Chief Minister of the ACT v Malcolm Macrae; Sylvia Isobel Ruth Macrae; Bryan John Rumble and Phyllis Amy Rumble [1993] FCA 359 (2 August 1993)

FEDERAL COURT OF AUSTRALIA

CHIEF MINISTER FOR THE A.C.T. v. MALCOLM MACRAE; SYLVIA ISOBEL RUTH MACRAE;
BRYAN JOHN RUMBLE and PHYLLIS AMY RUMBLE
No. ACTG59 of 1992
FED No. 521
Number of pages - 11
Australian Capital Territory

COURT

IN THE FEDERAL COURT OF AUSTRALIA
AUSTRALIAN CAPITAL TERRITORY DISTRICT REGISTRY
GENERAL DIVISION
Black CJ(1) Gallop(1) and Gummow JJ(1)

CATCHWORDS

Australian Capital Territory - leases - tenants' statutory right to value of improvements on the land at expiry of the lease - whether valuation to include allowance for goodwill or business carried on during the lease.

City Area Leases Act 1936 (A.C.T.) ss. 19A, 20

Administrative Appeals Tribunal Act 1989 (A.C.T.) s. 46

HEARING

CANBERRA, 7, 20 April 1993
2:8:1993

Counsel and solicitors Mr J.J. Webster and
for the Appellant: Mr Phillip Walker

instructed by the A.C.T.
Government Solicitor.

Counsel and solicitors Mr T. Simos Q.C. and

for the Respondents: Mr T. Johnstone

instructed by Snedden, Hall and Gallop.

ORDER

THE COURT ORDERS THAT:
(1) The appeal be allowed and the cross-appeal be dismissed.

(2) Order (2) of the orders made by Higgins J on 25 September 1992 and the order made by Higgins J on 9 October 1992 be set aside.

(3) The decision of the Australian Capital Territory Administrative Appeals Tribunal ("the Tribunal") be set aside and the case be remitted to the Tribunal to be heard and decided with such further evidence as to the Tribunal appears necessary to give effect to the reasons of this Court.

(4) The appellant pay one half of the costs of the respondents in the Supreme Court but that there be no order as to costs of the appeal to this Court.
Note: Settlement and entry of orders is dealt with by Rule 36 of the Federal Court Rules.

DECISION

BLACK CJ, GALLOP and GUMMOW JJ This is an appeal from the judgment and orders made by a Judge (Higgins J) of the Supreme Court of the Australian Capital Territory ("the Territory"). His Honour allowed an appeal from a decision of the Australian Capital Territory Administrative Appeals Tribunal ("the Tribunal"). The right of appeal to the Supreme Court was conferred by s. 46 of the Administrative Appeals Tribunal Act 1989 (A.C.T.) ("the AAT Act"). Sub-section 46 (1) of the AAT Act limits the appeal to an appeal "on a question of law".

2. Sub-section 20 (5) of the City Area Leases Act 1936 (A.C.T.) ("the Act") provides that an application may be made to the Tribunal for the review of a decision of the Minister, in this case the Chief Minister, which determines "the value of improvements under this section". It will be appropriate to refer further to the provisions of the Act after outlining the facts.

3. Pursuant to what was then the City Area Leases Ordinance 1936-1964 (A.C.T.), the Commonwealth by written instrument granted to Mr and Mrs Eastham, as joint tenants, a lease ("the lease") of a parcel of land at the corner of Collie and Tennant Streets, Fyshwick in the Territory ("the land") for the term of 25 years commencing 1 October 1964. The area of the land was 10,699 sq. m.

4. The lessees covenanted that within 6 months from the commencement of the term or within such further time as the lessor might approve in writing they would commence to erect an approved building or buildings on the land at a cost of no less than pounds 4,000, and in accordance with plans and specifications prepared by them and previously submitted to and approved in writing by the lessor. They further covenanted that the buildings in question would be completed within 12 months from the commencement of the term. Further, the lessees undertook in cl. 1 (h):

"To use the said land only for the purpose of
boarding kennels for dogs and accom-modation for
cats and other small domestic animals and one
residential unit."

5. For its part, the Commonwealth covenanted in cl. 2 (a):

"That the lessee may at any time upon payment of
all rent and other moneys due to the
Commonwealth under this lease surrender this
lease to the Commonwealth but subject to any law
of the Territory to the contrary the lessee
shall not be entitled to receive any
compensation from the Commonwealth in respect of
such surrender or in respect of any buildings
erections or improvements upon the said land."

6. It is appropriate to note here, though it will be necessary to refer further to the term "improvements", that in construing the phrase "fixtures, erections and improvements on the said land . . ." as it appeared in a lease of agricultural land in the Territory, the High Court in The Commonwealth of Australia v Oldfield [1976] HCA 17; (1976) 133 CLR 612 held that timber clearing, pasture improvements and shade and shelter plantings were comprised within the term "improvements"; this term applied to the physical consequences which enured to the land of acts whereby the land attained a quality and usefulness additional to that which it had in its virgin state. Jacobs J (at 619) pointed to the conjunction between the words "fixtures, erections" and the word "improvements" and said:

"If the latter word did not include improvements
to the quality of the land itself there would be
few, if any, things which the word would
denote."

7. The lease was transferred to the respondents on 16 June 1971 by a dealing entered on 20 July 1972. The buildings referred to in the lease were constructed. For many years there has been conducted on the land a business known as the Aarondale Pets Motel, for the accommodation of dogs and cats. The business was conducted by sub-lessees and information as to the rent received from the sub-lessees since 1971 was before the Tribunal. The business carried on on the land was sold by the then sub-lessee 6 times between 1971 and 1986, at prices between $15,000 and $86,500. The lease expired, in accordance with its terms, on 30 September 1989. The sub-lease expired on the previous day. The improvements include a house, 4 buildings containing in all 132 kennels, a cattery with 40 cages, a building containing a washroom for dogs and an additional cattery with 24 cages, an aviary, a toilet block, and "cyclone" security fencing to all boundaries.

8. The system of leases for which the Act provides takes effect, save as otherwise provided in the Act itself or other legislation, in accordance with general law doctrines regulating the relationship between landlord and tenant; see, for example, Owendale Pty Ltd v Anthony [1967] HCA 20; (1967) 117 CLR 539. At common law, upon expiry of the term of a lease of premises upon which a business was conducted by the tenant, the tenant could remove the stock in trade and the tenant's fixtures; but, in the absence of any special provision in the lease, the goodwill enured to the reversioner.

9. In Llewellyn v Rutherford (1875) LR 10 CP 456, the lease did make special provision. Lord Coleridge CJ said, at 467-8:

"Here is a public-house in which a thriving
business has been carried on, having attached to
it that which has been variously described as
goodwill, - a thing which has an appreciable
value and is every day bought and sold. That
goodwill the tenant is about to forego. In the
absence of a stipulation to the contrary, it
would be an increased value of the premises,
which on the tenant's going away would enure to
the benefit of the landlord: he might let them
for an increased rent or he might obtain a
premium. In the absence of a stipulation, the
tenant could derive no advantage from such
increased value. The end of the term having
arrived, all he could take away would be the
stock-in-trade and the tenant's fixtures. The
goodwill is lost to him. But by this proviso,
which, as I before observed, is introduced in
favour of the tenant, the latter is to have
something for the goodwill at the expiration of
the tenancy. What is he to have? 'Such sum of
money as shall or can be procured for the
goodwill of the business of a licensed
victualler in respect of the said premises from
an incoming tenant.' Upon consideration, it
seems to me that that means substantially what
Mr. Herschell has contended. If the goodwill is
actually sold, and sold honestly, the tenant
would receive the amount paid for it. But,
inasmuch as the landlord might choose to forego
the goodwill, or to discontinue to use the
premises for a public-house, the tenant would in
that case be entitled to recover from the
landlord such sum as the latter would have
received from an incoming tenant who continued
to carry on the same business. It would be
difficult for us to determine what the sum
should be. I should say it ought to be such a
sum as persons who are in the habit of
estimating such things would fix as the value of
the goodwill of the premises under ordinary
circumstances. By arrangement, this is left to
the determination of the arbitrator, who will
receive the evidence of persons accustomed to
the trade of valuing."

10. The effect of the common law might, of course, also be modified by statute. Examples of statutes dealing upon expiry of the term with "goodwill" which had become attached to leased premises are given by the Full Court in Ranoa Pty Ltd v BP Oil Distribution Ltd (1989) 91 ALR 251 at 256-7.

11. Section 19A of the Act, the side-note to which reads "Tenant right in improvements" is another statutory modification to what otherwise would be the operation of the common law. Put broadly, if the term of a lease of land upon which there are improvements expires and the lessee is not granted a further lease, the Commonwealth is liable to pay to the lessee "the value of the improvements on the land". The value of those improvements is to be determined in accordance with s. 20 with, as we have indicated, the right under sub-s. 20 (5) to review by the Tribunal.

12. It should be emphasised at the outset that these provisions are not concerned with compensation payable upon resumption of an interest in land, nor with the imposition of rates or charges upon land. A number of the decisions to which the Tribunal and the Supreme Court were referred construed resumption or rating laws. The reasoning therein was directed to a different realm of discourse to that with which ss. 19A and 20 of the Act are concerned.

13. The legislation with which this case is concerned differs from that considered in leading authorities to which counsel had invited the attention of the Tribunal and the Supreme Court. We refer, in particular, to Minister for Home and Territories v Lazarus [1919] HCA 12; (1919) 26 CLR 159; Toohey's Limited v The Valuer-General (1925) AC 439; McGeoch v The Federal Commissioner of Land Tax [1929] HCA 29; (1929) 43 CLR 277; The Commonwealth v Reeve [1949] HCA 22; (1949) 78 CLR 410 and The Valuer General v Fenton Nominees Proprietary Limited [1982] HCA 46; (1982) 150 CLR 160.

14. The Tribunal varied the decision under review by substituting for the amount of $350,000 as the market value on 30 September 1989 of the improvements, the amount of $1m. On application to the Supreme Court to review the decision, the Supreme Court allowed the appeal and determined that the market value of the improvements should be amended to $929,000. An appeal and cross-appeal from the decision of the Supreme Court are before us.

15. The central question is whether there has been an error of law in the construction of the relevant provisions of the Act. However, in their submissions upon that issue, counsel offered conflicting analyses of the effect of the valuation evidence before the Tribunal.

16. It is appropriate now to turn to the terms of ss. 19A and 20 of the Act.

17. Section 19A is as follows:

"19A (1) Where, upon the expiration of the term of the lease of
land upon which there are improve-ments, the lessee is
granted a further lease of that land, or is granted a
lease of any part of that land, he shall not be liable
to make any payment to the Commonwealth for the
improve-ments on that land or part.
(2) Where, upon the expiration of the term of a lease of
land upon which there are improve-ments, the lessee is
not granted a further lease of the land or is granted
a lease of part only of the land, the Commonwealth
shall -
(a) in respect of the land or any part of the land
not leased to the lessee, where the land or part
has not, prior to the expiration of the term of
the lease, been declared by the Minister to be
available for lease - forthwith;
(b) in respect of the land or any part of the land
not leased to the lessee, where the land or part
has, prior to the expiration of the term of the
lease, been declared by the Minister to be
available for lease and a lease thereof is
granted, within six months after the expiration
of the term of the lease, to a person other than
the lessee - upon the grant of a lease to that
person; and
(c) in any other case - upon the expiration of six
months after the expiration of the term of the
lease, be liable to pay to the lessee -
(i) where no part of the land is leased to the
lessee, the value of the improvements on the
land; or
(ii) where part of the land is leased to the lessee,
the value of the improvements on the part of the
land not so leased;
Provided that, if the land or any part thereof is,
prior to the expiration of the term of the lease,
declared by the Minister to be available for lease,
and the lessee does not, within six months after the
expiration of the term of the lease, elect to take a
further lease of the land or of that part, there shall
be deducted from the amount payable to the lessee
under this sub-section the amount of such expenditure
as the Minister determines has been incurred in
connexion with the grant to any other person of a
lease of the land or that part.
(3) Where, between the date of the expiration of the term
of a lease of land upon which there are improvements
and the date of the grant of a further lease of that
land or part thereof, the Commonwealth derives
revenue, part or all of which is attributable to the
improvements on that land or part thereof, the
Commonwealth shall pay to the lessee, from time to
time, as the Minister determines, the difference
between such sum as the Minister determines is
attributable to revenue from those improvements and
the amount of such expenditure as the Minister
determines has been incurred by the Commonwealth in
maintenance and other costs in respect of those
improvements.
(4) Notwithstanding anything contained in any lease, and
subject to the covenants (if any) of the lease with
respect to the erection of a building on the land
having fully been observed or performed, where the
lease is determined or surrendered by virtue of any
provision contained in the lease, the provisions of
this section relating to the payment to the lessee of
the value of the improvements on the land comprised in
a lease upon the expiration of its term shall (so far
as applicable) apply as if the term of the lease had
expired on the date of the termination or surrender:
Provided that there shall be deducted from any sum
payable in respect of the value of the improvements on
the land the amount of such expenditure as the
Minister determines has been incurred by the
Commonwealth in connexion with the determination or
surrender of the lease and the grant (if any) of a
further lease of the land or any part thereof.
(5) For the purpose of this section -
'improvements' includes buildings and erections, but
does not include improvements effected at the cost of
the Commonwealth unless the Commonwealth has received
or is entitled to receive payments for the
improvements;
'lessee', in relation to a lease which has been
determined or surrendered or in relation to a lease
the term of which has expired, means the person who
was the lessee under the lease at the date of the
determination or surrender or at the date of the
expiration of the term, as the case may be.
(6) In this section, a reference to the value of
improvements, in relation to improvements on land,
shall be read as a reference to the value of the
improvements determined in accordance with section 20.

So far as is relevant, s. 20 states:

"20 (1) In this section -
'lessee' has the same meaning as in section 19A;
'market value', in relation to improvements on land,
means the amount by which improvements increase the
value of the lease of the land, assuming that the
lease, together with the improvements, were offered
for sale at a bona fide sale on the day immediately
before the prescribed date on such reasonable terms
and conditions as a bona fide seller would require;
'prescribed date' means, in relation to land the lease
of which has expired or has been determined or
surrendered, the date of expiry, determination or
surrender, as the case requires.
(2) Where compensation is payable under section 19A in
respect of improvements, the Minister shall, as soon
as practicable after the date that is the prescribed
date in relation to land, by instrument in writing
determine, in accordance with this section, the market
value of the improvements on the land as at the
prescribed date.
(3) Where the compensation is payable by virtue of
sub-section 19A (2), the Minister shall, in valuing the
improvements, assume that the lease of land had been
renewed subject to the same covenants and conditions,
and for the same term, as the lease the term of which
had expired.
(4) . . .
(5) . . .
(6) . . .
(7) . . ."

Sub-section 20 (3) is of importance, particularly on the cross-appeal.

18. Clause 3 (c) of the lease provided that it was mutually covenanted and agreed:

"If at the expiration of this lease the Minister
shall have decided not to subdivide the said
land and that it is not required for any
Commonwealth purpose and shall have declared the
said land to be available for lease the lessee
shall be entitled to a further lease of the said
land for such further term and at such rent and
subject to such conditions (including
re-appraisement of rent) as may then be provided or
permitted by Statute Ordinance or Regulation.
If the Minister shall have decided to subdivide
the said land the lessee shall be entitled to a
lease under the Statutes Ordinances and
Regulations then in force of any one block which
forms part of the said land and which the
Minister shall have declared to be available for
lease."

19. As early as 1974, the respondents were told that on the expiry of the lease in 1989 the land might be required for subdivision for industrial purposes. The original lessees had been informed to the same effect in 1968. In the events that happened, the Minister decided that on expiry of the lease the land should be subdivided to permit excision of a high voltage electricity easement. This brought into operation cl. 3 (c) of the lease. An offer to the respondents of a 99 year lease, for $940,000, of what would become block 17, was rejected by the respondents on 20 February 1990. Sub-section 19A (2) therefore became applicable. The Commonwealth was liable to pay to the respondents the value of the improvements on the land. A determination was made under s. 20 that the market value on 30 September 1989, being the prescribed date, was $350,000. The respondents then sought review by the Tribunal.

20. There were no submissions before us as to whether when sub-s. 19A (2) speaks of "a lease of land upon which there are improvements", the "improvements" extend to all activities upon the land which have the effect of enhancing its value; cf The Commonwealth v Oldfield supra. The "improvements" with which the contentions of the parties were concerned were those effected in compliance with the covenants in the lease to erect certain buildings and use the land for the purpose of boarding kennels. Undoubtedly these were "buildings and erections" within the meaning of the definition of "improvements" in subs-s. 19A (5) and were "upon" the subject land.

21. Before us, the submissions of counsel centred upon the definition in sub-s. 20 (1) of "market value". In the course of argument, it became apparent that, in the main, these submissions had not been put either to the Supreme Court or to the Tribunal. In final submissions, both sides accepted that

(i) the Act requires the making of a valuation of the
"assumed" lease referred to in the definition of
"market value", together with the improvements,
(ii) if a business was conducted on the land during the
currency of the now expired lease, this assumption is
not to include that business or its goodwill, and
unlike the situation with which the courts have dealt
in cases such as Llewellyn v Rutherford supra, there
is to be no valuation of that goodwill, but
(iii) the valuation of the lease and improvements is to be made on
the footing that a business has been carried on with or
utilising those improvements, and
(iv) the unimproved value must then, consistently with
(iii) be assessed on the footing that the improvements
are erected upon the land and were used for a business
previously carried on there, but which has ceased.

22. If the matter is approached in this way, it will be for the decision-maker to determine, having regard to what is said by the expert valuers, whether or not the sale of the lease together with those improvements will produce a higher value than a sale based upon an assumption that no business had ever been carried on on the land utilising those improvements.

23. The respondents contend that the Act should be so construed because they, as former lessees, should receive compensation commensurate with the benefit derived by the Territory upon the expiration of the lease. As a result of the non-renewal of the lease, the lessor receives the benefit of the improvements with which the business had previously been carried on and the lessor might, if it wished, turn that benefit to its own commercial account.

24. We accept that the steps outlined above for the valuation of the "assumed lease", referred to in the definition of "market value" in s. 20 of the Act, reflect the proper construction of the legislation.

25. The appellant submits that, in any event, neither the Tribunal nor the Supreme Court dealt with the matter upon the correct construction of the legislation, so that it is inevitable that the appeal be allowed and an order be made remitting the matter to the Tribunal.

26. The Tribunal had the assistance of two valuers. The appellant put forward Mr D.N. Parkes who is an officer with the Australian Valuation Office. However, the Tribunal held that Mr Parkes' valuation was "fundamentally flawed in principle", and no attempt at resuscitation was made before us.

27. The other valuer, Mr S.E. Wilkinson, was put forward by the respondents and the Tribunal accepted his valuation which adopted as the preferred method, a "market value approach". This was said to involve the assessment of the market value of the improved lease and deduction of an amount which represented the value of the unimproved lease to the lessee. The Tribunal did not base its decision upon what Mr Wilkinson described as his "check method". This involved an assessment of the development cost of the improvements, and reduction of that amount by a sum to recognise the wear and tear on the improvements and their lessened economic life.

28. Counsel for the appellant submits that the matter should go back to the Tribunal if there is a substantial doubt that the methodology which was accepted by the Tribunal departed from that which would be required by the legislation as it has now been construed. In particular, counsel submitted that, despite assertions to the contrary by Mr Wilkinson in his oral evidence to the Tribunal, allowances had been made for what in substance reflected the value of the business conducted on the land.

29. Mr Wilkinson said that he eschewed the inclusion of any factor directly answering the description of "goodwill", "because I have never come across a word that is more often incorrectly interpreted". He assessed the estimated total annual rental for the property as $117,000, and taking this sum as the annual income, for 25 years at 10%, reached the sum of $1,062,000 as the market value of the property. Taking into account various possibilities to which he referred, the sum of $1,000,000 was arrived at.

30. In reaching the figure of $117,000 as the estimated total annual rental, Mr Wilkinson referred to the fact that the business carried on on the property had been sold 6 times since 1971, and that it had been last sold in 1986 for $60,000 whilst there was approximately 3 years remaining of the sub-lease. He said that "the extent of any plant and equipment was unknown". However, the evidence of Mr Parkes who had had access to primary documents in the Australian Valuation Office, was that the $60,000 was paid for goodwill.

31. In his valuation report, after referring to the sale in 1986, Mr Wilkinson continued:

"To determine the value of the property a
judgement has to be made as to the total rental
the property would attract from 29/09/89
including an allowance for the Profit Rent of
the Business. The prices paid in the past
include a component for Profit Rent (or Site
Goodwill, Personal Goodwill and plant and
equipment). For the purposes of this exercise
it has been concluded that the previous
sub-lease was purchased, with three years of the
sub-lease to run, for an amount of $50,000
exclusive of any (personal) goodwill, plant or
equipment. Allowing for inflation at say 7.5%
it is considered that a prudent sublessee would
pay $62,100 ($50,000 x 1.242) for the right to
the new three year sublease.
The equivalent rent of this $62,100 has to be
assessed. Using established principles, an
interest rate of 12% and 50% tax rate the
equivalent annual rent is $46,465 pa (see
Appendix 3). (Appendix 3 showed an annual base
rental of $70,540.)
The estimated total annual rental for the
property is therefore -
$70,540 + $46,465 = $117,005 say $117,000."

32. There was much debate before us as to what was to be taken as the meaning of the term, used by Mr Wilkinson, "Profit Rent of the Business". Mr Wilkinson identified this factor as "the amount a purchaser feels he would pay in addition to the stated rent" and as being "along the same lines" as key money. Having reread the evidence, we are left with the very real apprehension that the "Profit Rent of the Business" in substance represented, as to a significant part, money paid to be able to get in and run the business on the land. As such, it would not be an integer properly included in applying s. 20 of the Act as it has now been construed.

33. Having ascertained the estimated total annual rental of the property as $117,000, Mr Wilkinson looked at what he said was the only sale in recent years of a similar enterprise. He used the data from this sale to derive 10% as a reasonable rate of return. In his oral evidence, Mr Wilkinson, after referring to $117,000 per annum as the amount a willing tenant would be prepared to pay, continued:

"And having arrived at that rental I then
capitalised it at 10 per cent to arrive at the
25 years of the new lease and came up with a
value rounded of $1,062,000. Now, the rental
was capitalised at 10% and assistance in
obtaining that figure of 10 per cent was gained
from the sale of this other property,
occasionally called Parkwood, trade name Best
Friends, but located in the Belconnen Valley,
near the Belconnen tip. It sold in 1987 for
$550,000 and I did have reference to the
taxation figures that were available at the time
of the same to intending purchasers. Adding
back wages of the owners, the sale showed what
could be considered a remarkably low 7.44% for a
business of that nature. There are quite a few
reasons, some of which are certainly of no
interest to this tribunal, as to why someone
would pay an amount of money to obtain such a
business, such a low return, but there . . .
Are you suggesting this was a cash business -
Yes. And, in some respects, for all the reasons
I have outlined. This was the sale of an owner
occupied property, I might add, and it could
well be considered that the attraction of the
lifestyle, the running of the business - for all
those reasons - opportunity to be your own boss
- for all those reasons would have attracted in
this particular case a wish for a relatively low
return, but faced with the 7.44% on a comparable
property to that extent in 1987 I took into
account the factors which I think I have already
mentioned about increasing interest rates, some
judgments as to the security of income, and
adopted a rate of 10 per cent which arrived at
my figure rounded of $1,062,000."

Counsel for the respondents accepted that it was not clear what was the subject matter of the Parkwood sale, particularly as to the inclusion of work in progress, stock in trade, goodwill and the like. However, the evidence of Mr Wilkinson himself does suggest, as counsel for the appellant contended, that what was involved in fixing the capitalisation rate which was used by Mr Wilkinson, was the $550,000 received in 1987 for the sale of the "Best Friends" business, using that term to encompass all that one would ordinarily expect to go with such a sale.

34. We accept the submission for the appellant that in this respect also the Tribunal proceeded upon an evidentiary footing which did not equip it to apply the Act as it is now construed.

35. It follows, in our view, that the Supreme Court should have ordered that the decision of the Tribunal be set aside and remitted the case to be heard and decided by the Tribunal, with such further evidence as to the Tribunal may appear necessary to give effect to the reasons of the Court.

36. The order which the Supreme Court did make was, as we have indicated, one which amended to $929,000 the market value of the improvements found by the Tribunal to be $1,000,000. This reduction is the subject of a cross-appeal. The terms in which the appeal itself will be allowed in this Court are such as to remove also the subject matter of the cross-appeal, the matter as a whole having been remitted to the Tribunal.

37. This will mean that, as a formal matter, the cross-appeal should be dismissed. However, we should indicate that had it been necessary to do so we would have accepted the submission of the respondents, made on their cross-appeal, and detailed in their written summary of argument, that the valuation of $62,000 for the unimproved lease on conditions in 1964, should be substituted for the figure of $133,000. This was based by Mr Wilkinson on the erroneous assumption that what was required by sub-s. 20 (3) was a valuation reflecting conditions in 1989. It would follow that whilst the Supreme Court correctly held that the existence of sub-s. 20 (3) enhanced the unimproved value of the lease, the valuation of $1,000,000, if otherwise correct, should not have been reduced to $929,000. This reduction represented the difference of $71,000 between $62,000 and $133,000.

38. It remains to consider the question of costs.

39. The Supreme Court ordered that the appeal to the Supreme Court be allowed, as a necessary consequence of the finding that the market value of the improvements should be reduced to $929,000. In that sense, the present appellant, who was the appellant also before the Supreme Court, was successful at first instance. However, the Supreme Court ordered that the appellant pay the respondents' costs assessed at the rate of 95% of the party/party costs. This reflected his Honour's view of the time taken before him as a result of the unsuccessful attempt by the appellant to support the valuation by Mr Parkes.

40. As a result of the appeal to this Full Court, the appellant now succeeds completely, in the sense that the whole of the matter is remitted to the Tribunal. But it succeeds on a construction of the legislation and on arguments which were not advanced before the Supreme Court. Further, the appellant contends that the costs order made by Higgins J was disproportionate in that the respondents apparently concede that but one half of their costs in the Supreme Court was attributable to resistance to the attempt by the appellant to support the Parkes valuation.

41. In all the circumstances, we believe the appropriate course would be to make no order as to the costs of the appeal and to vary the costs order made by the Supreme Court by ordering that the appellant pay one half of the costs of the respondents in the Supreme Court.