|
|
Home
| Databases
| WorldLII
| Search
| Feedback
Supreme Court of Papua New Guinea |
PAPUA NEW GUINEA
[IN THE SUPREME COURT OF JUSTICE]
SCA No. 66 of 2019
BETWEEN
BALEEN NO 28 LIMITED
Appellant
AND
HON. BENNY ALLAN, Minister for Lands &Physical Planning
First Respondent
AND
THE INDEPENDENT STATE OF PAPUA NEW GUINEA
Second Respondent
Waigani: Makail, Koeget &Thompson JJ
2019: 30th October & 8th November
SUPREME COURT – CIVIL APPEAL – Appeal against decision on an assessment of damages and interest – Compensation for value of land – Compulsory acquisition of land – Value of land assessed based on valuation report – Value of unimproved land – Land Act, 1996 – Sections 12, 14 and 23(1)(a)
Facts
This was an appeal against a decision of the trial judge on an assessment of compensation and interest following entry of default interlocutory judgment against the Respondents. It arises from a compulsory acquisition of the Appellant’s land by the State on 6 January 2015. At the hearing, the Appellant produced a valuation of the land at the date of acquisition. The Respondents produced a valuation of the land some two years after the date of compulsory acquisition. The sole issue was an assessment of the amount of compensation payable by the Respondents to the Appellant for the compulsory acquisition of its land.
Held:
5. After considering the value of the land prior to the date of acquisition, and having regard to the value of the land at the date of acquisition provided by the Appellants’ valuation, the true value of the land at the date of acquisition was lower than the final estimate given by the Valuer.
6. In relation to interest, pursuant to Division 8 S47 of the Land Act 1996 an amount of compensation payable in respect of a compulsory acquisition bears interest at the rate of 3% per annum from the date of acquisition. The Appellant was awarded interest at the rate of 3% per annum from date of acquisition to date of judgment by the Supreme Court.
Cases Cited:
Nil
Counsel:
Mr. I Molloy & Ms. E. Heagi, for the Appellant
Mr. R Uware, for the Respondents
JUDGMENT
8th November, 2019
1. BY THE COURT: This was an Appeal against a decision of the trial judge on an assessment of compensation and interest.
2. The matter before the trial judge was solely an assessment, following an earlier entry of default interlocutory judgment against the Respondents. The sole issue was an assessment of the amount of compensation payable by the Respondents to the Appellant for the compulsory acquisition of its land.
Compulsory Acquisition of Land
3. Pursuant to S12 of the Land Act 1996 (“the Act”) the Appellant’s land was gazetted on 6 January 2015 as having been compulsorily acquired by the State. Pursuant to S12 (2) (a) of the Act, on publication of the gazettal notice, the land became immediately vested in the State.
4. Pursuant to S14 of the Act, following the compulsory acquisition, the owner’s interest was converted into a right to compensation under the Act.
5. Pursuant to S23 (1) of the Act, when determining the amount of compensation, “..... regard shall be had to (a) the value of the land at the date of acquisition.....”.
Value of Land
6. At the hearing, the Appellant produced a valuation of the land at the date of acquisition, in a sum of between K8.3m – K10.1m, with a final estimate of K8.9m. The Respondents produced a valuation of the land as at 24 March 2017, of up to K8.9m, with a final estimate of K5.6m.
7. The trial judge rejected both valuations, on the basis that they were not prepared at the date of acquisition in January 2015, and therefore did not comply with S23 (1) (a) of the Act. The Appellant’s valuation was prepared following an inspection in August 2015. The Respondents’ valuation was prepared following an inspection in May 2017. The Appellant’s valuation was that if the land had been placed on the market for sale in January 2015, it would have been valued at a minimum of K8.9m. The Respondents’ valuation was based on the market value of the land as at 24 May 2017.
8. The requirement of S23 (1) (a) is for regard to be had to “the value of the land” at the acquisition date, and not
to a valuation of the land at the acquisition date. This is plainly because it would be almost impossible for a notice of compulsory
acquisition to be published in a Government Gazette on a certain date, and for a valuation to then be carried out on that same date.
The trial judge therefore erred in rejecting the valuations because they had not been prepared on or about 9 January 2015, the date
of the acquisition.
9. The trial judge would have been entitled to reject the Respondent’s valuation, on the basis that it did not estimate the
value of the land at the date of acquisition in January 2015. It only estimated the value of the land in May 2017.
Annual Rent
10. Having rejected both valuations, the trial judge proceeded to calculate her own estimate of the value of the land, by using the annual rental figure shown on the State Lease.
11. In doing this, the trial judge misapprehended the figures in the State Lease. Pursuant to the Condition (b), annual rent of K203,300.00 was to be paid for the first ten years of the State Lease, and then reassessed on the basis of a re-appraised valuation, with such re-appraisals being made every ten years. The rental of K203,300.00 was stated to be “five per centum (5%) per annum of the unimproved value of land”. The trial judge proceeded on the mistaken basis that K203,300.00 was the unimproved value of the land, when in fact it was only 5% of the unimproved value. This meant that the unimproved value of the land was actually K4.066m at the date when the State Lease was issued in August 2012. The trial judge therefore erred in using K203,300.00 instead of K4.066m for the unimproved value of the land as the basis of her calculations.
12. For these reasons, the grounds of Appeal will be upheld. This then leaves the issue of how the compensation should have been correctly assessed.
Unimproved Land Value
13. Pursuant to S16 of the Supreme Court Act, the Supreme Court may give such judgment as ought to have been given in the first instance. That is an appropriate course to take in view of the time which has already elapsed since the acquisition in January 2015.
14. The valuation evidence before the court was that in January 2015 the unimproved land value was at least K8.9m. There was also evidence that in May 2017 the unimproved land value was K5.6m. Pursuant to S23 (1) of the Act this Court must have regard to the Appellant’s valuation, which was the only evidence of the value of the land at the date of acquisition. However, the Court is not bound to uncritically accept that evidence. When having regard to the Appellant’s valuation, the Court may determine how much weight should be attached to the evidence, by reference to all the surrounding matters.
15. One of those matters is the value of the land at the date when it was purchased by the Appellant in December 2013. Another matter is the value of the land when the State Lease was issued in August 2012.
16. The State Lease provides evidence that in August 2012, the unimproved value of the land for the purpose of rates was K4.066m. There was no evidence of the purchase price paid by the Appellant in December 2013, when the land was still unimproved. There was evidence that the land was valued at K8.9m in January 2015, when the land was still unimproved. The improvement covenant (for a minimum of K500,000.00 within three years) had not been complied with, and the land was not fenced. In the opinion of the Appellants’ valuer, the location of the land and the scarcity of recent redevelopment sites meant that this was prime land, and land in comparable positions and of similar size consistently achieved good prices. However, the weight to be attached to this opinion is somewhat lessened by the fact that the sale prices for similar properties relied on by the valuer were not entirely comparable, and were almost all sales in 2010, with one in 2012. There was no mention of the 2013 sale price from the original State Lease holder to the Appellant in December 2013, which would have been the most relevant price.
17. While it could be expected that the market value of a piece of unimproved land may be more than the value used by the State for the purpose of land rent calculations, it is significant that the land is submitted to have more than doubled in value between August 2012 and January 2015, ie 2.5 years. The Appellants’ valuer said that this type of land consistently achieved good prices shown by the “consistent variation” in the prices achieved. It is assumed that by “variation”, he referred to increases, and not decreases. Even so, he did not go so far as to say that prices had more than doubled.
18. Further, the only comparable land area for any of the sale prices relied on in the valuation, was for Sale No. 4 with a land area of 1.94 hectares. The other sales concerned much larger land areas of 2.7 - 7.8 hectares. The Appellant’s land was only 1.196 hectares. The sales price for Sale No. 4 for the land area of 1.94 hectares in 2010, was K1.5m, which was about one-sixth of the valuation given for the Appellant’s smaller land. The higher sales prices relied on by the Valuer were for much larger properties.
19. It was not in dispute that the land was unimproved and unfenced when the State Lease was first issued in August 2012, and remained unimproved and unfenced when it was compulsorily acquired in January 2015, two and a half years later.
Improvement Covenant
20. On this point, the original owner of the land breached Condition (d) of the State Lease, by selling the land without complying with the improvement covenant. There was no evidence that after purchasing the land in December 2013, the Appellant took any steps to comply with the improvement covenant, before the land was compulsorily acquired in January 2015, six months before the time limit for compliance would have expired. The Appellant said that prior to the acquisition it had prepared a development plan, although the copy of the plan does not show the date of preparation, and the Appellant had not fenced the land.
21. The Appellant’s Valuation does not refer to the fact that before the land was compulsorily acquired, the Appellant had only 6 months in which to comply with the improvement covenant. If there was non- compliance in 6 months, the land could not be sold, and was subject to possible forfeiture pursuant to S122 of the Land Act. This may have been another matter which was relevant to an assessment of the market value of the land.
22. When valuing the land at the date of acquisition, the Appellant’s valuation did not take into account the unimproved value of the land at the date of issue of the State Lease in August 2012, and failed to take into account the value shown by the purchase price which would have been paid by the Appellant in December 2013. These were relevant values which should have been included together with values shown by the sale prices of other comparable properties from 2010 to 2012. Further, after listing the sales prices in 2010-2012, the Valuer proceeded to give a valuation of the Appellant’s land in 2015 based on those prices, without making any reduction to take into account the fact that the Appellant’s land was only about one-fifth of the size of most of those land areas.
Value of Land
23. After considering the value of the land prior to the date of acquisition, and having regard to the value of the land at the date of acquisition provided by the Appellants’ valuation, we consider that the true value of the land at the date of acquisition was lower than the final estimate given by the Valuer. In the absence of evidence of the value of the land at the date of purchase by the Appellant in 2013, which would have been shown by the actual purchase price paid, we consider it appropriate to take the average of the 2012 value of the land for the purposes of rates -K4.066m- and the final estimate of the market value given by the Appellant’s valuer -K8.9m- to arrive at a figure of K6.48m as being the value of the land at the date of acquisition in January 2015.
Interest
24. In relation to interest, pursuant to S4 of the Judicial Proceedings (Interest on Debts and Damages) Act, the rate of interest which may be awarded against the State, shall not exceed 2% yearly. Pursuant to S6 of the Act, the rate of interest for post-judgment interest also cannot exceed 2% yearly.
25. However, S4 of the Act only applies to proceedings against the State for the recovery of a debt or damages. The Appellant’s
Statement of Claim pleaded it as a claim for compensation pursuant to statute, namely, S30 of the Land Act. This Section is in Part IV of the Act. Section 32 of the Act says that this Part, and a determination of a Court, does not entitle a person to receive payment
of compensation otherwise than in accordance with Division 8.
26. Pursuant to Division 8 S47 of the Act, an amount of compensation payable in respect of a compulsory acquisition bears interest
at the rate of 3% per annum from the date of acquisition. This is the rate which was claimed in the Writ of Summons.
27. In relation to costs, as the Appellant was successful in the National Court proceedings, the effect of the order for “costs are in the cause”, was that costs follow the event, so that the Respondents were to pay the Appellant’s costs.
Final Order
28. We therefore make the following orders:
(a) The Appeal is allowed.
(b) The Orders of the National Court made on 17 April 2019, are quashed.
(c) The amount of compensation payable by the Respondents to the Appellant for the compulsory acquisition of its land, is hereby assessed in the sum of K6.48m.
(d) The Respondents are to pay interest at the rate of 3% per annum from the date of the compulsory acquisition on 6 January 2015 to the date of judgment, and at 2% per annum thereafter.
- (e) Judgment is entered for the Appellant in the sum of K6.48m together with interest at the rate of 3% per annum to the date of judgment.
(f) The Respondents are to pay the Appellant’s costs on a party/party basis, to be agreed or taxed.
___________________________________________________________
Ashurst Lawyers: Lawyers for the Appellant
Solicitor General: Lawyers for the Respondent
PacLII:
Copyright Policy
|
Disclaimers
|
Privacy Policy
|
Feedback
URL: http://www.paclii.org/pg/cases/PGSC/2019/91.html