Geita Sebea v Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 (24 November 1941)

Geita Sebea and Others Plaintiffs, Appellants; and The Territory of Papua Defendant, Respondent.

I have had the advantage of reading the judgment of Williams J. and as I am in substantial agreement with it I have nothing to add.

Appeal by case stated from the Supreme Court of the Territory of Papua pursuant to the Papua Act 1905-1940, sec. 43. Counsel appeared for the Territory, but the appellants submitted a legal argument in writing pursuant to the section.

The appellants in the Supreme Court claimed compensation under the Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939 (No. 19 of 1939). By that Ordinance, sec. 2, certain lands described in the schedules were vested in His Majesty, in the events which happened, for an estate of fee simple, freed and discharged from all trusts and encumbrances whatever. That Ordinance, sec. 3, also provided:—"The Government of the Territory of Papua shall pay compensation for the land vested in His Majesty pursuant to this Ordinance and the amount of such compensation and the persons entitled shall be determined as nearly as possible in the manner prescribed in respect of land compulsorily acquired under the Lands Acquisition Ordinance, 1914, notwithstanding anything to the contrary in such Ordinance." The Lands Acquisition Ordinance 1914 (No. 7 of 1914) provides, sec. 28, that in determining the compensation under the Ordinance, regard shall be had, so far as material to the case, to the value of the land acquired, but without reference to any increase in value arising from a proposal to carry out a public purpose. In the present case, that value should be assessed as on 1st January 1939 (Ordinance, sec. 29 (b)), but it would not seem that the value of the land was different at any subsequent date. The principle upon which compensation is assessed is the same as in English law. It is the value that a willing vendor might reasonably expect to obtain from a willing purchaser for the land with all potentialities, but any enhanced value attaching to the land by reason of the fact that it is being compulsorily acquired for the purpose of the acquiring authority must be disregarded (Cedars Rapids Manufacturing and Power Co. v. Lacoste[1]; Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer, Vizagapatam[2]).

The natives or people of Kila Kila are divided into clans called Iduhu, which control through headmen their lands. These natives or people had a right of enjoyment in respect of the lands acquired: it is a communal or usufructuary occupation with a perpetual right of possession in the community. But the lands were controlled by two Iduhu, of whom the plaintiffs in the action were the headmen or representatives. In 1937, the headmen or representatives of these Iduhu by an instrument in writing describing them as the owners of the land leased to His Majesty portion of the land the subject of the acquisition for a term of ten years at a yearly rental of fifteen pounds per annum and this instrument becomes conclusive evidence of the facts therein set forth and of the title of the Crown to the estate or interest referred to: See Land Ordinance 1911-1935, Second Schedule, clause 7. The majority of these headmen or representatives are the appellants in this Court and it has been assumed in the Supreme Court and before this Court that they sufficiently represent the persons entitled to compensation under the Ordinance already mentioned.

The compensation under the Ordinance is payable on the footing that an estate in fee simple freed and discharged from all trusts and encumbrances whatever is being transferred from the natives or people of Kila Kila to the Crown: See Ordinance 1939 No. 19, sec. 3; Amodu Tijani v. Secretary, Southern Nigeria[3]. The persons entitled to the compensation are the people or natives of Kila Kila, and it is distributable among the members of the community through the headmen or representatives of the Iduhu, which controlled the lands acquired. And no objection has been taken to the form of the action or to the parties thereto.

The value of the land is necessarily one of difficulty. It is situated in an uncivilized country and can at best be only roughly estimated. The learned judge fixed the value of the land for agricultural purposes at six pounds per acre for a block of seventy-one acres upon which there was an aerodrome, and twenty-eight pounds for another block of eighteen acres, or £454 altogether. And he held that this sum represented the true value of the land with all its potentialities. But he declined to consider as affecting the value of the land certain improvements and structures which existed upon the land at the date upon which the value of the land had to be assessed. These improvements and structures had been made by the Government of the Territory or by business firms who were licensees of the Government. They were aerodrome improvements such as the runways, drainage, roads, parking areas, and fencing, a building for housing the power plant erected on a concrete base with walls of fibrocement sheets, a building for a radio station and meteorological office and laboratory erected on heavy cement blocks, a customs and quarantine office, and there were also other buildings erected by business firms under the licence of the Government. The learned judge was of opinion that these structures were not fixed to the land so as to become part of it, but remained chattels.

"The meaning of the word" (fixtures) "is anything annexed to the freehold, that is, fastened to or connected with it, not in mere juxtaposition with the soil. Whatever is so annexed becomes part of the realty, and the person who was the owner of it when it was a chattel loses his property in it, which immediately vests in the owner of the soil... But an exception has long been established in favour of a tenant erecting fixtures for the purposes of trade, allowing him the privilege of removing them during the continuance of the term" (Bain v. Brand[4]). And in determining whether or not a chattel becomes a fixture, the intention of the person affixing it to the soil is material only so far as it can be presumed from the degree and object of the annexation (Hobson v. Gorringe[5]; Provincial Bill Posting Co. v. Low Moor Iron Co.[6]; Reid v. Smith[7]).

The learned judge was unable to draw the inference that the improvements and structures were part of the land, because they would be useless to the natives and because he could not think that buildings erected in connection with a public utility were to remain attached to the land. Here I think the learned judge was in error. All he had to consider in connection with the structures on the land was the degree of annexation, which was very considerable, and the object of annexation, which was patent for all to see, namely their use as part of an aerodrome. Moreover, the improvements on the land in the way of runways, drainage, parking areas, and so forth were inherent in the land itself and did not depend upon annexation or affixation.

But the value of the land might, however, be affected and diminished if the structures and buildings upon the land upon the day for the assessment of its value were "trade fixtures" removable by the Government. The land did not vest in the Government until 7th February 1940, when the Gazette notice of vesting was published pursuant to the Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939 No. 19, but on 1st January 1939, when the assessment had to be made, the Government's rights under the lease from the natives subsisted, including the right to remove trade fixtures upon the land during the continuance of its term. This latter right was a relaxation in favour of the tenant for the encouragement of trade.

But whether they are or are not trade fixtures is a question of fact depending upon the circumstances of the case. In some cases, the size and permanence and the general character and object of the structures and buildings may lead one to the conclusion that they are not tenant's fixtures but something permanently annexed to the land (See Pole-Carew v. Western Counties and General Manure Co.[8]; Whitehead v. Bennett[9]); for the removal must be capable of being effected without material injury to the land or the destruction of the fixture: Cf. Foa, Landlord and Tenant, 4th ed. (1907), p. 697.

It is for the learned judge to determine whether the structures and buildings upon the land were or were not trade fixtures upon the land upon 1st January 1939. If they were, then in my opinion the value of the land should be assessed upon the footing that the Government had a right to remove them from the land and would, rather than pay compensation therefor, remove them from the land during the continuance of its term. I do not of course refer to the improvements upon the land such as runways and so forth already mentioned, inherent in the land.

The question remains how the land should be valued, if these improvements and structures or any portion thereof form part of the land. It is useless to consider what the land with the improvements and structures upon it would bring in the open or any other market, for there was no market. Some artificial method must be adopted, and the most satisfactory, to my mind, is to take the agricultural value of the land as fixed by the learned judge plus an addition measured by what it would cost to make or establish the improvements and structures existing upon and forming part of the land at the date of valuation but taking into account a proper deduction for obsolescence or depreciation: Cf. Edinburgh Street Tramways Co. v. Lord Provost, &c., of Edinburgh[10]; London Street Tramways Co. v. London County Council[11]; Melbourne Tramway and Omnibus Co. v. Tramway Board[12].

The leasehold interest in the Government also requires consideration and a proper deduction made in respect of it. One of the witnesses placed a value, as I follow his evidence, of £2,562 upon that interest. But the value of the interest depends, I apprehend, on the difference between the actual rent paid and the improved annual rental that the property is worth multiplied by the number of years' purchase at which the tenant's interest should be valued: See Cripps, Compensation, 8th ed. (1938), p. 189.

The appellants also claimed that they were entitled to ten per cent or some other amount for compulsory acquisition of their lands. In practice, a ten per cent allowance is often made, but "this percentage may be taken to cover various incidental costs and charges to which the owner is subject whose land has been taken, and if no percentage were added such incidental costs and charges would have to be considered in assessing the amount of compensation" (Cripps, Compensation, 8th ed. (1938), p. 213). Otherwise there is no right to this percentage, and in the present case the claim is untenable.

The question whether the provision of the Land Ordinance restricting the rights of the appellants to sell or otherwise deal with the land affects its value should be answered in the negative. The Ordinance, sec. 3, provides that save as thereinafter provided a native shall have no power to sell, lease, or otherwise deal with, or dispose of, any land, and any contract made by him to do so shall be void. But the Government may in certain cases purchase or lease native lands (sec. 5). The Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939, however, disposes of the matter. It enables the Government to acquire the lands in question here and prescribes for payment of compensation to the natives or persons entitled thereto.

No. The land should be valued as on 1st January 1939 with such improvements upon it as formed part of the land and such structures and buildings upon it as were permanently attached or affixed to it.

The land should be valued on the footing that an estate in fee simple freed and discharged from all trusts and encumbrances whatsoever was acquired by the Government.

No.

See No. 5.

Yes, (a) if subsisting improvements on 1st January 1939, (b) if permanently attached or affixed to the land on 1st January 1939.

No.

Yes.

Unnecessary to answer.

Finally, I would express the hope that the administration and the Protector of the Natives will consider the propriety of protecting the money payable to the natives as compensation and appropriating it by Ordinance or in some other lawful manner for the permanent welfare of the natives; e.g., in improving their lands or dwellings or schools or hospitals, and not allowing it to be wasted in exchange for shells or beads or coloured cloths or suchlike things.

On 23rd March 1937 the appellants, who are natives of Papua, leased approximately fifty acres of land to the Crown for the term of ten years computed from 19th March 1937 at the yearly rental of fifteen pounds. The Crown constructed an aerodrome upon this land known as the Kila Kila Aerodrome. By 1st January 1939 the Crown had constructed on the land a runway formed with concrete drains and parking areas and had enclosed the whole aero-drome with a fence. The Crown had also erected certain buildings occupied as a radio and meteorological station and office and a customs and quarantine office; and certain companies had also placed buildings on the land, which they used in connection with servicing the aircraft. The owners of the buildings paid no rent and no charges were made for the use of the aerodrome. The buildings, with the exception of one, were erected on concrete piers. There was no evidence to show whether or not they were fastened to these piers. All the buildings were erected for the purpose of using the land as an aerodrome and for no other purpose whatever. The value of the work done in making the aerodrome was assessed on behalf of the appellants at £2,740 and of the buildings at £3,460. The respondent gave no evidence of value.

After this work had been done to the land and these buildings had been erected the Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939 was passed, authorizing the resumption of the leased lands which, together with about twenty acres of adjoining lands and a further area of land comprising about eighteen acres situated about one mile from the leased lands, were included in the schedules thereto. Clause 3 of the Ordinance provided that the Crown should pay compensation and the amount of such compensation should be determined as nearly as possible in the manner prescribed in respect of land compulsorily acquired under the Lands Acquisition Ordinance 1914. By notice in the Government Gazette dated 7th February 1940 the lands described in the schedules were resumed by the Crown.

The appellants brought an action in the Central Court of Papua to determine the amount of compensation to which they were entitled. The action came on for trial before Gore J., who held that the resumed lands had no potentiality except for use as agricultural lands and assessed the compensation on that basis at £454.

This appeal raises the question whether the basis of compensation adopted by the learned trial judge was correct.

As appears from his Honour's informative report, the appellants' title to the land was a communal usufructuary title equivalent to full ownership of the land, so that they were entitled to be compensated on this footing (Amodu Tijani v. Secretary, Southern Nigeria[13]). The Land Ordinance 1911-1935, sec. 3, prohibits the disposal of land owned by natives by sale, lease or any other dealing and any contract made by them to dispose of land is void, but this restriction could have no detrimental effect upon the determination of the value of the land when compulsorily acquired, because in the hands of the Crown it would be freed therefrom. Indeed, the reference in the Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939, sec. 3, to the Lands Acquisition Ordinance 1914 is sufficient to show that the appellants as full owners of the land are entitled to have the compensation assessed upon as ample a basis as though it had been acquired from a European. The Crown stressed the fact that under the peculiar circumstances of this case it was the only possible purchaser, but even so, as pointed out by the Privy Council in Vyricherla Narayana Gajapatiraju v. Revenue Divisional Officer, Vizagapatam[14], "if the potentiality is of value to the vendor if there happen to be two or more possible purchasers of it, it is difficult to see why he should be willing to part with it for nothing merely because there is only one purchaser. To compel him to do so is to treat him as a vendor parting with his land under compulsion and not as a willing vendor. The fact is that the only possible purchaser of a potentiality is usually quite willing to pay for it."

The Lands Acquisition Ordinance 1914, sec. 29, provides as follows:—"The value of any land acquired by compulsory process shall be assessed as follows:—(a) In the case of land acquired for a public purpose not authorised by a Special Ordinance according to the value of the land on the first day of January last preceding the date of acquisition; and (b) In the case of land acquired for a public purpose authorised by a Special Ordinance, according to the value of the land on the first day of January last preceding the first day of the meeting of the Legislative Council in which the Special Ordinance was passed. (2) The value of the land shall be assessed without' reference to any increase in value arising from the proposal to carry out the public purpose."

At the date of the resumption the leased part of the land had been improved as an aerodrome, but the additional land was still unimproved for this purpose. The Lands (Kila Kila Aerodrome) Acquisition Ordinance 1939 does not specifically authorize a public purpose, but the preamble states that the lands described in the schedules are required immediately for the purposes of or connected with the Kila Kila Aerodrome, and it appears to me that this statement is sufficient to bring the case within the Lands Acquisition Ordinance 1914, sec. 29 (b). The correct date of valuation is therefore 1st January 1939. It is true that the Crown was free to acquire other suitable lands of the same dimensions and construct an aerodrome there, but to do so would require considerable outlay, so that the resumed lands had the potentiality that, having been improved to the extent already mentioned, the Crown would be willing to acquire them for their agricultural value plus the value of the expenditure already made rather than to have to purchase other lands at their agricultural value and then have the trouble and expense of improving them to the same extent. Assuming, therefore, that the appellants were willing vendors and the Crown was a willing purchaser the price would be determined having regard to the fact that the vendors would know that the Crown would pay this amount but no more, and the Crown would know that the vendors could reasonably expect this price (In re London County Council and London Street Tramways Co.[15]; Melbourne Tramway and Omnibus Co. v. Tramway Board[16]). Similar principles are applied where land used as a church or school is resumed, the compensation being fixed by ascertaining what it would cost to acquire an equally convenient site and erect equally convenient buildings there (Halsbury, 2nd ed. vol. 6, p. 45; Cripps on Compensation, 7th ed. (1931), p. 170). In determining the amount, the improvements made to the leased land consisting of the runway and the concrete drains would have to be taken into account.

There remains the question of the buildings. On the scanty evidence available to this Court they were apparently fixtures, but this is a matter for the learned trial judge to determine applying the principles referred to in Halsbury, 2nd. ed, vol. 20, pp. 96 et seq., and in the cases referred to by this Court in Commissioner of Stamps (W.A.) v. L. Whiteman Ltd.[17]. A tenant is allowed to remove trade fixtures during or at the end of the term. The Crown as lessee was not trading in the strict sense, but the aerodrome was used for commercial purposes, although not for profit, and it seems to me that the principles applicable to trade fixtures can be applied to the buildings placed there by the Crown. The buildings erected by the companies with the permission of the Crown were clearly placed there for the purposes of trade, and were therefore tenant's fixtures (Halsbury, 2nd ed. vol. 20, pp. 105, note a, and 106, note e; Mears v. Callender[18]; Webb v. Bevis Ltd.[19]; North Shore Gas Co. Ltd. v. Commissioner of Stamp Duties (N.S.W.)[20]). If, as appears to be probable, the buildings can be removed, their only materiality in the assessment of the compensation would be that it would benefit the Crown to pay something more for the resumed land rather than to have to go to the expense of removing and re-erecting them elsewhere.

The case is not one in which ten per cent should be added to the value of the land when determined in accordance with these principles. This addition is often made to cover incidental costs and charges to which an owner whose lands are taken is subject so as to ensure that he will receive full compensation, but there do not appear to be any circumstances here which would require the addition.

These considerations show that the valuation on an agricultural basis made by the learned judge was erroneous and that the case should be referred back to him to amend his valuation in the light of these general principles. When the amount of compensation has been determined, it will be necessary to consider whether the rental of fifteen pounds per annum payable under the existing lease of the fifty acres is equivalent to the full rental value of the land. If it is not, as appears to be the case, the lessee would be entitled to an amount to represent the value of the lease to him for the balance of the term and this amount should be deducted from the compensation, because, under an ordinary resumption, the lessee would be entitled thereto as his share of the full value of the land, but here the Crown and the lessee are the same person.

As a check to the amount of the valuation arrived at according to these principles, it would be justifiable to assess the rental value of the resumed lands by estimating the amount which the Crown would be willing to pay to continue its occupation of the leased lands having regard to the extent to which they had been improved for the purpose of an aerodrome, and to occupy the additional lands rather than to have to go elsewhere, carry out similar improvements and remove the buildings thereto, and then to capitalize this rental value (Earl of Eldon v. North-Eastern Railway Co.[21]; In re Athlone Rifle Range[22]).

The appeal should be allowed and the questions asked in the case answered as suggested by my brother Starke.

Appeal allowed. Discharge the order of the Court below. Remit the matter to it to award compensation in accordance with the terms of this judgment. Respondent to pay the appellants' costs of this appeal. Costs of the original hearing to be dealt with by the Supreme Court.

Solicitor for the respondent, H. F. E. Whitlam, Crown Solicitor for the Commonwealth.

[1] (1914) A.C. 569.

[2] (1939) A.C. 302.

[3] (1921) 2 A.C. 399.

[4] (1876) 1 A.C. 762, at p. 772.

[5] (1897) 1 Ch. 182.

[6] (1909) 2 K.B. 344.

[7] [1905] HCA 54; (1905) 3 C.L.R. 656.

[8] (1920) 2 Ch. 97.

[9] (1858) 27 L.J. Ch. 474.

[10] (1894) A.C. 456, at pp. 459, 460.

[11] (1894) A.C. 489, at p. 491; (1894) 2 Q.B. 189, at pp. 191, 192.

[12] (1919) A.C. 667, at p. 672.

[13] (1921) 2 A.C. 399.

[14] (1939) A.C. 302, at pp. 316, 317.

[15] (1894) 2 Q.B. 189.

[16] (1919) A.C. 667.

[17] [1940] HCA 30; (1940) 64 C.L.R. 407.

[18] (1901) 2 Ch. 388, at pp. 396, 397.

[19] (1940) 1 All E.R. 247.

[20] [1940] HCA 7; (1940) 63 C.L.R. 52, at p. 68.

[21] (1899) 80 L.T. 723.

[22] (1902) 1 Ir. Ch. 433.

High Court of Australia

Geita Sebea v Territory of Papua [1941] HCA 37; (1941) 67 CLR 544 (24 November 1941)

HIGH COURT OF AUSTRALIA