No Obligation of Court for Running Commentary on Submissions, Including those Made Orally

In oOh!media Fly Pty Ltd v Transport for NSW [2024] NSWCA 200 (15 August 2024), the New South Wales Court of Appeal– in response to a submission of absence of procedural fairness, for want of court response to oral submissions – made plain that the court was not obliged to be constantly responsive thereto during hearing so that all parties could gauge the court’s reception and understanding thereof. The court, speaking by Kirk JA (Leeming and Adamson JJA agreeing), wrote:

[2]   … Qantas Drive is a much used road in the vicinity of Sydney Airport. Next to the road was a strip of land used for rail purposes (the Land). The appellant, oOh!media Fly Pty Ltd, had a leasehold interest in the Land (the Lease) which had enabled it to erect 18 large billboard signs directed at motorists, as part of the outdoor advertising business of its parent company, oOh!media Ltd. On 18 September 2020 the Lease was compulsorily acquired by the respondent, Transport for NSW (TfNSW), for the purpose of facilitating construction, operation and maintenance of the “Sydney Gateway” road project. That project was connected to the broader WestConnex road development. The dispute in these proceedings is the compensation to which the appellant is entitled under the Land Acquisition (Just Terms Compensation) Act 1991 (NSW) (the Act) for acquisition of its leasehold interest.

[3]  The Valuer-General determined the compensation payable to be some $3.8 million. The appellant exercised its right to challenge that determination in the Land and Environment Court. In its amended points of claim it sought the rather larger amounts of some $52.2 million on its preferred scenario or $32.6 million on its alternative scenario. After a seven day hearing the primary judge, Moore J, rejected the substance of the appellant’s arguments: oOh!media Fly Pty Ltd v Transport for NSW [2023] NSWLEC 26 (J). In a subsequent judgment his Honour quantified the compensation payable under the Act as some $2.7 million, being less than the Valuer-General’s determination: oOh!media Fly Pty Ltd v Transport for NSW (No 2) [2023] NSWLEC 112 (J2).

…

Ground 1: procedural fairness

[17]  One issue before the primary judge was what valuation method should be adopted for assessing the market value of the lease pursuant to ss 55(a) and 56 of the Act. The appellant had proposed two possible valuation approaches, as manifest in its two scenarios: first, a discounted cash flow (DCF) method; alternatively, a profit rent method, that is, assessing the net present value of the difference between the rent payable under the lease and market rent. The latter approach produced a lower figure on the appellant’s analysis. TfNSW had initially asserted that the profit rent method should be applied. However, by closing submissions it said a DCF approach should be adopted in light of the evidence given in the hearing. The appellant’s position in closing was to support the DCF approach based on its analysis of the evidence, but it also said that whichever method would result in a higher value should be applied.

[18]  The primary judge noted the appellant’s position about adopting either method (at J[157]). His Honour held that the profit rent method was not available on the facts, and thus proceeded on a DCF approach, saying:

[167]  Although s 56(1) mandates consideration of the hypothetical transaction in the terms there set out, such a transaction must be hypothesised as taking place in a market which is known to exist. Just as it would be inappropriate, in a hypothetical real estate transaction to seek to use analysis of the sale of a residential property in suburban Sydney for the purposes of deriving a value to be adopted for a CBD office tower, because such a process would not be one in a s 56(1) real-world, that is also the position which arises with respect to the Company’s proposed hypothetical profit rent analysis. There simply is no evidence that supports the proposition that there is or has been any market for outdoor advertising billboard sites involving transactions where the hypothetical purchaser was an investor who was not an existing player in the outdoor advertising market.

[168]  In these proceedings, the evidence is that there is fierce competition between the major players in the limited pool of active participants in the outdoor advertising industry. There is, however, no evidence of any transaction of the type here hypothesised by the Company. In the absence of evidence demonstrating that such a market exists, and is not merely a concept advanced in the absence of real-world existence of such a market, there is no possible basis to entertain consideration of the claim advanced on this methodology.

[19]  The appellant does not challenge the nature of this reasoning. It expressly accepts that a “finding that a particular market would value an interest in land in a particular way is a finding of fact and is, therefore, outside the scope of an appeal under s 57 of the LEC Act”. Its complaint is that in rejecting the profit rent method for the reasons given at [167] the primary judge denied it procedural fairness.

[20]  The availability of the profit rent approach in this case was seen to depend upon the existence of a category of potential lessees or purchasers comprised of investors who were not themselves participants in the outdoor advertising market but who would on-lease the sites to outdoor advertising companies such as the appellant. The appellant had submitted below that there was such a class of market participants and that those participants were likely to proceed by a profit rent valuation approach. His Honour concluded that there was no evidence of any market involving such investor transactions. That was a finding of fact. Although the judge spoke in terms of there being no evidence of “such a market”, it is apparent (and the appellant accepted) that what he meant was that there was no evidence that there was such a class of investors operating within the market for purchase or lease of outdoor advertising billboard sites.

[21]  The appellant complained that the proposition that there was no such evidence was not put to the trial judge by either party, was contrary to the evidence, and was a conclusion which could not reasonably have been expected by the appellant. It submitted:

The Appellant assumed, incorrectly it would appear, that the trial judge had understood the totality of the available evidence. Had the Appellant been made aware either by the Respondent’s submissions or by indication from the trial judge that the Court would proceed on the (incorrect) assumption that there was no investor market for the Acquired Lease, the fact of the prior transaction of the Acquired Lease itself, and the evidence of Mr Lunney, could have been highlighted.

[22]  Mr David Lunney was one of the valuers who gave evidence. At J[157]–[158] the primary judge referred to, and quoted, submissions put on behalf of the appellant to the effect that whichever methodology produced the higher value should be applied. His Honour then said this (emphasis added):

[159]  In response, Mr Hutley [for TfNSW] submitted …:

Can I turn to the discount rate of [sic — or ] the profit rent approach. The experts have agreed that if the market trades these signs on a basis other than profit rents, ie by reference to discounted cashflows, then that’s the appropriate valuation methodology. The experts have agreed, that is the experts to do with the signage, have agreed that that’s the approach in the market.

It’s telling that there’s no suggestion from our learned friend’s expert, Mr Whitford, that there’s concept of some property trader coming in and buying up precincts, and seeking to market them, so this theory of the property developer seems one which nobody in the industry has ever heard of, and there’s no certainly no evidence that they’ve ever heard of it, and they say that that’s how these signs trade, and, in our respectful submission, having regard to what was found in Eureka and supported by the Court of Appeal, that should be the basis of valuation, in this case. That’s what the market would pay for it, not what it [sic — this] imagined investigation [sic — investor] would pay for it. So, we say that should be the end of it. Our learned friend seem to have advanced the case in that they get the better of the two analyses, and, in our respectful submission, this is not a game show, this is your Honour determining what the market value is, and there will be a market value, and that’s it, and if the market value’s in a particular way, in our respectful submission, that’s the end of it. Against the possibility that one needs to deal with that.

[23]  Mr Adam Whitford was an expert witness on the outdoor advertising market called by the appellant. Mr Hutley SC, who appeared with Mr Astill for TfNSW both below and on appeal, was clear in saying that there was “certainly no evidence” of the type of market activity postulated by the appellant. It was that submission which the primary judge accepted in his reasoning at [167]. The appellant is thus incorrect to say that the proposition that there was no such evidence was not put to the trial judge by either party. It is incorrect to say that it was a conclusion which could not reasonably have been expected by the appellant. The issue in question was squarely raised. The appellant had every chance to respond to it in its oral reply submissions.

[24]  Mr Hemmings SC, who appeared with Ms McKelvey for the appellant at trial and in this Court, said of Mr Hutley’s oral submission, as quoted at J[159], “I accept that those words, taken in isolation and out of context, have the possibility to have put us on notice”. His Honour did not take the words out of context. As set out in his Honour’s quotation at J[159], Mr Hutley had introduced that portion of his oral submissions by saying “Can I turn to the discount rate of [sic — or] the profit rent approach”.

[25]  Mr Hemmings submitted that Mr Hutley’s submission “doesn’t appropriately deal with the issue that there was a submission plainly made, contrary to the case the parties were otherwise running”, and that the “the one-liner wasn’t good enough to put us on notice”. Senior counsel also complained that Mr Hutley had mentioned one type of evidence — that given by one of the advertising market experts — but not other evidence by the valuers, including a reference to Manboom (the entity from which the appellant had acquired the 2000 iteration of the Lease). That the appellant’s representatives do not consider the submission adequate or persuasive is hardly to the point. The submission may have been brief but its meaning was clear. And, as it happens, Mr Hutley repeated the point in his oral submissions a few minutes after the passage quoted at J[159], saying:

So, in other words, what we say is — this idea is legally misconceived, and not only is it legally misconceived — my learned friend can shake his head, he probably was, it doesn’t impress anyone — this thing is legally misconceived, Your Honour hasn’t heard one jot of evidence that any person in the marketplace has ever done this, conceived of it, and it is a thought experiment worked out by our learned friends.

[26]  To put these submissions in further context, as noted above, TfNSW’s opening position had been to prefer a profit rent methodology. In its closing written submissions it said that the “orthodox approach of assessing the market value of a leasehold interest” was the profit rent method. But it then referred to evidence from the outdoor advertising experts in support of the DCF method (which I will come back to) and submitted that:

The land valuers agreed that if industry advice was that this was the way in which the market approached pricing of a lease such as this, then the DCF method was appropriate to value the lease.

Nevertheless, the Applicant has not abandoned the alternative claim based on a profit rent assessment …

[27]  TfNSW was thus implicitly suggesting that the DCF methodology was the appropriate one on the facts of this case. It is true that this submission did not refer to an absence of evidence about investor market participants. Important points should be made in written submissions. Nevertheless, this submission did at least put the appellant on notice of the need to justify why a profit rent approach should be adopted.

[28]  Mr Hemmings took this Court to his oral reply submissions in the Court below, saying he did not “take on a suggestion that there is no class of purchaser that would pay profit rent”. The fact that he did not do so indicates that he — and presumably the rest of the appellant’s legal team — had not understood Mr Hutley’s submission in the way that his Honour later did. That may reflect the absence of the point from TfNSW’s written submissions. Although the point should have been put in writing, Australian courts continue to operate within an oral tradition. Sometimes new points are raised by counsel orally; sometimes they are raised from the bench. One of the responsibilities of appearing in court is having constantly to be alert to what is being said and being ready to respond.

[29]  The fact is that in closing submissions in the Court below Mr Hutley did make the “no evidence” point, clearly and twice. There was no requirement that the primary judge spell out what he understood the submission to mean. The High Court has observed of an administrative tribunal that “[p]rocedural fairness does not require the Tribunal to give an applicant a running commentary upon what it thinks about the evidence that is given”: SZBEL v Minister for Immigration and Multicultural and Indigenous Affairs [2006] HCA 63; (2006) 228 CLR 152 at [48] . The same is true of a court. And the principle extends to not needing to comment on submissions.

(emphasis added)

The full decision may be found here.