G & R Wills & Co Ltd v Adelaide Corporation [1962] HCA 61; (1962) 108 CLR 1 (5 December 1962)

HIGH COURT OF AUSTRALIA

G. & R. WILLS & CO. LTD. v. ADELAIDE CORPORATION [1962] HCA 61; (1962) 108 CLR 1

Resumption

High Court of Australia
McTiernan(1), Windeyer(1) and Owen(1) JJ.

CATCHWORDS

Resumption - Compensation - Resumption of portion of land - Prior to resumption single business carried on in building erected on whole of land - Severance - Allowance for diminution in floor space available for carrying on business - Cost of replacement of floor space as measure of compensation for loss - Disturbance - Compulsory Acquisition of Land Act, 1925-1959 (S.A.), s. 12.

HEARING

Adelaide, 1962, September 28, October 1, 2;
Sydney, 1962, December 5. 5:12:1962
APPEAL from the Supreme Court of South Australia.

DECISION

December 5.
THE COURT delivered the following written judgment:-
The questions for determination in this appeal arise out of the compulsory land owned by the plaintiff in the City of Adelaide, the purpose of the resumption being to widen a narrow street called Gawler Place on to which the resumed land fronted. The plaintiff brought an action for compensation and Millhouse J. awarded it 91,966 pounds. The plaintiff has appealed on the ground that the amount is insufficient and the defendant has cross-appealed on the ground that the amount is excessive. (at p4)

2. The land resumed was portion of a larger area owned by the plaintiff, upon the whole of which was erected a building in which it and its predecessor, a partnership, had been carrying on the business of a wholesale merchant of soft goods and fancy goods for more than one hundred years. The building consisted of a basement and five floors, except for a portion at its eastern end in which there were three floors and a basement. It contained bulk storage space, display floors, a factory for making shirts and other articles, office accommodation and lavatories. The western end of the building had a frontage of 87 feet 8 inches to Gawler Place and from that frontage the land on which the five-storeyed part of the building stood ran back a distance of about 189 feet. The portion resumed was a strip along the whole frontage to Gawler Place with a depth varying from 23 feet 5 inches at the southern end to 23 feet 10 inches at the northern end. The part of the building standing on this strip contained 12,000 square feet of floor space used mainly for showrooms and other purposes of the business. (at p5)

3. The power of the Corporation to acquire land compulsorily is to be found in the Local Government Act, 1934 (S.A.) and, by s. 415 of that Act, the provisions of the Compulsory Acquisition of Land Act (S.A.) are incorporated, with certain exceptions not material to be noticed here. Section 12 of the Compulsory Acquisition of Land Act, which is one of the provisions incorporated in the Local Government Act, sets out the rules to be applied in determining the amount of compensation payable to a dispossessed owner. It directs that "regard shall be had to" the matters set out in r. 1 of which, for the purposes of the present case, the following are material: (a) the value of the land taken, and (b) the damage (if any) by reason of the severing of the land taken from other land of the person entitled to compensation. Rule 2 provides that the value of the land resumed is to be taken to be its value at the beginning of the period of twelve months prior to the giving by the resuming authority of the notice to treat; and by r. 7 no allowance is to be made for any enhancement or diminution in the value of the land taken arising in consequence of any proposal to construct the works for which the land is being acquired or any expectation that the works will be constructed. Under r. 8 allowance is to be made in favour of the resuming authority for any enhancement in value of other land adjoining the land taken or injuriously affected, or severed therefrom, of the person entitled to compensation by reason of the execution, carrying on, or use of the wirks by that authority; and r. 9 provides that the provisions of r. 2 are not to affect the assessment of compensation for disturbance or any other matter not directly based on the value of the land. In the present case, the relevant date for determining the value of the land was 28th September 1958. The date for determining the other matters to which the rules refer is the date when the assessment of compensation is made: Adelaide Fruit and Produce Exchange Co. Ltd. v. Adelaide Corporation [1961] HCA 20; (1961) 106 CLR 85, at p 93 . (at p5)

4. The rules set out in the Act are designed to ensure that the amount of compensation paid will place the dispossessed owner, so far as money can do so, in the same position as he would have been in had his land not been resumed and, in considering that question, "it must be steadily borne in mind that compensation depends upon the value to the owner dispossessed. It is the owner's loss that is to be estimated . . .". (The Moreton Club v. The Commonwealth [1948] HCA 21; (1948) 77 CLR 253, at p 257 ). (at p6)

5. The figure of 91,966 pounds awarded by Millhouse J. was arrived at in the following way. He assessed the improved value of the land resumed at 52,500 pounds. To this he added 48,016 pounds, representing damages for severance, and 10,200 pounds, representing damages for disturbance, making a total of 110,716 pounds. From this he deducted 18,750 pounds, representing the enhancement in value of the land retained by the plaintiff which his Honour considered would result from the widening of Gawler Place. In arriving at his assessment of the value of the land resumed, his Honour accepted the evidence of a Mr. Shuttleworth, a valuer called by the defendant, that, as at 28th September 1958 its improved value was 52,500 pounds, that estimate having been made without taking into account the proposal to widen Gawler Place. Mr. Shuttleworth's figure of 52,500 pounds was made up of 17,000 pounds, representing the unimproved value of the land, and 35,500 pounds, representing the value of the improvements which consisted of so much of the building as stood upon the land resumed. It is clear from an examination of his evidence that, while he considered that the resumed land with the strip of building on it would have had a special value to the plaintiff as being a necessary part of the premises on which it conducted its business, he had not taken that fact into account in arriving at his figure of 52,500 pounds; and that the sum of 35,500 pounds, at which he valued the part of the building on the land resumed, was not based upon the cost of replacing the floor space and facilities in it which were lost to the plaintiff by the resumption. On the appeal counsel for the plaintiff did not quarrel with the amount of 52,500 pounds fixed by the learned trial judge but, for reasons which will appear later, he stressed the fact that that figure took no account of the two matters mentioned above. Having regard to the fact that the whole of the building before resumption was required by the plaintiff for the purposes of the business and that the loss of the part resumed left it with insufficient space, it is surprising that, in determining the value of the land resumed, account was not taken of its special value to the plaintiff. Instead matters which might well have been very material in considering the question of value were treated as coming under the head of damages for severance. Before us, however, counsel for the defendant properly agreed that the ultimate aim must be to ascertain what was the total amount of compensation to which the plaintiff was entitled and that, so long as there was no duplication, it was of little or no importance whether a particular part of the claim was considered under one head rather than under another. It was on this basis that the appeal proceeded. (at p7)

6. Millhouse J. next dealt with the question of damages for severance and this he assessed at 48,016 pounds. He found, and the fact is not questioned, that it was essential to the plaintiff that it should continue to carry on its business on its existing site close to the retail shops with which it does much of its trade, and that the space left to it in that part of the building which it retained is insufficient to enable it to conduct its business as efficiently and profitably as it did before the resumption. The amount of 48,016 pounds fixed by his Honour was arrived at by allowing the cost of constructing a new western wall to the building along the western boundary of the land retained, together with the cost of reinstating in the part of the building retained office and lavatory accommodation which had previously been in the resumed area and of making the necessary alterations to the water and electricity services, and the cost of various temporary structures necessary to enable these works to be done. It has not been suggested that the figure of 48,016 pounds thus arrived at was not an amount proper to be included in the award of compensation but, at the trial and before us, it was contended on behalf of the plaintiff that a further sum should be included to make good damage to the plaintiff resulting from the fact that, as a result of the resumption, it had been deprived of 12,000 square feet of floor space. In support of this claim, evidence was led that consideration had been given by the plaintiff to plans to add two additional floors on the three-storied part of the building at its eastern end which would provide 20,000 square feet of floor space. It appeared that, by arrangement between the parties, plans had been prepared and tenders had been called in 1959 for doing that work and that the amount of the lowest tender was 126,033 pounds. The evidence was that to build additional floors to provide only 12,000 square feet of space would not be practicable since it would necessitate extensive alterations of the lower floors to carry the new floors. Accordingly the case for the plaintiff proceeded upon the basis that the percentage of the total cost of 126,033 pounds which would represent the cost of providing 12,000 square feet of space would be 61.7%. The resultant figure would be 77,762 pounds. To that would have to be added 8 2/3% representing the increase in the cost of building between the date of the tender and the date of trial, and to this again would have to be added 6% representing architect's fees, making the total estimated cost of providing 12,000 square feet of additional space 89,269 pounds. These figures and calculations were not disputed by counsel for the defendant. This part of the plaintiff's claim was rejected on the ground that no final decision had been made by the plaintiff to build the additional floors but, with all respect to his Honour, that was not a relevant fact in considering this issue. The plaintiff's claim was that it was entitled to have included in the compensation to be paid to it the amount required to make good the damage it had sustained by the diminution of its original floor space and that evidence of the cost of providing an equivalent area on the land retained provided a method whereby the amount of that damage might be assessed. Before us counsel for the defendant did not seek to support the reason which led his Honour to rule against this part of the plaintiff's claim. His submission was that it should not be allowed because it would mean that the plaintiff would be compensated twice for the same loss because this part of its claim was already covered by the amount of 35,500 pounds awarded as being the value of the portion of the building on the land resumed. We would have been disposed to think that this submission would have been correct if the value placed by Mr. Shuttleworth upon the part of the building on the land resumed had been based upon replacement cost, although it may be that this does not follow. For example, in the Adelaide Fruit and Produce Exchange Company Case [1961] HCA 20; (1961) 106 CLR 85 it appeared that, in determining the value of the land resumed, the cost of replacement of the improvements on it, or some of them, had been taken into account. The learned trial judge had then awarded the plaintiff a further sum representing the cost of replacing those improvements upon the land retained. On appeal to this Court it was contended on behalf of the resuming authority that the plaintiff was recovering double compensation for the same loss, but the answer given by the Court was that "If, as it seems, the improvements upon the land retained were valued at a figure that would cover replacement cost, it may be that in the result the Company in receiving both replacement cost and the cost of replacing improvements upon the land retained will obtain an advantage, but if it be so this is the accidental consequence of the acceptance of the way in which the buildings were valued and the possibility affords no reason for denying the Company the damages for severance that the evidence and his Honour's findings theron warrant " (1961) 106 CLR, at p 91 . It should be mentioned that in this passage an error has crept in and that the words "land retained" where first used should read "land resumed". It is, however, unnecessary in the present case to consider what would have been the position had the value of the improvements on the land resumed been based upon replacement cost since this was not the case. In these circumstances his Honour rightly allowed, as part of the compensation, an amount representing the cost of building a new western wall on the land retained and of reinstating there the lavatories and office accommodation which had been in the part of the building which stood upon the land resumed, and this is not disputed. He should, however, have also taken into account, as part of the plaintiff's loss, the diminution of floor space caused by the resumption, and that unless replaced this loss of space would necessarily interfere with the conduct by it of its business. To take the cost of replacing on the land retained the floor space lost by the resumption seems to us, in all the circumstances, to provide a reasonable method whereby to measure the compensation payable for that loss, but in doing so the value placed upon the portion of the building on the land resumed must be deducted, otherwise the plaintiff, at the defendant's expense, would be able to provide upon the land retained the same accommodation as it had before the resumption and in addition have the 35,500 pounds representing the value of the portion of the building which stood upon the land resumed. In the result, therefore, it is entitled, as part of its compensation, to 101,785 pounds, that figure being arrived at by adding together 48,016 pounds and 89,269 pounds and subtracting 35,500 pounds. (at p9)

7. The next matter with which the learned trial judge dealt was the claim for damages for disturbance and this he assessed at 10,200 pounds. This represented, in his Honour's view, the probable cost of removing stock and plant out of the part of the building resumed and out of so much of that portion of the remainder of the building as would be necessary to enable the new external western wall to be built and the lavatories and office accommodation to be reinstated. It took into account also the estimated cost of moving stock and plant back after the completion of these operations and the estimated reduction in gross profit while they were in progress. The method by which his Honour arrived at the figure of 10,200 pounds was not criticized. It was said, however, that he had wrongly refused to allow a further amount to compensate the plaintiff for the disturbance to its business which would occur if and when the additional floors were added to the building. There is no doubt that the carrying out of that work would involve the removal and later replacement of stock, plant and fittings and some loss of earnings, but the difficulty which the plaintiff faces on this part of its claim is due to the fact that it has not been decided to add the additional floors to the building and on this issue that is a relevant fact. It cannot even be said, on the evidence, that it is probable that the additions to the building will be made and in these circumstances the plaintiff has, in our opinion, failed to establish this part of the claim. (at p10)

8. Finally his Honour dealt with the question of the enhancement in the value of the land retained by reason of the proposal to widen Gawler Place. He accepted evidence given by Mr. Shuttleworth that the value of the land retained would increase by 500 pounds per foot which, on a frontage of 87 feet 8 inches, would amount to 43,750 pounds. The witness was of opinion that the best economic use to which the new Gawler Place frontage could be put would be to build shops on the ground floor level with a depth of about 30 feet, and the cost of building those shops he estimated to be 25,000 pounds. It was on the assumption that that amount was spent to provide the shops that he had estimated the amount of the enhancement at 500 pounds per foot on the Gawler Place frontage. Accordingly he considered that the amount by which the widening of Gawler Place would increase the value of the plaintiff's land was 18,750 pounds, that being the difference between 43,750 pounds and 25,000 pounds, and this was the figure accepted by his Honour. On appeal counsel for the plaintiff pointed out that these calculations took no account of the fact that the provision of ground floor shops along the new Gawler Place frontage would necessarily involve the loss to the plaintiff of the floor space occupied by those shops and this would amount to about 2,500 square feet. In other words, so it was said, the enhancement in value of 43,750 pounds would be obtained not merely by expending 25,000 pounds to build the shops but also by giving up space required by the plaintiff for the carrying on of its business. On the other hand, counsel for the defendant contended that the figure of 18,750 pounds fixed by his Honour was inadequate and that on the true interpretation of Mr. Shuttleworth's evidence the proper figure was considerably larger. Notwithstanding these criticisms and although the witness' evidence relating to enhancement is not altogether easy to follow, it does seem to point to the conclusion that the witness, who was after all an experienced valuer, was making a comparison of the value of the land retained without regard to the widening of Gawler Place and the value of the same land fronting a wider Gawler Place. This is in accordance with the statute and is the way in which his Honour understood his evidence. His finding should therefore stand. The result, then, is that the amount of compensation to which the plaintiff is entitled is 145,735 pounds arrived at by adding together 52,500 pounds, 101,785 pounds and 10,200 pounds and deducting therefrom 18,750 pounds representing the amount of the enhancement in value of the land retained. (at p11)

9. The appeal should be allowed with costs and the order of Millhouse J. varied accordingly. The cross-appeal should be dismissed with costs. (at p11)

ORDER

Appeal allowed. Judgment of the Supreme Court varied by substituting the sum of 145,735 pounds for the sum of 91,966 pounds wherever appearing therin. Respondent to pay appellant's costs of the appeal. Cross-appeal dismissed with costs.