 1083. He would be willing to pay more than others, because retention of the site would save him the expense of moving, and the inconvenience of temporary disturbance and also the possible loss of customers. In some circumstances, such as those already mentioned, the extra value of the land to a prudent businessman might even exceed the present value of the business. In such a case that extra value is part of the value of the land to the claimant ." (Emphasis added).

In Windward Properties Limited v Government of Saint Vincent and The Grenadines [1996] 1 WLR 279, Sir Michael Hardie Boys, speaking for the Privy Council, said (at 286):

"[ Disturbance ] refers to costs incurred as a consequence of the compulsory acquisition, or to costs incurred to mitigate those consequences. In other words a causative connection is necessary ..."

It should be noticed that the concepts of "disturbance", "severance" and "reinstatement" sometimes overlap. In Kozaris v Roads Corporation [1991] VicRp 17; [1991] 1 VR 237, Gobbo J. said (at 240-1):

" The principle of reinstatement has not been definitively analysed in judicial decisions for there have been differences in view as to what precisely it covers. It has been described as applicable where the property was of such a character that there was no market or general demand for the property. The usual instances were churches, schools, hospitals, houses of exceptional character and business that can only be carried on under special conditions ... But there are cases where the cost of partial or complete reinstatement of premises, by way of replacing old premises with new, have sometimes been considered as disturbance loss and sometimes as severance damage. Thus in the Adelaide Fruit & Produce Exchange Co Ltd v City of Adelaide..., where the front portion of the building was taken, the Court held that the costs of constructing a new wall and a new toilet block should be allowed as severance damage and not as disturbance or injurious affection. No reference was made to reinstatement even though what occurred was, on one view, a form of partial reinstatement .

There have also been cases where relocation and disturbance loss is awarded and the claim is described in terms of reinstatement. This was the case in Commissioner of Highways v George Eblen Pty Ltd. The court spoke of reasonable reinstatement founded on the general principle in the legislation rather than the specific provision in the Act relating to reinstatement .

The concept of value to the owner and its role in accommodating cases of disturbance loss or cases analogous to reinstatement - in the wider and not strict use of that term - are discussed in a number of cases. For a comprehensive review of some of these cases, see Housing Commission of New South Wales v Falconer... see too , Keogh v Housing Commission of Victoria) (No 1)..."

In Shun Fung, above, Lord Nicholls observed (at 126) that "the application of the general principle of fair and adequate compensation bristles with problems". If further illustration of this be needed, reference may be made to two recent decisions.

In Banno v Commonwealth of Australia (1993) 45 FCR 32 Wilcox J. dealt with a claim for compensation of land of an area of about 5 ha acquired for the Badgery's Creek Airport on which the owners had carried on a poultry farm business. The Commonwealth had conceded the owner's entitlement to compensation of $872,299 comprising $812,000 as the value of the land and improvements, $36,401 for stamp duty and legal costs on the purchase of a replacement property for $812,000, $2,038 for accountancy and valuation fees, $500 for legal fees for initial advice and $21,360 for "solatium". The parties were in dispute about several other items, including a claim by the owners for further compensation for reinstatement of their business on the other land.

In Banno, Wilcox J. said (at 40):

"[ I ] t is not necessary to determine whether s 55(2 )( c) is available to the present applicants. Section 55(1) does not limit recoverable compensation to that arising out of direct effects. It is an open-textured provision requiring the Court to consider what amount of money will, under all the circumstances , " justly compensate " the dispossessed landowner. If the circumstances are such that a claimant can be justly compensated only by reference to the cost of reinstating a business in another location, this course must be taken .

The justice of compensating a disturbed business proprietor on the basis of reinstatement cost has been recognised in many cases ."

After considering the English and Australian authorities, including Keogh, Shipp Bros. and Kozaris, Wilcox J. said (at 44):

" Finally, I refer to Brown Bros (Marine) Holdings Pty Ltd v New South Wales Land and Housing Corporation (1991) 72 LGRA 50, a decision of Hemmings J of the New South Wales Land and Environment Court. That case concerned the acquisition of waterfront industrial land at Balmain, Sydney. The resumee relocated its business at Tomago near Newcastle and sought compensation on a reinstatement basis. The respondent objected that the claimed reinstatement cost exceeded the value of the business but Hemmings J held that this was not determinative of the issue. It was only one of the matters that should be considered ; where, because of costs, it is not reasonable that the business be relocated and reinstated, compensation should be paid on the basis of the extinguishment or destruction of the business ."

In considering whether reinstatement applied in that case. Wilcox J. said (at 45):

" As it seems to me, the only basis upon which it can be argued that it is reasonable for the applicants to reinstate their business at the Commonwealth's expense is that referred to by Wells J in par 9 of his judgment in Shipp, quoted above : the expropriation has cost them their jobs and lifestyles. It seems to me erroneous to address reasonableness only in financial terms. Many, if not most, Australian farms yield a profit (if any) that could be bettered in other forms of investment. Yet people buy farms ; presumably, because they are attracted to the rural lifestyle and because the farm furnishes them employment. The Court should take account of this fact in determining, under s 55(1) of the Lands Acquisition Act 1989 , what amount of compensation is necessary to compensate farmers for the loss of their land. As a result of the subject expropriation, the present applicants have each lost a source of remuneration worth about $ 25,000 per year, whether that sum be treated as wages or share of profit. especially at a time of high unemployment, this is a significant loss. The applicants may find it extremely difficult to obtain alternative employment. They have also lost the home in which they resided with their families. Contrary to the submission of counsel for the Commonwealth, I am not prepared to say that the minimal, or non-existent, profitability of the business necessarily rules out the reinstatement approach ."

However, his Honour went on to hold that the reinstatement approach was inappropriate because there was no evidence that it was the only way the applicants could reinstate their pre-acquisition income.

Wilcox J. said (at 45-6):

" The applicants have lost a six-bedroom house capable of accommodating two families. There is no evidence about house values but the Court is entitled to take judicial notice of their general level. It seems to me reasonable to assume that it would cost $ 250,000 -$ 300,000 to purchase a six-bedroom home within reasonable distance of the educational and social facilities the applicants' families require. That would leave a balance of $ 550,000 -$ 600,000 compensation money. Whatever the position in earlier times, it is difficult to see that the applicants today could securely invest this sum in a passive investment that would yield a reliable income of $ 50,000 per year .

On the other hand, it must be said that they could go close to achieving that result. It ought to be possible for the applicants securely to invest $ 550,000 -$ 600,000 so as to obtain a reliable return of 6-7 per cent ; that is , $ 33,000 -$ 42,000 per annum. Consideration of that fact calls into question the reasonableness of the applicants spending about $ 1.24 million to obtain a level of income only commensurate with what they earned at Badgery's Creek. If the applicants had $ 1.24 million available and wished to enjoy a rural lifestyle, they could surely buy a small rural allotment with a large house - or buy a vacant lot and build a large house - for, say , $ 500,000. This would leave them $ 900,000. If they invested that sum at only 6 per cent per annum they would receive $ 54,000 per annum, without having to work at all ."

Banno was distinguished in McBaron v Roads & Traffic Authority of New South Wales (1995) 87 LGERA 238, where a resumption was effected under State legislation without the benefit of the Commonwealth Constitution's "just terms" requirement. The claimants for compensation owned a large, high producing dairy farm, comprising (with adjacent dry country) 398.7 ha. The Authority resumed about 7.7 ha for road by-pass purposes. The effect of the acquisition was to sever about 100 ha of highly improved pasture land, leaving 40.5 ha between the deviation and the existing Highway, and 52 ha in the western section. The milking bails with stock holding yards were located on the eastern section, adjacent to the Highway. It was not disputed that the acquisition would have a serious adverse impact on the residue lands and management of the business: improvements would be lost, including a cottage, cattle yards, a shed and fencing; moreover access by cattle across the deviation by underpasses would be limited, so that it was claimed by the claimants, but disputed by the Authority, that it would be necessary to relocate the dairy building to the western section. It was further contended by the claimants, but disputed by the Authority, that, for the same reason, the severed land on the east would no longer be suitable for intensive grazing by the dairy herd, and that this area must be given over to the dry cows. The case thus had, in principle at least, some features in common with the present matter.

Talbot J. said (at 244-5):

" Mr Webster argued on behalf of the applicants that the only concern under the Act is to provide just compensation not necessarily restricted to placing a person in the same position before as after the acquisition even if that assumes that the owner will received ` new' for ` old'. Referring to what Wilcox J had to say in Banno... regarding s55(1) of the Commonwealth Act, Mr Webster asserted that s 54 is an ` open textured' provision requiring the Court to determine what amount of money will, under all circumstances, justly compensate the person for acquisition of the land. This submission does not properly take account of the constraints in s 54 and s 55 of the New South Wales Act. Although the entitlement under s 54 of the Act is similar to the right under s55(1) of the Commonwealth Act, it is limited to ` having regard to all relevant matters under this Part'. Section 55(1) of the Commonwealth Act does not include the words ` under this Part' in the context of the matters to which regard must be had. Consequently s 54 of the Act is qualified by reference to relevant matters under Pt 3 including s 55. Section 55 of the Act again differs from the Commonwealth Act in s 54(2) where it is stipulated that ` regard shall be had to all relevant matters including' the identified matters in the subsection. On the other hand a determination under s 55 of the Act is constrained by inclusion of the word ` only'. The effect is that the amount of compensation must be determined in New South Wales by having regard only to the matters referred to specifically in s 55(a) to (f) as explained in s 56 to s 59 .

Unless a head of compensation can be found within s 55, it cannot be recovered under the Act even if that means the person will not be justly compensated. It is otherwise under the Commonwealth Act. Unfortunately this Court is not able to approach its task in the same way adopted by Wilcox J in Banno. I agree with Bannon J when he expressed the same conclusion in Aceville Pty Ltd v State Rail Authority (NSW)... Nevertheless it is appropriate to seek to do justice by adopting a generous approach in favour of the resumee to ensure that just compensation is paid so far as the Act allows. Therefore any discretion should be exercised in favour of the claimant where practicable in order to achieve a just result ."

Talbot J. went on to say (at 245-6):

" I see no reason why the piecemeal approach should be rejected but, for the purpose of determining the value of the land taken, I prefer the before and after method ... I reject the approach taken by Mr Allsopp where he has made his assessment on the basis of reinstatement, or as he preferred to put it, replacement (see Bannon J in Aceville).

By adopting the piecemeal approach and the before and after method to determine the value of the land taken, severance damage and any enhancement of value are comprehended without any necessity for specification ... Where improvements, such as the dairy, are fixtures, they form part of the land and any increase or decrease in the value of those fixtures can be taken into account pursuant to s 55(f) or if they need to be replaced or modified, the costs might be recovered as a loss attributable to disturbance pursuant to s 59(c) or (f ).

The market value of the actual land taken can be satisfactorily determined by contrasting the value of the pre-existing 100 hectares of highly improved pasture land to the remaining two parcels after resumption. The before value can be ascertained by reference to sales of comparable land after making an adjustment for the cost of bringing the sale land up to the same level of productivity. Following resumption, the same sales provide sufficient evidence to establish the value of the two severed sections. The western section can be maintained at the same level of productivity as before whereas the eastern section will revert to good quality pasture which is not maintained at the highest level of improvement. A further allowance for the proximity of the new raised section of roadway is permissible under s 55(f ).

Apart from fencing, which is accounted for in the actual land value, there is no reason why the Court should not determine any change in value to other farm improvements, including total losses, to reflect part of the increase or decrease in the value of other land pursuant to s 55(f ). In this respect the Court is satisfied by the evidence that it will not be practicable to maintain a dairy at the existing location. Accordingly the land will suffer a decrease in value equivalent to replacing the milking bails and associated facilities, after making due allowance for the residual value of what is there now. Without a functioning dairy in close proximity to the pasture land used for the milking herd, there would be no justification for attributing the higher value to those lands in the after situation. Alternatively the cost of a replacement dairy can be addressed as an element of the loss attributable to disturbance ."

(b) The effect, if any, of the operation of the Deed for present purposes

(i) The general position

Althoug, as has been said, the general principles governing the present statutory entitlement appear to be well understood, their application depends upon the particular circumstances of the case and that exercise can be complex and difficult. No doubt, it was in this context, as well as in the context of the resolution of the dispute about the PAD, and its variations, that the Deed was entered into.

A question arises at the outset as to the legal efficacy of the Deed for present purposes, but before going to that issue, it should be noted that there is a further preliminary question to be considered and that is, whether the hearing before Wilcox J. and the appeal to this Full Court should be treated as final for instant purposes or as merely interlocutory. In form, these proceedings were interlocutory. But, as a matter of substance, it may be appropriate to conclude that they be treated as if they were final, notwithstanding, as appears to be the case, that his Honour made no formal orders by way of answer to the separate questions posed (cf. Arrowcrest Group Pty Ltd v Gill [1993] FCA 541; (1993) 46 FCR 90 per French J. at 98-101). I will return to this aspect.

In considering the legal efficacy of the Deed, it may be observed that circumstances can arise where, in the course of negotiations seeking to achieve a compromise of a claim for compensation, the resuming authority makes an admission against interest. There are other possibilities in this connection, for instance, the creation of estoppels short of entry into a formal contract.

It is, without question, the policy of the common law to encourage the compromise of any doubtful claim on mutually satisfactory terms, without litigating to the finish (see Field v Commissioner for Railways (NSW) [1957] HCA 92; (1957) 99 CLR 285 at 291; Cutts v Head [1984] Ch.290 per Oliver LJ. at 306; Rush & Tomkins Ltd v Greater London Council [1988] UKHL 7; [1989] 1 AC 1280 at 1299; Trade Practices Commission v Arnott's Ltd [1989] FCA 283; (1989) 88 ALR 69 at 71). Compensation claims are a good example of an area where the courts should be particularly concerned to promote compromise by the parties of the whole, or even of discrete parts, of a claim wherever this is appropriate. But, as the history of this litigation shows, where a claim, as here, is complex, the parties must take care to ensure that each of them fully understands the other's position. Regrettably this did not happen here. Although the parties were to be commended for finally resolving their dispute about the size of the acquisition, their attempt to define in the Deed the parameters of the compensation claim was not expressed with sufficient clarity, with the result, as we have seen, that the parties now appear to hold quite different views as to the meaning of the material provisions of the Deed.

If, as was pointed out by the Court in argument, instead of formal entry into the Deed, the parties had sought to tender a joint admission in this area and if, as here, it were to emerge that the admission was not reasonably clear or ambiguous, the Court would, generally speaking, not act on the admission, which is never conclusive, and merely some of the evidence in the case; even a formal admission may, with the leave of the court, be retracted (see J D Heydon, Cross on Evidence, 5th Aust. ed. at 143-4). Ordinarily, leave would be granted to withdraw an ambiguous admission.

Counsel's researches did not reveal any authority squarely on the present point, although our attention was drawn to, and mention should be made of, some helpful observations by Gobbo J. in King v Minister for Planning & Housing (1991) 76 LGRA 288. There, in the process of negotiations for the purchase by the Board of Works of reserved land, the parties agreed to abide by the specified plans for hypothetical development in the event of the private sale going ahead. No agreement was reached and a notice of intention to acquire compulsorily was given. Compensation was subsequently sought.

It was held: (1) the agreement in respect of the plans for hypothetical development was, in effect, an agreement in the process of negotiations to use the plans in agreeing to a price if a purchase were to take place; but there could not be implied into that agreement a term that if no purchase took place and there was a compulsory acquisition, the plans would be used in the assessment of compensation; and (2) in so far as the acceptance of the plans impliedly recognised that they represented the highest and best use of the land at the time they were drawn up, it constituted an informal admission against interest and was admissible in evidence on the compensation claim in a limited role as part of the evidence relevant to reaching a decision on the highest and best use at the time of the notice to treat.

Gobbo J. said (at 295):

" The above analysis and conclusion that there was no agreement intended to stand alone as a binding agreement makes it unnecessary to decide some interesting questions as to the power of a statutory body with powers of acquisition to make agreements that bind it in the assessment of compensation which is set down in the statute. As a matter of principle I do not understand why the authority could not bind itself in advance, provided it does not act in conflict with the Act. So, for example, as the Act sets a limit of 10 per cent for solatium the authority could not agree to pay a figure of 20 per cent of the market value as solatium. There are strong considerations of public interest that support the making of agreements that reduce litigation and resolve disputes. It is easier to enforce such an agreement if there is a dispute and proceedings following a notice of acquisition, since agreements - even though limited to a portion of the dispute - should be enforced, usually by treating the agreement as an admission in the proceeding ."

Turning to the question of a possible estoppel in this area, Gobbo J. said (at 295-6):

" The alternative argument of the claimants was that the authority was estopped from denying that plans X and Y were to be the method of assessment of the market value of the land both in a private sale or following a compulsory acquisition. It was said that the authority had represented that the plans were to be the method of assessment and that the claimants had relied upon that representation to their detriment .

There was no express representation of the kind suggested, but there was sufficient evidence of some agreement to raise the question of an implied representation. Reliance was placed on recent cases for the proposition that in view of the authority's conduct it would be unconscionable for the authority to depart from the representation alleged ... It was also put on behalf of the claimants that there was an assumption on their part that the agreement would not be departed from ...

But whatever be the ultimate decision on the question of detriment, the critical issue that still remains relates to the representation and what assumption was created to the knowledge of the authority. The facts as to this are the same as those considered in relation to the agreement. There the conclusion was that there was no separate agreement intended to bind the parties but rather a step in a process of negotiations towards the agreement of a price for a purchase. It was not at that time a step towards the resolution of a dispute after compulsory process had got under way .

It was always going to be difficult for the claimants to succeed on estoppel if the agreement was not made out and the difficulty still remains because it cannot be demonstrated that there was a representation that the plans would be used for the assessment of compensation in any dispute following the service of compulsory process. There was no express representation. As to implication, it is no more possible to infer a representation than it was to do so in relation to the alleged agreement. Nor was an equivalent assumption created ."

It was therefore not necessary that Gobbo J. deal with an argument put by the authority that the estoppel suggested by the claimants could not fetter the authority's statutory discretion or the court's powers in the proceedings. However, it appears, in absence of authority on the point, full reference should be made to his Honour's observations as follows (at 297):

" I am by no means persuaded that a public authority cannot bind itself in advance as to an item of compensation. Looking first at the time after dispute is joined, I see no reason why the authority through its agents, cannot resolve part of a dispute whether by concession or by a compromise that involves making one concession in exchange for another. There can be no doubt that it has the power to resolve claims whether before or after a dispute. The implied power to resolve a dispute must carry with it the power to resolve part of a dispute .

It was argued, however, that the authority could not so settle an issue so as to run counter to the method of assessment laid down in the statute or so as to limit the discretion of the board or court that had to resolve the dispute. A concession of law that runs counter to the express provisions of the statute that gives an entitlement to compensation would almost certainly be beyond power. Thus an express agreement to pay solatium in the sum of 20 per cent of market value when the statute provides for a maximum of 10 per cent of market value would clearly be beyond power .

The matter becomes more difficult, however, where the matter is dependent on the weight of evidence and where the issue is one of fact - or at best - one of mixed law and fact. Thus a dispute about value where there are conflicting valuations founded on different uses of sales evidence is one that lends itself to reasonable compromise or concession even if this involves a concession of a figure not directly supported by the authority's own valuer's opinion. The same would in my opinion be true of a concession about highest and best use or what is sometimes described as the notional or underlying zoning of land reserved for a public purpose .

The position may be otherwise however where it is not so much a concession on a category of entitlement but is rather an acknowledgment of a category of compensation that is neither provided by the statute nor by judge-made law .

All of the foregoing remarks are made in the context of what may be compendiously described as statute law and judge-made law. It does not advert to internal regulation or monitoring mechanisms set up to compel additional authorisation for purchases or settlements in relation to land by departments or statutory bodies. However rigorous these mechanisms, they do not in my view impinge on the validity of an agreement or concession that is otherwise within power ."

Addressing next the question of a possible admission by the authority, Gobbo J. said (at 297-8):

" The claimants also argued that in any event the conduct of the authority amounted to an admission against interest that the agreed ` before' plans constituted the highest and best use of the land .

There is in my view sufficient material in the evidence already reviewed to support the proposition that the authority did by its acceptance of the plans impliedly recognise that the plans represented the highest and best use of the land at that time. In one sense this is a statement against the interest of the authority which had been contending that the northern land could not be subdivided at all or to the extent reflected in the plans .

This does not mean however that there was therefore a formal admission of a contested matter of the kind that can occur in a pleading in litigation. It was plainly not that kind of admission. Rather it was in the category of an informal admission against interest. As such, it could not bind the authority to the proposition admitted and was no more than an item of evidence that could be considered along with all the other evidence on that issue. The question was whether the admission could have the decisive effect contended for by the claimants who sought to rest their primary assessment upon it, if the agreement and estoppel arguments failed .

In my view the proper but limited role of the evidence was as part of the evidence in reaching a decision on highest and best use at the time of the notice to treat. The claimants' planning evidence did not support a development as high as that depicted in the plans. Rather the evidence of the claimants' expert as to the planning history of the land supported a lesser development which, though less than that in agreed plans was higher than the single allotment case put for the authority. The admission constituted by the plans stood virtually alone and could not on the evidence properly lead to the fifteen lot development of the northern land being regarded as the highest and best use .

....

I therefore conclude that though the admissions do not formally bind the authority, they are admissible and material to the issue as to what was the highest and best use of the land at the date of acquisition ."

Finally, in coming to his award, Gobbo J. said (at 322):

"It would always, of course, be open to the parties to convert their firm understandings, if not agreements, into legally binding agreements by recourse to legal formalities. That could have been done in this case. But it is not necessarily a course to be encouraged and in the long run it may not be in the public interest. It is better to encourage, and abide by the result of, useful negotiations between well-informed experts seeking to resolve what are often difficult and complex questions ."

I respectfully agree with all of these observations. I would only add that in the Federal context, as here, nothing can be lawfully agreed by the parties if it detracts from the constitutional guarantee of "just terms" enacted in ss.55(1) and 93 of the Act.

As has been noted, the proceedings before Wilcox J. were interlocutory, at least in their form. The issues were described as "preliminary". Yet, as has been said, a considerable body of evidence was tendered, presumably by way of background, or to provide at least some of the context in which the parties entered into the Deed. In his reasons, Wilcox J. made some findings of fact and answered the questions posed, on what may be taken to be a final basis. Yet the parties now say that they intend, and have always intended, to adduce further evidence at the final hearing. Can it be said then that the findings of Wilcox J. or, on appeal, our findings, are interlocutory or final? The question is important for several reasons, including the possible result that there will be an issue estoppel on the issues decided. The point is not free from controversy.

In Re Martin; Ex parte Amtron Australia Pty Ltd (1996) 62 FCR 438, Cooper J. held that, in some circumstances, an interlocutory decision may give rise to an issue estoppel. His Honour said (at 442- 3):

" In the instant case, the judicial determination in question is an interlocutory judgment. I do not agree with the proposition that an issue determined in interlocutory proceedings cannot give rise to an issue estoppel (cf Whitemark Pty Ltd v Cann Australia Pty Ltd ( unreported, Federal Court, French J, 31 March 1993) at p 6 ).

Whilst it is clear that a decision which is ` truly' interlocutory cannot found a relevant estoppel (for example, dismissal of a claim for interlocutory relief on the ground that there is not disclosed a serious question to be tried ; see Schlieske v Minister for Immigration and Ethnic Affairs (1987) 79 ALR 554 at 574 per Beaumont J ), there is authority that, in certain circumstances where an issue is finally determined in what are interlocutory proceedings, an issue estoppel may arise (see Carl Zeiss Stiftung v Rayner & Keeler Ltd (No 3) [1970] Ch 506 at 538-539 ; Joseph Lynch Land Co Ltd v Lynch [1995] 1 NZLR 37 at 42-43 ; Makhoul v Barnes (1995) 60 FCR 572 at 582 .

In Joseph Lynch Land Co at 42-43, the New Zealand Court of Appeal said :

` The purpose behind cause of action estoppel and issue estoppel is that litigants should not be twice vexed by the same claim or point and it is in the public interest that there be an end to litigation : see New Zealand Social Credit Political League Inc v O'Brien [1984] 1 NZLR 84 at 95 per Somers J ; Gregoriadis v Commissioner of Inland Revenue [1986] 1 NZLR 110 at 114 per Richardson J and at 118 per Somers J and also the Carl Zeiss case at 946 per Lord Upjohn .

While we acknowledge that points decided in interlocutory proceedings may in certain circumstances lead to an estoppel, the rationale is less powerful in an interlocutory context. Therefore the justice of the case must be compelling before a decision which is in substance interlocutory is held to prevent the later ventilation of an issue. We consider that the statement in Cross on Evidence ( 4th NZ ed, 1989 ), p 317, par 12.9 that a decision on an interlocutory matter will not suffice for an issue estoppel is too widely expressed.'

In my view, the correct approach is to consider whether in the circumstances it is reasonable to regard the earlier decision as a final determination of the issue which one of the parties wishes to raise again, rather than to restrict consideration to the nature of the earlier proceedings (Joseph Lynch Land Co at 43 ; Makhoul v Barnes at 582-583 )."

I respectfully agree with these observations. If parties have conducted an aspect of their litigation upon the footing that this part of the proceedings is to be then determined, to that extent, finally, it is only reasonable that they be bound by the way their cases on this aspect have been conducted.

In my opinion, the hearing before Wilcox J., and before this Court, on the issue of interpretation of the material provisions of the Deed, has been treated by the parties as if it were a final hearing. But so far as concerns the issue of the proper amount of compensation, the hearings to this point should, I think, be regarded as truly preliminary and thus interlocutory only; for instance, no attempt was made, or could have been made, before Wilcox J. or this Full Court to arrive at a figure for compensation.

Apart from issue estoppel by judicial determination, there may be estoppels arising from entry into the Deed itself. But there are limits to the creation of estoppels of this kind as Jordan CJ. said in Discount & Finance Ltd v Gehrig's NSW Wines Ltd (1940) 40 SR (NSW) 598, (at 603-4):

" The authorities show that if the defendants are to be bound by estoppel by deed, in the present action on the deed, it must be shown (1) that in the deed there is a precise and unambiguous statement of the fact in question, and (2) that the statement is a statement by the defendants. It is not sufficient to point to something in the deed from which the existence of the fact might be inferred : Onward Building Society v. Smithson. Nor is a promise that the fact exists equivalent, for this purpose, to a statement that it exists : General Finance Mortgage and Discount Co. v. Liberator Permanent Benefit Building Society. There must be a clear and explicit statement that it exists. Further, it is not sufficient that the fact is stated if, according to the true intendment of the deed, it is not the party sought to be bound by the estoppel who has stated it ."

Finally, it should be mentioned that, given the wide differences in the parties' respective interpretations of the Deed, this is not a case of estoppel arising from a deed by convention (cf. Offshore Oil N.L. v Southern Cross Exploration N.L. (1985) 3 NSWLR 337).

(ii) The meaning of specific provisions of the Deed

For presnt purposes, the central provision is cl.5 of the Deed. It will be convenient to consider aspects of its interpretation in stages.

It will be recalled that by cl.5(a) it is provided that, if the varied PAD becomes absolute and the acquisition (of Lot 101) and the easement and restrictions become absolute, the Commonwealth "agrees to pay compensation to [Leppington] for the acquisition in accordance with Part VII of the Act..."; and that provision is then made for the payment of an initial advance of compensation monies to Leppington in the sum of $4,200,000, subject to the execution by Leppington of a deed of release in that connection.

There is no ambiguity in the language of cl.5(a). It contemplates an acquisition in accordance with Part VII. If the matter had rested there, the provisions of s.55 would have applied here so that, in assessing "just" compensation under s.55(1), regard would have been had to (a) the market value of the interests acquired (s.55(2)(a)(i); and (b) any loss, injury or damage suffered, or expense reasonably incurred by Leppington that was, having regard to all relevant considerations, including any circumstances peculiar to Leppington, suffered or incurred by Leppington as a direct, natural and reasonable consequence of the acquisition (s.55(2)(c)).

Whilst these general principles are well known and understood, it is notorious, as has been said, that their application can be complex and difficult. From the face of the Deed itself, it appears that one of the main objectives of the parties in entering into the Deed was to establish some common ground in defining at least some of the parameters of the method of assessment of the amount of compensation. In other words, it seems, from the provisions of the Deed viewed in their general context (that is, the well known uncertainties in the application of the statutory compensation principles) that the parties' objective was to ensure that some (but clearly not all) matters in the assessment methodology would be put beyond dispute. This intention emerges from the provisions of cl.5(b)(i), (ii) and (iii) in particular. I now turn to consider their meaning.

It will be remembered that cl.5(b) commences with the words "subject to" the Act. What, in this context, is the effect of that provision?

One of the dictionary meanings of "subject" is: "being dependent or conditional upon something (fol. by to)." In my opinion, this meaning of the phrase is indicated by the present context. (See also Palatine Insurance Company Limited v Gregory [1926] AC 90 at 92; Masters v Cameron [1954] HCA 72; (1954) 91 CLR 353 at 362-3; Hong Guan & Co. Limited v R Jumabhoy & Sons Limited [1960] AC 684 at 700; Meehan v Jones [1982] HCA 52; (1982) 149 CLR 571 at 578; 590). That is to say, the provisions of cl.5(b) which follow are dependent or conditional upon the operation of the Act. This is to be expected since, as has been noted, the Act itself reflects the constitutional guarantee of "just terms" in s.55(1) and s.93 in stating the general principles by which the amount of compensation is to be assessed and s.55(2) directs that regard be had to specific matters, for instance, those mentioned in s.55(2)(a)(i) and (c)(i). There is no indication in the Deed that the parties intended, even if it were possible, to detract from the operation of those provisions.

Clause 5(b) is framed as an acknowledgment by the Commonwealth that, in the assessment process, "it shall... take into account, amongst other things, the cost [there] specified." No doubt the reference to "other things" would be capable of picking up, for instance, the market value of the interests acquired (s.55(2)(a)(i)), consistently, as has been said, with the use of the phrase "subject to the Act". But what is meant by "take into account" the cost mentioned, remembering that s.55(2) employs the similar formula "regard shall be had"?

In Reg. v Hunt; Ex parte Sean Investments Pty Ltd [1979] HCA 32; (1979) 180 CLR 322 Mason J. said (at 329):

" When sub-s .( 7) directs the Permanent Head to " have regard to " the costs, it requires him to take those costs into account and to give weight to them as a fundamental element in making his determination. There are two reasons for saying that the costs are a fundamental element in the making of the determination. First, they are the only matter explicitly mentioned as a matter to be taken into account. Secondly, the scheme of the provisions is that, once the premises of the proprietor are approved as a nursing home, he is bound by the conditions of approval not to exceed the scale of fees fixed by the Permanent Head in relation to the nursing home. In many cases it is to be expected that the scale of fees will be fixed by ascertaining the costs necessarily incurred and adding to them a profit factor. In the very nature of things, the costs necessarily incurred by the proprietor in providing nursing home care in the nursery home are a fundamental matter for consideration .

However, the sub-section does not direct the Permanent Head to fix the scale of fees exclusively by reference to costs necessarily incurred and profit. The sub-section is so generally expressed that it is not possible to say that he is confined to these two considerations. The Permanent Head is entitled to have regard to other considerations which show or tend to show that a scale of fees arrived at by reference to costs necessarily incurred, with or without a profit factor, is excessive or unreasonable. It may be that the rent paid by the proprietor of a nursing home, though a cost necessarily incurred, exceeds the prevailing rental which is paid for comparable premises and that the determination of a scale of fees by reference to that rent would result in a scale of fees which is unreasonably high. The Permanent Head would be entitled to take this factor into account in making his determination ." (Emphasis added).

In my opinion, these observations are apposite here. As a matter of context and purposive construction, the phrase "take into account" should be interpreted, I think, in the same way.

The "cost" there mentioned is that "involved in carrying out the work and adopting the farming practices specified below" (i.e. in cl.5(b)(i), (ii) and (iii)).

As Jordan CJ. observed in Ex parte Brierley; Re Elvidge (1947) 47 SR (NSW) 423 (at 427) "[t]he word `cost' may be used in various senses".

The Macquarie Dictionary definitions of the noun "cost" include: "the price paid to acquire, produce, accomplish, or maintain anything... outlay or expenditure of money, time, labour, trouble etc." But it is not clear from the present context which of these meanings was intended by the Deed.

In the present context, what is to be assessed ultimately, is, of course, a sum of money, so that an outlay in the form of time, labour or trouble should be excluded. At the same time, as Wilcox J. pointed out, the assessment of compensation is no mere arithmetical exercise and judgments of various kinds are called for at all stages of the process.

What, in this connection, is meant by "involved in"? One of the dictionary definitions of the verb "involve" is: "to include, contain, or comprehend within itself or its scope". It appears that the phrase "involved in" was used here in this sense.

It will be recalled that the "work" carried out and the "farming practices" adopted in cl.5(b)(i) are "the relocation and reconstruction on the remaining land of [Leppington's] buildings, plant, equipment and other material presently located on the acquisition land (`the Farm Buildings') necessary for [Leppington's] operations as are manifest at the acquisition date". As has been seen, the meaning of the latter part of this provision is in issue. It appears to refer to buildings, etc. which are necessary for Leppington's "operations" and which are "manifest" at the acquisition date. In this connection, it appears that the noun "operations" has the following dictionary definition: "a course of productive or industrial activity". It further appears that the adjective "manifest" is intended here to have its primary dictionary meaning: "readily perceived by the eye or the understanding; evident; obvious; apparent; plain".

It will then be recalled that cl.5(b)(ii) picks up the cost of "the redesign" of the remaining land as may be "necessitated" by the relocation of the Farm Buildings, "taking into account such matters [as are then nominated]". Two of the dictionary meanings of "design" are: (verb) "to plan and fashion a work of art etc..." (noun) "the combination of details or features of a picture, building etc..." It appears that "redesign" is used here in this sense.

Clause 5(b)(ii) directs that in assessing the cost of the relocation and reconstruction identified, there be taken into account such matters as the possible need for the alteration of or replacement of: (1) the fencing and paddock subdivisions; (2) the irrigation system; (3) the sullage pits; (4) the electricity (equipment); (5) the town water supply; (6) roads; and (7) all infrastructure improvements existing on Leppington's land at the acquisition date.

This is a key provision and several points concerning it should be noted. First, it appears that the notion of "taking into account" is intended to operate along the lines previously discussed. Further, the reference to "such matters as" suggests that the list then given is not intended to be exhaustive. Finally the reference to "possible need" (emphasis added) suggests that the extent of any redesign necessitated by the relocation and reconstruction is not then known.

Clause 5(b)(iii), as has been seen, speaks of the cost involved in the adoption of new or varied farming practices that "may be required to enable [Leppington] to continue its operations at the same standard and degree of efficiency as are manifest at the acquisition date as a result of [certain matters]."

It appears that "required" has here its dictionary meaning: "to have need of; need; he requires medical care"; that "operations" and "manifest" have the meanings discussed earlier; and that "efficiency" is meant to describe an "effective... use of... resources".

Clause 5(b)(iii) operates only in the limited circumstances there specified viz., as a result of the alteration to the irrigation system necessitated by (1) the re-positioning of the Northern Road pursuant to cl.6; or (2) the acquiring of the easement and restrictive covenants.

As we have seen, there is a proviso to the operation of the whole of cl.5 to the effect that Leppington provide details of its claim and its basis. Nothing appears to turn on this proviso for present purposes.

Clause 5(c), which is also important, uses the same terminology as cl.5(b) with, in my view, the same meaning.

Clause 5(c) is not expressed to be "subject to the Act" as cl.5(b) is. It is not clear what follows from this. It appears that it was intended to create mutual estoppels in the form of an assumption on the part of both parties that the costs of relocation and reconstruction would be one (but not the only) element in the assessment of compensation. In particular, there is, in my view, nothing in any part of cl.5 to justify an inference that other elements, for instance, the market value of land, could not be considered.

(c) The preliminary issues

I will now address the Preliminary Issues in turn.

Question 1

" 1. Do the provisions of the [ D ] eed ... require the application of any special principle or approach to the determination of Leppington's claim for compensation and, if so, what ?"

In my opinion, there is a possible ambiguity in the question arising out of the use of the word "special". It could simply refer, in a general way, to the existence of a "special" value to Leppington as owner in accordance with the principle established in Pastoral Finance Association Ltd v The Minister [1914] UKPC 77; [1914] AC 1083 (see Brown, op. cit., at 99-103). But there is another possible use of the word "special" here and that is to describe the (special) "relocation" (business loss) approach or methodology to the assessment of the amount of compensation. Brown, op. cit., writes (at 129-130):

" BUSINESS LOSS : RELOCATION

[ 3 . 29 ] In this situation the dispossessed landowner conducting a business on the resumed land moves to neighbouring land and re-establishes the business on that land. He or she claims the market value of the resumed land and the cost of relocating. Because the transfer of the business has been effected speedily and effectively the claimant encounters no loss of profits, goodwill and loss of customers. The cost of relocation comes fairly under the heading of ` loss or damage' or under ` disturbance'. In this situation the claimant establishes without any doubt the fact that he or she has relocated. There has been no perceptible gap between the cessation of the business on the resumed land and the relocation on the new land. The situation may be different where the claimant merely has an intention to relocate at the date of resumption but that intention is not fulfilled ."

It is true that in the present case a partial, rather than a complete, relocation was provided for in the Deed. But the principle is equally applicable.

In my view, it is probable that "special" was used in Issue 1 in the latter sense as described by Brown, given, in particular, the circumstance that one of the central provisions of the Deed addresses, inter alia , the question of the cost of relocation. I think it unlikely that the question merely referred to the general, well accepted notion of special value to the owner. Rather, I believe that this Issue seeks to address something more specific and more concrete than the generality of the Pastoral Finance principle. That principle is so well recognised as available under the Act that there would be little point in asking the Court to consider its potential application in the present circumstances.

I would answer question 1: Yes, to the extent that the Deed provides that one element in assessing compensation for the compulsory acquisition will include an assessment of Leppington's reasonable costs of relocation in the manner contemplated by the Deed.

Question 2

" 2. In particular, does that [ D ] eed, on its proper construction, mean no more than the Commonwealth is precluded from asserting that Leppington is not entitled to 'special value compensation' for the resumed land in excess of the market value of that land on the acquisition date ?"

Again, there is an ambiguity in the reference to "special value compensation"; but it follows from 1, above, that I would answer this question in the negative.

As has been said, the Act provides that in assessing compensation, regard shall be had not only to the market value of the land (s.55(2)(a)(i)) but also to any loss, injury or damage of the kind specified in s.55(2)(c). There is nothing, in my view, in the provisions of the Deed which would detract from the operation of s.55(2)(a)(i) and (c). In the light of the constitutional requirement of just terms enacted in s.55(c) and s.93, it is difficult to see how the Deed could have contradicted the operation of s.55(2)(a)(i) and (c) in any event. But it is not necessary to pursue this since it should be presumed, I think, that the Deed proceeds upon the footing that the Act contemplates that, in the assessment of compensation, regard will be had (but not in any exhaustive sense; see Hubertus Schuetzenverein Liverpool Rifle Club v Commonwealth of Australia [1995] FCA 1374; (1995) 130 ALR 447 at 453), to market value and to any loss, injury or damage of the kind described in s.55(2)(c).

I would answer question 2: "No."

Question 3

" 3. Is the determinative factor of the expression 'operations as are (were) manifest at the acquisition date' :

(a)

the maintainable net profitability of those operations ; or

(b)

the manner in which Leppington was on the acquisition date carrying out those operations ?"

As to 3(a), with all respect to the learned trial Judge, I can find no basis for implying the notion of net profitability of the business into the provisions of the Deed, let alone making it "determinative". There is no express reference to that concept in the Deed. Any attempt to imply it would encounter the difficulty of the uncertainty of its meaning and content, specifically the absence of criteria by which "net profitability" might be determined. The uncertain meaning of "cost" has already been mentioned. "Net profitability" is equally indefinite. But, as has been seen, there is a further difficulty. As I read cl.5(b)(i), the word "manifest" qualifies the Farm Buildings, and not the "operations".

I would answer question 3(a): "No."

As to question 3(b), in my view, any assessment of compensation which has regard to loss, injury or damage of the kind described in s.55(2)(c) (being in this case, the business loss arising from the partial relocation of Leppington's business) would necessarily involve a consideration of the manner in which Leppington conducted its business.

I would answer question 3(b): "Yes, to the extent that an assessment of the cost of Leppington's relocation is envisaged to be made on the footing that the relocation is effected at a reasonable cost and in the manner contemplated by the Deed".

Question 4

" 4. Having regard to the [ D ] eed ... and the ... Act is the Commonwealth obliged to pay compensation in an amount equal to the cost of relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices in the manner set out in the plan marked 'LP4A' regardless of :

(a)

whether or not Leppington intends to carry that plan into effect ; and

(b)

whether or not the expense which would be incurred by Leppington if it were to carry that plan into effect would be a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land ?"

In my opinion, this question should not be answered, at least at the present interlocutory stage. As has been said, whilst the proper interpretation of the Deed in the light of the Act should be regarded as finally determined at this stage, the remaining aspects of the claim, in particular, the final hearing of the actual process of assessment of the amount of compensation, has not yet been embarked upon. No specific proposal, let alone one of the kind found in "LP4A" is mentioned, expressly or by implication, in the provisions of the Deed.

It is true that the parties chose to adduce a considerable body of evidence before his Honour, but presumably this was done as evidence of extrinsic circumstances as an aid to the construction of the Deed. As has been seen, I have not found that this evidence provides any significant assistance in the interpretative exercise. In fairness to the parties, this material will, no doubt, be used at the final hearing. In fairness to his Honour, as an exercise in case management, perhaps viewed as an extended directions hearing, there was benefit for the parties, and for the Court, in exploring possible areas of common ground between the parties with a view to defining the real issues, so that the time and expense required for the final hearing could be kept within reasonable limits. However, as I see it, this was a hearing which was truly interlocutory taking place against the background of incomplete evidence and at a stage where the final hearing of the assessment of the amount of compensation had not commenced.

In these circumstances, I think that it is premature to consider this question since it goes beyond the question of interpretation of the Deed.

Question 5

" 5. If the answer to 4 is 'no', according to what essential criteria are the expenses (to be) incurred by Leppington in relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices as a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land (and the Commonwealth's resultant liability to pay compensation) to be assessed ?"

Since this question is linked, in one sense at least, to question 4, it should follow that I would decline to answer it also. In order to avoid any doubts, I would only add, as has already been said more than once, that my view is that in the assessment process, regard should be had to the specific provisions of the Deed, the meaning of which I have attempted to explain, viewed against the background of the general principles found in ss.55(1) and 93 of the specific provisions of s.55(2)(a)(i) and (c). It is well established that s.55(1) provides an "overriding compensation formula" (see Liverpool Rifle Club, above, at 453).

Question 6

6. By what amount, if any, should the cost of relocation and reconstruction as at the resumption day , ( being an element of the special value to form part of the compensation payable to the dispossessed owner) be discounted to reflect the period after resumption day during which Leppington may remain on the resumed land pursuant to a lease granted by the Commonwealth until the time at which Leppington will or may incur the costs of relocation ?"

Again, I believe that it is now premature to address this question in any abstract fashion before the final hearing of the assessment process has commenced. Here also, I find it difficult, if not impossible, to generalise in advance in a way that is useful. Moreover, as has been noted, the assessment process is no mere arithmetical exercise in any event, so that it is not possible to consider whether any discount should be allowed without knowledge of the amount or amounts in question and their particular character. These are all matters for the final hearing.

I would only add, it if be necessary to do so, as Wilcox J. noted, that it is settled that, under the Act, compensation is to be assessed as at the acquisition date. This was explained in, for instance, Liverpool Rifle Club, above, at 449, 454 where it was held that interest and compensation under the Act are discrete matters; and, specifically, that interest is not a relevant matter to be taken into account under s.55. I accept that the discount issue is different in principle from the interest question, and that in many contexts including the present, it may in some circumstances be appropriate to allow a discount in respect of future expenditure. But, as has been said, it is not useful to consider the discount issue as an abstraction, divorced from identified items of expenditure.

COSTS

In the light of the complex nature of the issues and the history of the litigation, it is appropriate, I think, that the costs at first instance, and on the appeal and the cross-appeal, be the costs of the parties in the proceedings, such costs to abide the order of the trial Judge at the final hearing.

ORDERS PROPOSED

I would propose the following orders on the appeal and the cross- appeal:

1. Vary the orders indicated by Wilcox J. by way of answers to the Preliminary Issues in his Honour's reasons for judgment dated 27 July 1995 by ordering that the following questions be answered as follows, in lieu of the answers indicated by Wilcox J.:

" Q1. Do the provisions of the [ D ] eed ... require the application of any special principle or approach to the determination of Leppington's claim for compensation and, if so, what ?"

A1. Yes, to the extent that the Deed provides that one element in assessing compensation for the compulsory acquisition will include an assessment of Leppington's reasonable costs of relocation in the manner contemplated by the Deed.

" Q2. In particular, does that [ D ] eed, on its proper construction, mean no more than the Commonwealth is precluded from asserting that Leppington is not entitled to 'special value compensation' for the resumed land in excess of the market value of that land on the acquisition date ?"

A2. No.

" Q3. Is the determinative factor of the expression 'operations as are (were) manifest at the acquisition date' :

(a)

the maintainable net profitability of those operations ; or

(b)

the manner in which Leppington was on the acquisition date carrying out those operations ?"

A3(a) No.

A3(b) Yes, to the extent that an assessment of the cost of Leppington's relocation is envisaged to be made on the footing that the relocation is effected at a reasonable cost and in the manner contemplated by the Deed.

" Q4. Having regard to the [ D ] eed ... and the ... Act is the Commonwealth obliged to pay compensation in an amount equal to the cost of relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices in the manner set out in the plan marked 'LP4A' regardless of :

(a)

whether or not Leppington intends to carry that plan into effect ; and

(b)

whether or not the expense which would be incurred by Leppington if it were to carry that plan into effect would be a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land ?"

" Q5. If the answer to 4 is 'no', according to what essential criteria are the expenses (to be) incurred by Leppington in relocating and reconstructing the farm buildings, redesigning the remaining land and adopting new or varied farming practices as a direct natural and reasonable consequence of the Commonwealth's acquisition of the resumed land (and the Commonwealth's resultant liability to pay compensation) to be assessed ?"

"Q6. By what amount, if any, should the cost of relocation and reconstruction as at the resumption day , ( being an element of the special value to form part of the compensation payable to the dispossessed owner) be discounted to reflect the period after resumption day during which Leppington may remain on the resumed land pursuant to a lease granted by the Commonwealth until the time at which Leppington will or may incur the costs of relocation ?"

A4. )

A5. ) These questions should not be answered.

A6. )

2. Order that the costs of the preliminary issues before Wilcox J., and before the Full Court, be the costs of the parties in the proceedings, such costs to abide the order of the trial Judge at the final hearing.