Siva Afi Investment and Designs Ltd v Attorney General [2012] WSSC 46 (13 July 2012)

SUPREME COURT OF SAMOA

Siva Afi Investment and Designs Ltd v AG [2012] WSSC 46

Case name: Siva Afi Investment and Designs Ltd v Attorney General

Citation: [2012] WSSC 46

Decision date: 13 July 2012

Parties:

Siva Afi Investments Limited and Siva Afi Designs Ltd

The Attorney General on behalf of the Minister of Natural Resources and Environment

Hearing date(s): 19, 20, 21 September 2011

File number(s):

Jurisdiction: Civil

Place of delivery: Mulinu’u

Judge(s): Justice Vaai

On appeal from:

Order:

(a)	The following amounts of compensation are awarded to the claimants:
(i)	Loss of benefit in the leasehold	$473,000
(ii)	Added value of improvements	$205,000
(iii)	Relocation Costs	$40, 186.15
(iv)	Valuation Costs	$30,000
	Total of	$748,186.15

(b)	The following amounts are to be deducted representing:
(i)	Compensation paid	$339,955.88
(ii)	Rents owing	$122,864.47
	Total of	$462,820.35

(c) The respondent is ordered to pay $285,365.80.
(d) Interest to accrue at 12% on the amount awarded of $285,365.80 from the 16^th June 2010.
(e) Each party will bear its own costs.

Representation:

Olinda Woodroffe for claimants

Donald Kerslake and Elemesi Schmidt for respondent

Catchwords:

Words and phrases:

Legislation cited:
Cases cited:

Samoa Land Corporation v Siva Afi Investment (unreported 28/7/09),

Wellington City v Berger Paints (1975) 1 NZLR 184,

Hull & Lumber Investment Co. Ltd v Hull Corp. (1965) 2 QB 145,

Harvey v Crawley Development Corporation (1957) 1 QB 485,
Wm. Collin & Sons Proprietary Ltd v The Co-coordinator General of Public Works (Qld)(1973) 22 The Valuer 413.
Commissioner of Taxation v Murry (1998) HCA 42,
Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492 at 519,
Box v Commissioner of Taxation [1952] HCA 61; (1952) 86 CLR 387,
Commissioner of Taxation v Murry (supra),
Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] UKLawRpAC 20; (1901) AC 217 at 223 – 224,
J Wulf v National Provident Fund (unreported 23/7/07) and Stanley v Vito (unreported (6/2/09)
Lee v Minister of Transport (1966) 1 QB 11

Summary of decision:

IN THE SUPREME COURT OF SAMOA

HELD AT MULINUU

File No.

BETWEEN:

SIVA AFI INVESTMENTS LIMITED and SIVA AFI DESIGNS LIMITED

Claimants

AND

THE ATTORNEY GENERAL on behalf of the Minister of Natural Resources and Environment

Respondent

Counsel:

Olinda Woodroffe for claimants

Donald Kerslake and Elemesi Schmidt for respondent

Hearing: 19, 20, 21 September 2011

Decision: 13 July 2012

DECISION OF THE COURT

Introduction

1. The claimants were tenants of two parcels of land (the land) at Sogi within the Central Business District of Apia, on which they carried on business of bar and restaurant, handicraft shop and screen printing.
2. They claim for compensation under the Taking of Land Act 1964 following the taking of the land by the Respondent for public purpose. Compulsory acquisition of the land was by proclamation dated 12^th November 2009.
3. On the 16^th June 2010 the Respondent offered compensation totalling $462,820.35, less outstanding rent of $122,864.47. As the claimants refused to accept the offer, the balance of $339,955.88 was paid to the office of the Public Trustee.
4. Refusal by the claimants to accept the offer of compensation was grounded on two premises, namely that the compensation amount was insufficient and secondly there were no rents owing at the time of the acquisition. It nonetheless subsequently uplifted from the Public Trust office the monies lodged by the Respondent.
5. The relevant factual background is set out in the decision of this Court in Samoa Land Corporation v Siva Afi Investment (unreported 28/7/09). Briefly the sequence of events are as follows.

Background

6. In February 2006 the claimants and the then registered proprietor of the land, Samoa Land Corporation entered into a lease agreement for a lease of twenty years to commence from February 2005. A right of renewal for a further twenty years with rent payments and review provided as follows:

1/4/05	$15,750
1/4/06	$40,500
1/4/07	$48,375
January 2008	- Review
January 2011	- Review
January 2014	- Review

7. Consequent to the execution of the lease, Samoa Land Corporation advised the claimants of the Government’s (Respondent) intention to take the land. This was confirmed by a letter dated 13^th October 2006. From then on, representatives of Samoa Land Corporation and Mr & Mrs Leota of the claimants discussed through correspondences and meetings the relocation of the claimants elsewhere.
8. Samoa Land Corporation not only offered to look for alternative sites, it also ceased charging rent to assist the claimants with relocation costs. By October 2006 the claimants were already in arrears with rent payment.
9. Samoa Land Corporation offered two sites in the town area and one at the Vaitele Industrial Zone but were declined by the applicants. By January 2008 the applicants had identified three suitable sections and had sought the assistance of the Prime Minister who was willing to assist. But the three sites were government reserves and were not for lease.
10. The applicants were of the firm belief however that either Samoa Land Corporation or the Respondent should relocate the applicants. A letter to Samoa Land Corporation on the 25^th March 2009 reads:

“Since Samoa Land Corporation first advised us of Government’s desire to develop land at Sogi, including our leased property, we have indicated our preparedness to consider relocation to an appropriate site.

From meetings with your General Manager, your Minister, the Deputy Prime Minister and the Prime Minister since October 2006, it has been our understanding that government would relocate us.”

11. Samoa Land Corporation terminated the lease on the 18^th March 2009. The deed of conveyance transferring ownership of the land from Samoa Land Corporation to the Respondent was registered on the 31^st March 2009.
12. In April 2009 Samoa Land Corporation general manager met with Mr Leota of the applicant to resolve rent issue. The applicant paid $10,000 towards arrears. The applicant requested Samoa Land Corporation to set its rent at the rate when the lease commenced, that is, instead of $48,375 per annum as stipulated, the applicant requested $15,750.
13. By letter dated 22^nd April 2009 the Attorney General on behalf of the Respondent terminated the lease and ordered the applicants to vacate within one month. The applicant did not vacate. Their legal representative then became involved.
14. A written quote from Fletcher Construction for relocation costs totalling $2.5 million to 3 million was given by the applicants to the Respondent. It also enclosed a valuation report dated May 2009 of the applicants’ improvements on the land totalling $669,000.
15. On the 28^th July 2009 this court dismissed the motion for interim injunction filed by the applicants against the Respondent and Samoa Land Corporation as well as the motion for injunction filed by the Samoa Land Corporation and the Respondent against the applicant.
16. By letter dated 14^th September 2009 Samoa Land Corporation wrote to the claimants reinstating all rents stipulated under the lease.
17. By letter dated 15^th September 2009 the Attorney General wrote to the applicants’ solicitor offering $400,00 less rent arrears and costs of moving the applicants’ improvements from the land to the applicants new site. The offer was rejected.
18. Despite the proclamation of the 12^th November 2009 the applicants refused to vacate. They were evicted.

Clause 6.11 of the lease

19. The clause provides:

“that in the event of public roads or other public works being made through upon the said land to surrender those parts of the said land required for the purpose of such ....and to allow the removal of trees or other plants buildings or other structures required to be removed for such public roads or public works without the payment of any compensation.

20. The Respondent at the commencement of the trial alluded to the purpose of the clause which in its view prevented the claimants from claiming compensation. The simple answer in my respective view is that clause 6.11 contemplated those situations in which a portion of the land is required for public works or public purpose so as to enable the lease to continue running despite the minor interruptions brought about by the need of public works. The resumption of all of the leasehold was not therefore contemplated by clause 6.11.

Compensation

21. Assessment of Compensation is controlled so far as they extend by section 37 of the Taking of Land Act 1964.

Subsection 2 provides:

“In determining the amount of compensation to be awarded the court shall act in accordance with the following rules:

(a) No allowance shall be made on account of the taking of any land being compulsory;

(b) The value of land shall, subject as hereinafter provided, be taken to be the amount, which the land if sold in the open market by a willing seller on the specified date might be expected to realize;

PROVIDED THAT: the provisions of this paragraph shall not affect the assessment of compensation for any matter which is not directly based on the value of land and in respect of which a right to compensation is conferred under this or any other Act

22. Section 37 (2) (a) (b) and (c) of the Taking of Land Act adopted the ipsissma verba of section 29 (a) (b) and (c) of the New Zealand Finance Act (No 3) 1944 which dealt with the method of assessing compensation in New Zealand for the taking of lands under the New Zealand Public Works Act. The New Zealand Court of Appeal in Wellington City v Berger Paints (1975) 1 NZLR 184 recognized that the New Zealand rules in section 29 of The Finance Act corresponded with the English rules.
23. It was also recognized by Richmond J in the same case that the Finance Act 1944 omitted the words disturbance from the proviso to section 29 which substituted the rules for compensation in the 1936 Finance Act where disturbance was specifically mentioned. Richmond J however was of the opinion that the omission of disturbance from the proviso to section 29 did not have the effect of excluding from compensation awards the losses falling within a true disturbance claim.
24. The proviso to section 37 (2) (b) specifically provides for assessment of compensation for any matter not directly based on the value of the land which means that other than the value of the claimants’ interest in the land, the claimants are also entitled to be compensated for any loss suffered by reason of the compulsory acquisition. The term disturbance has been used in most common law jurisdictions to include all losses not directly based on the value of the land but suffered by reason of being disturbed in possession or by reason of having to vacate the land.
25. Pearson LJ in Hull & Lumber Investment Co. Ltd v Hull Corp. (1965) 2 QB 145 emphasised losses not directly based on the value of the land. He said at page 160 – 161:

“It is a very simple principle, when certain largely verbal complications have been cleared out of the way. The whole compensation takes the form of a price to be paid for the land by the acquiring authority to the claimants. Nearly always the main element (or it may be the only element) in the compensation and therefore in the price is the value of the land of which the claimants have been deprived by the compulsory acquisition. But the compulsory acquisition may also have caused other loss to the claimants, and the compensation for such other loss must also be included in the price. It is conveniently referred to as compensation for disturbance, as nearly all of it is due to disturbance, but that is not an exhaustive description, as there may be some admissible items of loss which are not naturally attributable to disturbance. The relevant inquiry, therefore, is not whether this is disturbance, but whether, there is loss by the compulsory acquisition.”

26. It follows that not all loss suffered by the dispossessed owner is compensable as disturbance. To be properly regarded as the subject of compensation for disturbance, the item must first be shown to be not too remote and second that it is the natural and reasonable consequence of the dispossession of the owner: Harvey v Crawley Development Corporation (1957) 1 QB 485
27. The effect of the numerous decision referred to by counsel for the applicants on the topic of compensation for disturbance is only one example of a wider class of recoverable loss, that is, losses which are not directly based on the value of the land but are nevertheless losses which are caused by the compulsory acquisition and are not too remote.
28. It follows that I reject the submissions by the Respondent which contended that claim for compensation under the heading of disturbance and other losses not related to the value of the land cannot be recovered under our legislation. I will now address each head of compensation claimed by the claimants.

Loss of Business Income

29. The estimate of the loss of business income is based on a report by Mr Wilson, a chartered accountant and financial consultant for more than 25 years. His fields of expertise are in the area of business valuation, insolvency and reconstruction, preparation of feasibility studies and financing proposals.
30. In undertaking the valuation for the loss of business income for the claimants, Mr Wilson relied on the financial statements for the years 2006, 2007, 2008, 2009 and 2010 prepared by the claimants’ accountant.
31. Valuation of loss of income commenced on valuing the business for sale to an interested buyer based on future maintainable profits for a period of 3 years discounted at a capitalization rate to arrive at present value equivalent.
32. Future maintainable profits are based on Net Profit before tax for the years 2007 and 2008 (before acquisition) which is then adjusted by several factors and discounted at the capitalization rate of 12%.
33. Mr Wilson considered that it would take 3 to 5 years for the claimants to fully re-establish itself to a position it would have been had the termination not taken place. He accordingly adopted a multiple factor of 3 years as fair to determine maintainable profits.
34. Mr Wilson then charged interest at 5% to allow for the delay in payment of compensation. He assumed that the applicant should have been paid before being evicted. He said at paragraph 2.1.5 of his report:

“In other words, it is assumed that both parties had agreed to a compensation for the termination of the lease.”

35. He concluded that the total loss of business from October 2009 to October 2011 is $951,000.

Discussion of the claim for Loss of Business Income

36. Whilst enunciations of the principles of compensation are comparatively easy and covered by ample authority, the difficulty is the application of those principles to the facts and circumstances of the subject case and the formulation of the quantum of compensation for the relevant items that properly should receive consideration: Wm. Collin & Sons Proprietary Ltd v The Co-coordinator General of Public Works (Qld) (1973) 22 The Valuer 413
37. It is incontestable that there was disturbance. That is quite apparent from the history of the acquisition of the land, and the disturbance suffered by the claimants’ warrants compensation.
38. However the method chosen by the claimants in its endeavor to prove its loss of business in my view is difficult to absorb. In the first place no credible explanation was provided why the applicants considered three to five years to fully re-establish themselves. After all there is testimony by Claire Leota (Ms Leota) for the applicants that a new factory was set up from the 16^th November 2009 to 27 November 2009. A separate claim for relocation costs has been lodged and will be discussed later in this ruling. The purpose of compensation is to compensate the claimants for the loss and reduction in business as a result of the acquisition. The claimants must prove their losses.
39. Secondly there is no explanation why the bar and restaurant have not been relocated or a prediction given when they will be recommenced. This is not a case of the business being extinguished by the acquisition. Neither can the court draw the assumption that the claimants business was destroyed or materially damaged as a result of the acquisition. Disturbance, yes. It did indeed have a Business Plan dated October 2005 and cost structure of some proposed developments on the land but at the same time they did have the long notice which they had of the impending taking of the land. Their duty was to relocate. The Respondent was duty bound to compensate for relocation costs and consequential losses flowing from the deprivation of occupation of the land. Their complacency and indifference to relocation deprived them of their rightful entitlement to compensation.
40. Although Mr Wilson in his affidavit stated that he used the financial statements for 2006, 2007, 2008, 2009 and 2010 to calculate the loss of business income, he in fact only used the 2007 and 2008 statements. Which means a high nett profit after tax figures were employed to bring about distortedly inflatable future maintainable profits resulting in exaggerated results.
41. The appropriate method to assess the loss of business income would have been the comparison of earnings during the period of relocation and the following months after re-establishment with the earnings for the same period in the previous years before the land acquisition. The difference in earnings should reflect a more realistic loss.
42. If a portion of the loss as the claimants alleged was due to the damaged equipments and machinery which needed repairs or replacements, the necessary repairs or replacement should only take months; not three years.
43. Mr Wilson also incorrectly assumed that the applicant should have been compensated before being evicted.
44. It has been said already that the losses and the inconvenience suffered by the claimants were through their own conduct. Proposed taking of the land was confirmed by letter in October 2006. When the proclamation was issued and published in November 2009 the claimants still refused to leave the land because they felt Samoa Land Corporation and the Respondent were obligated to find alternative land to relocate to and pay compensation as well.
45. Pursuant to the provisions of the Taking of Land Act the Respondent is obligated to pay compensation only.
46. On the evidence the court finds it impossible to assess with any degree of accuracy the extent or value of the business loss or the amount of profits lost pursuant to the acquisition. The claimants have failed to prove their losses. The claim is accordingly rejected.

Claim for Loss of Goodwill for Laumei Lager Beer

47. In its Business Plan referred to in paragraph 39 above the applicants did contemplate a Laumei Lager Micro Brewery to commence production in 2008 with estimated earnings of $70,500 in 2008, increasing to $188,000 in 2009, and $282,000 by 2010.
48. Laumei Lager Trademark was registered on the 7^th November 2008. Ms Leota at paragraph 9 of her brief of evidence said:

“... Early in 2008 we conducted a trial production of Laumei Lager with the help of Tala Vavae, the most qualified brew master in Samoa. While the trial was successful we were unable to proceed with the project because by then we had agreed with Samoa Land Corporation that we were prepared to relocate our business subject to satisfactory compensation, as a result of developments that I describe later in this brief.”

49. In the same paragraph Ms Leota showed how she calculated the loss of goodwill:

“We quantify the loss of goodwill over 3 years for this project. I produce as an exhibit a copy of the calculations for the loss of goodwill for this project.”

50. From the estimated earnings stated in paragraph 45 above for the Laumei Lager Ms Leota estimated profit before tax of:

$32,825.00 for 2008

$109,200.00 for 2009

$171,350.00 for 2010

Total of $313,375.00 which Ms Leota contended was the loss of goodwill for three years. This figure was reduced by Mr Wilson to $223,000 after adjustments made.

51. Mr Wilson in his valuation report referred to the definition of goodwill by the High Court of Australia in Commissioner of Taxation v Murry (1998) HCA 42. He noted that the existence of goodwill depends upon proof that the business generates and is likely to continue to generate earnings from the use of its assets. He also averted to the fact that goodwill by its very nature cannot exist independently of the business which created and maintains it.
52. Mr Wilson took the stance that the applicants’ location and nature of business are conducing to generating reasonable sales of the Laumei Lager. He then said at paragraph 2.2.4 of his report:

“This intangible asset satisfies the attributes of enduring in nature; attributable to generating cash flow and would have commercial value that can be sold or transferred to a third party.”

53. Mr Wilson then accepted Ms Leota’s estimates of profits before tax from the Laumei Lager for the years 2008, 2009 and 2010 and calculated its present value at a capitalization rate of 12% arriving at $223,000 as loss of goodwill for the 3 years.
    

Discussion

54. The claim for the loss of goodwill for the Laumei Lager beer must be rejected. It is acknowledged that the Laumei Lager Micro Brewery was included in the claimants’ Business Plan of 2006 with production to commence in 2008. It is also true that the claimants knew in October 2006 their plans on the land will not eventuate as the Respondent had other plans for the land. Yet they went ahead and launched the laumei lager not at the beginning of 2008 as originally planned but right at the end of the year.
55. Laumei Lager Trademark was registered in November 2008 and the lager beer launched around about the same time when pressure was placed on the applicants to relocate.
56. Other than having the lager brewed by Tala Vavae an employee of Vailima Breweries there is not the slightest evidence that the applicant acquired materials for a Micro Brewery. There is a claim for compensation for the damage caused to its equipments, machinery, furniture and goods, left on the land when the applicants left the land. The list of the goods and equipments submitted by the applicants which they claim they left behind does not include any equipments attributable to a Micro Brewery. The only equipment which can be classified as resembling a brewery component is the keg cooler (“exhibit C30”) which the claimants alleged was damaged and have obtained a quote for its replacement. The Full – Size Kegerator is described on page 1 of the quote as:

“The Danby DKC 645BL Keg Beer Cooler Kegerator is large enough to hold all full size kegs. This Beer Dispenser Cools and Dispenses Full Size Kegs.”

Obviously the equipment can be found at all outlets in Samoa which sells Vailima lager on the tap. Not a brewery component.

57. Upon receipt of notice in 2006 that its intended developments on the land will not materialize the applicant made no move to establish its Micro Brewery elsewhere. It believed the Samoa Land Corporation or the Respondent should relocate them.
58. Goodwill, as Mr Malielegaoi pointed out, and counsel for the Respondent submitted correctly in my view, cannot eventuate in circumstances contended by the applicant. Goodwill in a product cannot exist before the product itself has existed. It certainly cannot exist on the basis that it was intended to be produced on premises which were forcibly taken through acquisition when in fact the owner of the product knew three years in advance that the land will be taken.
59. The claim for loss of goodwill for 3 years also presupposes that the land acquisition extinguished the Laumei Lager Micro Brewery business. It did not. There was no business to extinguish.

Claim for loss of Personal goodwill of Mr and Mrs Leota

60. The basis for this claim is explained by Ms Leota in paragraph 10 of her brief of evidence:

“The Laumei Faiaga bar/restaurant was started in 2006 to essentially provide a venue for all Samoan performing arts, fire dance, dance, live music and theatre. In its 4 years’ operation, the Laumei Faiaga hosted numerous tourists, local and overseas Samoan, including the most prominent citizens of our country – the Prime Minister, Church leaders, Members of Parliament, Members of the Judiciary and Private Section. Both Lene and myself have contributed an enormous amount to the cultural development of Samoa. We have taken groups of fire dances to Fire Knife Competitions in Hawaii, Los Angeles, American Samoa, and Dance groups, and showcasing Samoan culture to New Zealand and Australia. In 2006 we were successful in securing contracts for three fire dancers with Hong Kong Disneyland, two of whom are still employed in Hong Kong. We have also hosted the International Fire Knife Competition for 10 consecutive years. It was Siva Afi’s intention that the commercial operation of Laumei Faiaga should remunerate Lene and myself for our input to that business. We have claimed $163,000 for the loss of goodwill in relation to this part of the business. I produce as an exhibit a copy of the calculations for the loss of goodwill for this project. This has been claimed as part of our claim for goodwill. The total amount that we have claimed for loss of goodwill is $476,000.00.”

61. She claimed $163,000 goodwill. She admitted under cross examination that her calculations were in effect for loss of income. She was then asked:

Question:

How does this calculation relate to goodwill?

Answer:

whatever you set up a new business there is offer a period of time where the owners of the business or directors of the business are unable to take financial benefit from that business and then in our case we never took any personal income out of the Laumei part of the business, our salaries from I think 2003 have never changed, so we were not getting any financial benefit personally from the running of the Laumei business. At some point in time when the business was operating over time, as the business continue to operate we wouldn’t be able to take a financial benefit from the company and therefore that’s why we claim a loss of income which is related to the activities that we will directly involved in the Laumei business which included the trading of both performance, the show set designs by weekly shows, events management which we did quite a lot of, we had two shows every week and then we did other weddings, like other events like weddings or birthdays, those kind of events so that we had anticipation, had our lease been able to reach its full term, we had an expectation that we would have been able to draw income from performing those activities in the 4 years operating, we won’t able to take that money but if we had been there at 10 years or 20 years we would have been able to take probably a lot more than a 163,000 so I think it’s really quite a minor amount.

62. Mr Wilson accepted Ms Leota’s calculation of $163,000 and re-iterated it would take Mr and Mrs Leota 3 years to re-establish their Laumei Faiaga business so that loss of personal goodwill benefit would be fair for a 3 year period. The present value of the loss at a capitalization rate of 12% is $87,000.
63. Counsel for the claimants submitted at paragraph 85 of her written submissions that as a result of relocation and downsizing the business due to the acquisition the claimants were unable to continue with all aspects of their business which had been successful and profitable. Significant future profits have been lost as well as significant value in the goodwill aspect of the business. An implicit part of that is that goodwill has been lost with loyal staff no longer able to be employed.

Discussion

64. Goodwill is notoriously difficult to define: Hepples v Federal Commissioner of Taxation [1992] HCA 3; (1992) 173 CLR 492 at 519. There are various reasons for the difficulty in defining goodwill as noted in the numerous court decisions. One of the reasons is that goodwill is really a quality or attribute derived from other assets of the business. In Box v Commissioner of Taxation [1952] HCA 61; (1952) 86 CLR 387 it was said at page 397:

“goodwill includes whatever adds value to a business, and different businesses derive their value from different considerations.”

65. The difficulty in achieving a uniform legal definition of goodwill has been recognized and commented on in a number of cases. Some of the reasons for the difficulty were recognized in Commissioner of Taxation v Murry (supra) at paragraph 12:

“Another reason is that courts have been called on to define and identify goodwill in greatly differing contexts. In some cases, the nature of goodwill as property may be the focus of the legal inquiry. In other cases, the value of the goodwill of a business may be focus of the inquiry. And in still other cases identifying the sources or elements of goodwill may be the focus of the inquiry. It is unsurprising that in these varied situations courts have defined goodwill in ways that, although appropriate enough in one situation, are inadequate in other situations.”

66. Lord Macnagten in Inland Revenue Commissioners v Muller & Co’s Margarine Ltd [1901] UKLawRpAC 20; (1901) AC 217 at 223 – 224 referred to goodwill as a thing very easy to describe and very difficult to define.
67. The goodwill claimed by the applicants here is in relation to their involvement not in the manufacturing side of Siva Afi but the efforts and labour they expended on the Laumei Bar and Restaurant which according to the Financial Statements of the claimants has been struggling to make a profit before the acquisition.
68. However, it can be contended that the power of attraction of the personalities of Mr & Mrs Leota at the bar and restaurant and in organizing and running the entertainments and cultural shows attracted the customers to the premises and boosts the sales of the manufacturing side of the claimants.
69. The claimants also contended that they promoted Samoa overseas as a tourist destination and have also secured contracts for some local knife dancers to perform overseas. Annually they bring knife dancers to the annual knife fire dance competition organized by the claimants.
70. Although claimed under the head of goodwill, the claimants really want to be rewarded for the efforts they put into running their bar and restaurant and in organizing the weekly cultural shows, organizing the annual knife fire dance competition and finding employment overseas for the local boys. Goodwill is a reward for the success in one’s efforts, it is not a reward for the amount of effort one puts into an enterprise even if the enterprise does not flourish.
71. Mr Malielegaoi correctly reminded counsel that the applicants were not the only outfit which organised the weekly cultural shows. And the Samoa Tourism Authority is the major force which promotes and represents Samoa overseas in major events like Expos and other major festivals. In so far as the local cultural entertainments are concerned the applicants themselves recognized that their cultural shows have to compete with those of Aggie Greys and Kitano the two major stakeholders in the business of weekly cultural entertainment. They said so in their Business Plan at page 7:

“We believe that our cultural shows and casual atmosphere will be able to successfully compete with the two major tourist shows of Kitano and Aggies ...”

It cannot be ignored that the primary purpose of the Business Plan was to persuade and convince financial institutions to provide the necessary financial assistance to the applicants by way of loans and overdraft facilities.

72. The annual accounts for the years 2007, 2008 and 2009 show that Ms Leota was paid consultancy/ salary of $50,000 annually.
73. The truth of the matter is that the applicants have not lost its customers as a result of the acquisition. They have lost the customers for the bar and restaurant because they have not relocated. And they did not relocate because they believed the Respondent should find the appropriate if not a prime location in or the vicinity of the town area for them to locate to.
74. Far from dying, the name Siva Afi continues. It cannot be claimed that the goodwill attaching to the name has been destroyed or impaired by the acquisition. What they are actually claiming is loss of income.
75. This claim for loss of personal goodwill is also rejected.

Loss of Benefit in the Leasehold

76. It cannot be denied that the applicants are entitled to be compensated for the loss of benefit to the unexpired term of the lease. What is required to be determined under this heading is the quantum of the compensation.
77. The lease was for 20 years with right of renewal for 20 years. Mr Wilson for the claimants valued the interest for the unexpired term of the first 20 years at $473,000. He also valued the claimants’ interest for the second 20 year term boosting the total claim to $740,845.
78. Mr Clark valued the claimants’ interest in the leasehold at $255,000. His valuation report is dated 28^th September 2009. He was of the opinion that the lessee’s interest must reflect the terminating nature of the lease. He then valued the claimants’ interest to January 2011 when the rent will be reviewed in accordance with the terms of the lease.
79. Both Mr Clark and Mr Wilson assessed the freehold value of the land at $1,360,000. They also both agree that the ground rental for the land would be 5% of the land value, which is $68,000. As the then current rent pursuant to the lease was $48,375 the rental benefit to the claimants was therefore $19,625 per annum.
80. As Mr Clarke was of the view that the lease was a terminating one, he applied the rental benefit until the next rental review date which was the 1^st January 2011, a period of some 14 months.
81. Due to the terminating nature of the lease Mr Clark considered that 17.5% of the land value plus the present value of the rental benefit for the remaining 14 months at a rate of 12% represents the value of the lessee’s interest. His calculations were:

17% of $1,360,000	= $238,000
14 months @ 12%	= $217,073
	$255,073

82. Contrary to Mr Clark’s assumption Mr Wilson assessed claimants’ interest to reflect and cover the unexpired term of the lease for first twenty years. He then proceeded to calculate the claimants’ interest for the following 20 years.

Discussion

83. Mr Wilson in my view was correct in approaching the question of compensation on the footing that but for the taking, the claimants would have had the legal right to remain on the land until the first twenty year term has expired. At the same time I reject that the claimants are also entitled to the benefit for the next twenty years.
84. Total benefit of $473,000 for the remaining 15 years in Mr Wilson’s calculations should have been higher had he not applied and adopted rental reviews every three years after the 2014 review stipulated in the lease. No rental review is stipulated after the 2014 rental review which means the rental benefits would substantially increase, assuming of course the land values will continue to rise as they should since only about 12% of lands in Samoa are freehold.
85. The court will nonetheless accept the $473,000 as the appropriate compensation for the applicant’s interest in the land.

Value of Lessee’s Improvements

86. Mr Seru of Central Property Valuers was commissioned by the applicants in May 2009 to value the improvements. His valuation was assessed on a replacement cost basis of each improvement using the summation approach. His valuation can be summarized as follows:

Improvement	Construction Rate/m2	Replacement Value
Samoan fale	$1,200	89,000
Kitchen /Dining /Bar	$1,500	261,000
Storage fale	$1,000	45,000
Shop area	$1,400	80,000
Office	$1,300	81,000
Open shed	$400	25,000
Bathroom & Toilets	$1,200	23,000
Stage	$300	25,000
	Total	669,000

87. In August, the same year, Mr Seru was commissioned by the Samoa Land Corporation to value the same improvements as well as other items. His valuation can be summarized as follows:

Improvement	Area & Construction rate	Value
Samoan fale	86m2 @ $1,000 per m2	$86,000
Kitchen & Bar	80m2 @ 1,00 per m2	128,000
Opening Dining	121 m2 @ 400	48,400
Band/ Storage	51 m2 @ 800	40,000
Shop	55 m2 @ 1,400	77,000
Office	62 m2 @ 1,300	80,000
Open shed	52 m2 @ 300	20,800
Bathroom / Toilet	19 m2 @ 1200	15,600
Stage	31 m2 @ 400	12,400
Other improvements	Fencing, tanks, foyer etc	30,000
	Total Value	$538,200

88. The value given to each improvement did not include depreciation of 10% which Mr Seru applied to the $538,200 in paragraph 87 above to arrive at the current value of improvements.
89. There are glaring discrepancies in the value of some of the improvements in the two reports. I now refer to some of them:
    • (i) In the May report the Kitchen/ Bar/Dining with a construction rate of $1500 per square meter was valued at $261,000 which means a floor area of 174 square meters.
    • (ii) But in the August report the kitchen/bar was allocated 80 square meters at a construction rate of $1600 per square meter, while the dining area was allocated 121 square meter. A total floor area of 201 square meters valued at $176,000 a difference of $85,000 in total value, and not to mention the 27 square meters difference in total area.
    • (iii) The stage in the May report had a construction rate of $300 per square meter resulting in a value of $25,000. Which means the stage had an area of 83.3 square meters in May. But by August the stage had shrunk to 31 square meters and despite the increase of the construction rate to $400 per square meter it was valued at $12,400 within a space of 3 months the value of the stage has depreciated by more than 50%.
    • (iv) For the storage fale the construction rate in May was $1,000 resulting in a value of $45,000 which means an area of 45 square meters. But in August the area has increased by 6 square meters to 51 but the construction rate has reduced to $800 per square meters.
90. It is true that the nature of the valuer’s work in carrying out valuation works require the sharing informations and obtaining peer views and opinions on issues like construction rates, interest rates, land values, rental rates, capitalization rates and the like. But when there is no credible logical explanation for the sudden sharp increase or decrease in construction rates or the physical size of a building or structure or when a valuation of the same subject matter by the same valuer for two different opposing parties has inexcusable discrepancies, this court is entitled to criticize and disregard the valuation report as it has done in at least two previous occasions in A. J Wulf v National Provident Fund (unreported 23/7/07) and Stanley v Vito (unreported (6/2/09) ).
91. Attempts by Mr Seru to justify the discrepancies in his two reports did very little service to his credibility.
92. Mr Seru under cross examination conceded that the shed and the storage fale could be moved from the land. The shed valued by Mr Seru in May at $25,000 and the storage fale at $80,000; a total of $105,000.
93. Mr Seru also said under cross examination that except for the Samoan fale which he described as of high quality construction the rest of the structures were of fairly good to very good standard.
94. Mr Clark’s report of the improvements on the land included photographs of the buildings indicating the nature of the structure and the general standard of presentation. Mr Clark like Mr Seru also sought the peer views before compiling his report. Four valuers including Mr Seru were consulted. He also sought the views of Mr Tinai of Tinai Gordon and Associates, a very respected firm of Architects and Engineers.
95. As a result of his observations of the presentations, construction and finish of the buildings Mr Clark shared the same views as Mr Tinai who described the buildings as sub-standard, below an acceptable level and could not be insured for cyclone cover.
96. He adopted an overall rate of $300 per square meter for the depreciated replacement rate to arrive at the added value of the improvements amounting to $205,500. Which means the total floor area including the open stages is 685 square meters compared to Mr Seru’s 551 square meters in his August report.

Discussion

97. Mr Seru’s valuation report in August 2009 to Samoa Land Corporation was a result of instructions given to Mr Seru and other valuers to reflect:
    • (i) the current value of the lessee’s improvements
    • (ii) loss of business
    • (iii) relocation cost to government land (about 400 meters away).

Tinai Gordon & Associates a firm of Engineers & Architects was also commissioned for the same project. Mr Seru in cross examination said that Mr Tinai of Tinai Gordon was not present when Mr Seru and other valuers discussed the instructions given by Samoa Land Corporation.

98. More importantly Mr Seru admitted under cross examination that the May and August reports he compiled were to assess the current market value only and were not for compensation purposes. He was asked (at page 40 transcript 19/9/2011):

Question:	are u saying that based on instructions that are given to you in relation to the May report that you prepared, in the August report that you prepared that they were not based on valuation of compensation?
Answer:	No
Question:	and yet Siva Afi are in fact relying on your report as a basis to justify amount for compensation?
Answer:	for the value of improvements, a current value of improvement, yes but as an overall value for compensation it’s not sufficient there are other areas which has to be assessed.

99. The other areas which Mr Seru obviously referred included the concept of obsolescence, which Mr Tinai obviously considered when he wrote in his report to Samoa Land Corporation that the cost of land improvements on the existing property at Sogi is not significant. He did place a replacement cost rate of $800 per square meter of floor area. Concepts of obsolescence and depreciation have not been considered and applied to the replacement costs or current value of the improvements to arrive at the added value of the improvements on the leasehold.
100. As an engineer, and a very respected and recognized one as well, Mr Tinai was better placed than Mr Seru and other valuers to recognize the state of the structures. Mr Seru admitted that fact. He was asked at page 29:

Question:	would u agree that a structural engineer would be able to determine the conditions of the construction of any of the buildings better than property valuer?
Answer:	Yes for Structures

101. Compensation for freehold land with buildings taken compulsorily involves different concepts from those involved when considering compensation for leasehold interests taken. In the case of freehold land the value of the land and structure is calculated at the time of acquisition on a willing buyer / seller basis. The owner is compensated and he goes to look for a new place to live. He may claim for compensation under disturbance to cover any valuation fees, or report which may be required in acquiring his new home.

In the case of the acquisition of land under lease there are other areas to be considered other than the value of the land, value of the lessees interest, value of improvements, including costs of relocating; loss or reduction in earnings (in case of a business), costs and other items.

102. In determining the lessee’s interest in the leasehold the added value of the improvements in addition to the value of the unexpired term of the lease constitutes the lessees interests. But both items are valued and assessed differently. Current value of the improvements on the leasehold is not the value of the compensation as Mr Seru agreed (paragraph 99 above).
103. Mr Clark correctly pointed out that the cost of constructing buildings which are not necessarily the highest and best value may not necessarily mean that the cost of those improvements plus the land value will equate market value.
104. The valuation report relied on by the claimants simply valued the current market value of the improvements. It failed (as Mr Seru conceded) to factor other concepts which Mr Clark did in his report. Accordingly I accept Mr Clark’s valuation to be more accurate.
105. For the value of Improvements the sum of $205,500 is accepted as the appropriate amount.

Relocation Costs

106. Relocation costs are claimed to cover expenses during the period 16 November 2009 to 27 November 2009 when the new factory became operational. Costs of Relocations are claimable provided they relate to relocation.
107. Compensation for relocation have been submitted under 5 different headings. For convenience I will consider each of the five headings separately and give my ruling on each one:

(i) Moving Expenses.

The claim amounting to $14,045.34 covers transport hire, wages, statutory, deductions, TV and Newspaper advertisings. It also includes Loan Principal and Interest totalling $1,896.19 which I disallow for the obvious reason that this item can be claimed as expense or liability in the applicant’s Annual Returns. It is a duplicated claim. I accordingly allow $12,149.15.

(ii) Set Up of New Factory

The claim relates to installing of power, telephone, gas, air condition, movement of container of goods, and value of materials stored in the container for construction, as well as materials purchased from ACE, AST and Samoa SpareParts. The total claim under this head is $21,588.84. Materials purchased from AST and ACE amounted to $1,522.67 which I consider in the absence of evidence were building materials. I disallow this amount as it tantamount to duplicate what has been considered under value of Improvements. I accordingly allow $20,066.17.

(iii) Damage Caused by the Move

This claim covers cost of repairs to equipments called Innove Controls damaged during the move, as well as Customs duties and installation costs and totalling $1,200. I consider the damage claim to be far too remote. I allow installation costs only which amounted to $415.

(iv) Set up of shop

The claim relates to electrical costs, cost of flooring & tiling, value of materials from container for construction and labour totalling $9,801.00. The claim includes payment of $2,245 to Flooring Down-under which I believe is for titles. I disallow this claim for two reasons. One is that this appears to duplicate what was considered under Value of Improvements and secondly the element of betterment raised by counsel in her submissions was not accounted for and taken into account in submitting this claim. I allow $7,556.

(v) Wages and Accommodation for Contracted chef

This claim is to cover wages and accommodation paid for the Contracted chef between 16^th November 2009 to 31^st March 2010 when the chef obtained work at another place totalling $11,790. This claim is rejected. The claimants knew for more than 3 years that they had to move. They made no move until they were forced.

Loss and Damage to Plant

108. This claim is premised on the allegation that at the time of the acquisition, the claimants had no site in which to move their equipments, machinery and furnitures. As a result of these items being moved by the Respondent’s employees from inside the buildings to the car park, they were subjected to the elements, became damaged and destroyed. The claimants claim $272,765 compensation to replace the damaged equipments with new ones.
109. The basis for the claim is explained at paragraph 20 of Ms Leota’s Brief of Evidence:

“As referred to above, the claimant had large items of printing machinery and other equipment on the land at Sogi. At the time of the taking of the land the claimant was not able to find premises in which either to store or operate these large items of machinery. At a meeting on the Sogi land between ourselves, the CEO of MNRE, the CEO of Public Works and a representative from the Police on Tuesday 17 November 2009, the CEO of Public Works and the CEO of MNRE agreed to keep any equipment that we could not move (due to the urgency caused by the actions of the Government) safe, until such time that the issue of compensation had been settled with the Government. I asked the CEO of Public Works and the CEO of MNRE who was going to look after our equipment. They told Lene and I that they would store the equipment until compensation had been sorted out. However, sometime later the claimants become aware that the Ministry had taken no steps to store the machinery in a manner which would give it adequate protection. Instead the machinery had been left outside, in the elements, in a Ministry carpark, and has remained there for over two years. I have had the opportunity of inspecting the machinery and confirm that it is unusable and effectively has been destroyed.

110. Ms Leota in her testimony also said that the CEO of the Ministry of Works was also interviewed on television and he said during the interview that he would store the claimants’ equip. At the request of the claimants this video clip of the interview was produced for viewing.

Discussion

111. The allegation by the applicant that the Ministry of Works agreed to store its equipment is outrageously misleading. The video clip of the television interview of the CEO removes all cloud of doubt that the CEO neither expressly or impliedly agreed, undertook or promised to look after and take care of the applicant’s machinery, plants, and equipments.
112. The repeated responses of the applicants, and their solicitor in reply to letters to remove their equipment and improvements were that they simply had no where to move.
113. Nothing was said or done by the CEO of the Ministry of Works, or anyone of his Ministry, to create a bailor / bailee relationship between the Ministry and the applicants. Taking of Lands Act does not impose an obligation on the Respondent or anyone else to relocate the dispossessed, take care of its, his or her assets, equipments etc until compensation has been settled and paid.
114. The claim is rejected.

Valuation Expenses

115. The claimants claim to recover costs of valuation fees which they incurred in preparing the claim for compensation as well as the preparations towards this court hearing. Valuations fees are identified as follows:

Central Property Valuers	$23,000
E.K Wilson & Associates	$20,000
Leota Accountant	$10,000
	$53,000

A total of $53,000 is claimed.

116. Accounting costs of $10,000 is for the preparation of annual accounts which is the obligation imposed by law on the applicants. Acquisition or no acquisition those accounts would still have to be prepared and submitted to the Ministry of Revenue. The claim of $10,000 is accordingly rejected.
117. By reason of having to vacate the premises due to the acquisition the applicants were required to prepare their claim for compensation and to do that they required the services of a valuer. In Lee v Minister of Transport (1966) 1 QB 11 the English Court of Appeal examined more closely the meaning of disturbance because a section of the Town Planning Act provided that compensation shall not include any amount attributable to disturbance. The question before the Court was whether fees which the owner had to pay to his surveyor, valuer or agent to prepare his claim for compensation were items recoverable for compensation. It was held they were not, but recoverable by virtue of the words any other matter in the English rule 6.
118. The words and any other matter appear in the proviso to section 37 (2) of our Taking of Land Act which deals with compensation.
119. Mr Wilson of E.L. Wilson was commissioned to value loss of business, loss of goodwill and lessees interest in the leasehold. He provided a comprehensive 10 page report which has assisted the court a great deal in this trial. This report however was not before the Honourable Minister when the claim was considered. Nonetheless the report was required for the purpose it was commissioned for. The claim for fees of $20,000 is granted.
120. In May 2009 Mr Seru of Central Property Valuers was engaged to value the market value of the lessees’ improvements on the land which he did and produced a 3 page report for which he demanded $23,000 in fees an average of $7,600 per page. Although the applicant’s are entitled to be compensated it would be against good sense and in the interest of justice to burden the respondent with fees which appear blatantly to be out of proportion. The respondent should pay only a portion of the fees claimed and $10,000 is accordingly ordered.
121. A total of $30,000 is granted under this head.

Legal Fees

122. Legal fees of $71,146.83 are claimed. It appears from the documents that the applicants sought legal assistance on or about April 2009 after Samoa Land Corporation by letter of the 18^th March 2009 terminated the lease on the basis of the non-payment of rent arrears totalling $103,194.03.
123. The first billing invoice is dated 8^th July 2009 which accounted for services commencing from May 2009 through to the first court hearing in July 2009. Several other invoices for services rendered followed. The original claim of $115,266.71 has been amended to $71,146.83.
124. As stated earlier the wider class of losses which are sustained by reason of being disturbed in possession as a result of the acquisition are recoverable by way of compensation so long as they are not too remote.
125. In my view the legal costs claimed are far too remote even though counsel was engaged by the claimants before the claim for compensation was lodged.
126. The claim under this head is rejected.

Counterclaim by the Respondent for Rents owing

127. The Respondent contended that it was entitled to deduct from the compensation it offered the sum of $122,864.47 representing the rent arrears owing by the applicant on the leasehold.
128. The applicants deny owing any rent. They rely on the ruling of this Court dated the 28^th July 2009 in which it denied applications by the plaintiffs and the defendant for injunctions against each other. They say the court ruled that no rents were owing by the applicants. Res Judicata, the claimants contended, prevents the Respondent from raising and challenging the issue of rent again.
129. If the court in its ruling of the 28^th July 2009 determined that there were no rents owing by the applicants because the applicants have been complying with rental payments or given other remunerable services to the Samoa Land Corporation in lieu of rent, their argument has merit.
130. If on the hand the court ruled there were no rents owing because the Samoa Land Corporation ceased charging rents upon a condition or obligation to be fulfilled by the claimants, and that obligation had not occurred, or was more likely to occur, and there was possibility or likelihood to occur before the matter was litigated in July 2009, then the claimants’ argument must fail.
131. No rents were owing because Samoa Land Corporation after informing the claimants of the pending taking of the land offered not only to look for an alternative site to relocate the claimants to but it also offered to cease charging rent to enable the claimants to save to relocate. Both the claimants and Samoa Land Corporation embarked on a course to relocate the claimants. At the time the offer was made the claimants were already in arrears in their rental payments.
132. Negotiations dragged on for over two years over suitable sites for relocations. Differences and other agendas led Samoa Land Corporation to write to the applicants on the 18^th March 2009 terminating the lease for non-payment of arrears totalling $103,194.33. The claimants made a payment of $10,000 on or about the 26^th March 2009. On the 5^th April 2009 Samoa Land Corporation wrote to the applicants referring to its letter of termination of 18^th march 2009. Part of the letter of the 5^th April reads:

“... we are still willing to waive rental for the last 32 months only to compensate to relocation of your assets of a new location is being sorted out between your company and rightful landlords of your preferred sites.”

133. It is crystal clear throughout that the rents owing and rents due would not be claimed; they constituted relocation expenses of the applicants whenever relocation occurs. When the court gave its ruling on the 28^th July 2009 the applicants have still not relocated and the deal between the parties was still alive although it has turned sour, so when the court in its ruling said no rent was owing, it did so because no rent was charged. And no rent was charged to assist the applicants with relocation expenses.
134. Rent arrears owing constituted compensation. Common sense dictates that those arrears should be deducted from the compensation awarded to the claimants.

Orders

(a)	The following amounts of compensation are awarded to the claimants:
(i)	Loss of benefit in the leasehold	$473,000
(ii)	Added value of improvements	$205,000
(iii)	Relocation Costs	$40, 186.15
(iv)	Valuation Costs	$30,000
	Total of	$748,186.15

(b)	The following amounts are to be deducted representing:
(i)	Compensation paid	$339,955.88
(ii)	Rents owing	$122,864.47
	Total of	$462,820.35

(c) The respondent is ordered to pay $285,365.80.

(d) Interest to accrue at 12% on the amount awarded of $285,365.80 from the 16^th June 2010.

(e) Each party will bear its own costs.

JUSTICE VAAI