Boland v. Yates Property Corporation Pty Ltd
167 ALR 575(Judgment by: Gleeson CJ)
Boland v Yates Property Corporation Pty Ltd
Webster v Yates Property Corporation Pty Ltd
Judges:
Gleeson CJGaudron J
Gummow J
Kirby J
Hayne J
Callinan J
Judgment date: 9 December 1999
Canberra
Judgment by:
Gleeson CJ
[1] These two appeals were heard together. They arise out of actions for damages for professional negligence.
[2] Each appellant is a legal practitioner. The first respondent, Yates Property Corporation Pty Ltd (Yates), was the client of the appellants. The first appellant, Mr Boland, was sued by Yates as a representative of Abbott Tout Russell Kennedy (Abbott Tout), a firm of solicitors engaged to act for Yates in the conduct of a compensation claim before the Land and Environment Court of New South Wales. The second appellant, Mr Webster, is a barrister who acted as junior counsel in the proceedings before the Land and Environment Court. Mr Webster was led in those proceedings by Mr Simos QC, who was also sued by Yates. The second respondent to each appeal, Mr Yates, is the controlling shareholder of Yates. He was not a party to the original actions brought by Yates, but was joined in the proceedings when an order for costs was sought and made against him.
[3] The actions were all heard by Branson J in the Federal Court. She found in favour of the defendants. [1]
[4] Yates instituted two appeals against the judgments of Branson J on liability (No NG 495 of 1997) and costs (No NG 716 of 1997). Mr Yates appealed from that part of the judgment against him on costs (No NG717 of 1997). The appeals were consolidated by an order made on 22 September 1997. Orders for security for costs were made against Yates by Davies J in favour of each of the respondents, including Mr Simos. No security was provided in respect of Mr Simos and, on 13 February 1998, Davies J ordered that the appeals by Yates against Mr Simos be dismissed.
[5] The Full Court (Drummond, Sundberg and Finkelstein JJ) allowed the appeals which remained on foot. [2] It ordered Mr Boland and Mr Webster to pay the costs of the appeals by Yates (Nos NG495 and 716 of 1997). It ordered those parties and Mr Simos to pay the costs of the appeal by Mr Yates.
[6] Although the primary claim made by Yates against its former legal representatives was for damages for negligence (including, in the case of the solicitors, breaches of a contractual obligation to exercise care and skill), Yates relied on other causes of action, including allegations of contraventions of s 52 of the Trade Practices Act 1974 (Cth) and s 42 of the Fair Trading Act 1987 (NSW) (misleading and deceptive conduct), and allegations of breaches of fiduciary duty. Those other claims also failed before Branson J. Subject to one qualification, it was not suggested that they added anything to the claims based on professional negligence. The matter was argued, both in the Federal Court and in this court, upon the basis that, if Yates could not succeed in establishing professional negligence, it could not make out the factual foundation for its other causes of action. The qualification relates to the question of an immunity claimed by all defendants. Having regard to the way in which they decided the case, it was unnecessary either for Branson J, or for the Full Court, to deal with the question whether the immunity from suit relied upon by Mr Boland and Mr Webster would have defeated the other causes of action. Branson J held there was no negligence. The Full Court of the Federal Court held there was negligence, but that such negligence was not covered by any immunity. It would only be if this court were to uphold the finding of negligence, but to conclude that it was covered by the immunity, that a question as to the significance of the other causes of action would arise.
[7] In order to explain the nature of the allegations of professional negligence, and the issues to which those allegations have given rise, it is necessary to examine, in some detail, the litigation out of which they arose. The course of that litigation was complicated. The original compensation proceedings were heard by Cripps J, the Chief Judge of the Land and Environment Court, in early 1990. [3] Both parties were dissatisfied with the outcome. There was an appeal, and a cross-appeal, to the Court of Appeal of New South Wales. That appeal was heard in late 1990, and judgment was given in July 1991. [4] The Court of Appeal (Kirby P and Handley JA, Mahoney JA dissenting) allowed the appeal in part, allowed the cross-appeal, and remitted the proceedings to the Land and Environment Court for rehearing on certain issues. The matter was reheard before Cripps J in March 1992. [5] At that stage Yates terminated the retainer of Abbott Tout and instructed other solicitors to lodge a further appeal to the New South Wales Court of Appeal. In November 1992, the further appeal was settled on the basis of payment to Yates of an additional amount. That put an end to the primary litigation. Yates then pursued claims against its former legal representatives.
[8] During the course of the relevant events, Yates went into liquidation. That fact, and the respective roles of the liquidator, and the second respondent, were material to some aspects of the case, but they are not presently significant, and may be disregarded.
The primary litigation
[9] In 1981 Yates purchased land in the Darling Harbour area. The purchase price was $5.1 million. Yates decided to investigate the possibility of developing the land as a retail market place. The company sought expressions of interest from prospective stallholders, and obtained written agreement from 40 of them to take a stall if the market were constructed. In 1983, consultants were engaged to carry out the work necessary to obtain approval from the Sydney City Council to develop the land as a market. Such approval was given. Yates also engaged architects to prepare plans for a market building. In 1984 the existing structures on the land were demolished and a builder was retained to carry out the construction of the building in accordance with the plans that were prepared. In July 1984 Yates obtained the authority of the Sydney City Council to construct a market building that would house 896 market stalls. Expenditure incurred to reach that stage exceeded $2.7 million.
[10] In June 1984 it was announced by the New South Wales Director of Public Works that the land was likely to be resumed for the purposes of the Darling Harbour Authority. Yates was told to hold its development proposals in abeyance. In May 1985 the land was acquired by the Darling Harbour Authority pursuant to the Darling Harbour Authority Act 1984 (NSW). Pursuant to s 12C of the Darling Harbour Authority Act, Yates was entitled to receive compensation. A claim for compensation was to be dealt with as if it were a case in which a claim had been made by reason of the acquisition of land for public purposes under the Public Works Act 1912 (NSW). The Public Works Act contained provisions setting out the basis on which compensation was to be calculated. By virtue of s 124 of that Act, for the purpose of ascertaining the compensation to be paid, regard was to be had to the value of the land taken, and to the damage (if any) caused by the severing of the land taken from any other lands of the owner or by the exercise of any other powers by the resuming authority otherwise injuriously affecting such other lands. Jurisdiction to deal with any disputed claim for compensation was vested in the Land and Environment Court.
[11] The function of the court was to assess the compensation payable according to the value of the land at the time the land was resumed. The "value of the land" means "value of the land to the owner". [6] What is to be noted, however, is that the basis of compensation was the value of the land taken and not, apart from the specific kinds of damage referred to in s 124, the general or particular financial harm otherwise suffered by Yates as a consequence of the resumption.
[12] The parties to the proceedings in the Land and Environment Court were Yates as applicant and the Darling Harbour Authority as respondent. Mr Simos QC and Mr Webster, instructed by Abbott Tout, appeared for Yates. The proceedings lasted for eight weeks. Forty-one witnesses were called, more than 20 of whom were experts dealing with matters such as town planning, financial feasibility, and valuation. Six expert valuers were called. Their valuations of the subject land ranged between $12.74 million and $75 million. On behalf of the Darling Harbour Authority, Mr Weir assessed the value at $12.74 million, Mr Vaughan, a valuer from the Valuer-General's Department, assessed the value at $16.75 million and Mr Gilbert assessed the value at $16.6 million. Three valuers were called on behalf of Yates. Each was found in the Federal Court to be an experienced and highly regarded expert in his field. Mr Parkinson fixed compensation at $75 million, made up of "market value" of $53 million and "special value" of $22 million. Mr Woodley valued the land at $60.6 million, including special value. Mr Egan fixed a market value, based on comparable sales, of $27 million, to which he added $10.8 million for "special value". The range of the six valuations, in relation to land which had been acquired in 1981 for $5.1 million, indicates, if any indication be necessary, that the valuation of land is not an exact science.
[13] At the conclusion of the first hearing, Cripps J fixed compensation in the sum of $22,334,500.
[14] One of the issues raised and argued before Cripps J was whether compensation ought to be fixed on the basis that the land had a "special value" to Yates. It is convenient to say something briefly about that concept at this point. It will be necessary to return to it in due course.
[15] It was common ground that the starting point for the determination of the value of land was the principle stated in Spencer v Commonwealth , [7] that is to say, to consider, from the point of view of persons conversant with the subject at the relevant time, what, according to then current opinion of land values, a willing but not anxious purchaser would have to offer to induce a not unwilling vendor to sell the land. That is the market value.
[16] In some circumstances, land may have a "special value", which reflects a value to the owner over and above the price which a hypothetical purchaser may pay. What is often referred to as a useful explanation of the concept appears in Pastoral Finance Association Ltd v Minister . [8] That was a case in which a dispossessed owner conducted a wool and meat freezing business on Kirribilli Point across Sydney Harbour from Darling Harbour. The business expanded, and the owner bought land at Darling Harbour, which was a site to which the business could suitably have been transferred. The owner then obtained plans and estimates for the erection of buildings adapted to the needs of the business. Before commencement of the erection of the buildings, the owner learned of an intended resumption, and did not proceed with construction. The land was resumed. The Privy Council said: [9]
That which the appellants were entitled to receive was compensation not for the business profits or savings which they expected to make from the use of the land, but for the value of the land to them. No doubt the suitability of the land for the purpose of their special business affected the value of the land to them, and the prospective savings and additional profits which it could be shown would probably attend the use of the land in their business furnished material for estimating what was the real value of the land to them. But that is a very different thing from saying that they were entitled to have the capitalised value of these savings and additional profits added to the market value of the land in estimating their compensation. They were only entitled to have them taken into consideration so far as they might fairly be said to increase the value of the land. Probably the most practical form in which the matter can be put is that they were entitled to that which a prudent man in their position would have been willing to give for the land sooner than fail to obtain it.
[17] The three valuers called on behalf of Yates each expressed an opinion that the subject land had a special value. Mr Parkinson, for example, having expressed an opinion as to the market value of the land, went on to assess special value by reference to what it would cost to acquire an alternative market. [10] This he treated as a basis for estimating an amount, in addition to market value, which a hypothetical purchaser in the position of the owners would have been willing to pay to return the subject land.
[18] In his reasons for judgment, Cripps J did not adopt and apply the opinions of any one of the valuers who gave evidence. Rather, his Honour made comments on some aspects of the valuation evidence, expressed a preference for some parts of it over others, and then stated his own conclusions.
[19] In relation to the matter of special value, Cripps J made particular reference to Pastoral Finance Association Ltd v Minister ; Housing Commission of New South Wales v Falconer , [11] and Kennedy Street Pty Ltd v Minister . [12] He accepted that the subject land had "a special value". He rejected a submission made by the Authority that the principle enunciated in the Pastoral Finance case could have no application to vacant land or, if it could, could have no application to vacant land where the dispossessed owner was not carrying on a business elsewhere. [13] Cripps J said: [14]
I am of the opinion that conformably with the above-mentioned authorities, the subject land did have a "special value" to Yates. That is, a purchaser in the position of Yates would have regard to the potentiality of the subject site by reason of its size and location for use as a market and for that reason would be prepared to pay something above the land value rather than not obtain it.
[20] Later, his Honour said: [15]
Yates did a considerable amount of work in preparation for the markets. It hoped it could replace Paddy's [Markets] but if it could not it was prepared to compete with it. Of special significance is the circumstance that approximately 718 recorded registration forms were received from people interested in becoming stallholders at the Harbour Street markets. Each paid $50 to register interest. Perhaps of more significance is the circumstance that about forty people paid rent in advance, about $100,000 for the right to occupy stalls in the market yet to be built....Having regard to the evidence of Mr Byrne and Mr Banks, I am of the opinion that a prudent purchaser in the position of Yates would have considered that there was some potential for a successful market and there was a possibility that such a market would be highly successful. However, he would also be aware that there was a risk of failure and a high risk that the markets would not function at anything like the profit levels forecast by Mr Dimasi.
[21] After considering the evidence of individual valuers, including evidence of special value, Cripps J said: [16]
As will be seen, I have fixed compensation by reference to a rate per square metre derived from comparable sales. In arriving at my conclusion, I have had regard to relevant comparable sales and to what I find to be the special value of the land to Yates. Yates had available a large area of land which had the potential for use as a market. The subject land was close to the CBD and Chinatown and within an area where market use was established albeit under the authority of the State. It presented Yates with an opportunity to establish a profitable market of the type proposed. It is true that in part the opportunity available to Yates was the result of the entrepreneurial skills of Mr Yates. On my understanding of the authorities, I can make no allowance in favour of Yates for this because Yates' entrepreneurial skills were not affected by the resumption. (In the proceedings I was asked to assume an identity between Mr Yates and his corporation.) But the opportunity also arose by reason of the size of the land and its location. In my opinion, it is that which gave the land a special value to Yates. Because, as I find, there was no other land immediately available for market purposes, upon resumption Yates lost the opportunity to exploit its land for its market potential. As I have said, I do not accept that a reasonably minded purchaser would have accepted Mr Dimasi's figures without qualifications and that he would have paid almost no regard to Mr Parkinson's estimates. Nonetheless, the expressions of interest received by Yates and the receipt of almost$100,000 rent in advance before any building works were undertaken support Yates' optimism concerning the success of the market. Yates had development consent and building approval from the Sydney City Council. In my opinion, someone in Yates' position would have been prepared to have paid something more than what I might describe as "land value" sooner than lose it [emphasis added].
[22] Cripps J did not make separate assessments of market value and special value, but included special value in the compensation which he ultimately fixed in the sum of $22,334,500.
[23] Yates appealed to the Court of Appeal of New South Wales, and the Darling Harbour Authority cross-appealed. At the hearing of the appeal, both sides agreed that Cripps J had made one error, although there was argument as to whether it was an error of fact or an error of law. In the course of his judgment, Cripps J said that no claim was made by Yates for abortive expenditure. This was a reference to expenditure incurred in relation to the proposal to develop and use the land as a market. Before the Court of Appeal, both sides agreed that this was an error, and that Yates had claimed that a sum of $217,443.78 should be taken into account.
[24] One of the other issues the subject of argument in the appeal concerned special value apart from the matter of abortive expenditure. The Darling Harbour Authority argued that Cripps J erred in holding that special value could be taken into account in the circumstances of the case. That argument failed. Mahoney JA was of the view that there was no demonstrated error of law in the approach taken by Cripps J to the matter of special value. With that view, Kirby P and Handley JA disagreed, but the extent of their disagreement was limited.
[25] Kirby P said: [17]
It is incontestable, following Pastoral Finance , that the appellant was entitled to compensation for "special value" if it could establish that it qualified for such compensation. Cripps J concluded that it had so qualified. However, the basis upon which he so concluded is unclear. In so far as it is explained it appears to relate to considerations apt for the assessment of "market value" and insufficient for the determination of "special value". It therefore appears that an error in law has occurred in the provision of reasons which entitles the appellant to have its claim for "special value" compensation re-determined. It could not be re-determined by this court. The re-determination should carefully avoid the danger of duplicating compensation for aborted expenditure and "special value" to the owner.
[26] Certain observations made in the reasons for judgment of Handley JA were later taken up in support of the claim for professional negligence now advanced. In dealing with the matter of special value, Handley JA criticised the reasons of Cripps J as ambiguous. He referred to a submission made on behalf of the Darling Harbour Authority that the case of Kennedy Street Pty Ltd v Minister , [18] upon which Mr Simos had relied, was wrongly decided, and rejected that submission. He noted the acknowledged error in relation to the abortive expenditure. He also referred to a line of authority relating to the duty of a judge to give adequate reasons to explain a judicial decision.
[27] Handley JA, in discussing the claim for special value, and the decision in Kennedy Street Pty Ltd v Minister , referred to the work done by Yates which confirmed the suitability of the subject land for use as a market in the hands of any owner. This, his Honour said, was a factor which, in accordance with Spencer , would be taken into consideration by any prudent purchaser. However, in relation to the information which Yates had obtained concerning the names and addresses of persons expressing interest, and of persons prepaying rent, Handley JA said that the documents recording that information would not pass to a purchaser on a sale of the land. (That proposition has been contested on this appeal. The appellants contend that Handley JA appears to have assumed that, as an act of self-denial, a vendor would decline to provide a purchaser with information which might motivate the purchaser to pay more for the subject land.) His Honour referred to a Western Australian case on the subject of stamp duty, which turned upon the conclusion that a hypothetical purchaser would not be entitled to such a document. Handley JA said: [19]
If the documents recording this information would be of value to a purchaser, they would also be of value to the owner. In such a case because the owner does not either have to purchase the documents, or repeat the work, the land may be worth more to him than to anyone else.
[28] This, it may be noted, was a rather narrow basis for a claim of special value, and was unlikely to have been of such significance having regard to the amounts of money involved in the dispute as to market value. Furthermore, the criticism which the present appellants make of the reasoning behind it is valid.
[29] Handley JA went on to say: [20]
The findings by the trial judge in relation to the other matters which made the land suitable for markets raised questions of law as to which of them were relevant to market value and which were relevant only to special value. It is not clear whether [Cripps J] misdirected himself in deciding these questions and indeed whether they were decided in favour of the appellant or the Authority.
[30] In brief, putting to one side the abortive expenditure, and the documents recording information about prospective tenants, Handley JA's decision concerning special value turned upon the proposition that it was impossible to tell from the reasons of Cripps J whether he had given proper consideration to the question of special value, and to the relationship between market value and special value.
[31] Handley JA said, in a passage that turned out to be critical: [21]
The existence of the appellant's work etc may have given the appellant an advantage or head start over other purchasers in the development of markets on this land. The judge made no finding to that effect . If such an advantage or head start did exist it would generally be worth money to a developer in the position of the owner. Hence it would generally give rise to some special value. These issues raise questions of fact . However, it is impossible to determine on the face of his Honour's reasons whether he made any allowance for special value determined on this basis. Had his Honour separately assessed a sum for special value this problem may not have arisen [emphasis added].
[32] Later, Handley JA said: [22]
In my respectful opinion the trial judge failed to give a sufficient indication of the basis of his decision on the question of special value and he therefore erred in law.It may be that during the trial neither party supported a finding of special value based on Kennedy Street . However, facts were found capable of supporting such a finding and the judge may have found special value on this basis. While he may not have erred in law in ignoring an entitlement to special value which was not relied upon, at the same time he would not have erred in law if he allowed for an element of special value which lay between the forensic positions adopted by the parties.The existing evidence may, or may not, enable the amount of such special value, if any, to be fixed with precision. The principles previously referred to may nevertheless enable a judicial valuer to arrive at a proper award. In any event the appellant has its alternative claim for abortive expenditure.In remitting these issues for further determination I should make it clear that the appellant is not entitled to compensation for both the expenditure it incurred and any increased market or special value produced by that expenditure. The development and building approvals eliminated uncertainty and reduced the risks costs and delay faced by a purchaser wishing to establish markets on the land. Accordingly they would have increased the price which a prudent purchaser wishing to use the land for that purpose would have been prepared to pay. The appellant would not also be entitled to the cost of obtaining such approvals. Such expenditure would not have been abortive.The expenditure incurred other than in securing such approvals may have contributed to any special value which the land had for the appellant. It would be entitled to compensation for the loss of such special value but, in that event, not for the expenditure which created it. If the expenditure incurred was greater than the special value it created the difference was lost to the appellant for reasons other than the resumption and cannot be allowed for. If the special value created exceeded its cost the appellant would be entitled to compensation for the higher figure. In many cases no doubt parties agree to compensation being awarded for expenditure rendered abortive by the resumption without an elaborate inquiry into whether it was all productive or whether the value it created was greater than its cost.
[33] In the above passage, his Honour speculated that it may be that during the trial neither party supported a finding of special value based on Kennedy Street . At the trial, the Darling Harbour Authority argued that no claim for special value was available. The written submissions and the record of oral argument show that Yates undoubtedly made a claim for special value based particularly on Kennedy Street . Cripps J referred to Kennedy Street in support of his finding of special value.
[34] When the case went back to Cripps J, Mr Simos, for Yates, endeavoured to tender additional evidence said to be relevant to the claim for special value. In brief, that evidence fell into two categories. First, there was an attempt to put a modest value ($79,000), upon the documents containing information about potential occupiers of the proposed markets, which Handley JA had suggested could have a separate value. Secondly, there was evidence relating to the costs, estimated at several million dollars, of relocating the proposed markets to a different site. As will appear, the nature of that evidence was misunderstood by the Full Court of the Federal Court. Cripps J rejected the evidence on the ground that it added nothing material to what he already knew. However, he added the abortive expenditure of $217,443.78, which included expenses incurred in consequence and in furtherance of the development and building approvals, costs of conducting investigations in relation to the proposed markets, and expenses incurred in signing up proposed stallholders, to the amount he awarded.
[35] Cripps J summed up his conclusions as follows, referring in part to his earlier reasons:
I adopted a per square metre estimate of the value of the land. I said that compensation payable for the acquisition of the Harbour Street land should be fixed at a square metre rate of$1450 per square metre and the James Street land at $1500 per square metre (less $58,000 demolition costs). I do not understand that method to be inappropriate provided, of course, that I did not duplicate compensation. In an endeavour to put an end to this litigation, I indicate that I fix (and did fix) the sum of approximately $35 per square metre on the Harbour Street property as "the special value" component of the compensation. That amounted to approximately $500,000 being the amount of money over and above the "market value" a person in the position of Yates would have paid sooner than not obtain the land because of the special value the land had to Yates by reason of the work done and expenditure incurred and referred to in the decision of Handley JA.I have been asked to add to the compensation I awarded the sum of $217,443.78. As I have said, a part of that was referrable to expenditure incurred in actually obtaining these expressions of interest. I do not think, however, that it is appropriate to deduct that sum from the figure agreed upon, that is, $217,443.78. When I considered the "special value" to Yates, I knew that some money had been spent but I paid no particular regard to the actual amount because I was of the opinion that, however Yates acquired that interest, it was relevantly of special value to it. I propose to allow all the amounts in Ex 14 as "abortive expenditure" and in doing so I have been careful not to duplicate compensation.In accordance with these findings, I fix compensation for the resumption of both parcels of land in the sum of $22,551,944.
[36] As was noted above, Yates again appealed to the Court of Appeal. This further appeal was compromised, the Darling Harbour Authority agreeing to pay Yates an additional sum of $1.25 million. The additional amount paid by the Darling Harbour Authority to settle the threatened second appeal to the Court of Appeal is not presently material. In brief, it involved an agreement to pay a sum to Yates based on stamp duty and legal and other expenses that would have been incurred in relation to acquiring an alternative site. Since it was paid by way of a negotiated settlement, it is fruitless to consider the legal basis on which the payment was justified. Perhaps it could be explained by reference to "disturbance", a concept which will be considered below. It seems to have had nothing to do with "head start". That also gave rise to a misunderstanding on the part of the Full Court of the Federal Court.
The alleged negligence
[37] Yates sued Mr Simos, Mr Webster, and Abbott Tout, in the Federal Court, asserting that it had suffered financial loss by reason of the fact that the "special value" aspect of its claim for compensation had not been adequately presented, and that this was a consequence of breach of professional duty by each of the defendants.
[38] At the time of the primary litigation, Mr Simos was a senior member of the New South Wales Bar, with substantial experience in land and valuation matters. He had appeared as junior to Mr Mahoney QC in the Kennedy Street case. Mr Webster, as well as being a junior barrister, was himself a qualified valuer, and had worked for a number of years as an officer in the New South Wales Valuer-General's Department. There has never been any suggestion that Abbott Tout were negligent in the selection of counsel to represent the interests of Yates in the primary litigation. On the contrary, the negligence action was conducted upon the basis that Yates was represented in the primary litigation by experienced senior and junior counsel who had a reputation for competence in the field which warranted their being retained on behalf of Yates.
[39] The central criticism which Yates made of the lawyers was that they failed to identify, and pursue, by way of evidence and argument, what has come to be called "the head start case". That expression is taken from one of the passages in the reasons of judgment of Handley JA set out above. The contention was that Yates, at the resumption date, was in a position of advantage relative to any other prospective purchaser wishing to build markets on the land. That position was said to have arisen by reason of a number of matters which may be summarised as follows:1. Yates had undertaken investigations and market research concerning the use of the land for the purpose of markets. Those investigations and research had brought it to the point, by June 1984, of receiving registrations of interest in the markets proposal from prospective stallholders. Those registrations of interest accounted for more than 100% of the available space. Yates had also procured licence agreements and prepaid rents from a number of interested participants.2. Yates had undertaken work and incurred expenditure in designing and obtaining development and building approvals for a structure on the land to house the markets and a carpark. By mid 1984 all relevant council consents (subject to satisfaction of conditions) had been obtained.3. Further preparation had been undertaken for the construction of the structure by the preparation of working drawings relating to the final form of the building.4. Yates had negotiated with the Sydney City Council to purchase from the council a property at 23 Pier Street, Haymarket, to be used for car parking associated with the markets in order to comply with the conditions of the amended development consent. Yates was also the assignee of leasehold interests in lands owned by the State Rail Authority which was adjacent to the resumed land and which was to be used for car parking and other amenities in connection with the markets.5. By mid 1984 Yates was in a position to commence construction (the estimated time for construction being 23 weeks) having negotiated and selected a builder of the structure to be constructed on the land and having obtained finance.
[40] It was said that any prospective purchaser would have been required to repeat the steps taken by Yates and that it would have taken at least 20 months to do so. Having regard to a factual issue that arose before Branson J, proposition 5 above is of particular significance.
[41] Yates contended that its legal advisers should have propounded a case of special value on the basis that a hypothetical purchaser in the position of the owner would have paid more for the subject land than an ordinary hypothetical purchaser because the hypothetical purchaser in the position of the owner could have commenced development of the land more quickly than any other hypothetical purchaser. This was because, although both the hypothetical purchaser in the position of the owner and the ordinary hypothetical purchaser have the benefit of the development approval and the building approval, only the hypothetical purchaser in the position of the owner would commence development of the land immediately after purchase, whereas the ordinary hypothetical purchaser would delay for 20 months before commencing to develop the land, during which period it would either obtain a new development approval and building approval more suited to its requirements, or repeat the work done by the dispossessed owner in order to be satisfied that the existing development approval and building approval were, in fact, suitable to its requirements.
[42] The allegations of negligence were met head on. The legal practitioners who were sued denied that there was any material inadequacy in the manner in which the special value aspect of Yates' claim for compensation was presented and argued in the primary litigation. They contended that the criticisms of their performance were misconceived, and that the so called "head start" claim as now formulated by Yates was based upon both factual error and a misunderstanding of valuation principles. They said there was no failure to lead any relevant evidence, or address any legally and factually supportable argument, in the primary litigation. They argued that such of the matters associated with "head start" as might legitimately be taken into account in a claim for compensation were taken into account in the evidence and arguments advanced in the primary litigation, either in connection with the estimation of market value, or in connection with the estimation of special value. They denied any failure to present Yates' case to its best advantage. It was also submitted that, if there were any respects in which Yates' claim could have been put differently, or better, in the primary litigation, that did not, in the circumstances, amount to professional negligence, and at most involved a matter of professional judgment. In particular, Mr Webster and Abbott Tout relied upon the experience and judgment of Mr Simos, and said that there was no act or omission for which they were responsible that amounted to negligence. Additionally, all three relied upon a principle of immunity from action which they said they were entitled to invoke.
[43] At first instance in the Federal Court, Branson J found in favour of all defendants on all grounds. [23] Her Honour held that there was no negligence on the part of any of the defendants, and that in any event all three defendants were immune from action, although it was unnecessary for them to invoke that immunity.
[44] The appeal against the decisions in favour of Mr Webster and Abbott Tout was successful. [24] The Full Court of the Federal Court held that there had been negligence on the part of Mr Webster and Abbot Tout, and that there was no relevant immunity from action. The court ordered that the matter be remitted to a single judge to assess damages.
The decision of Branson J [25] 25
[45] In the proceedings before Branson J, the defendants gave evidence. In addition, there was further evidence from expert valuers, and from senior counsel experienced in valuation law and practice. Her Honour relied upon that evidence, and upon her own opinions and judgment, in reaching her conclusions.
[46] Branson J addressed the contention by Yates that it was in an advantageous position at the date of the resumption of the subject land relative to any other prospective purchaser of the land wishing to build markets, and that this was the basis of a special value case that should have been, but was not, put in the primary litigation. [26] Her Honour observed that the expression "head start", in the context of special value, appeared to have been coined by Handley JA, and was not previously used in judgments, or professional literature, on the subject of valuation. [27] She then considered two decided cases referred to by Handley JA and relied upon by Yates to support its argument, namely, Kennedy Street Pty Ltd v Minister [28] and Baringa Enterprises Pty Ltd v Manly Municipal Council . [29] She noted that Mr Simos had appeared as junior counsel in Kennedy Street , and that the decision had been referred to both in argument before, and in the reasons for judgment of, Cripps J. She analysed the facts and decisions in the two cases.
[47] Branson J referred to evidence given before her by Mr Simos concerning his opinion on the relevant issues. She also referred to evidence given by two legal experts, Mr McClellan QC and Mr Davison SC. Mr McClellan was called by Yates, and Mr Davison was called on behalf of the defendants. Mr McClellan was not asked to, and did not, express an opinion on whether the approach adopted by Messrs Simos and Webster to the subject of special value was one which could reasonably have been taken by competent senior and junior counsel. [30] Mr Davison, a barrister with extensive experience of valuation law and practice, expressed the opinion that the views which had informed the presentation and conduct of the primary litigation by Mr Simos and Mr Webster were views which could reasonably have been held by competent senior counsel at the time of the proceedings and, in addition, were views with which Mr Davison personally agreed. [31]
[48] Mr Simos, in his evidence as to the way in which the case was presented to Cripps J, insisted that Spencer's case required hypotheses which negated a supposed "head start" in Yates. Furthermore, as the case on market value was presented on behalf of Yates, especially in the evidence of Mr Parkinson, it was assumed both that a market development was the highest and best use of the land, and that a hypothetical purchaser would have available, and could use, the information in the possession of Yates, the approvals it had obtained, and the arrangements into which it had already entered. It was both legally and forensically inconsistent with the way in which the case on market value was presented to argue a case on special value based upon the hypothesis that the hypothetical purchaser would be significantly less ready to develop the land for markets than Yates. Thus, it was said, the assumption upon which the theory of head start turns was legally impermissible, and potentially damaging to the market value case. To that may be added the consideration that Branson J also found the hypothesis to involve a factually erroneous assumption as to Yates' readiness and ability to proceed with the development.
[49] Branson J said: [32]
In the circumstance that no expert has expressed a view which I regard as plainly out of line with the established authorities, I have considered it appropriate to place reliance principally on the expert evidence in considering the issue of whether the conduct of the respondents in failing to advise of the existence of, or to propound or cause to be propounded on behalf of [Yates] before the Land and Environment Court, a head start claim, conformed to the standard of reasonable care demanded by the law, of competent legal representatives in their respective positions.Having regard principally to the expert evidence, but attaching weight also to my own reading of the authorities, I have formed the view that no negligence has been established against any respondent in connection with the alleged head start claim of [Yates].I find that the views of the law held by Messrs Simos and Webster at the relevant time were views which it was reasonably open to barristers of their respective seniorities experienced in valuation law to hold.Even were I of the contrary view to that expressed above, and subject to the alleged errors of principle said to have otherwise tainted the valuers' assessments of special value (which are discussed below), I would not uphold the complaints of the applicant that the second and third respondents should have caused evidence of the kind said by the applicant to support the head start claim to be called in the Land and Environment Court proceeding. The evidence establishes that the valuers were comprehensively briefed as to the factual background against which their valuations were to be prepared and none of them identified a claim for special value of the head start kind. The special value claims which they respectively identified were based on premises inconsistent with such claims and, if accepted, had the apparent potential to lead to higher levels of compensation to [Yates] than the head start claim now identified by [Yates]. The second and third respondents were not, in my view, under a duty to require the valuers to consider and give evidence concerning every alternative method of assessing special value which could be advanced consistent with legal principle.
[50] Branson J examined criticisms made on behalf of Yates of the evidence of the three valuers called on behalf of Yates in the primary proceedings. [33] She considered the respective roles of lawyers and valuers in compensation litigation and came to the conclusion that it would not be unreasonable for the legal representatives of Yates in the primary litigation to have called the valuation evidence which was led on behalf of Yates. [34]
[51] In summary, Branson J, having regard to her own understanding of the authorities on the relevant valuation issues, and the evidence before her, including the evidence of Mr Simos, and Mr Davison came to the view that the approach taken by the legal representatives of Yates in their presentation of the special value claim was orthodox, that it was not unreasonable of the legal representatives of Yates to have presented their case as they did, that it was not unreasonable of them to have called the valuation evidence that was called, that the proper performance of their professional duty did not require them to attempt to argue a "head start" claim of the kind for which Yates was now contending, and, that such a claim had the potential to undermine other aspects of Yates' case. Her Honour rightly criticised the idea that, as barristers conducting litigation, Messrs Simos and Webster were under a duty to call evidence, and advance argument, "concerning every alternative method of assessing special value which could be advanced consistent with legal principle". [35] Having rejected the complainant's case as to the conduct of counsel, and having rejected the suggestion that Yates' case on special value had not been put to its best advantage in the primary proceedings, Branson J, inevitably, found no fault on the part of the instructing solicitors.
[52] Having regard to one aspect of the decision of the Full Court, it is necessary to emphasise a finding made by Branson J, to which the Full Court made no reference.
[53] Branson J rejected a substantial part of the factual basis on which Yates claimed to have a head start over a hypothetical purchaser. It was in the interests of Yates, as a hypothetical vendor, to provide a purchaser with every opportunity to develop the land in accordance with its highest and best use and, in that respect, to provide all relevant information. Moreover, Branson J found as a fact that Yates would not have been in a position to develop the site for retail markets as promptly as it claimed. She found that, as at the date of resumption, Yates did not have the financial capacity immediately to erect the markets. [36] She also rejected evidence of Mr Yates concerning the stage he had reached with plans to form a unit trust to develop markets. [37] In that respect she formed an adverse opinion as to Mr Yates' credibility.
[54] Mr Hart, who gave evidence before Branson J in support of the head start argument on behalf of Yates, acknowledged in the course of his cross-examination that his theory of head start was based in part upon the assumption that for some reason, which he was unable to explain, the vendor would withhold from a prospective purchaser information which would assist the purchaser to develop the land. There was no warrant for such an assumption, which is contrary to common sense. It is also contrary to the principles explained by Isaacs J in Spencer v Commonwealth . [38]
[55] Branson J was also aware that the evidence as to market value called on behalf of Yates proceeded, in a number of respects, upon the hypotheses that a hypothetical purchaser would begin to build markets immediately and would complete them within six months.
The decision of the Full Court of the Federal Court [39]
[56] The fifth occasion upon which a special value claim was considered was before the Full Court of the Federal Court, on appeal from Branson J. (The appeal to this court constitutes the sixth occasion.)
[57] The appeal by Yates against Mr Simos had been dismissed, in the circumstances explained earlier in these reasons, before the hearing by the Full Court. However, the Full Court held that Mr Webster and the instructing solicitors had been negligent and, by plain implication, they were of the same view concerning Mr Simos.
[58] Before examining any details of the reasons of the Full Court in this respect, it is worth noting the position that had been reached in the litigation by the time the Full Court came to deal with the matter. Cripps J, the Chief Judge of the Land and Environment Court, had considered a special value claim and allowed it to a certain extent. In the Court of Appeal, the dissenting judge, Mahoney JA, found no error of law in the approach taken by Cripps J to the question of special value. The majority in the Court of Appeal found that Cripps J had failed to give sufficient reasons for his decision and, in addition, had made an error about a particular matter concerning abortive expenditure. The case was remitted to Cripps J for further consideration. When it came back before Cripps J, an attempt was made on behalf of Yates to propound, by evidence and argument, an alternative approach to special value, in so far as the lawyers for Yates were able to reconcile that approach with what they regarded as settled principle. Cripps J rejected the evidence and the argument, saying that it did not add anything of relevance to what Yates had advanced on the first occasion, although he added to the compensation the amount for abortive expenditure. A further appeal to the Court of Appeal was compromised on the basis of a payment to Yates of an additional amount of compensation which was not based on a head start approach. Yates then sued its lawyers for negligence. At the hearing before Branson J, the lawyers gave evidence explaining the approach they had taken to the matter of special value. They were supported in their opinions on the subject by the evidence of other senior counsel. Branson J, on the basis of the evidence before her, and also her own views as to the relevant legal principles, concluded that the conduct of the primary litigation by the lawyers for Yates was reasonable, and in accordance with her own views of the law, and that there was no justification for a conclusion that the claim for special value had been advanced other than competently.
[59] In addition, there had to be considered the role of the expert valuers. Although the lawyers accepted an obligation to check the evidence of the valuers to ensure that it conformed to established legal principles, it was the valuers who were retained to form and express opinions as to the value of the relevant land, whether that be market value, or market value plus special value. None of the six valuers in the primary litigation expressed an opinion in conformity with the approach for which Yates was contending in the Federal Court.
[60] It is to be emphasised that, as Handley JA had pointed out, what was involved was an issue of fact. That issue had to be litigated and decided in accordance with established legal principles, but it was, ultimately, a factual argument. Moreover, it was a factual argument that had to be dealt with in conjunction with other factual arguments, some of which might have involved elements of inconsistency. What was being criticised by the client was the manner in which its lawyers fought one aspect of a complex factual dispute.
[61] The Full Court began an examination of the reasoning of Branson J with the observation that it seemed that, in the conduct of the case before her Honour, the parties "lost sight of the real issue that required determination". [40]
[62] Their Honours said: [41]
It will be apparent that both sides proceeded on the assumption that if Yates was in a position to develop the market immediately by reason of the work undertaken before its land had been resumed, that resulted in an advantage that was of economic value and for which it was entitled to receive compensation. Indeed Mr Simos said in evidence that it was "obvious" that an ordinary hypothetical purchaser who intended to develop the resumed land immediately after purchase in accordance with the existing development approval and building approval would pay a higher price for the land. We agree with this observation. The difference between the parties was that Yates submitted that the economic value of this advantageous position formed part of the special value of the land and the respondents asserted that it should form part of the market value of the land. Here each party proceeded on an unfounded assumption. The unfounded assumption made by Yates was that if its advantageous position was not compensable as special value it was not otherwise compensable. The unfounded assumption made by the respondents was that the Land and Environment Court was in a position to assess that advantageous position as part of the market value of the land. The latter assumption was unfounded for the reason that no evidence had been led to properly identify or quantify the economic value of being in a position to immediately commence the development of a market.
[63] The above passage contains what is argued on the present appeal to be a significant error in its account of the evidence given by Mr Simos. That is a matter to which it will be necessary to return.
[64] The Full Court examined the cases of Spencer v Commonwealth , [42] Kennedy Street Pty Ltd v Minister [43] and Baringa Enterprises Pty Ltd v Manly Municipal Council . [44] They concluded [45] that those cases, especially the last two, stood for the principle "that land will have a special value to its owner if that owner is in fact in a position where he can develop that site more expeditiously than could the hypothetical purchaser".
[65] In considering the case against Abbott Tout, the Full Court rejected a contention that, having retained experienced counsel and expert valuers, the solicitors were not obliged to give independent consideration to the precise manner in which the special value claim was presented to Cripps J. [46] Their Honours said that the standard of care required of the solicitors was to carry out their retainer as would a reasonably competent solicitor expert in the law relating to resumption of land, since they professed expertise in that area. [47] They then went on to consider whether a reasonably competent solicitor expert in the law relating to the resumption of land "should have advised Yates to advance a case that Yates was entitled to compensation for the work it had done to bring the proposed market to a point where it was capable of immediate development". [48] Answering that question in the affirmative, the Full Court said: [49]
Subject to one potential qualification there can be no doubt that this is the advice that should have been given and how the case should have been put. Yates was entitled to be compensated for the economic value of being in a position to commence the market project. To the extent that it added to the market value of the land, some of that work (for example, obtaining a development approval and a building approval), would be the subject of compensation in the ascertainment of market value. The remainder of the work, for example, preparing plans for the market development, engaging the services of a builder and gathering together prospective stallholders, would give the land a special value to Yates. However, for present purposes it makes no difference whether the balance of the work ought to be taken into account as part of the market value of the land as the respondents allege or as part of its special value as we have held. Once it is accepted that the work had economic value that value should have been put forward as part of the compensation to which Yates was entitled whether for the purpose of assessing the market value of the land or in the assessment of the special value of the land to Yates. That is to say, a competent solicitor experienced in the law relating to the resumption of land would have appreciated that Yates was entitled to compensation as a result of being in a position to immediately develop the land and he would have advised Yates to put forward that claim whether the solicitor was of the view that the proper characterisation of the claim was as an element of the market value of the land or as an element of its special value. If there was any doubt about the proper characterisation of the claim, the advice to give was that the claim should be put as falling under one or other head of compensation.
[66] The potential qualification referred to at the commencement of that passage related to an important point made on behalf of Abbott Tout and Mr Webster. It was observed that there was an inconsistency between an argument based upon the assumption that a hypothetical purchaser would not have been in a position to construct markets on the subject land for a substantial period, and the assumptions made by the valuers called on behalf of Yates before Cripps J. Those valuers had assumed, in estimating market value, prompt development by a hypothetical purchaser. The "head start" claim now envisaged would have partially undermined their opinions. The Full Court did not disagree with that, but said that, since no consideration was given to making the head start claim, the question was hypothetical and need not be examined further. [50] This being essentially a dispute about the way a factual argument should have been presented and conducted, the question was not hypothetical; it was of practical consequence.
[67] As to the contention, accepted by Branson J, that, in all the circumstances, Abbott Tout were entitled to follow the advice of counsel as to how the case was to be run, the Full Court described the proposition as "curious" and involving "real difficulty". [51] The answer to the contention was said to lie in the fact that no specific advice was ever sought from counsel as to the proper approach to valuation. Furthermore, even if specific advice from counsel on the point had been taken, there was a duty on the solicitors to consider it and form their own views as to its correctness. [52] It was concluded that Abbott Tout were negligent in failing to advise Yates how its claims should be properly presented, in terms of evidence and argument.
[68] As has been noted, one of the findings of fact made by Branson J went to the crux of the head start claim. That claim involved the proposition that a prospective purchaser would have taken about 20 months longer than Yates would have taken to be in a position to commence building markets. Branson J found that at the date of resumption Yates did not have the financial capacity and arrangement immediately to erect the markets. That finding was based partly on credit. She also found that it was not reasonable to hypothesise that a prudent purchaser would not repeat all the steps which Yates have taken in relation to the land. The Full Court did not explain or justify departing from those findings.
[69] The conclusions adverse to Mr Webster were based on considerations similar to those concerning Abbott Tout. However, nowhere in their reasons for judgment did the Full Court refer to the fact that there was no contractual relationship between Mr Webster and the lay client, that the action in negligence against him was framed solely in tort, and that damage was the gist of the action. There was no finding by the Full Court that the value of any head start claim, properly assessed, would have exceeded, or added to, the amount awarded by Cripps J for special value. The Full Court left unresolved the question of what, if any, damage resulted from what they found to be Mr Webster's negligence and, therefore, left undecided the question whether such negligence was actionable. Although the form of the order made by the Full Court remitted the matter for the assessment of damages, in so far as the claim again Mr Webster was concerned, there was an outstanding issue going to liability.
The Full Court's approach to the facts
[70] It was submitted by the appellants in this court that the decision of the Full Court of the Federal Court was affected by significant factual errors, by a failure to have due regard to findings of fact made by Branson J, and by misunderstandings as to what had occurred at various stages of the primary litigation. It is necessary to deal with some only of the matters the subject of those submissions, which have been made out.
[71] First, on the factual basis of the head start claim, the Full Court incorrectly recorded what was said by Handley JA. The Full Court said [53] that Handley JA referred to the "fact" that Yates was in a position where it could construct a market on the land more quickly than any hypothetical purchaser, that this gave Yates an "advantage" and that Cripps J had failed to take this into account. Handley JA had not referred to such a "fact", but to a possibility, as a passage from his judgment quoted above demonstrates.
[72] Secondly, Branson J made findings contrary to the supposed "fact", which the Full Court disregarded. It gave no reason for departing from those findings, which were based in part upon evidence that had not been before Cripps J, and in part upon her views as to Mr Yates' credibility.
[73] Thirdly, the Full Court made an error in recording the history of the proceedings before Cripps J when the matter was remitted. Their Honours said [54] that counsel for Yates sought leave to reopen the case "to lead evidence to quantify the economic value to Yates of being in a position to develop a market on the land immediately". If that were so, it might have been regarded as an implied admission that there was available evidence, as to the head start theory, which should have been addressed in the first place. The Full Court appears to have misunderstood the nature of the evidence which Yates sought to adduce at the second hearing before Cripps J, and to have believed it was similar to the evidence Yates led at the hearing before Branson J concerning "head start". Leaving aside the minor matter of the supposed value of certain documents, the evidence tendered at the second hearing before Cripps J constituted an attempt to prove what it would have cost Yates to relocate to an alternative site. Cripps J took the view that this added nothing material to the evidence that had been before him on the first occasion.
[74] Fourthly, the Full Court, in describing the way in which the case was presented to Cripps J originally, said that the case was not prepared on the basis that the advanced state of the development project should be reflected in the market value of the land. [55] That is incorrect. On the contrary, the valuation evidence called on behalf of Yates in the primary litigation treated that as of considerable importance in relation to market value.
[75] Fifthly, the Full Court, in referring to the evidence given by Mr Simos before Branson J, attributed to him, as though it were a concession, an observation that it was "obvious" that an ordinary hypothetical purchaser who intended to develop the resumed land immediately after purchase in accordance with the existing development approval and building approval would pay a higher price for the land. [56] That failed to have regard to the context. Mr Simos was speaking of market value, and was making the point that the work which had been done, and the information which had been obtained, to advance the development project would be substantially reflected (as Cripps J held) in market value, not special value. Mr Simos pointed out that Cripps J had before him, in the original proceedings, all available relevant evidence as to the work Yates had done in relation to the project. Mr Simos was also concerned to make the point that, consistently with the assumptions required and justified by Spencer in relation to market value, there was no warrant for assuming that a hypothetical purchaser would be materially slower than Yates in proceeding with the development and, as has already been noted, Yates' arguments as to market value were to the contrary of such an assumption, and would have been undermined if it had been made.
[76] Sixthly, as has already been noted, the Full Court appears to have taken the view, incorrectly, that the additional sum paid to compromise the second appeal from Cripps J was calculated to reflect, albeit insufficiently, the supposed head start enjoyed by Yates.
[77] It was argued for the appellants in this court that there were other errors in the reasoning of the Full Court, but that the most important error related to the assessment of the merits of the "head start" theory of special value. It is necessary to turn now to that issue.
The "head start" theory of special value
[78] It is unnecessary for present purposes to examine fully the theoretical foundation of the concept of "special value to the owner". At this stage of the matter there is no party wishing to argue that the concept was inapplicable to the facts of the case, although such an argument was advanced, unsuccessfully, on behalf of the Darling Harbour Authority in the primary litigation. However, in order to consider the head start theory of special value, which is fundamental to the allegations of professional negligence made by Yates, it is necessary to make certain preliminary observations.
[79] In Spencer , [57] Griffiths CJ pointed out that, in a context such as the present, "value" means "exchange value", which presupposes a person willing to give what is being valued in exchange for money and another willing to give money in exchange for what is being valued. In the case of chattels for which there is an established market, the exercise may be simple. In other cases it may not be simple. There may be no readily identifiable market, or the market may be controlled or for some other reason artificial. [58] There may be room for argument as to the nature of the relevant market. It is necessary to make the hypothesis of a sale between a willing but not anxious vendor and a willing but not anxious purchaser. A decision as to what price would be achieved in such a sale involves a factual judgment, and may be made by reference to comparable sales, or a capitalisation of profits formula, or, in certain circumstances, by reference to costs of reinstatement or other criteria. [59]
[80] It was established in Pastoral Finance Association Ltd v Minister , [60] which has been followed in many subsequent cases, that in some circumstances land may have a special value to the owner which exceeds the market value. If, in a given case, it is contended that such special value exists, that also raises an issue for factual judgment. The subject matter of such factual judgment was explained by Bray CJ in Arkaba Holdings Ltd v Commissioner of Highways : [61]
It is, of course, well established that it is the value to the owner which must be paid, even if that value exceeds the market value ... The additional element is commonly called "special value to the owner" ... But this special value must in my view arise from some attribute of the land, some use made or to be made of it or advantage derived or to be derived from it, which is peculiar to the claimant and would not exist in the case of the abstract hypothetical purchaser. Would a prudent man in the position of the claimant have been willing to give more for this land than the market value rather than fail to obtain it or regain it if he had been momentarily deprived of it?
[81] Bray CJ went on to give, as a typical example of special value, a case where the land is peculiarly adapted to a certain use made of it by the claimant, such as agricultural land worked in connection with a neighbouring residence or farm buildings. [62]
[82] The idea that an item of property may have a value to one person which exceeds the price it would bring if sold to a third party in an open market is not peculiar to this area of discourse. It is also reflected in insurance law and practice, where a distinction is sometimes drawn between the market value of property and its value to an insured. [63]
[83] There is a difficulty which has been adverted to by the courts, but which they have not permitted to stand in the way of allowing just compensation to a dispossessed owner. [64] There is a degree of tension between the concept of value as exchange value, which carries with it the notion that the value of something is the price the owner can get for it, and the concept of a special value to the owner over and above the price which a hypothetical purchaser would pay. However, as was pointed out in Minister for Public Works v Thistlethwayte , [65] the hypothesis of a willing seller and purchaser is merely a useful and conventional method of arriving at market value. Market value, or the amount that would be realised from a sale in a market where the price is agreed by freely contracting parties, provides a measure of value from the perspective, not only of the particular purchaser and vendor, but also of others in the market who are not parties to the particular transaction. Special value to the owner directs attention to the perspective of the vendor. What is insisted upon is that, leaving to one side any claim for damages founded upon the relevant statutory provisions, what is in question is the value of the land or other resumed or acquired asset, not the fixing of compensation for all loss resulting from the resumption or acquisition. The dividing line between those two ideas sometimes becomes blurred by claims for special value based upon what is called "disturbance", or upon wasted ("abortive") expenditure upon resumed land. Although such claims have on occasion been accepted as legitimate, in a statutory context such as that which applied to the present case, they can only be justified if they support the conclusion of special value, and not merely some form of loss or damage to the dispossessed owner. In Commonwealth v Milledge [66] Dixon CJ and Kitto J said:
There remains the item of the plaintiff's claim described as business disturbance. Though it was considered convenient in this case, as it often is, to deal with this topic as a separate matter, it must always be remembered that disturbance is not a separate subject of compensation. Its relevance to the assessment of the amount which will compensate the former owner for the loss of his land lies in the fact that the compensation must include not only the amount which any prudent purchaser would find it worth his while to give for the land, but also any additional amount which a prudent purchaser in the position of the owner, that is to say with a business such as the owner's already established on the land, would find it worth his while to pay sooner than fail to obtain the land ... Disturbance, in other words, is relevant only to the assessment of the difference between, on the one hand, the value of the land to a hypothetical purchaser for the kind of use to which the owner was putting it at the date of resumption and, on the other hand, the value of the land to the actual owner himself for the precise use to which he was putting it at that date.
[84] Their Honours went on to make a point about consistency, which has some bearing on the present case. They observed that if the market value of land is determined on the basis of the suitability of land for the more profitable form of use to which the owner was putting it, there could be no justification for finding a special value, on the basis of disturbance, related to such use. That, it was said, would involve an obvious inconsistency, the inconsistency arising out of the assumption on which market value had already been ascertained. There is a similar form of inconsistency involved in the application of the head start theory to the present case, by reason of the assumptions upon which arguments as to market value were advanced.
[85] In Milledge , the references to a claim for special value based upon disturbance were made in the context of a consideration of an existing, especially profitable, business being conducted on the resumed land by the dispossessed owner. Ten years later, in Kennedy Street Pty Ltd v Minister , [67] a decision which has received mixed reviews, Hardie J applied a similar process of reasoning to a case, not where an existing business was being conducted on the subject land, but where such a business was about to be conducted. The plaintiff company had been formed for the purpose of acquiring certain land, subdividing it, and selling the subdivided lots. At the date of assessment no subdivision approval had been obtained. A claim for compensation included a claim for special value. Hardie J allowed a modest amount for special value, which he described giving rise to a difficult question. He said [68] that there was a particular relationship between the plaintiff company and the subject land which caused him, as a matter of fact, to conclude that the case was one of special value. The relationship existed because the plaintiff company had been specifically formed for the purpose of acquiring, developing, and selling the land. It had paid stamp duty and legal fees to acquire the land, and it had paid surveying and engineering fees and a council fee in relation to a subdivision application. These moneys, and the knowledge and expertise acquired by the principal shareholders in preparing for subdivision, were, as a result of the resumption, largely wasted. The plaintiff's profit earning capacity was diminished, one factor relating to that being the length of time reasonably required by the plaintiff to undertake another similar venture. Hardie J considered it reasonable to assume that it would take the plaintiff two or three months to re-establish itself in the business of selling vacant land in subdivision. He inferred that the plaintiff, having expended the amounts referred to and undertaken the work considered, so as to be in a position to proceed expeditiously with the completion of the purchase and the subdivision of the land, and being confronted with cost and delay in re-establishing a similar venture elsewhere, would have paid an amount over and above what a hypothetical purchaser would have paid. This amount was special value.
[86] The decision of Hardie J was one of fact. His Honour referred to Pastoral Finance Association Ltd v Minister , but did not expound upon the principles. The correctness of the decision of Hardie J was doubted in some later cases. [69] However, it has been accepted as correct in other cases. [70] In Yarn Traders Pty Ltd v Melbourne and Metropolitan Board of Works [71] abortive expenditure similar to that which had been considered in Kennedy Street was taken into account in a finding of special value. Kennedy Street was considered, and explained, by the Court of Appeal of New South Wales in Housing Commission of New South Wales v Falconer . [72] In that case, Hope JA, considering an allowance for future increases in costs during delays in an owner's building program following resumption, discussed special value in terms of "disturbance". [73] Mahoney JA [74] referred to both Kennedy Street and Baringa Enterprises in the context of disturbance.
[87] It was on the basis of disturbance, and wasted expenditure, that the claim for special value advanced on behalf of Yates at the first hearing before Cripps J was made. The submissions as to a special value referred to, and relied upon, Pastoral Finance Association Ltd v Minister ; Commonwealth v Milledge ; Housing Commission of New South Wales v Falconer and Kennedy Street Pty Ltd v Minister . The submissions, framed in that way, were consistent with established authority, and also with the manner in which the subject of special value had been treated in the leading textbooks on the subject. [75] They were also consistent with the way in which the case on market value was presented. Although Cripps J, who accepted the claim for special value, was found by the Court of Appeal not to have given adequate reasons for his decision in that respect, when his reasons for his first decision are read together with his reasons when the matter was remitted to him, it is evident that he was noting Kennedy Street , and taking into account disturbance and wasted expenditure, in conformity with the way in which that case had been explained by the Court of Appeal in Housing Commission of New South Wales v Falconer .
[88] Until the speculative reference to head start made by Handley JA in the Court of Appeal, no judge or text writer had ever referred to head start in the context of special value, and no reference to it was made by any of the senior counsel, who, in addition to Mr Simos, had advised Yates prior to the primary litigation. Nevertheless, the Full Court of the Federal Court decided the case upon the basis that the idea, which had hitherto escaped the attention of everybody, was not only right, but so obviously right that failure to advert to it and pursue it as a factual argument constituted professional negligence.
[89] Contrary to what was held by the Full Court, there are serious problems about the head start argument, both as a matter of principle, and in its application to the particular facts of the present case.
[90] The first problem concerns the question of consistency. The Full Court seems to have thought that, when the present appellants referred to the inconsistency between the head start theory of special value and the case as to market value being advanced on behalf of Yates in the primary litigation, they were concerned only with a matter of tactics. There was more to it than that. All of the valuers called on behalf of Yates assessed market value on the assumption that the highest and best use of the land in question was for development as a site for markets, and upon the assumption that a hypothetical purchaser would undertake such development promptly. They allowed for no significant delay on the part of the purchaser over and above any delay that would be involved for Yates. Thus, to refer to the point made by Dixon CJ and Kitto J in Milledge , they were estimating market value in a manner inconsistent with a claim for special value based upon the premise that Yates had a significant advantage over a hypothetical purchaser in terms of the speed with which it could develop the land.
[91] Secondly, as was pointed out by Mr Simos, and by Mr Davison, in evidence before Branson J, there is nothing in Spencer which warrants the assumption that a hypothetical purchaser of the land would delay for any substantial period over and above the period which would be taken by Yates to develop the markets. Witnesses called on behalf of Yates before Branson J endeavoured, unsuccessfully, to persuade her Honour that it was reasonable to make such an assumption, but that attempt ignored the abstract nature of the hypothetical purchaser in contemplation in the plaintiff's case. As was acknowledged in evidence, some purchasers might have delayed, others might have proceeded immediately, and some might have taken some intermediate time. However, that kind of individualised prediction is outside the scope of the exercise involved in estimating market value.
[92] Thirdly, Branson J rejected evidence on behalf of Yates to the effect that Yates would and could have proceeded immediately to develop the land as a site for markets.
[93] Particular reference was made by Handley JA, and the Full Court of the Federal Court, to the case of Baringa Enterprises v Manly Municipal Council . [76] That case turned upon its own special facts. By reason of established council policy, the owner of the resumed land in question was the only person who could have expected to be allowed to develop the land to its maximum potential. The highest and best use available to anybody else was of a more restricted nature. Whether or not Hardie J was factually right to conclude that the case was a proper one for allowing special value, that conclusion involved no inconsistency with the assumptions on which market value had been assessed, and there was a reason why it could have been regarded as necessary to assume that any hypothetical purchaser would be able to put the land to a use less profitable than that to which the dispossessed owner might have expected to put it. The case had never been regarded by commentators or judges as a case of head start. It was a case in which there was a difference between the use to which the dispossessed owner might have put the land and the use to which anyone else would have been able to put it. That is the basis upon which the decision has been explained subsequently. [77]
Conclusion
[94] Branson J was correct in deciding that negligence had not been established on the part of any of the legal representatives of Yates in relation to the manner in which its case before Cripps J was prepared and conducted.
[95] It is unnecessary to examine the significance that might attach to the differences between the respective roles of senior counsel, junior counsel and solicitors. While Abbott Tout and Mr Webster developed substantial arguments in relation to that matter, the case can be decided without exploring those arguments. The finding of negligence by the Full Court of the Federal Court was founded upon an erroneous view of the merits of the head start theory of special value, an unjustified departure from important findings of fact made by Branson J, and a number of significant factual errors and misunderstandings.
The immunity issue
[96] Because there was no negligence on the part of the appellants (and, therefore, as is conceded, no misleading or deceptive conduct or breach of fudiciary duty) the claims for immunity from suit based upon the decision of this court in Giannarelli v Wraith [78] need not be resolved. Branson J would have upheld such claims had it been necessary to do so. The Full Court of the Federal Court took a different view. Both courts were bound by the decision in Giannarelli v Wraith . On appeal to this court it was submitted on behalf of the respondent that, if the issue of immunity had to be resolved, the court should reconsider Giannarelli v Wraith . Because the issue does not arise, it is inappropriate to deal further with that submission.
[97] It should be said, however, that I consider that, in relation to the practical application of the immunity to the circumstances of the present case, which was the point upon which there was disagreement between Branson J and the Full Court, the views of Branson J, which are in accordance with the majority opinion in Keefe v Marks , [79] are to be preferred to those of the Full Court of the Federal Court. The Full Court, in its reasons for judgment, did not refer to Keefe v Marks . Branson J was correct in her application of that decision to the present case.
Orders
[98] The appeals should be allowed with costs. The orders of the Full Court of the Federal Court should be set aside, and the appellants in the appeals to that court should be ordered to pay the costs of the respondents to the appeals. The orders made by Branson J should be restored, except in so far as they concerned the order for costs against the second respondent in this court, Mr Yates. That order was to the effect that Mr Yates be personally liable for the costs of the present appellants on an indemnity basis in certain eventualities. Mr Yates' appeal to the Full Court of the Federal Court challenged that order, but it was unnecessary for the Full Court to deal with the matter. Mr Yates has never had that issue determined on its merits, and in that respect only, the matter should be remitted to the Full Court of the Federal Court to consider that aspect of his appeal.
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