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McDonald v Department of Transport & Main Roads[2015] QLC 28

McDonald v Department of Transport & Main Roads[2015] QLC 28

 

LAND COURT OF QUEENSLAND

 

CITATION:

McDonald v Department of Transport & Main Roads [2015] QLC 28

PARTIES:

Alyssa Jade McDonald

(applicant)

 

v

 

Chief Executive, Department of Transport and Main Roads

(respondent)

FILE NO:

AQL058-14

DIVISION:

General Division

PROCEEDING:

Determination of compensation under the Acquisition of Land Act 1967

DELIVERED ON:

3 August 2015

DELIVERED AT:

Brisbane 

HEARD ON:

4 – 5 June 2014

HEARD AT:

Brisbane

PRESIDENT:

CAC MacDonald

ORDER:

  1. Compensation is determined in the sum of Four Hundred and Thirty-Four Thousand, Six Hundred and Fifty-Nine Dollars and Ninety-Five cents ($434,659.95). 
  1. The respondent is ordered to pay interest to the claimant at the rate of 5% on the sum of $420,000 on and from 29 August 2008 up to and including 9 October 2012.
  1. The respondent is further ordered to pay interest to the claimant, at the rates published on the Land Court website, on the items of disturbance allowed, such interest to be calculated on and from the date such amounts were paid by the claimant up to and including the day immediately preceding the date on which those items are paid by the respondent to the claimant. 

CATCHWORDS:

Resumption- Acquisition of Land Act 1967 s 20 ‒ special value ‒ loss of an exemption from capital gains tax- rollover relief ‒ Pejama Pty Ltd v Commissioner of Main Roads –Theo v Brisbane City Council ‒ CGT ‒ liability personal and not part of the “value of the estate or interest of the claimant in the land taken under s 20” ‒ Boland v Yates Property Corporation Pty Ltd ‒ absence of special factor on land ‒ any loss not allowed.

Resumption ‒ Acquisition of Land Act 1967 s 20 ‒ disturbance ‒ loss of exemption from capital gains tax ‒ rollover relief ‒ Boland v Yates Property Corporation Pty Ltd ‒ economic loss resulting naturally, reasonably or directly from acquisition ‒ no CGT liability incurred ‒ contingent, unknown, indeterminate ‒ re-establishment of exemption ‒ possible future loss too remote ‒ no claim for disturbance loss.

Resumption ‒ Acquisition of Land Act 1967 (the Act) ‒ loss of CGT exemption ‒ claimant not Australian resident for tax purposes at date of resumption ‒ CGT event ‒ s 104.160 Income Tax Assessment Act 1997 ‒ resident of Australia ‒ s 6 (1) Income Tax Assessment Act 1936 ‒ Taxation Ruling IT2650 ‒ domicile and permanent place of abode ‒ CGT exemption no longer available.

Resumption ‒ Acquisition of Land Act 1967 – loss of CGT exemption – quantification – various figures claimed between $180,000 and $2,300,000 – variations demonstrate uncertain and contingent nature of this aspect of claim.

Resumption – Acquisition of Land Act 1967 – disturbance items – stamp duty – RP data property report – removal and storage – relocation of services/utilities – financial/quantification advice – legal costs – interest. 

Acquisition of Land Act 1967

Income Tax Assessment Act 1997 (Cth)

Land Acquisition (Just Terms Compensation) Act 1991 (NSW)

Boland v Yates (1999) 74 ALJR 209

Burns v Eurobodalla Shire Council (2006) 149 LGERA 227

G and M Core Pty Ltd v The Commissioner for Railways (1976) 3 QLCR 342

Director of Buildings and Lands v Shun Fung Ironworks Limited [1995] 1 All ER 846

Groves v Ryde Tyre Service Pty Ltd (unreported) NSWLEC, 13 April 1992

Heavey Lex No 64 Pty Ltd v Chief Executive, Department of Transport (2001) 22 QLCR 177

Horn v Sunderland Corporation [1941] 2 KB 26

LR Beilharz Investments Pty Ltd v Darling Harbour Authority (unreported), 23 April 1991

Merivale Motel Investments Pty Limited v The Brisbane Exposition and South Bank Redevelopment Authority (1984-1985) 10 QLCR 268

Pejama Pty Ltd v Commissioner of Main Roads (1989) 12 QLCR 278

Prince Alfred Reserve Trust v State Rail Authority (NSW) (1997) 96 LGERA 75

State of Queensland v Pajares (2004) 25 QLCR 165

The Commonwealth v Milledge (1953-1954) 90 CLR 157

Theo v Brisbane City Council (1990) 13 QLCR 160

Vass and Lambert v Coordinator-General (No. 2) [2015] QLAC 2 

APPEARANCES:

Mr N McDonald, agent, for the applicant

Mr JM Horton of counsel, for the respondent

SOLICITORS:

Clayton Utz Lawyers for the respondent

Background

  1. [1]
    On 29 August 2008 the Chief Executive, Department of Transport and Main Roads (the respondent) resumed land at 29 Lamington Avenue, Lutwyche.  The claimant in these proceedings, Alyssa Jade McDonald, was the owner of the land, described as Lot 5 on BUP 9803 in the County of Stanley, Parish of Enoggera.  In these proceedings, the claimant is seeking a determination of compensation for the resumption of her estate or interest in the land under the provisions of the Acquisition of Land Act 1967 (the Act).
  1. [2]
    The parties have agreed on the value of the claimant’s estate or interest in the land taken other than:
  • whether the claimant is entitled to compensation for loss of an exemption from capital gains tax (CGT) caused by the resumption;
  • the quantum of any such entitlement;  and
  • disturbance losses.

The agreed value of the land component is $420,000. 

  1. [3]
    The parties are also in disagreement as to the allowance to be made for interest.

Loss of capital gains tax exemption

  1. [4]
    The claimant purchased the property at 5/29 Lamington Avenue in 1997 in conjunction with another family member.  She became the sole owner of the property in approximately 2000.  The evidence was that she lived at the property until 2004 and thereby obtained an exemption, in respect of any future sale of the property, from liability for payment of CGT on the proceeds of such a sale, under s 118-110 of the Income Tax Assessment Act 1997 (Cth), known as the principal place of residence (PPR) exemption. 
  2. [5]
    The claimant has not lived in the property since 2004 as she has been living and working overseas since that time.  However, her case is that the PPR exemption for the property continued despite her departure overseas, and would have continued indefinitely, in the absence of the resumption, unless and until the property became income producing, or the claimant established another PPR in Australia, or the claimant became a non-resident of Australia for taxation purposes.
  3. [6]
    The claimant says that the effect of the resumption was that she has lost the benefit of the CGT exemption because if she were to purchase another property in substitution for the Lamington Avenue property, she could not establish the new property as a PPR unless she moves into the new property to establish it as her PPR[1].  It may have been possible for the claimant to obtain rollover relief, that is to purchase a new property and roll the CGT exemption over to that property, if she had purchased a replacement property within one year after the income year in which her property was resumed.  Section 124-85 of the Income Tax Assessment Act 1997 (Cth) was in force as at the date of resumption.  It is not clear whether that provision would have allowed the Commissioner to exercise a discretion to extend the time for rollover beyond one year.  In any event, the claimant says she could not afford to buy a replacement property until she received compensation monies.  The claimant therefore seeks compensation for the loss of the benefit of the PPR exemption in the amount of $180,348[2]. 
  4. [7]
    The claim for loss of the CGT exemption was put on two bases under s 20 of the Act – as a claim for special value or as a disturbance loss. 
  5. [8]
    The respondent says that compensation is not payable in respect of the loss of the PPR exemption both as a matter of fact and by reason of binding Land Appeal Court authority.  The respondent also contests the quantum of the claim.
  6. [9]
    Expert evidence in relation to this aspect of the claim was given for the claimant by Mr A White and Mr TJ Monaghan.  Mr N Calabro was called by the respondent.
  7. [10]
    Mr Nathan McDonald, the claimant’s brother, conducted the claimant’s case as her agent at the hearing.  Mr J Horton of counsel appeared for the respondent.

Whether loss of CGT exemption claimable

  1. [11]
    As at the date of resumption, s 20 of the Act provided that[3]:

“20 Assessment of compensation

  1. (1)
    In assessing the compensation to be paid, regard shall in every case be had not only to the value of land taken but also to the damage (if any) caused by either or both of the following, namely –
  1. (a)
    the severing of the land taken from other land of the claimant;
  1. (b)
    the exercise of any statutory powers by the constructing authority otherwise injuriously affecting such other land. 
  1. (2)
    Compensation shall be assessed according to the value of the estate or interest of the claimant in the land taken on the date when it was taken.
  1. (3)
    In assessing the compensation to be paid, there shall be taken into consideration, by way of set-off or abatement, any enhancement of the value of the interest of the claimant in any land adjoining the land taken or severed therefrom by the carrying out of the works or purpose for which the land is taken. 
  1. (4)
    But in no case shall subsection (3) operate so as to require any payment to be made by the claimant in consideration of such enhancement of value.”
  1. [12]
    A CGT related claim for compensation was considered by this Court in Pejama Pty Ltd v Commissioner of Main Roads[4] and by the Land Appeal Court in Theo v Brisbane City Council[5].  In both cases the claim was rejected.
  2. [13]
    It is not clear from the decision in Pejama what the basis of the liability for CGT was said to be nor the basis of the claim for compensation in respect of CGT.  The matter was dealt with briefly by the learned Member who said[6]:

“The item following – capital gains tax – is somewhat novel and in my opinion is not compensable.  It appears to me that the liability is merely an incident of ownership which runs with the land.  In assessing compensation, it is the value to the owner;  that is, what he could achieve in the market place and not the value of the land in his hands that is the criterion  Maori Trustee v. Ministry of Works (1959) A.C. p. 1 P.C.

  1. [14]
    In Theo, the resumed land was purchased by the claimants as an investment property prior to the introduction in 1985 of the legislation imposing CGT.  The claimants in Theo submitted that the compensation money (other than interest) received by them was not liable for CGT because the land had been purchased prior to the introduction of the CGT.  They also submitted that they were entitled to compensation for any CGT which might be payable upon the realization of any replacement capital investment property if they elected to acquire one.
  2. [15]
    The Land Appeal Court rejected the claim.  The Court said that the liability of taxpayers for CGT on the sale of a property was indistinguishable from liability in respect of income tax formerly assessable on sales caught by s 26(a) of the Income Tax Assessment Act.  The liability was personal and did not form part of the “value of the estate or interest of the claimant in the land taken” under s 20(2) of the Act[7].  The Court said[8]:

“… there is no authority for the proposition that an award of compensation payable upon a resumption should be adjusted or altered so as to take into account the liability of the claimants to income tax.  As was stated by Else-Mitchell J. in Chong v Fairfield Municipal Council (1968) 88 W.N. (NSW) 346 at p. 350

 ‘I was unable to agree that the liability or otherwise to income tax of a developer has any relevance to the assessment of compensation.  Income tax is not a charge on land or on the income or assets of a taxpayer:  it is an exaction imposed by government and quantified by factors and criteria which in many respects are personal to the taxpayer and are capable of arrangement or re-arrangement so as to vary the total tax burden.’

We are in agreement that income tax is not a charge on land.”

  1. [16]
    The claimant in these proceedings sought to frame her case on a different basis from that in Theo by submitting that her right to a CGT exemption was based on her actual use of the subject land, rather than its purchase prior to the introduction of the CGT legislation, as was the case in Theo.  It is necessary to consider this submission in some detail.  The submission relied principally on the opinion of Mr T Monaghan, a practising chartered accountant, as to the relevance of the decision in Burns v Eurobodalla Shire Council[9].
  2. [17]
    In Burns, the applicant’s claim for compensation for compulsory acquisition of two adjoining parcels of land included a claim for special value under s 55(b) of the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) which provided that in determining compensation to which a person is entitled, regard must be had to any special value of the land to the person on the date of its acquisition.  Special value was defined in s 57 of that Act as follows:

“special value of land means the financial value of any advantage, in addition to market value, to the person entitled to compensation which is incidental to the person’s use of the land.”

The applicant had purchased the land prior to September 1985 and had planned to use the property as an asset for his retirement, in that he intended to build a dwelling on each allotment, live in one and rent the other and, ultimately, sell the rented property for retirement income.  The land was exempt from CGT having been purchased before 1985.  The applicant claimed that he was unable to find a suitable property to replace the acquired property and therefore he was unable to take advantage of the provisions which would have enabled him to rollover the exemption to a replacement property.  The applicant also said that the financial advantage of the exemption was incidental to his use of the property as an investment for retirement purposes. 

  1. [18]
    The Court held that, on the facts, the applicant was able to purchase a replacement property within a reasonable time and therefore he should not be compensated for CGT as no CGT would be incurred.  However, the Court went on to discuss whether the exemption from CGT could constitute “special value” as claimed and held that capital gains tax was not special value incidental to the applicant’s use of the land.  Rather, it was rightly characterized as a personal liability of the applicant and akin to income tax.  It was a future benefit/detriment, which was too intangible to be attached to the usage of the land[10]. 
  2. [19]
    Mr Monaghan sought to distinguish the decision in Burns on a number of grounds: 
  1. (i)
    In Burns, Lloyd J relied on s 57 of the New South Wales Act.  There is no equivalent section in the Queensland Act. 
  1. (ii)
    In Burns, the CGT rollover was still available to the applicant, subject to the issue of whether the applicant could find a suitable replacement property.  The rollover was no longer available to Ms McDonald, unless a discretion in favour of Ms McDonald is exercised by the commissioner.
  1. (iii)
    In Burns, Lloyd J considered the question of whether the future CGT would have been allowed under s 59 of the New South Wales Act which, Mr Monaghan said, was similar to s 20(5) of the Queensland Act.  Lloyd J referred to the case of Prince Alfred Park Reserve Trust v State Rail Authority (NSW)[11] and said[12]:

“Pearlman J found that capital gains tax cannot be categorised as a financial cost relating to the actual use of the land.  Her reasoning mirrored that of Bignold J in Beilharz, viewing capital gains tax as an income tax and a personal liability of the taxpayer unrelated to the actual use of the land.” 

Mr Monaghan considered that the operative words were “actual use of the land”. 

  1. (iv)
    In the Burns case the actual use of the land was as vacant land with the owner intending to construct two buildings, one to become his residence and the other an income producing property.  Ms McDonald’s actual use of the land was as her main residence prior to the compulsory acquisition with the intention of not altering that use for an indefinite period of time.
  1. (v)
    The CGT exemption in Burns did not relate to the actual use of the land as it was based purely on the timing of the original acquisition.  The CGT in the current case relates solely to the actual use of the land.
  1. (vi)
    The New South Wales legislation refers to the “actual use of the land” taken (s 59(f));  the Queensland Act refers to the “use of the land taken” (s 20(5)(e)).  Mr Monaghan submitted that the intention of the legislation was to deal only with issues related to actual use.
  1. (vii)
    In Burns, there was no direct link between the actual use of the land and the CGT exemption.  In the current case the exemption and loss of the exemption are closely related to the use of the land. 

Special value

  1. [20]
    Points (i), (ii), (iv), (v) and (vii) in the previous paragraph relate to the claim based on special value.  As Mr Monaghan pointed out, unlike the 1991 NSW legislation, there is no mention of special value in s 20 of the Acquisition of Land Act.  Nevertheless, there is clear authority in Queensland that special value is an element of the “value of the estate or interest of the claimant in the land taken” referred to in s 20(2) and that, where special value is proved, compensation is to be paid for that value in addition to the market value of the land[13]. 
  2. [21]
    The most authoritative relatively recent discussion of the concept of special value in cases where there is no statutory definition of the term is found in the decision of the High Court in Boland v Yates Property Corporation Pty Ltd[14].  Having stated that special value and disturbance are separate but related concepts, Callinan J said[15]:

"The special value of land is its value to the owner over and above its market value. It arises in circumstances in which there is a conjunction of some special factor relating to the land and a capacity on the part of the owner exclusively or perhaps almost exclusively to exploit it.  … There will in practice be few cases in which a property does have a special value for a particular owner.  Obviously neither sentiment nor a long attachment to it will suffice."

  1. [22]
    In this case, the resumed land had no special factor of the kind referred to by Callinan J.  The CGT exemption arose only because the claimant had chosen to establish her principal place of residence there.  That was a choice she could have made in respect of any residential property in Queensland.  The fact that the claimant’s CGT exemption arose from the use of the resumed property as her PPR rather than because the property was acquired prior to 1985 makes no difference to the characterisation of CGT as an income tax.  The tax is personal to the claimant as a taxpayer and is not related to the land itself so as to constitute special value[16].  I consider therefore that the reasoning and decision of the Land Appeal Court in Theo v Brisbane City Council[17] is applicable to the claim based on special value brought by the claimant in this case.  The benefit of the exemption from CGT liability was purely personal and did not form part of the estate or interest of the claimant in the land taken.  It follows that the loss of that benefit did not ground a claim for compensation for special value under the Act.
  2. [23]
    It also follows that any loss by the claimant of the benefit of the rollover provisions in the Income Tax Assessment Act does not provide a relevant distinction between this case and the authorities referred to above. 
  3. [24]
    Accordingly the claim for compensation for loss of the CGT exemption is not allowed.

Disturbance

  1. [25]
    The claimant also submitted that the loss of the CGT exemption was compensable as a disturbance loss under s 20 of the Act.  Points (iii) and (vi) in [19] above raise that issue. 
  2. [26]
    Section 20 was extensively amended in 2009[18].  Relevantly, s 20(1)(b) was inserted providing that the claimant’s costs attributable to disturbance were to be taken into account in assessing the compensation to be paid and new s 20(5) provided an extended definition of the phrase “costs attributable to disturbance”.  However, the legislation to be applied in determining compensation in this case is the Acquisition of Land Act as it stood at the date of resumption, that is Reprint 5A.  There was no equivalent of s 20(1)(b) or s 20(5) in the Act as at that date.  Nevertheless, it had long been recognized prior to the introduction of those subsections that in Queensland disturbance losses were to be included as part of the compensation to be paid for the loss of the owner’s estate or interest in the land[19].  The result is that the law to be applied in considering the disturbance claim in this matter is the law developed in cases decided prior to the introduction of s 20(1)(b) and s 20(5) into the Act in 2009.
  3. [27]
    Boland v Yates Property Corporation Pty Ltd[20] was a case where the relevant legislation did not incorporate provisions similar to s 20(1)(b) and s 20(5) of the Act.  In that case, Callinan J accepted[21] the definition proposed by the Australian Law Reform Commission[22] that disturbance covers

“economic losses which result naturally, reasonably or directly from acquisition.  It may include such items as removal expenses, costs of necessary replacement of furniture and fittings, legal and other costs of purchasing [an alternative site] and loss of local goodwill.”

His Honour continued[23]:

“Some of these items may however also fall under the head of valuation previously referred to as reinstatement. 

I would merely add that compensation for disturbance may not be available if the claims for it are too remote as I think the settlement sum may well have been here.”

  1. [28]
    It is apparent from the definition of disturbance adopted by Callinan J that the concept of disturbance potentially encompasses a wider range of claims than does the concept of special value.  To succeed in this claim, however, the claimant must establish an economic loss which results naturally, reasonably or directly from the acquisition. 
  2. [29]
    The claimant says that, as a result of the resumption, she has lost her property which was her major investment.  She had intended to keep the property indefinitely with the expectation that it would continue to increase in value, and that she would not be liable to pay CGT on the increase in value as and when she might sell the property.  I have not been able to find any authority where such a CGT claim has been made (or, therefore, allowed) in circumstances such as these. 
  3. [30]
    The difficulty faced by the claimant is that she has not established that she has suffered any loss within the scope of the definition adopted by Callinan J in Boland v Yates.  She has not incurred any liability to pay CGT.  Nor is there any evidence that she is likely to incur any such liability at a definite time in the future.  The claimant says that the loss of the CGT exemption has prevented her from purchasing a replacement property.  Assuming that is so the result is that, as at the date of the hearing, which was six years after the resumption, the claimant had not incurred even a potential liability for CGT, as she owned no property in relation to which such a liability might arise.  Any liability of the claimant to pay CGT in the future could at best be described as contingent.  Whether a CGT exemption would apply to any replacement property is completely unknown and dependent in part on the claimant’s arrangements of her personal affairs.  For example, the claimant has said that she intends to return to Australia in the future and live here with her husband.  Should she purchase a property, she could establish a PPR exemption by living in the property for the appropriate period.  However, even if such an exemption did not apply to a replacement property, any consequent liability for CGT on the sale of such a property is also unknown and indeterminate.  Put at its highest, the claimant has, as a result of the resumption, lost the benefit of the CGT exemption that related to the resumed property.  The loss of the exemption has not translated into an economic loss or liability incurred or likely to be incurred.  In Director of Buildings and Lands v Shun Fung Ironworks Limited[24] the Privy Council said that the purpose of the relevant legislative provision is to provide fair compensation for a claimant whose land has been compulsorily taken.  The Privy Council continued[25]:

“The adverse consequences to a claimant whose land is taken may extend outwards and onwards a very long way, but fairness does not require that the acquiring authority shall be responsible ad infinitum.  There is a need to distinguish between adverse consequences which trigger a claim for compensation and those which do not.  … The law describes losses which are irrecoverable for this reason as too remote.”

 In my opinion any loss that the claimant may suffer in the future is not compensable because such loss would be too remote.  On that basis, I do not consider that the loss of the CGT exemption can be claimed as a disturbance loss.

Whether there was a loss of the CGT exemption caused by the resumption

  1. [31]
    Although my conclusion in the previous section would dispose of the claim in respect of the CGT exemption, there is a second equally compelling reason for my conclusion that the claim cannot succeed.  That reason is that I have formed the view that it is likely that the claimant no longer had the benefit of the CGT exemption for the resumed property as at the date of resumption because she was no longer an Australian resident for tax purposes, having lived and worked overseas for four years.  Cessation of her status as an Australian resident for tax purposes was a ‘CGT event’ which would render her liable to CGT under s 104.160 of the Income Tax Assessment Act. 
  2. [32]
    The claimant contended that she had retained her Australian residency for tax purposes and adduced a significant amount of evidence about that issue.  When she left Australia in August 2004, her intention was to work in a couple of different jobs in different places for a few months.  She started full-time work for Deutsch Telekom in Germany in 2004, initially as a volunteer.  After three months she was offered a full-time position as international brand manager for a subsidiary of Deutsch Telekom in Frankfurt, where she was responsible for the international brand management and strategy for 28 countries.  She remained in that position until the end of 2007 when she was promoted to headquarters in Bonn where she was responsible for 65 countries.  She held that position until the end of 2009.  During that period she travelled all round the world, particularly to Athens, New York and London.  She had apartments in Bonn, Athens and New York but also travelled to Hungary, Ecuador, Switzerland and Italy.  She spent the longest periods in Greece, Hungary, Germany and Ecuador. 
  3. [33]
    At the end of 2009 the claimant established her own business, BLYSS GmbH.  The company is registered in Germany and is regulated under German law.  The company produces a special type of chocolate and the main customers are in the Middle East, India, Australasia and Europe.  The claimant married a German citizen in 2013, in a ceremony conducted in Australia.  From 2009 to 2013, she had no apartment or house that she called home.  She travelled all over the world to see customers, staying in hotels or customer’s or friend’s homes.  She has business connections in Australia.  She has always called Australia home although she had no home in Australia because of the resumption of her property.  Her most important and favourite possessions are stored in different locations in Australia and all of her friends are in Australia.  When she visits Australia, she ticks the box as a returning Australian resident on the landing card.  She uses her mother’s address in Australia as her home address when completing forms for immigration and visa purposes.  Her clothes are sent forwards and back to her mother each summer and winter. 
  4. [34]
    The claimant filed no tax returns in Australia from 2005 until late May 2014.    Her evidence was that she did not believe that it was necessary to lodge returns in Australia as she was lodging returns and paying tax in Germany during that period.  Tax returns for the period were filed in Australia just prior to the hearing.
  5. [35]
    Section 6(1) of the Income Tax Assessment Act 1936 relevantly provides that “resident or resident of Australia” means: 
    1. (a)
      a person, other than a company, who resides in Australia and includes a person
  1. (i)
    whose domicile is in Australia, unless the Commissioner is satisfied that the person’s permanent place of abode is outside Australia; “
  1. [36]
    Taxation Ruling IT 2650 issued by the Australian Taxation Office (ATO) on 8 August 1991 identifies two relevant tests to ascertain whether an individual is a resident;
  • residence according to ordinary concepts;
  • domicile and permanent place of abode test.

The ruling says that there are no conclusive rules for determining the residency status of individuals leaving Australia temporarily, but the following factors are to be taken into account:

  1. (a)
    the intended or actual length of the individual’s stay in the overseas country;
  2. (b)
    any intention either to return to Australia at some definite point in time or to travel to another country;
  3. (c)
    the establishment of a home outside Australia;
  4. (d)
    the abandonment of any residence or place of abode the individual may have had in Australia;
  5. (e)
    the duration and continuity of the individual’s presence in the overseas country;  and
  6. (f)
    the durability of association that the individual has with a particular place in Australia.

The Ruling says that the weight to be given to each factor will vary with individual circumstances of each case and no single factor is conclusive. 

  1. [37]
    I consider that it is likely that the Commissioner of Taxation would decide that the claimant is not resident in Australia within the ordinary meaning of that word which, in IT 2650, is “to dwell permanently, or for a considerable time, to have one’s settled or usual abode, to live in or at a particular place”.  The question then becomes whether the claimant comes within the extended definition of that term in s 6(1)(a)(i) of the Income Tax Assessment Act 1936, that is, is she domiciled in Australia and if so is her permanent place of abode outside Australia? 
  2. [38]
    The claimant appears to be domiciled in Australia and the respondent did not contend otherwise.  The next question is whether her permanent place of abode is outside Australia. 
  3. [39]
    The claimant’s activities since she left Australia in 2004 do not fit neatly into any one or group of the factors set out above.  Although the claimant did not intend to leave Australia for a lengthy period at the time of her departure, as at the date of the hearing she had not lived in Australia for 10 years.  During that period she visited Australia from time to time.  She had intended to retain the Lamington Avenue property indefinitely, secure in the knowledge, until the resumption, that the property would be available for her use as and when she did return to Australia.  Although she regards herself as an Australian resident and intends to return to live in Australia at some time in the future, she has no intention to do so at any particular time.  She said that she and her husband would settle in Australia after her husband’s children finish school.  Her important possessions are kept in Australia and it appears that she retained at least one bank account here.
  4. [40]
    Within a period of months after leaving Australia the claimant was employed full time by a German company for approximately five years.  Although the nature of the work was such that she travelled continuously throughout the world so that she saw no need to establish her own home in Europe, I consider that at the date of the resumption it is likely that the Federal Commissioner of Taxation would rule that she was no longer an Australian resident for tax purposes.  By that time she had been absent from Australia for four years and had no intention to return to Australia at any definite time.  Taxation ruling IT 2650 says that as a broad rule of thumb, a period of about 2 years or more would generally be regarded as a substantial period for the purpose of a taxpayer’s stay in another country although this is not conclusive.  Although she travelled to other countries the claimant had, in my opinion established a connection with Germany in that she was in stable employment with a German company initially based in Frankfurt and subsequently in Bonn.  She lodged returns and paid tax in Germany. 
  5. [41]
    It is not clear whether the claimant had established a home between 2004 and 2008 as she apparently had the use of apartments in Bonn, Athens and New York.  However, even if she had not set up her own home in Germany or anywhere else, that is not conclusive, and I consider, it is outweighed by the length of time she had been away from Australia, as at the date of resumption, and the fact that she had a long term job based in Germany.  Moreover, the reason the claimant had not established a home appears to be related to the nature of her employment, not because she was simply travelling to “see the world”.  Although the claimant retained her residence in Australia, and visited Australia from time to time, the major part of her life was based outside Australia.  The consequence is that CGT event I1 occurred because the claimant had ceased being an Australian resident by the date of resumption.  Consequently, it is likely that the claimant no longer had the benefit of a CGT exemption for her property as at that date.

Quantum of GST exemption

  1. [42]
    It is unnecessary for me to decide this issue in view of my conclusions above.  The amount claimed has been quantified at various figures between approximately $2,300,000 and $180,000.  In my opinion the variations in the quantification by the claimant of her loss, in materials filed in this Court, demonstrate the contingent and uncertain nature of this aspect of the claim. 

Other disturbance claims

  1. [43]
    As discussed above, the claimant is entitled to compensation for disturbance losses, that is economic losses which result naturally, reasonably or directly from the acquisition.  The remaining claims are discussed below. 
  2. [44]
    Stamp Duty:  The claim is for $5,950 and appears to relate to a possible purchase of a replacement property.  While expenditure on stamp duty paid on the purchase of a replacement property would in principle be allowed as a disturbance item, in this case no replacement property has been purchased and there is no compelling evidence that such a property will be purchased at any definite time in the near future.  Therefore there has been no proof of loss of this money.  The claim is disallowed.
  3. [45]
    RP Data Property Long Term Value Report:  The claim is for $1,040.  A ‘product schedule’ dated 17 February 2014 is in evidence[26] from which it appears that the services/information to be provided by RP Data were to commence on 17 February 2014 and to continue for 12 months.  The charge was to be $20.00 a week + $2.00 GST for 12 months.  The total of the charge for 1 year would therefore be $1,040 excluding GST.  Mr McDonald said that he had purchased a housing report from RP Data.  No receipt for payment has been provided by the claimant although it appears that payment by credit card was authorized by Mr McDonald. 
  4. [46]
    Claims for disturbance to reimburse a claimant for the costs of bringing a claim for compensation to this Court are in principle allowed subject to the proviso that the amount of the costs is reasonable and that it was reasonable for those costs to be incurred[27].  However such claims are limited to costs incurred up to and including the filing of the claim in this Court.  Legal and other costs of the proceeding incurred after filing the claim in this Court are to be dealt with under s 27 of the Act as costs of and incidental to the hearing and determination of the claim by the Court.
  5. [47]
    There are a number of difficulties with this claim.  First it is not clear what data was to be provided by RP Data nor how such data might be relevant to the claim.  Second no receipt has been provided establishing that payment was made.  Third, it is not clear why the data was requested for a year.  Fourth, if the data was relevant to preparing the claim, the maximum amount payable would be $20/week for two weeks, that is $40 plus GST.  In the circumstances the claim for $1,040 is not allowed.  The claim may be allowable as a cost of the litigation, if it is shown to be relevant for that purpose. 
  6. [48]
    Removal and storage costs:  The claim is for $21,806.50.  Removal and storage costs incurred as a result of compulsory acquisition are in principle recoverable as disturbance items.   It appears that the claimant’s home contents (personal goods and furniture) have been stored at her mother’s residence since the resumption.  The claimant’s mother said in an email that she remembers paying a removalist to move the goods to her property but the records she was keeping for the claimant were lost in the floods.  No evidence has been provided by the claimant that the storage liability has been incurred or paid. 
  7. [49]
    In materials filed on 1 April 2014, the removal from Lutwyche to storage was quantified as: 
  • Packing  Lutwyche – 8 hrs @ $149/hr Brisk rates) = $1,192.00
  • Moving from Lutwyche to storage 5 hrs @ $149/hr =   $745.00

It appears that the ‘storage’ referred to above is located at Bulimba.  The goods have not been stored at Bulimba but at the claimant’s mother’s property[28].  The claimant’s mother says that the goods were moved from Lutwyche to Everton Park[29]. 

  1. [50]
    Although no receipts have been provided for the costs of removal, I have accepted the explanation for their loss.  The amount per hour set out above appears to be reasonable as does the time for packing and removal of the goods from Lutwyche to Everton Park.  The claim is allowed as follows:

 Packing – 8 hours @ $149/hr  = $1,192.00

 Moving – 5 hours @ $149/hr  =    $745.00

    Total     $1,937.00

  1. [51]
    Relocation of services/utilities (phone, gas etc):  $1,000 (estimated by claimant).  Again no evidence has been provided that this liability has been incurred or paid.  The claim is not allowed.
  2. [52]
    Legal costs:   McCullough and Robertson : $3,722.95

 Ellison Moschella   : $9,000.00

These items have been paid and have been accepted by the respondent.  They are both allowed.

  1. [53]
    Mustor Institute Fees:  The claim is for $13,535 made up as follows -

 Compensation Determination Services:  21 hours @ $645.00 = $13,535.00

  1. [54]
    The respondent has submitted that the fees are in reality payable to Mr Nathan McDonald who has conducted the case on behalf of the claimant. 
  2. [55]
    The claim is supported by an invoice dated 10 May 2013 but there is no evidence that the amount has been paid.  Further, there is no detail in the invoice as to the nature of work done, when the work was done, nor how the hourly rate was set. I am unable to say therefore whether the charges are reasonable. 
  3. [56]
    As I am not satisfied that the amount has been paid or whether the charges are reasonable, or reasonably incurred, I am not able to allow this claim. 
  4. [57]
    Solutions Trust Fees:  The claim is for $7,050 and the Solutions Trust invoice itemises work done between 22 October 2012 and 1 September 2013.  The work was done for the claimant by Mr Mark Andrews in relation to the quantification of the claim for loss of the CGT exemption.  Mr Andrews prepared a written report which was filed on 16 April 2014.  Mr Andrews was not required to give evidence.  He describes himself as having expertise and experience in assisting people, many who are financially challenged, to facilitate equitable settlements to outstanding issues.
  5. [58]
    There are a number of reasons not to allow this claim.  There is no evidence that the invoice has been paid.  Further, there is no evidence that the amount of time claimed (47 hours) nor the rate per hour claimed ($150) was reasonable.  Nor am I satisfied that Mr Andrews has sufficient expertise to be described and paid as an expert witness.  The claim is not allowed. 
  6. [59]
    The total of the disturbance items allowed is $14,659.95.
  7. [60]
    Therefore the compensation to be awarded is calculated as follows:

Value of land   $420,000.00

Disturbance   $14,659.95

    $434,659.95

Interest

  1. [61]
    Section 28 of the Act provides: 

"28   Interest

(1) Subject to subsection (2), in respect of the period or any part of the period commenced on and including the date on and from which any land is taken and ending on and including the day immediately preceding the date on which payment of compensation is made the Land Court or, upon appeal, the Land Appeal Court may order that interest be paid upon the amount of compensation determined by it.

(1A) Such interest shall be at such rate per centum per annum as the Land Court or, upon appeal, the Land Appeal Court, deeming reasonable, fixes by the order.

(1B) Interest so ordered to be paid shall be payable as if it were part of the compensation in question and shall be added to the amount thereof and be payable by the constructing authority accordingly.

(2) Interest shall not be payable in respect of any amount of compensation advanced under section 23."

  1. [62]
    As noted above, the sum of $420,000 was paid into the Supreme Court by the respondent on 10 October 2012 for the reasons set out by Mr PJ Dwyer in his affidavit sworn on 3 June 2014.  Mr Horton submitted that no interest is payable on this amount after 10 October 2012, the date of the payment into Court.
  2. [63]
    I have accepted that submission.  Section 23 of the Act makes provision for the payment of an advance against compensation.  As indicated in Mr Dwyer’s affidavit, the respondent attempted on a number of occasions to enter into negotiations with the claimant concerning settlement of the compensation issue and, from 28 May 2010, to pay an advance of $420,000 to the claimant.  The claimant did not accept payment of the advance with the result that that amount was paid into Court.  The effect of the payment into Court is that $420,000 has been advanced.  Section 28(2) provides that interest shall not be payable in respect of any amount of compensation advanced under s 23.  Therefore, no interest is payable on that amount after that date.
  3. [64]
    Mr Horton also submitted that the interest payable to the claimant should be reduced by half because of the dilatory conduct of the claimant in progressing her claim and accepting the advance.  The respondent relied on Mr Dwyer’s affidavit in support of that submission.  Further, Mr Horton submitted, the claimant’s case had changed regularly and frequently as evidenced by the numerous “statements of quantum” filed on behalf of the claimant.  Where there has been unreasonable delay in lodging and/or pursuing a claim, he said, the Court should not follow its usual practice of ordering interest to be paid on compensation from the date of resumption until compensation has been paid by the constructing authority. 
  4. [65]
    The subject land was taken on 29 August 2008.  The Acquisition of Land Act provides that on and from that date, the estate and interest of every person entitled to the whole or any part of the land is thereby converted into a right to claim compensation under the Act (s 12(5)).  Section 19(1) of the Act provides that a claim for compensation is to be in writing and served on the constructing authority.  Although there were numerous communications and some meetings between the claimant and/or her mother with the respondent department, no claim for compensation was served on the respondent.  Accordingly, the respondent referred the question of the amount of compensation to the Land Court for hearing and determination, under s 24(1), on 18 December 2013.  The claimant subsequently filed an application for the determination of compensation in this Court on 26 February 2014, pursuant to a Court order.
  5. [66]
    Mr Dwyer’s affidavit sets out in detail the history of the department’s attempts to discuss and settle with the claimant the issue of compensation and the possible payment of an advance.  I am satisfied that the department initially, and Mr Dwyer subsequently, made numerous attempts to contact the appellant or her agents in an endeavour to settle the matter or at least to pay an advance against compensation.
  6. [67]
    It appears that from some time before and after the date of resumption the claimant had engaged two firms of solicitors, McCullough Robertson whose invoice was paid in June 2009 and Ellison Moschella whose fees were paid on 24 September 2013.  The correspondence annexed to Mr Dwyer’s affidavit shows that on 8 August 2008 (that is, prior to the resumption) an offer to settle the matter was made by Ellison Moschella on behalf of the claimant.  Thereafter there appears to have been no substantial response from the claimant or the solicitors to various communications from the department in 2009.  In May 2010 a meeting was held between the department’s representatives and the claimant (or the claimant’s mother) where an offer of settlement was made by the respondent.  An email was subsequently sent by the department to the claimant’s mother on 28 October 2010 following up on that offer.  On 10 May 2011, the department attempted again to settle the matter or to pay an advance.  On 7 June 2011 a further settlement offer was made by the department.  Further emails were exchanged in 2011 and in early 2012 the claimant wrote to the Minister for Main Roads about the matter.  The department wrote again to the claimant in January 2012 but no progress was made towards settlement.  In May 2012 Mr Dwyer wrote to the claimant advising that he acted on behalf of the department.  Further letters were sent to the claimant in May 2012, and in August 2012 Mr Dwyer advised the claimant that he was instructed to pay an amount of compensation into court but also making a final offer of settlement.  The claimant again sought a meeting with the Minister for Main Roads in June 2012 but the Minister was unable to meet with her.
  7. [68]
    The claimant was represented by her brother, who is not a lawyer, from the time the application was filed in this Court and at the hearing.  She had engaged lawyers for a number of years prior to filing the claim in this Court.  While she appears not to have been satisfied with the lawyers she employed, there was no clear explanation as to her reasons for not instructing other lawyers.  The issues about which the parties were in dispute were, essentially, questions of law, and the claimant and Mr McDonald were therefore at a particular disadvantage in formulating the claim, providing appropriate evidence in support of it and in responding appropriately to the respondent’s submission and evidence.
  8. [69]
    There has undoubtedly been delay by the claimant in responding to the approaches made by the department to settle the matter and in filing proceedings in this Court.  However, the claimant clearly believed that she had a sustainable claim in respect of the loss of the CGT exemption.  While I have rejected that claim, I accept that the claimant was entitled to pursue a claim which she honestly and reasonably believed to be valid. 
  9. [70]
    The respondent has sort a reduction by half on the interest payable between the date of resumption, 29 August 2008 and the date of payment into Court, 10 October 2012, a period of four years.  I am not prepared to make such an order.  Although the case is borderline, I consider that the delays in pursuing the claim were not such as to render the payment of interest for that period unreasonable.  The claimant was not living in Australia and this created some difficulties for her in dealing with the matter.  The relevant legal principles are not straight forward, particularly for non-lawyers.  In the circumstances, I consider that my discretion to order that interest be paid in accordance with s 28(1) of the Act should be exercised in favour of the claimant.

ORDERS

  1. Compensation is determined in the sum of Four Hundred and Thirty-Four Thousand, Six Hundred and Fifty-Nine Dollars and Ninety-Five cents ($434,659.95). 
  1. The respondent is ordered to pay interest to the claimant at the rate of 5% on the sum of $420,000 on and from 29 August 2008 up to and including 9 October 2012.
  1. The respondent is further ordered to pay interest to the claimant, at the rates published on the Land Court website, on the items of disturbance allowed, such interest to be calculated on and from the date such amounts were paid by the claimant up to and including the day immediately preceding the date on which those items are paid by the respondent to the claimant.

CAC MacDONALD

PRESIDENT OF THE LAND COURT

Footnotes

[1]  Relying on Exhibit 16, Private Ruling 83175, Australian Tax Office, June 2008.

[2]  $180,348 was the quantum of this aspect of the claim as finally formulated in a document entitled “Submission of Quantum” filed 3 June 2014.

[3]  Reprint 5A of the Acquisition of Land Act 1967 was in force as at the date of acquisition, 29 August 2008. 

[4]  (1989) 12 QLCR 278

[5]  (1990) 13 QLCR 160. 

[6]  At 291.

[7]  At 166.  In Groves v Ryde Tyre Service Pty Ltd (unreported), NSWLEC, 13 April 1992), the judge said that he was not convinced that land acquired before the imposition of CGT did not have special value to the owner.  That opinion cannot prevail in this Court given the decision of the Land Appeal Court in Theo v Brisbane City Council (1990) 13 QLCR 160.

[8]  At 165, 166.

[9]  (2006) 149 LGERA 227.

[10]  At 232. 

[11]  (1997) 96 LGERA 75.

[12]  At 232.

[13] G and M Core Pty Ltd v The Commissioner for Railways (1976) 3 QLCR 342 at 348;  Merivale Motel Investments Pty Limited v The Brisbane Exposition and South Bank Redevelopment Authority (1984-1985) 10 QLCR 268 at 271.  In State of Queensland v Pajares (2004) 25 QLCR 165 at 183-187 the Land Appeal Court accepted that compensation for special value was claimable under the Acquisition of Land Act 1967 although the claim was not allowed on that basis. 

[14]  (1999) 74 ALJR 209.

[15]  At 269;  Gaudron and Gummow JJ agreeing.

[16]  See LR Beilharz Investments Pty Ltd v Darling Harbour Authority (unreported), Land and Environment Court, NSW Bignold J, 23 April 1991, referred to in Burns v Eurobodalla Shire Council (2006) 149 LGERA 227 at 231, 232. 

[17]  (1990) 13 QLCR 160

[18]  Section 14 Acquisition of Land and Other Legislation Amendment Act 2009. 

[19] Merivale Motel Investments Pty Limited v The Brisbane Exposition and South Bank Redevelopment Authority (1984-85) 10 QLCR 268 at 271;  Vass and Lambert v Coordinator-General (No. 2) [2015] QLAC 2 at [43];  The Commonwealth v Milledge (1953-1954) 90 CLR 157 at 164;  Horn v Sunderland Corporation [1941] 2 KB 26 at 33. 

[20]  (1999) 74 ALJR 209. 

[21]  At 270;  Gaudron and Gummow JJ agreeing.

[22]  Australian Law Reform Commission, Lands Acquisition and Compensation, Report No 14 (1980) para 241.

[23] Boland v Yates Property Corporation Pty Ltd (1999) 74 ALJR 209 at [294]-[296].  Footnotes omitted.

[24]  [1995] 1 All ER 846 at 852.

[25]  At 853.

[26]  Exhibit 5, pp 38, 39.

[27] Heavey Lex No 64 Pty Ltd v Chief Executive, Department of Transport (2001) 22 QLCR 177 at 191. 

[28]  Exhibit 5, p 33.

[29]  Exhibit 5, p 34.

Close

Editorial Notes

  • Published Case Name:

    McDonald v Department of Transport & Main Roads

  • Shortened Case Name:

    McDonald v Department of Transport & Main Roads

  • MNC:

    [2015] QLC 28

  • Court:

    QLC

  • Judge(s):

    MacDonald P

  • Date:

    03 Aug 2015

Appeal Status

Please note, appeal data is presently unavailable for this judgment. This judgment may have been the subject of an appeal.

Cases Cited

Case NameFull CitationFrequency
Boland v Yates Property Corp Pty Ltd (1999) 74 ALJR 209
6 citations
Jump To
Cite 1 - (1999) 74 ALJR 209
Cite 2 - (1999) 74 ALJR 209
Cite 3 - (1999) 74 ALJR 209
Cite 4 - (1999) 74 ALJR 209
Cite 5 - (1999) 74 ALJR 209
Cite 6 - (1999) 74 ALJR 209
Burns v Eurobodalla Shire Council (2006) 149 LGERA 227
5 citations
Jump To
Cite 1 - (2006) 149 LGERA 227
Cite 2 - (2006) 149 LGERA 227
Cite 3 - (2006) 149 LGERA 227
Cite 4 - (2006) 149 LGERA 227
Cite 5 - (2006) 149 LGERA 227
Chong v Fairfield Municipal Council (1968) 88 W.N. NSW 346
1 citation
Jump To
Cite 1 - (1968) 88 W.N. NSW 346
Director of Buildings and Lands v Shun Fung Ltd (1995) 1 All ER 846
3 citations
Jump To
Cite 1 - (1995) 1 All ER 846
Cite 2 - (1995) 1 All ER 846
Cite 3 - (1995) 1 All ER 846
G and M Core Pty Ltd v The Commissioner for Railways (1976) 3 QLCR 342
2 citations
Jump To
Cite 1 - (1976) 3 QLCR 342
Cite 2 - (1976) 3 QLCR 342
Heavey Lex No 64 Pty Ltd v Chief Executive (2001) 22 QLCR 177
2 citations
Jump To
Cite 1 - (2001) 22 QLCR 177
Cite 2 - (2001) 22 QLCR 177
Horn v Sunderland Corporation (1941) 2 KB 26
2 citations
Jump To
Cite 1 - (1941) 2 KB 26
Cite 2 - (1941) 2 KB 26
Maori Trustee v Ministry for Works [1959] AC 1
1 citation
Jump To
Cite 1 - [1959] AC 1
Merivale Motel Investments Pty Ltd v The Brisbane Exposition and South Bank Redevelopment Authority (1985) 10 QLCR 268
3 citations
Jump To
Cite 1 - (1985) 10 QLCR 268
Cite 2 - (1985) 10 QLCR 268
Cite 3 - (1985) 10 QLCR 268
Pejama Pty Ltd v Commissioner of Main Roads (1989) 12 QLCR 278
3 citations
Jump To
Cite 1 - (1989) 12 QLCR 278
Cite 2 - (1989) 12 QLCR 278
Cite 3 - (1989) 12 QLCR 278
Prince Alfred Reserve Trust v State Rail Authority of NSW (1997) 96 LGERA 75
2 citations
Jump To
Cite 1 - (1997) 96 LGERA 75
Cite 2 - (1997) 96 LGERA 75
State of Queensland v Pajares (2004) 25 QLCR 165
2 citations
Jump To
Cite 1 - (2004) 25 QLCR 165
Cite 2 - (2004) 25 QLCR 165
The Commonwealth v Milledge (1954) 90 CLR 157
2 citations
Jump To
Cite 1 - (1954) 90 CLR 157
Cite 2 - (1954) 90 CLR 157
Theo v Brisbane City Council (1990) 13 QLCR 160
6 citations
Jump To
Cite 1 - (1990) 13 QLCR 160
Cite 2 - (1990) 13 QLCR 160
Cite 3 - (1990) 13 QLCR 160
Cite 4 - (1990) 13 QLCR 160
Cite 5 - (1990) 13 QLCR 160
Cite 6 - (1990) 13 QLCR 160
Vass v Coordinator-General (No. 2) [2015] QLAC 2
2 citations
Jump To
Cite 1 - [2015] QLAC 2
Cite 2 - [2015] QLAC 2

Cases Citing

Case NameFull CitationFrequency
McDonald v Chief Executive, Department of Transport and Main Roads (No 2) [2016] QLC 86 citations
1

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