Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 6)

[2019] NSWLEC 98

Land and Environment Court

New South Wales

Medium Neutral Citation:	Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 6) [2019] NSWLEC 98
Hearing dates:	16 October 2017; 3, 7, 13, 20, 23, 28, 29, and 30 November 2017; 1, 4, 5, 6, 7, 8, 11,12, 13, 15, and 20 December 2017; 29, 31 (view) January 2018; 1, 2, 23, and 28 February 2018; 5, 6, 7, 8,12, 13, 15, 16, 19, 20, 21, 26, 27, and 28 March 2018; 4, 9, 10, 11, 16, 17, 18, 19, and 30 April 2018; 8 April 2019; further written material 6 and 7 May 2019
Date of orders:	18 July 2019
Decision date:	18 July 2019
Jurisdiction:	Class 3
Before:	Sheahan J
Decision:	See pars [860] and [861]
Catchwords:	COMPULSORY ACQUISITION: compensation payable for acquisition of two lots in St Peters – site used for landfilling and waste operations – hypothetical development concepts for highest and best use of Lot 2 – Discounted Cash Flow valuation methodology employed – claims for losses attributable to disturbance – claims for special value - claims based on agency – construction of s 59(1) Land Acquisition (Just Terms Compensation) Act.
Legislation Cited:	Conveyancing Act 1919 Environmental Planning and Assessment Act 1979 Land Acquisition (Just Terms Compensation) Act 1991 Marrickville Local Environmental Plan 2011 Protection of the Environment Operations Act 1997 Real Property Act 1900 State Environmental Planning Policy (Exempt and Complying Development Codes) 2008 Sydney Local Environmental Plan 2012
Cases Cited:	1643 Pittwater Road Pty Ltd v Pittwater Council 11 Elvina Avenue Pty Ltd v Pittwater Council Doering v Pittwater Council 1643 Pittwater Road Pty Ltd v Pittwater Council [2004] NSWLEC 685 195 Crown St Pty Limited v Hoare [1969] 1 NSWR 193 Adelaide Clinic Holdings Pty Ltd v Minister for Water Resources (1988) 65 LGRA 410 Alexandria Landfill Pty Limited v Sydney City Council; Alexandria Landfill Pty Limited v Marrickville Council [2004] NSWLEC 639 Alexandria Landfill Pty Ltd and Boiling Pty Ltd v Roads and Maritime Services [2017] NSWLEC 148 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 2) [2017] NSWLEC 175 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 3) [2017] NSWLEC 183 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 4) [2018] NSWLEC 31 Alexandria Landfill Pty Ltd v Roads and Maritime Services; Boiling Pty Limited v Roads and Maritime Services (No 5) [2018] NSWLEC 37 Almona Pty Ltd v Roads and Traffic Authority of NSW [2008] NSWLEC 112 Baringa Enterprises Pty Limited v Manly Municipal Council (1965) 15 LGRA 201 Blacktown City Council v Fitzpatrick Investments Pty Ltd [2001] NSWCA 259 Boland v Yates Property Corporation Pty Limited (1999) 74 ALJR 209; [1999] HCA 64 Bronzel v State Planning Authority (1979) 44 LGRA 34 Carlewie Pty Ltd v Roads and Maritime Services [2017] NSWLEC 78 Carlewie Pty Ltd v Roads and Maritime Services [2018] NSWCA 181 Cedar Rapids Manufacturing and Power Co v Lacoste [1914] AC 569 Commonwealth Custodial Services Ltd v Valuer General (NSW) (2006) 148 LGERA 38; [2006] NSWLEC 400 Commonwealth v Arklay (1952) 87 CLR 159 Cook and Edwards v City of Sterling (1991) 4 WAR 469 De Ieso v Commissioner of Highways (1981) 27 SASR 248 Denshire v Roads and Maritime Services (NSW) (2017) 229 LGERA 118; [2017] NSWLEC 181 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] HCASL 236 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2016] NSWLEC 39 Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] NSWCA 73 Dial a Dump Industries Pty Ltd v Roads and Maritime Services [2015] NSWLEC 172 Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328 El Boustani v Minister Administering the Environmental Planning and Assessment Act 1979 [2012] NSWLEC 266 El Boustani v The Minister administering the Environmental Planning and Assessment Act 1979 (2014) 199 LGERA 198; [2014] NSWCA 33 Elmon Pty Ltd v Roads and Maritime Services [2016] NSWLEC 168 Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118 Fenton Nominees Pty Ltd v Valuer-General (1981) 47 LGRA 71 G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services [2019] NSWLEC 12 George D Angus Pty Limited v Health Administration Corporation (2013) 205 LGERA 357; [2013] NSWLEC 212 Gerraty v McGavin (1914) 18 CLR 152; (1914) 20 ALR 182 Hatzivasiliou v Roads and Maritime Services [2017] NSWLEC 9 Health Administration Corporation v George D Angus Pty Ltd (2014) 88 NSWLR 752; [2014] NSWCA 352 Housing Commissioner of NSW v Falconer [1981] 1 NSWLR 547 ISPT v Valuer General (2009) 165 LGERA 25 Jameson v Rail Corporation NSW [2014] NSWLEC 83 John Bridge Ltd (in liq) v Commonwealth (1951) 11 The Valuer 375 Kelly v Western Australian Planning Commission [2006] WASC 208 Konduru T/as Warringah Road Family Medical Centre v Roads and Maritime Services [2017] NSWLEC 36 Macarbell Pty Ltd v RTA; Nasser v RTA [2006] NSWLEC 366 Melino v Roads and Maritime Services [2018] NSWCA 251 Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118 Mir Bros Unit Constructions Pty Ltd v Roads & Traffic Authority of New South Wales [2006] NSWCA 314 Moloney v Roads and Maritime Services [2018] NSWCA 252 Moloney v Roads and Maritime Services (No 2) [2017] NSWLEC 68 Monti v Roads and Maritime Services (No 4) [2019] NSWLEC 11 Mount Lawley Pty Ltd v Western Australian Planning Commission (2004) 136 LGERA 16 Newbury DC v Secretary of State for the Environment [1981] AC 578 Park v Allied Mortgage Corporation Ltd (FCA, 5 July 1995, unreported) Raja’s case [1939] AC 302 Roads and Maritime Services v Allandale Blue Metal Pty Ltd [2016] NSWCA 7 Roads and Maritime Services v United Petroleum Pty Ltd [2019] NSWCA 41 Roads and Traffic Authority (NSW) v McDonald (2010) 79 NSWLR 155; [2010] NSWCA 236 Roads and Traffic Authority (NSW) v Peak [2007] NSWCA 66 Roads and Traffic Authority of New South Wales v Mosca (2006) 146 LGERA 335; [2006] NSWCA 159 Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223; [2001] NSWCA 11 Service Design Pty Limited v Commissioner of Highways (No 2) (1986) 59 LGRA 176 Smith and Hannaford v Zhang and Zhou [2011] NSWLEC 29 Spencer v The Commonwealth (1907) 5 CLR 418 Speter v Roads and Maritime Services [2016] NSWLEC 128 Sydney Water Corporation v Caruso (2009) 170 LGERA 298; [2009] NSWCA 391 The Minister v The New South Wales Aerated Water and Confectionary Company Ltd (1916) 22 CLR 56; (1916) 23 ALR 10 Tolson v Roads and Maritime Services [2014] NSWCA 161; (2014) 201 LGERA 367 Turner v Minister of Public Instruction (1956) 95 CLR 245 United Petroleum Pty Limited v Roads and Maritime Services [2018] NSWLEC 35 United Petroleum Pty Limited v Roads and Maritime Services (No 2) [2018] NSWLEC 64 Walker Corporation Pty Ltd v Sydney Harbour Foreshore Authority (2008) 233 CLR 259 Willoughby City Council v Transport Infrastructure Development Corporation (No 2) [2008] NSWLEC 238 Yates Property Corporation Pty Ltd v Darling Harbour Authority (1991) 24 NSWLR 156
Texts Cited:	A Hyam The Law Affecting Valuation of Land in Australia (4th ed. 2009, Federation Press) A Hyam The Law Affecting Valuation of Land in Australia (5th ed. 2014, Federation Press) Dr David Parker, DC F4 Theory and Practice the State of Play (Australian Property Journal August 2005) International Valuation Guidance No. 9 International Valuation Standard (6th ed.) IPart NSW. “WACC Biannual update” (February 2015), pp.1-6 Law of Agency, (3rd ed, 2014, LexisNexis) Wayne Lonergan, The Valuation of Business, Shares and Other Equity (4th ed. 2003, Allen and Unwin)
Category:	Principal judgment
Parties:	Alexandria Landfill Pty Ltd (Applicant) Boiling Pty Ltd (Applicant) Roads and Maritime Services (Respondent)
Representation:	Counsel: Mr I Hemmings, SC with Mr M Seymour, Ms K Lindeman, and Ms R Khalilizadeh (17 February only), barristers (Applicants) Mr R Lancaster, SC with Mr N Eastman, and Mr M Astill, barristers (Respondent) Solicitors: Addisons (Applicants) Norton Rose Fulbright (Respondents)
File Number(s):	2016/155678, 2016/155930

JUDGMENT

Contents

Judgment

Contents

Section 1: Introduction

1.1 General

1.2 The subject land and its valuation

1.3 The Hearing and some relevant external events

United

Some other decisions

The United Appeal

Reopening

1.4 The Evidence

Section 2: The Structure of this Judgment

Section 3: The Principal Statutory Provisions

Section 4: Background

4.1 The Evolution of the Claims now before the Court

4.2 The Acquired and other relevant Lands

4.3 The Malouf Companies and their lands

4.4 Land Titles

4.5 Development consents

4.6 The Boiling Lease:

Section 5: Methods of valuation

5.1 History of Valuation Scenarios

5.2 Final valuation scenario for Lot 2

Sections 6 to 14: Expert Evidence

Section 6: Town planning experts

Section 7: Traffic experts

Section 8: Geotechnical experts

Section 9: Waste operations experts

9.1 The options and site arrangements

9.2 Location of the temporary shed

9.3 Deferral of recycling income for 18 months

9.4 Gate fee for waste soils

9.5 Recovery rates

9.6 Receivable tonnage

9.7 Gate fee for mixed dry waste

9.8 Wages and salaries

9.9 Discount rates

Section 10: Environment and contamination evidence

10.1 The Competing Experts

10.2 Environmental protection licences

10.3 EPL Compliance Issues

10.4 The evidence in detail

Section 11: Environment management experts

11.1 Introduction

11.2 Experts’ Qualifications and Experience

11.3 Leachate management

11.4 Landfill gas management

Section 12: Quantity surveying experts

Section 13: Land valuation evidence re Lot 2

13.1 Proposed subdivision of land

13.2 Terminal value of land

13.3 Land discount rate

13.4 The Boiling lease

Section 14: Business valuation evidence

14.1 Discount rate for business related cash flows

14.2 Discount rate for initial stockpile remediation cost

14.3 Valuation of Area E based on cash flow of future business

Section 15: Highest and best use of Lot 2

15.1 The principles

15.2 Applicant’s submissions

15.3 Respondent’s submissions

15.4 Applicant’s submissions in reply

15.5 Consideration – highest and best use

15.6 Conclusion – highest and best use

Section 16: Arriving at the Market Value of Lot 2

16.1 Introduction

16.2 Contamination Considerations

16.3 Quantity Surveying

16.4 Geotechnical Considerations

16.5 Environmental Management (Leachate and Landfill Gas)

16.6 Waste Operations

16.7 Land Valuation

16.8 Business Valuation

Section 17: Market Value for Lot 1

17.1 Introduction

17.2 Evidence

17.3 Consideration

Section 18: ALF’s Disturbance Claims

18.1 The Principles

18.2 The Claims

18.3 Applicant’s submissions in more detail

18.4 Submissions in reply by RMS

18.5 ALF’s claim based on Agency

18.6 Recent decisions

18.7 Conclusions on Disturbance

Section 19: Special Value

Section 20: Costs

Section 21: Conclusion

Section 22: Determinations and Orders

Section 1: Introduction

1.1 General

1. The Applicants in these two matters, and some related entities, asserted interests in various lands acquired by the WestConnex Delivery Authority (“WDA”, later dissolved in favour of Roads and Maritime Services (“RMS”)) for the major infrastructure development “WestConnex”, and sought compensation pursuant to the Land Acquisition (Just Terms Compensation) Act 1991 (“the JTC Act”).

2. The various parcels of land were located at St Peters, south west of Sydney Central Business District (“CBD”), within an area bounded by Princes Highway, Canal Road, Burrows Road and Campbell Street/Road. They sit generally north-west of Alexandra Canal, south-west of Sydney Park, and across Canal Road from Cooks River Rail Terminal. On the north-west side of the Highway is suburban St Peters and Sydenham. Most of the lands were in the Marrickville Local Government Area (“LGA”), but some were in the City of Sydney LGA. Some have a history of quarrying, mostly for historic brick-making industries, and/or waste-related operations.

1.2 The subject land and its valuation

3. This judgment determines compensation in respect of the acquisition, gazetted on 19 December 2014, of Lot 1 in Deposited Plan (“DP”) 1010128 (“Lot 1”) and Lot 2 in DP1168612 (“Lot 2”), both owned at the date of acquisition (“DOA”) by Alexandria Landfill Pty Ltd (“ALF”), with Boiling Pty Limited (“Boiling”) a lessee of Lot 2, from 1 January 2014, under an unregistered lease dated 7 February 2014. It was common ground that ALF did not occupy and/or actually use Lot 2 as at the DOA.

4. The area of Lot 1 was 2,410m² whereas Lot 2 occupied an area of 15.71ha. Lots 1 and 2 were located on opposite sides of Albert Street, within the area described in [2] above.

5. The valuation methodology engaged for Lot 1 of the acquired land was described by the Applicants (subs par 451) as “entirely conventional”, and by the Respondent (Tp2721, L1) as “orthodox”, as a purchaser would “use it for industrial purposes outside the conceptual use of Lot 2”.

6. However, the valuation of Lot 2 relied upon the employment, by both sides, despite some reservations on the part of the Respondent’s experts (e.g. in Court Book, item 60, and [471] below), of “discounted cash flow” methodology (“DCF”), on the basis that, on the Applicant’s case, the highest and best use of the land involved the sale of parts of Lot 2 as they became “surplus” to a waste industry use over a period of years.

7. By arrangement between the parties and their experts, the individual line items which make up the DCF spreadsheets were built up electronically when input items emerged from the evidence. The court provided a monitor which was able to display the spreadsheets in open Court, and "USB memory sticks" were tendered, and used by the parties and the Court to access the spreadsheet information. A column was provided for each party, and the respective contentions for each input issue were set out as line items. In this way many matters of agreement became clear, and the differences in quantum between differing inputs also became evident. The spreadsheets contained total values for costs and expected revenue, and this evidence was also divided into sections matching the assumptions made by the parties as to the highest and best use of lot 2 in particular. A comprehensive hard copy of the spreadsheet information in its electronic form was provided to the Court by the parties, reflecting all scenarios.

8. All witnesses referred to a “development concept” for Lot 2, involving its staged filling, development and subdivision. That development scheme was formulated by the Applicants and their experts, then drawn up by one of those experts (Mr Anthony McLansborough), and depicted on a plan identified throughout the evidence and the hearing as “SKC23”.

9. While the Applicants relied heavily on this scheme, the Respondent did not accept it at all, contending for a “highest and best use” of Lot 2 which did not involve any subdivision of Lot 2, but saw it remain as a “passive industrial investment”, for landfill purposes, until sold eight years after the DOA.

1.3 The Hearing and some relevant external events

10. The hearing was fixed on 17 February 2017, to occupy some 35 hearing days, commencing, after some pre-trial case management mentions and directions hearings, on 20 November 2017.

11. I gratefully acknowledge the assistance I have received from Acting Commissioner Maston throughout the matter. However, each finding made in this judgment represents my view, albeit formed with the benefit of the advice given by the learned Acting Commissioner.

12. The actual hearing of evidence and submissions eventually commenced on 28 November 2017. Oral evidence occupied more than thirty days, and the competing oral submissions in chief of both parties concluded on 19 April 2018.

13. The matter was then stood over to 30 April for Mr Ian Hemmings SC, senior counsel for the Applicants, to reply, with judgment reserved on that date.

14. During that hearing I delivered five interlocutory judgments: (1) Alexandria Landfill Pty Ltd v Roads and Maritime Services [2017] NSWLEC 148 (application for recusal); (2) judgment (No 2) [2017] NSWLEC 175 (admission of a late expert report); (3) judgment (No 3) [2017] NSWLEC 183 (width of subpoena to Mr Lunney); (4) judgment (No 4) [2018] NSWLEC 31 (strike out application in respect of Points of Defence); and (5) judgment (No 5) [2018] NSWLEC 37 (reasons sought for a ruling on evidence).

United

15. On 23 March 2018, before oral evidence in this present matter had concluded, Robson J delivered his primary judgment in United Petroleum Pty Limited v Roads and Maritime Services (“United No 1”) [2018] NSWLEC 35. His Honour made a series of findings and directed the parties (at [327]) to “calculate the quantum accordingly”, on the basis of his finding “that the amount of compensation to which United is entitled should be determined having regard to the financial costs reasonably incurred as a natural consequence of the acquisition pursuant to s 59(f). ...”.

16. The parties could not agree, and His Honour conducted a further hearing on 23 April 2018, at which the finding at [327] was debated. He delivered his second judgment, and made final orders on 27 April 2018: United Petroleum Pty Limited v Roads and Maritime Services (No 2) (“United No 2”) [2018] NSWLEC 64.

17. United Nos 1 and 2 were eventually appealed to the Court of Appeal (“C of A”), but Robson J’s analysis and reasoning had been relied upon by both parties to the present case, in both their written and oral submissions, but to differing effects (see, e.g., T11.04.18 pp2529-2530, T19.04.18 pp2785-2786, and T30.04.18 p2864; Applicant subs in chief pars 457 to 464; Respondent subs pars 1244, 1398-1400, and 1426-1430; and Applicant reply subs p75, par (e)).

18. As United questioned the appropriate characterisation of commonly occurring elements of compensation claims, it seemed to me that it would be at least difficult, and probably undesirable, to finalize this judgment until the law was hopefully settled by the C of A decision in the United appeal.

19. While this judgment was being prepared, other decisions raised further “doubts” in my mind about the correct principles to apply in deciding the significant claims made by ALF. I will briefly introduce all these decisions now, and return to them in more detail later (section 18.6, commencing at [772]).

Some other decisions

20. Pain J decided Moloney v Roads and Maritime Services (No 2) [2017] NSWLEC 68, on 13 June 2017, and Moore J Michele Melino and three others in their capacity as executors of the Estate of the late Costanzo Melino v Roads and Maritime Services [2017] NSWLEC 118, on 14 September 2017, and both decisions were appealed to the C of A, where the appeals were heard together on 6-7 June 2018, with both judgments handed down on 2 November 2018 – Melino v Roads and Maritime Services (“Melino”) [2018] NSWCA 251, and Moloney v Roads and Maritime Services (“Moloney”) [2018] NSWCA 252.

21. Pepper J relied on both Melino and Moloney when deciding Monti v Roads and Maritime Services (No 4) (“Monti”) [2019] NSWLEC 11 on 13 February 2019, but the Court need also have regard to Pain J’s decisions in Denshire v Roads and Maritime Services (NSW) (“Denshire”) (2017) 229 LGERA 118; [2017] NSWLEC 181, and G Capital Corporation Pty Ltd; Gertos Holdings Pty Ltd; Marsden Developments Ltd v Roads and Maritime Services (“GCapital”) [2019] NSWLEC 12.

The United Appeal

22. The United appeal was heard by a bench of five judges of the C of A, on 30 November 2018, and the judgment of the Court was handed down on 6 March 2019: Roads and Maritime Services v United Petroleum Pty Ltd (“United CA”) [2019] NSWCA 41. I shall return to the decision in due course ([795]).

Reopening

23. The parties to this present case having agreed that it was appropriate for them to notify me of the decision of the C of A in United, and for the Applicants to seek leave to reopen their case to amend their Points of Claim (“POC”), the parties effectively then made a joint approach to the Court on 1 April 2019 for leave to amend both the POC and the Points of Defence (“POD”).

24. Leave was granted, at a short hearing on 9 April 2019, and the amended documents were filed, with short explanatory submissions from each side, on 8 April (“APOC”) and 12 April (“APOD”), respectively.

25. On 1 May 2019, I sought, by email, some clarification from the parties regarding the contents of those documents, and the parties responded on 6 May 2019. An amended schedule of disturbance items, as at 1 May 2019, was filed on 7 May 2019.

26. I shall return to set out the effects of these amended “pleadings” ([55]-[59]).

1.4 The Evidence

27. I have already noted that Mr Ian Hemmings SC led the Applicants’ legal team, and I here note that Mr Richard Lancaster SC led the Respondent’s team.

28. The hearing was conducted largely on a “paperless” basis, with many hundreds of documents being placed in evidence by their electronic inclusion in a Court Book (“CB” – numbered Exhibit A1), or a Tender Bundle (“TB” – numbered Exhibit R1).

29. Various documents additional to those in the CB and TB were also tendered, and numbered, in the usual way.

30. The Court has heard from many experts on either side of the proceedings, across eleven fields of expertise:

Area of Expertise	ALF retained Expert	RMS retained Expert
Non-Valuation Experts
1.	Town Planning	Paul Mitchell (EMM Consulting)	Julie Bindon (JBA Urban Planning)
2.	Environment/ Contamination	Bill Ryall (Ryall Environmental Pty Ltd) Daniel Martens (Martens Consulting Engineers)	Jason Clay (Senversa)
3.	Geotechnical	Garry Mostyn (Pells Sullivan Meynink – “PSM”)	Bryn Thomas (GHD)
4.	Waste management/ environment	Paul Fridell (ERM)	David Gamble (GHD) with assistance/advice by way of annexure from Anthony Dixon (GHD) Alison Horlyck (GHD)
5.	Leachate	Paul Fridell (ERM) Gareth Swarbrick (PSM) Bill Ryall (Ryall Environmental Pty Ltd) Geoffrey Webster (WN Waste & Management Services)	David Gamble (GHD) with assistance/advice by way of annexure from Anthony Dixon (GHD)
6.	Landfill gas	Paul Fridell (ERM) Geoffrey Webster (WN Waste & Management Services) Gareth Swarbrick (PSM) Bill Ryall (Ryall Environmental Pty Ltd)	David Gamble (GHD) with assistance/advice by way of annexure from Matthew Welsh (GHD)
7.	Traffic	Graham Pinder (Traffix)	Philip Brogan (Urbanhorizon)
8.	Waste operations	Geoffrey Webster (WN Waste & Management Services)	Mike Haywood (Sustainable Resource Solutions) Chris Berkefeld (Lindfield Associates) with assistance/advice by way of annexures from Rod Ferrier (Ferriers) Julie Bindon (JBA Urban Planning) Phil Brogan (Urbanhorizon)
9.	Quantity Surveying	Anthony McLandsborough (AT&L)	David Lawson (Infrasol Group) with assistance/advice by way of annexure from Bryn Thomas (GHD)
Valuation Experts
10.	Land valuation	Michael Dyson (Knight Frank)	David Lunney (Lunney Watt)
11.	Business valuation	Tony Samuel (Sapere Research Group)	Rod Ferrier (Ferriers)

31. The Applicants also relied on many affidavits, and on oral evidence, from three of their senior managers – Christopher Biggs (CEO), Darin Marks (CFO), and Rodney Johnson (Group Operations Manager).

32. RMS relied on affidavit and oral evidence from Damien Vella, CEO of “Breen Group”, Eric Le Provost, a waste facilities consultant, who was formerly a senior executive with “Enviroguard”, and Kenneth Reid, construction manager of the M5 Asset Corporation, which is part of the Sydney Motorway Corporation.

Section 2: The Structure of this Judgment

33. The structure of the rest of this judgment is as follows:

1. Section 3 (par [34]) sets out those provisions of the JTC Act most relevant to the adjudication of this compensation claim;

2. Section 4 (pars [35]-[124]) outlines the relevant background to the claim and the acquired lots;

3. Section 5 (pars [125]-[144]) summarises the methods of valuation for determining the market value of Lots 1 and 2;

4. Sections 6 to 14 (pars [145]-[471]) summarise the relevant expert evidence for two key components of the valuation task for Lot 2: firstly, the highest and best use, and secondly, the appropriate DCF inputs to determine the market value;

5. Section 15 (pars [472]-[553]) summarises the parties’ submissions, in relation to the highest and best use, and the Court’s determination on the appropriate highest and best use;

6. Section 16 (pars [554]-[681]) resolves the remaining disputes between the parties on the DCF inputs for the market value of Lot 2, identifying any outstanding issues, which may require further input from the parties;

7. Section 17 (pars [682]-[715]) determines the market value of Lot 1, in accordance with the expert valuation evidence and the parties’ submissions;

8. Section 18 (pars [716]-[822]) deals with ALF’s disturbance claim;

9. Section 19 (pars [823]-[847]) addresses ALF’s special value claim, in accordance with the expert evidence and parties’ submissions;

10. Section 20 (pars [848]-[850]) deals with costs.

11. Section 21 (pars [851]-[859) draws the Court’s conclusion; and

12. In Section 22 (pars [860]-[861]) the Court makes its determination and orders.

Section 3: The Principal Statutory Provisions

34. The sections of the JTC Act most relevant to these proceedings are set out below:

4   Definitions

...

interest in land means:

(a)   a legal or equitable estate or interest in the land, or

(b)   an easement, right, charge, power or privilege over, or in connection with, the land.

land includes any interest in land.

...

37   Right to compensation if land compulsorily acquired

An owner of an interest in land which is divested, extinguished or diminished by an acquisition notice is entitled to be paid compensation in accordance with this Part by the authority of the State which acquired the land.

...

54   Entitlement to just compensation

(1)   The amount of compensation to which a person is entitled under this [Part 3] is such amount as, having regard to all relevant matters under this Part, will justly compensate the person for the acquisition of the land.

55   Relevant matters to be considered in determining amount of compensation

In determining the amount of compensation to which a person is entitled, regard must be had to the following matters only (as assessed in accordance with this Division):

(a)   the market value of the land on the date of its acquisition,

(b)   any special value of the land to the person on the date of its acquisition,

(c)   any loss attributable to severance,

(d)   any loss attributable to disturbance,

(e)   the disadvantage resulting from relocation,

(f)   any increase or decrease in the value of any other land of the person at the [DOA] which adjoins or is severed from the acquired land by reason of the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired.

56   Market value

(1)   In this Act:

market value of land at any time means the amount that would have been paid for the land if it had been sold at that time by a willing but not anxious seller to a willing but not anxious buyer, disregarding (for the purpose of determining the amount that would have been paid):

(a)   any increase or decrease in the value of the land caused by the carrying out of, or the proposal to carry out, the public purpose for which the land was acquired, and

(b)   any increase in the value of the land caused by the carrying out by the authority of the State, before the land is acquired, of improvements for the public purpose for which the land is to be acquired, and

(c)   any increase in the value of the land caused by its use in a manner or for a purpose contrary to law.

(2)   When assessing the market value of land for the purpose of paying compensation to a number of former owners of the land, the sum of the market values of each interest in the land must not (except with the approval of the Minister responsible for the authority of the State) exceed the market value of the land at the date of acquisition.

(3)   If:

(a)   the land is used for a particular purpose and there is no general market for land used for that purpose, and

(b)   the owner genuinely proposes to continue after the acquisition to use other land for that purpose,

the market value of the land is taken, for the purpose of paying compensation, to be the reasonable cost to the owner of equivalent reinstatement in some other location. That cost is to be reduced by any costs for which compensation is payable for loss attributable to disturbance and by any likely improvement in the owner’s financial position because of the relocation.

57   Special value

In this Act:

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.

...

59   Loss attributable to disturbance

(1)   In this Act:

loss attributable to disturbance of land means any of the following:

(a)   legal costs reasonably incurred by the persons entitled to compensation in connection with the compulsory acquisition of the land,

(b)   valuation fees of a qualified valuer reasonably incurred by those persons in connection with the compulsory acquisition of the land (but not fees calculated by reference to the value, as assessed by the valuer, of the land),

(c)   financial costs reasonably incurred in connection with the relocation of those persons (including legal costs but not including stamp duty or mortgage costs),

(d)   stamp duty costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the purchase of land for relocation (but not exceeding the amount that would be incurred for the purchase of land of equivalent value to the land compulsorily acquired),

(e)   financial costs reasonably incurred (or that might reasonably be incurred) by those persons in connection with the discharge of a mortgage and the execution of a new mortgage resulting from the relocation (but not exceeding the amount that would be incurred if the new mortgage secured the repayment of the balance owing in respect of the discharged mortgage),

(f)   any other financial costs reasonably incurred (or that might reasonably be incurred), relating to the actual use of the land, as a direct and natural consequence of the acquisition.

(2)   Subject to the regulations, a reference in this section to a qualified valuer is a reference to a person who:

(a)   has membership of the Australian Valuers Institute (other than associate or student membership), or

(b)   has membership of the Australian Property Institute (other than student or provisional membership), acquired in connection with his or her occupation as a valuer, or

(c)   has membership of the Royal Institution of Chartered Surveyors as a chartered valuer, or

(d)   is of a class prescribed by the regulations.

...

61   Special provision relating to market value assessed on potential of land

If the market value of land is assessed on the basis that the land had potential to be used for a purpose other than that for which it is currently used, compensation is not payable in respect of:

(a)   any financial advantage that would necessarily have been forgone in realising that potential, and

(b)   any financial loss that would necessarily have been incurred in realising that potential.

Section 4: Background

4.1 The Evolution of the Claims now before the Court

35. When acquisition was proposed, Dial A Dump Industries Pty Ltd (“DADI”), joined with the present Applicants, ALF and Boiling, in a combined claim for compensation, and each of the three companies also made separate claims.

36. On 22 May 2015, DADI claimed $195,192,542, ALF $218,488,218, and Boiling $10,000. In its separate claim, DADI signified its interest in the land as “licensee” and “other”, and said that Boiling as lessee had permitted DADI “to operate a waste and landfill business” on Lot 2. In its own claim, Boiling said it held the lease from ALF, and an Environment Protection Licence, on trust for the DADI trust, and “permit[ted]” DADI to “operate the landfill and waste business on that land”.

37. The Valuer-General (“VG”) determined ALF’s compensation in the amount of $70,019,285, being $56,900,000 for market value, plus $13,119,285 for disturbance, and Boiling’s in the amount of $11,000.

38. The DADI claim was rejected by the VG, on the basis that, in terms of the JTC Act regime, DADI had only a “bare permission” in relation to, and could not establish an “interest” in, the land acquired.

39. DADI and ALF brought Class 3 proceedings in this Court, under s 67 and s 66 of the JTC Act, respectively, on 14 August 2015.

40. On 29 October 2015, Pepper J ordered the separate determination of the question whether DADI “had an interest in land as at the [DOA]”, for the purposes of ss 4 and 5 of the JTC Act, in respect of Lot 2: Dial a Dump Industries Pty Ltd v Roads and Maritime Services [2015] NSWLEC 172.

41. Preston ChJ dismissed the DADI proceedings after determining that separate or preliminary question in favour of RMS and against DADI: Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2016] NSWLEC 39.

42. Preston ChJ’s decision was upheld by the C of A: Dial A Dump Industries Pty Ltd v Roads and Maritime Services (“DADI CA”) [2017] NSWCA 73. The High Court refused special leave to appeal: Dial A Dump Industries Pty Ltd v Roads and Maritime Services [2017] HCASL 236.

43. The Respondent submits (closing subs par 17) that:

... from the ashes of DADI’s claim that it had an interest in land and was entitled to an award of compensation in the amount of $195,192,542, rises the phoenix of ALF’s claim for compensation for loss attributable to disturbance in a comparable amount, calculated by reference only to DADI’s business operations on Lot 2.

44. I might add here, for completeness, that, during the period 2015-2017, I also dealt with a claim made by a related company in respect of the compulsory acquisition of nearby land: Carlewie Pty Ltd v Road and Maritime Service (“Carlewie”) [2017] NSWLEC 78. That decision was overturned on appeal – Carlewie Pty Ltd v Roads and Maritime Services [2018] NSWCA 181 – and the matter was remitted to this Court for a further hearing yet to take place.

45. Returning now to the present proceedings, Boiling sought no order in respect of the acquisition of its interest, beyond the amount of $11,000 determined by the VG.

46. The Boiling lease proceedings are separate from the ALF proceedings, and I will deal with the Boiling matter in sec 4.6 below (from [99]).

47. However, an order was made, by consent, that both the present proceedings (by ALF, and Boiling) should be heard together, and that evidence in one should be evidence in the other.

48. Compensation will be required to be determined separately for each proceeding, and for the different parties, referable to their respective interests.

49. In this judgment the word “Applicant” or “Applicants” will normally refer only to ALF (and its claims).

50. The claims made in ALF’s name moved on markedly from the initial claims made in May 2015, and continued to move during the hearing.

51. The amounts claimed in ALF’s "draft" POC, dated 23 November 2017, and "revised draft" POC dated 28 November 2017, totalled $409,889,000, comprising the following amounts:

As to Lot 1: $5,500,000 for market value;

As to Lot 2: $343,638,000 for market value; and

$60,751,000 for Special Value.

Their Disturbance claim was "To Be Advised".

52. In ALF’s final submissions (p8, par 7), as amended by an errata notice dated 12 April 2018, it particularized its claims in these terms (omitting footnote references):

7.   The Applicant's claim for compensation is comprised of several elements under s 55 of the [JTC Act], being:

a.   A market value for Lot 1 based upon comparable sales analysis supporting a rate of $2,300/m(2) (ie $5,550,000).

b.   Market value for Lot 2 based upon Tony Samuel's Scenario 2 involving a [DCF] analysis applied to future earnings that could be derived from the use of Lot 2. Such earnings flow from the continued use by the hypothetical purchaser [sometimes “HP”] of Lot 2 for landfilling and waste recycling allowing for the potential sale of land that is surplus to those operations. It is only by looking at several different scenarios that Mr Samuel has been able to discern the highest and best use. In doing so, Mr Samuel has determined that value to be $267.7million

c.   Special value for Lot 2 of $60.7million in addition to the market value.

d.   Disturbance comprising:

i.   Lost profits	$173,753,000
ii.   Loss of 19 December 2014	$2,620,000
iii.   Business disruption	$1,486,000
iv.   Relocation costs	$1,308,000
v.   Legal and valuation fees	$424,910.68

53. By way of footnotes, ALF added the following:

1. In respect of Samuel’s “Scenario 2” (7b in [52] above):

This scenario itself employs two alternative possibilities looking forward.

Alternative 1 involves the on-going use of Lot 2 after land filling activity had ceased. Alternative 2 looks at the value of Lot 2 if all of Lot 2 was sold at the time that landfilling activity ceased ...

(see CB 65 at 7 and 9)

2. In respect of the disturbance claim(s) (7d in [52] above):

These figures may depend on a finding by the Court as to whether the award of any specific amount for disturbance ought to be given on a pre- or post-tax basis ...

(see CB 130 at [8])

54. The Respondent's position was set out in its draft Points of Defence ("POD"), dated 27 November 2017, and, in its final submissions, it contended for compensation in the following amounts:

As to Lot 1: $3,920,000 for market value;

As to Lot 2: $18,700,000 for market value;

Special value: $NIL;

plus only the finally claimed amount of $424,910.68 for legal and valuation fees, in respect of disturbance.

55. The APOC which were ultimately filed in Court on 8 April 2019 dealt primarily with disturbance matters, but retained a claim (APOC par 36) for Special Value of Lot 2 – $60,751,000 (under Scenario 1, or Alternative 1 in Scenario 2), or $23,451,000 (under Alternative 2 of Scenario 2).

56. In terms of disturbance, the APOC claim the following:

1. $426,710.68 (now revised down to and agreed at $424,910.68) for legal and valuation costs (APOC par 38 – ss 59(1)(a) & (b));

2. $1,288,557 for the financial costs “reasonably incurred” in relocating to 76 Burrows Road, and rehousing some plant and equipment to Eastern Creek, and $19,650 for financial costs “reasonably incurred” in preparing 33 Burrows Road for waste transfer operations, and relocating plant and equipment (APOC pars 40-44 – ss 55(d) by way of s 59(1)(c)).

3. By way of “relocation losses” (APOC pars 43 to 46 – claimed “pursuant to s 55(d) by way of s 59(1)(c) or, in the alternative, s 59(1)(f)”):

“(a)   The losses it incurred by reason of not being able to relocate all aspects of it (sic) business of $173,753,000;

(b)   The losses incurred leading up to the relocation of $2,620,000;

(c)   76 Burrows establishment and 33 Burrows aborted costs of $1,308,207;

(d)   The losses incurred in being unable to pursue Bradshaw Hill upon the relocation in $1,486,000, ...”

(As to “Bradshaw Hill”, see [63] below.)

4. For the “purchase of replacement property”, ALF claims (pursuant to s 55(d) by way of s 59(1)(d)) financial costs the amount of which “depends on the market value determination” (APOC pars 47 to 49).

57. The APOC conclude with pars 50 and 51 in these terms:

“Compensation Payable and Orders Sought

50.   ALF claims compensation in the following amount (plus interest):

55(a)   $343,638,000

55(b)   $60,751,000

55(d)   $179,593,918 (plus amounts unable to be specified)

51.   ALF seeks an order that the Respondent pay its costs of the proceedings.”

58. The APOD filed on 12 April 2019 refer extensively to the Respondent’s closing submissions, but nominate only the following amounts to be awarded to ALF:

1. market value Lot 1 $3,920,000 (par 19);

2. market value Lot 2 $45,762,720 (par 20(c));

3. nil for Special Value (pars 9 and 21);

4. disturbance, in terms of legal and valuation costs, of $424,910.68, as agreed (par 22, and see par [56](1) above).

59. The APOD conclude with the following summary:

1. Boiling Pty Ltd is entitled to $11,000 (par 26 – s 55(d))

2. ALF is entitled to (par 27):

Market value: s 55(a)
(a)   Lot 1:	$3,920,000
(b)   Lot 2:	$45,742,467
$49,662,467
Disturbance: s 55(d)
(c)	$424,910.68
Total	$50,089,177.70

60. Included in the supplementary material provided by the Applicants on 6 May 2019, and filed next day, but dated “1 May 2019”, was the following amended schedule, said to reflect the APOC, and particularising “losses attributable to disturbance pursuant to section 55(d) by way of section 59(1)(c) or in the alternative section 59(1)(f)” (i.e. other than legal and valuation costs):

“

Disturbance claim	Sub-Category	Source	Amount
Losses incurred by reason of not being able to relocate all aspects of the business	Third Joint Report CB 145 (2/4/18) includes a Table at p9.	$173,753,000*
Losses incurred leading up to relocation	Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [20] and [142]-[143]	$2,620,000
Losses incurred in being unable to pursue Bradshaw Hill upon relocation	Bradshaw Hill	Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [21] and [277]	$1,486,000
Relocation costs	Third Joint Report CB 145 (2/4/18) includes a Table at p9; Samuel Report CB 130 at [22] and Table 28 at [263]] (sic)
	76 Burrows Road – set up costs by landlord Carlewie for relocation	Samuel Report CB 130 at para [257-263]; Marks September affidavit CB 82 at [75-89]	$1,101,475
	76 Burrows – DADI relocation cost	Samuel Report CB 130 at para [261-263]; Marks September affidavit CB 82 at [87-89] and Tab 22	$187,082
	33 Burrows Road – aborted set up costs	Samuel Report CB 130 at para [263]; Marks September affidavit CB 82 at [72].	$19,650
	TOTAL	Samuel Report CB 130 at para [263].	$1,308,207
TOTAL Disturbance (excluding GST and legal and valuation fees)			$179,167,207

*Note this figure is derived from the Third Joint Report CB145 (2/4/18) table 9 by subtracting from Mr Samuel’s Total (at unlimited tonnes) Loss to 19 December 2014; Bradshaw Hill and Relocation costs as set out in the table at page 9.

ALF intends to purchase replacement property and will incur costs associated with that purchase. The financial costs are claimed pursuant to section 55(d) by way of section 59(1)(d). The amount depends on the market value determination.”

61. The Applicants’ solicitors explained (email to my associate from Kate Blunden, 3.51pm Monday 6 May 2019):

... the amount claimed for disturbance (excluding legal and valuation costs) is $179,167,207 ... [which] is different because the relocation costs should be $1,308,207 as per Mr Samuel’s report CB 130 at paragraph [263]. But you will note that Mr Samuel’s amount for relocation costs set out in the Third Joint Report CB145 (2/4/18) in table 9 (at unlimited tonnes) he has rounded the numbers to the closest thousand. The amount for relocation costs in the table at page 9 should be $1,308,207 and the Total should be $179,167,207. This error however does not change the amount claimed for losses incurred by reason of not being able to relocate all aspects of the business (previously loss profits) which is still $173,753,000.

4.2 The Acquired and other relevant Lands

62. As stated in ALF’s POC, at par 1(b), Lot 1 is known as 4-16 Campbell Road, St Peters, and Lot 2 as 10-16 Albert Street, 314 Princes Highway, and 9 Canal Road, St Peters. Lot 1 had an area of 2,410m², and Lot 2 15.71ha. Both are irregular in shape, and are separated by Albert Street.

63. On the Albert Street side, part of the north-eastern boundary of Lot 2 bordered, indeed “surrounded”, a triangular area of land owned by the RMS at the DOA. It was called “Bradshaw Hill”; and the Court notes that:

1. it straddled the local government boundary;

2. from 9 November 2009, it was leased to Concrete Recyclers (Group) Pty Ltd (“CRG”) for 5 years, with an option to renew for a further five;

3. the lease permitted that company to remove, and/or to crush, screen, and sell, sandstone stockpiled upon it;

4. CRG had subleased the land to ALF on 1 October 2013 (not executed until 15 may 2014), to 30 September 2018, with a five year option, for the winning of the sandstone (estimated at 400,000 tonnes); and

5. Project Approval 11-0086, for “St Peters Materials Recycling Facility”, covered such operations (and the sublessee ALF was obliged by cl 18 to comply, as if it were the proponent).

64. Most attention during this case has been paid to Lot 2, which, for many years from 1880, included a brick shale quarry and, later, the Austral-Radford brick pits.

65. Brick shale extraction declined in 1930, and ceased in 1980. Sometime between 1952 and 1960, the filling of the “older northern brickpits with domestic garbage began” (CB 32, p5). It was acquired by the City of Sydney and used by Council as a landfill, becoming known from about 1987 as City of Sydney “Waste Transfer Station” (“WTS”), and sometimes, later, as “Alexandria Recycling Centre”.

66. The City Council operation was predominantly for non-putrescible waste – it was described by the Applicant’s present CEO as a “public landfill for non-putrescible construction and demolition waste and for Council clean up waste” (Christopher Biggs, “site information” affidavit 22 November 2017, par 9). It appears also to have accepted incinerator ash, asbestos containing material (“ACM”, until 1996), incinerated green waste, and industrial and commercial waste (CB 22, p10, par 6.4, and Applicant subs par 44).

67. It was, from about 2002, owned and operated by the Applicant ALF, which sought, through its wholly owned subsidiary, DADI, to continue the landfill operation, but also to expand it to include waste transfer, recycling, and recovery (Exhibit R19, p3). The address of the WTS is recorded in much of the material as 10-16 Albert Street, St Peters, or as 1 Holland Street, St Peters, and most of it is located, along with the whole of Lot 1, within the Marrickville LGA.

68. Lot 1, accessed via Holland Street, was, at the DOA, largely vacant, but “leased out by ALF to various persons for predominantly storage purposes” (Exhibit R19, p4). Its improvements were considered to have no value.

4.3 The Malouf Companies and their lands

69. ALF, DADI, and Boiling are members of what might here be called, for convenience, the/a “Malouf Group” of companies (see Carlewie, at [50]). In Carlewie, I also noted (at [49]) references by Westpac to the/a “Malouf Property group”. The internal arrangements and relationships within the “group” assumed some importance at various stages of the proceedings.

70. The Malouf Group of companies has undergone a number of restructures over the years – since Ian Malouf apparently commenced “Dial a Dump” in 1984 (The Australian, 1 March 2019) – as the various Malouf businesses, to some of which the evidence in this case refers, evolved, prior to the conclusion of the hearing (Biggs, “Relationships” affidavit 22 November 2017, pars 10 to 26, 32 to 35, 62 to 92, and 128 to 144). (Although it appears that the group may now have merged, or be in the process of merging, with another company or group in the waste management industry, what follows is drawn from the evidence before the Court at the hearing of the present matter.)

71. CFO Marks deposed (26 September 2017, pars 5 and 6) that he “acts as CFO for Dial A Dump Industries Trust”, and that he “or [his] team” also prepare the financial accounts for Good River Properties Pty Ltd and Carlewie Pty Ltd, which are also Malouf companies, but sit outside what he calls the ALF Group, to which he referred (par 4) as:

...consisting of ALF and companies 100% owned or controlled by ALF ... being:

a.   Dial A Dump Industries Pty Ltd (ACN 131565583) (DADI);

b.   Tradies Heaven Pty Ltd;

c.   IRM Property Group No 2 Pty Ltd;

d.   Dial a Dump (EC) Pty Ltd;

e.   The Next Generation (NSW) Pty Ltd; and

f.   ThaQuarry Unit Trust

72. The Court notes that Boiling is not a member of that group, and is neither the parent, nor a subsidiary, of either ALF or DADI.

73. In a later affidavit (7 March 2018, pars 1, 5, 6, 11, 59, 60 and 61), Marks provided more fulsome information, deposing:

1.   [At] all relevant times both before and after the acquisition of Lots 1 and 2, I was employed by Dial A Dump Industries Trust which provided my services as Chief Financial Officer (CFO) to [ALF] and its subsidiaries and associates.

...

5.   ALF, DADI and DAD(EC) are part of a Tax Consolidated Group with ALF as the ultimate holding company. Exhibited at Tab 1 is a copy of a letter from the Australian Taxation Office confirming the Alexandria Landfill tax consolidated group.

6.   The ALF Group for accounting purposes consists of:

•   [DADI] which carries out the waste related commercial activities on behalf of the Group;

•   Tradies Heaven Pty Ltd; which is an entity which has never traded i.e. dormant;

•   IRM Property Group No 2 Pty Ltd; is a landholding entity with no other commercial function;

•   [DAD(EC)]; is the owner of the land at Eastern Creek upon which the Genesis waste recycling and landfill are located;

•   The Next Generation (NSW) ... Pty Ltd [(“TNG”)]; is the applicant for planning approval for the construction of a power station near Genesis; and

•   ThaQuarry Unit Trust formerly owner of a parcel of land at Eastern Creek comprising part of the "Genesis" landholding.

...

11.   When Genesis Recycling became operative in June 2012 and Genesis Landfill in December 2012, financial reporting continued to be issued on an activity basis though data was identifiable also by location if required for landfilling and recycling.

...

59.   ... As a result of DADI operating the commercial business, available cash was transferred from DADI to ALF via a loan account. ...

60.}   .... As ALF was the holding company and only shareholder of DADI the

61.}   dividend was paid to ALF and the payment of the dividend offset the loan account between DADI and ALF. ...

74. The business valuation experts, accountants Dr Rodney Ferrier and Tony Samuel, were asked about the concept of “groups” (including “tax consolidated groups”, as mentioned above). They said (Tp2378, LL10-25):

MR SAMUEL: Your Honour, consolidated accounts take the financial results of the entire group, which comprises generally a holding company and various subsidiaries, and it adds them up. In doing that, it then eliminates the transactions between them, so that it's reflecting, in effect, the whole - results as if it is one entity. So on a consolidated basis, the ALF results will include the results of DADI and DAD(EC), including the revenue and expenses incurred by DADI and DAD(EC).

MR HEMMINGS: Dr Ferrier, do you agree with that description?

DR FERRIER: In general terms, yes. The group is what we call an economic entity, made up of separate and distinct legal entities, all of which are under common control.

75. The Managing Director and principal shareholder of relevant group(s) and companies is Mr Ian Malouf, and his key lieutenant is Christopher Biggs. Biggs is a solicitor of more than 30 years’ standing, his legal career from 1986 having largely been as in-house counsel. He joined the Malouf group, apparently in about 2001 (“site” affidavit, par 4). At least as late as 2011, Biggs corresponded with State Government regulators as “Christopher Biggs, Solicitors and Attorneys of 32 Burrows Road”, while his email contact was “@DADI ...”.

76. At the time Carlewie was decided, Biggs was General Manager and in-house counsel of much if not all of the Malouf group, which he described as “the ALF group”. In the present hearing, he sometimes (e.g. at Tp1020, L27) referred to the “DADI Group”. In any event, in July 2017, he became the Chief Executive Officer of ALF “and its subsidiaries” (Tp1020, LL30-33). He swore affidavits in the present matter, both before and since that change in his role.

77. In 2001-2002, ALF was formed to purchase, from the City of Sydney, its landfill located adjacent to the Carlewie land (Biggs, “Relationships” affidavit, par 23).

78. In June 2008, as part of a restructure of the ALF business, “a wholly owned and controlled subsidiary” of ALF was formed to operate the landfill etc. – it was originally “Dial-A-Dump Industries Pty Ltd”, but was renamed “DADI” in June/July 2008.

79. DADI commenced commercial operations on Lot 2 on 1 July 2008, “consistently with the consent or authority given by Boiling” (“relationships”, par 83). The then current Environment Protection Licences (“EPLs”) remained in the names of ALF and Boiling (Exhibit R19, p3). Boiling had relevantly been the trustee of the “DADI Trust”, but had also been trustee of the Dial A Dump Employment Services Trust (“DEST” – Biggs, “stamp duty” affidavit, par 24, and “relationships” affidavit, par 32).

80. The Malouf company Good River Properties Pty Ltd (“GRP”), had been, until 12 May 2009, “Dial A Dump Pty Ltd” (“DAD”). GRP is not a subsidiary of ALF, nor a “related corporation”, nor a member of the “DADI” group (Tp1033, LL33-47). Nor does it have any interest in Lot 2 (Tp1034, LL2-4).

81. Biggs deposed on 22 November 2017 (“Relationships” affidavit, pars 112-113):

112   ALF is the ultimate holding company of a tax consolidated group of which DADI is the major commercial operating entity. Financial accounts are prepared on a consolidated basis as if ALF and its wholly owned subsidiaries including DADI are one entity.

113   On or about 1 September 2011 the class of beneficiaries of DADI Trust was attenuated and became confined to ALF and its wholly owned subsidiaries. At the [DOA], DADI Trust, had only two beneficiaries which were ALF and DADI. Payment of rent by DADI to DADI Trust would be shown as income to DADI Trust and distributed in turn to ALF.

82. Biggs also deposed on 22 November 2017 (“Stamp duty” affidavit, pars 29-31):

29.   The properties beneficially owned by GRP at the Date of Resumption were:

(a)   28 Burrows Road, St Peters purchased July 1994;

(b)   30 Burrows Road, St Peters, purchased July 1994;

(c)   34 Burrows Road, St Peters, purchased June 1989.

30.   The properties owned by Carlewie were at the Date of Resumption:

(a)   76-82 Bur rows (sic) Road, Alexandria, purchased in March 2001;

(b)   33 Burrows Road, Alexandria, purchased April 1999.

31.   The properties owned by ALF were at the Date of Resumption:

(a)   10 – 16 Albert Street, St Peters, purchased in January 2002 (Lot 2) and

(b)   4-16 Campbell Road, St Peters in January 2002 (Lot 1).

83. All of those nominated properties were in close proximity to one another (see also Carlewie, at [50]). Malouf’s “Dial A Dump” business operated (from about 2004) from/at 33 Burrows Road.

84. In 2006-7, ALF, through a wholly owned subsidiary, other than DADI, acquired a significant quarry site in Eastern Creek (114ha), used since the 1950s for stockpiling soils (Biggs’ affidavit 29 January 2018, par 40). Dial A Dump (EC) Pty Ltd (DADEC) was formed.

85. In 2009-2012, ALF commenced developing a landfill and recycling centre there, now called “Genesis”, and operated by DADI – recycling commenced in June 2012, and landfilling in December 2012.

86. As Biggs deposes (“Relationships” affidavit, par 144), “up to the [DOA] ... DADI operations at Lot 2 seamlessly integrated with the operations at the Eastern Creek site”. (The Court visited and inspected the Genesis site, during its View.)

87. Biggs deposed (29 January 2018, par 7):

In my various roles for the Dial A Dump group I (among other things):

a.   directed the acquisition of the Alexandria Landfill site at St Peters in 2002;

b.   directed the acquisition of the Eastern Creek site in 2006-7; and

c   Was intimately involved in the preparation of the environmental impact statement and planning approvals obtained for Genesis in 2009/2007 (sic).

88. He also deposed (pars 8-11):

8   In 2002 when ALF acquired Lot 2 the site had been classified as an inert and solid waste landfill. Waste which was received in bulk for landfilling was accompanied by a certification provided by an appropriately qualified consultant indicating that the waste was “inert”. With receipt of this certification the receiver, ALF, knew that the waste was not hazardous, clinical waste restricted waste or waste such as putrescible waste which the EPL did not permit. In the case of Lot 2 EPL 4296 permitted the receipt for landfilling of asbestos waste.

...

9   EPL 12594 was issued to Boiling in 2007 and this permitted the receipt of materials for recycling and resource recovery. Those materials continued to be in the “inert” category and certification to that effect was required. ...

...

11   Beginning in or about October 2007 the NSW [Environment Protection Authority (“EPA”)] first introduced the “Three Fs” policy which contemplated that for recovered/recycled products to be sold, a testing regime would be required to be carried out. ...

89. He attached (CB 121, at Tab 3) an internal memo he received (dated 10 October 2007), regarding the so-called “Three F’s” policy. That advising was headed “3 or 4 fs”, and referred to a then proposed new legislative provision he called “the 4Fs gateway”, but did not explain further.

90. As at the DOA, no final land use had been determined for Lot 2 after the closure of the landfill. After Lot 2 and the Carlewie site (33 Burrows Road) were resumed, the ALF operations moved, so far as feasible, to the premises at 76 Burrows Road (the waste transfer operations) and 84-88 Burrows Road (the collections operations), as well as to “Genesis” at Eastern Creek.

4.4 Land Titles

91. ALF completed its original claim for compensation in the statutory form on 22 May 2015. This correctly notes that there are endorsements on the land title for Lot 2. These include notation of two registered easements affecting the land, both numbered AG600007, six metres wide and eight metres wide respectively, marked “C” and “D” respectively. These areas are depicted on the DP, and consist of a strip of land crossing the whole of Lot 2 generally from east to west in its southern part. The easements in each case are for water supply purposes. They are depicted on DP1168612 by dashed lines.

92. Also, land below a depth from the surface of Lot 2 of 15.2m is affected by a reservation marked “(P)” in the title diagram. This appears to be a relatively small triangular area which overlaps the easement for water supply purposes close to the southeast area of the site.

93. There is also an easement to drain water created by instrument registered E88840, marked “F” on DP1168612, affecting the whole of Lot 2.

94. There is also an exception of the reservations and conditions contained in the crown grant (which includes a reservation of all minerals).

4.5 Development consents

95. Development consents (“DC”) under the Environmental Planning and Assessment Act 1979 (“EPA Act”) relevant to these proceedings include:

1. Consent granted on 23 February 1987 by Sydney City Council to itself approving the use of Lot 2 as “a solid waste landfill depot”.

2. Consent granted on 20 Mar 1987 by Marrickville Council to Sydney City Council approving the use of Lot 2 as a “non-putrescible waste land-fill depot and for carrying out associated engineering works and the erection of associated amenities, weighbridge and office buildings”.

3. A DC over Lot 2, numbered D2003/635, granted by the Sydney City Council, and a DC, numbered 2003/00514, granted by Marrickville Council, to ALF, to use the premises for a waste transfer, recycling and resource recovery facility, being designated and integrated development. (A third party appeal in the Land and Environment Court against each of these consents was instituted by Tallina Pty Limited whose land adjoined Lot 2. Both appeals were upheld by the Court making orders by consent to grant conditional DC: see judgment in Alexandria Landfill Pty Limited v Sydney City Council; Alexandria Landfill Pty Limited v Marrickville Council [2004] NSWLEC 639, and consent orders made in matters 10079 and 11646 of 2004, on 28 September 2006.)

96. Both consents in par [95](3) above were time limited, but were modified in 2012 and 2013. The amendments included extending the operation of the waste recovery facility by an additional five years, until 2 April 2018, in relation to the City of Sydney Council consent, and 7 November 2017, for the Marrickville Council consent. An existing limit to processing, namely 240,000 tonnes per annum of waste through the recovery facility, was continued, and a condition required cessation of the use within six months of the cessation of the then current solid waste landfill operation, if it ceased prior to the five year limit contained in the consents.

97. Also, ALF was required to (1) provide the Council and the EPA with a map indicating land filled areas, and the location of intermittent cover or capping, in accordance with certain hydraulic conductivity requirements, (2) maintain a trade waste agreement with Sydney Water for discharge of leachate to sewer, and (3) prepare a report relating to potentially offensive odour emissions and removing conditions relating to 1 Holland Street, “to reflect the subdivision of the site and removal of the property known as 1 Holland St from the site”.

98. Under Marrickville Council consent number 2003/00514 only, a condition required that within 12 months of the approval date (or a later date agreed between the person acting on the consent and Marrickville Council), all mixed waste was to be dealt with within a structure constructed pursuant to and in accordance with DC numbered 2007/00278, issued by Marrickville Council on 28 February 2008, and modified on 7 November 2012.

4.6 The Boiling Lease:

99. The Boiling lease, dated 7 February 2014 (TB 455), governed the relationship between Boiling and ALF with respect to Lot 2, as at the DOA. It was executed by “Larissa Malouf – sole director/secretary”, on behalf of Boiling Pty Limited.

100. Under it, exclusive possession of Lot 2 had been given to Boiling. The terms of the lease forbade Boiling transferring its interest under the lease or parting with possession without ALF’s consent (cls 10.1, and 10.7). The business being conducted on the land at the DOA required the use of the respective environment protection licences held by ALF and Boiling, because each person who is an occupier of premises at which scheduled activities are carried out is required to be a holder of a licence authorised for that activity, under s 258 of the Protection of the Environment Operations Act 1997 (“POEO Act”).

101. The term of the lease was one year from 1 January 2014 to 31 December 2014. Item 12 of the schedule to Annexure A to the lease provides for three one-year options for renewal. The maximum period of the tenancy under the lease, and its permitted renewals, was four years. The lease subsisted on the DOA of Lot 2.

102. The compulsory acquisition of the lease took place 12 days prior to the expiry date of the initial term nominated in it. The first day on which the first option for renewal could have been exercised was three months prior to the commencement of the first option period, i.e. by 30 September 2014, and the last day for its exercise was one day prior to commencement of the relevant option period, i.e. by 31 December 2014: lease item 12. There is no evidence as to the exercise of the first option period of one year, which would have commenced on 1 January 2015. The lease would have been capable of renewal for the first option term if it had been exercised on, before or after the DOA, within these constraints.

103. The rent payable was a fixed $100,000 per annum, plus GST, payable by equal monthly instalments. It was the tenant’s obligation to pay 100% of outgoings including local rates, taxes and building insurance. Item 17 of the lease sets out the permitted use of the land as:

[W]aste management, waste transfer, waste collection, waste transportation, waste disposal, landfilling, waste recycling and resource recovery involving sorting, crushing, shredding, screening, processing or stockpiling of materials of any type or any one or combination of such activities or activities of a similar nature.

104. The lease refers to EPLs and various environmental matters. It records that the lessor is the licence holder of EPL 4627, “authorising landfilling on the property”, and that the lessee was the licence holder of EPL 12594, authorising resource recovery on the property.

105. The lease also provides that the lessor and lessee must each maintain and renew the respective EPLs for the duration of the lease including any renewal periods. Neither party was entitled to make any claim against the other relating to the past and present uses of the property, any breach of the terms and conditions of EPLs, the POEO Act and the EPA Act. Nor could either party cause or tend to cause any government authority to take action, or to require the owner or occupier of the property to take any action, or serve any notice or order in respect of any of them. This includes any matter disclosed in the public register under s.308 of the POEO Act. Environmental matters, including contamination, pollution or hazardous substances, or any other environmental harm suffered by the property or by other land, were also included in the inter partes liability to the other.

106. Clause 1 of Annexure B provides that the lease is a deed, even if it is not registered. The deed includes the schedule of items commencing at item 1 on the lease form and ending with item 20 in Annexure A, as well as Annexure B. Clause 7 of the lease prohibits any structural alterations to the property and any other alterations require the lessor’s consent in writing (but the lessor cannot withhold consent unreasonably).

107. Clause 9 in Annexure B deals with the lessor’s rights of access to the property. Access was to be available at any reasonable time:

1. for the purpose of inspecting the property; or

2. how it is being used; or

3. doing anything that the lessor can or must do under this lease or must do by law. The lessor must give the lessee at least two days written notice for access (except in an emergency). The lessor must promptly make good any damage caused to the property and to any of the lessee’s belongings which result from exercising the access rights under cl 9.

108. RMS admitted the claim in ALF’s POC dated 28 November 2017 that the sale of each Applicant’s interest (lease and freehold) “should be treated as separate and distinct components of the one bargain”: see par 29 of those POC. This suggests that the hypothetical purchaser acquired both the freehold estate together with the leasehold estate of Boiling (i.e. two distinct components) in one bargain. However, this pleading was not repeated in subsequent amending POC and POD.

109. In any event, a hypothetical bargain in these terms would be contrary to s 56 of the JTC Act in which there is a hypothetical seller and hypothetical purchaser for each interest acquired, and the assumed sale is effectively unconditional. The two sales could be joined only by assuming that that sale was conditioned to require the purchaser to be not hypothetical (and in that sense unknowable) and that the bargain contain a special condition specifying the identity of the purchaser.

110. On these two bases, even if the parties to the respective proceedings made the pleaded assumptions, and that agreement had not been supplanted by subsequent amended proceedings (which is not the case) the purported agreement on the pleadings could not be implemented.

111. The Boiling lease proceedings relate inter alia to the market value of the leasehold interest under s 55(a) of the JTC Act. Generally, the factors to be taken into account in such circumstances include the actual rental payable (here, $100,000 plus GST per annum) in comparison to the market rental value of the leased land; favourable and onerous covenants and conditions in the document creating the leasehold interest; the unexpired term of the lease; and the right of the holder to an extension(s) of the terms. Relevant to the last of these factors are the options for renewal for the period 1 January 2015 to 31 December 2018 (or three years from expiry of the initial one year term), subject to the lessee giving notice of exercise of the options within the prescribed periods. The agreement in the deed of lease for the option terms is binding.

112. The lease for one year does not require registration under s 53(1) of the Real Property Act 1900, and the presence of the options for renewal for three one-year terms does not alter that position: see 195 Crown St Pty Limited v Hoare [1969] 1 NSWR 193 at 199, in which Asprey JA (with whose conclusion on this point Walsh JA, at 198, and Hardie A-JA, at 207, agreed) stated that the exercise of an option for the renewal of a lease is a grant of a fresh lease for a new term; see also Gerraty v McGavin (1914) 18 CLR 152; (1914) 20 ALR 182, where Isaacs J stated of a “lease obtained by the exercise of an option to renew” that “clearly it is a new lease, a new demise”. Isaacs J reiterated this view in The Minister v The New South Wales Aerated Water and Confectionary Company Ltd (1916) 22 CLR 56; (1916) 23 ALR 10, concluding that “a renewal is a new lease”.

113. Prior to the DOA the options for renewal in the Boiling lease were available at the times and on the terms set out in the lease. On page 3 of Mr Lunney’s joint valuation report with Dr R Ferrier, with respect to Lot 2 (CB 60), he states: “given that Boiling had breached an essential term of the lease as at the [DOA]”, on advice [from others], it would be possible for a hypothetical purchaser of the reversionary interest of the registered proprietor of Lot 2 “to terminate the lease and achieve vacant possession”. Nevertheless, he opines that if the Court holds that the options for renewal were or would have been available to Boiling his valuation would need to reflect this fact.

114. I have difficulty in accepting the advice that had been given to Mr Lunney. Part 8 Div 4 of the Conveyancing Act 1919 (“CAct”) deals with options in leases, and its provisions have effect notwithstanding any stipulation to the contrary. Section 133E of the CAct states:

133E   Breach of certain obligations not to preclude option except in certain circumstances

(1)    This section applies to a lease that contains:

(a)   an option exercisable by the lessee, and

(b)   provision by which the lessee’s entitlement to the option is made to depend on performance by the lessee of any specified obligation, whether such performance is required before, or after, or before and after, the giving of any notice by which the option is exercised.

(2)   Despite any provision of the kind referred to in subsection (1) (b), no breach by the lessee of any relevant obligation precludes the lessee’s entitlement to the option unless:

(a)   the prescribed notice has been served on the lessee in respect of the breach, and

(b)   the lessee’s rights are extinguished in relation to the notice.

(3)   In subsection (2):

breach of an obligation includes, where the obligation requires any thing to be done, any neglect or failure to do the thing concerned.

obligation includes any agreement, covenant, condition or stipulation by which the lessee is required to do or refrain from doing any thing.

prescribed notice means a notice in writing:

(a)   specifying the lessee’s breach of the relevant obligation and served on the lessee:

(i)   within 14 days after the giving of a notice by which the option is exercised, if the breach occurred before the giving of that notice, or

(ii)   within 14 days after the breach, if the breach occurred after the giving of that notice, and

(b)   states that, subject to any order of the court under section 133F, the lessor proposes to treat the breach as precluding the lessee from entitlement to the option.

(4)   For the purposes of subsection (2) (b), the lessee’s rights are extinguished in relation to a prescribed notice:

(a)   if an order for relief against the effect of the breach in relation to the lessee’s entitlement to the option is not sought from the court within one month after service of the prescribed notice, or

(b)   if proceedings in which such relief is sought are disposed of, in so far as they relate to that relief, otherwise than by granting relief, or

(c)   if such relief is granted on terms to be complied with by the lessee before compliance by the lessor with the order granting relief, and the lessee fails to comply with those terms within the time stipulated by the court for the purpose.

115. There is no evidence that a prescribed notice under s 133E, or a notice under s 129 of the CAct, had been given, or that the lessor had terminated the lease for repudiation or breach of an essential term, prior to the DOA.

116. Moreover, the period during which the lessee was entitled to exercise the first option for renewal had not expired. Accordingly, there is no evidence before the Court of any impediment to the right of the lessee under the Boiling lease to exercise the options for renewal.

117. The right of entry to the land in Lot 2, by ALF, under the provisions of the lease, can only occur during the lease or option terms, and in accordance with the covenants in the lease.

118. If the market value of the Boiling lease interest is determined in this way, and in accordance with s 56 of the JTC Act, the identities of the lessee and lessor at the DOA are purely hypothetical, and do not involve any consideration of the actual parties to the lease.

119. For that reason the highest and best use of the Boiling leasehold interest may have been constrained to a more or less extensive use than the legally permissible uses allowed to Boiling by its EPL 12594, namely, for “resource recovery and waste storage”, with acceptable waste being limited to:

•   Foundry sands

•   Soils that meet the criteria for general solid waste

•   Garden waste

•   Wood waste

•   Metal waste

•   Glass

•   Plastic

•   Building and demolition waste (maximum 180,000 tonnes per annum)

The maximum amount of waste per annum permitted to be accepted is 240,000 tonnes per annum;

The maximum wood waste for reuse is 2,000 tonnes per annum, as is also shredded wood and garden waste;

Maximum metal is 500 tonnes per annum;

Maximum glass or plastic - 500 tonnes per annum each;

120. Section 56(1) of the JTC Act requires the market value of interests such as Boiling’s leasehold to be determined “disregarding (for the purpose of determining the amount that would have been paid [in the hypothetical transaction]): ... (c) any increase in the value of the [acquired] land caused by its use in a manner or for a purpose contrary to law”.

121. Use of the leased land beyond the limitations of the EPL 12594 would be “contrary to law”, and any consequential contribution to the value of the leasehold interest must be disregarded. This can readily be quantified by deducting any value referable to income from the forbidden use.

122. During final submissions, the Applicant submitted (at Tp2555, LL4-13 and LL21-23):

... We seek no compensation for market value. [As to] The disturbance claim, the Valuer-General gave us $11,000, but in the context of these proceedings we haven't even sought to put on evidence to justify that $11,000 that the Valuer-General was otherwise willing to award us.

There being no market value claim and there being no separate disturbance claim, that was just for some legal and valuation costs that they anticipated we would have incurred. ... if it is $11,000, so be it, subject to a normal order for costs would be the only matter that would be happening in relation to the position of Boiling. ...

123. The parties have agreed upon the amount the Respondent will pay to the Applicants on account of their legal and valuation costs (disturbance items) in respect of the lodging of the claim for compensation.

124. There will also be an order that the Respondent pay to the Applicant the sum of $11,000 as total compensation to the Applicant in proceedings now numbered 2016/00155930 – Boiling Pty Limited v Roads and Maritime Services.

Section 5: Methods of valuation

125. Given that the whole of the land in Lot 1 and Lot 2 was acquired, and that there is no residue land left with the Applicants, the market value should be determined in accordance with the definition of that term in s 56 of the JTC Act.

126. For this purpose the highest and best use of each of Lot 1 and Lot 2 ought to be separately identified, and, in this regard, it is necessary for the land to be valued in the condition it was in on the DOA, with all its potentialities as potentialities: Roads and Traffic Authority of New South Wales v Mosca (“Mosca”) (2006) 146 LGERA 335; [2006] NSWCA 159, at [15]. (See [478] below.)

127. With respect to Lot 1, both parties have approached the valuation task by the method of direct comparison with comparable sales. On this basis the Applicant’s valuer, Mr Dyson, determined the amount to be $5,500,000, and the Respondent’s valuer, Mr Lunney, $3,920,000.

128. With respect to Lot 2, the highest and best use can be either (i) its existing use or (ii) a higher and more valuable use for which the land possesses the potential, and for which it is advantageously adapted: see Sydney Water Corporation v Caruso (“Caruso”) (2009) 170 LGERA 298; [2009] NSWCA 391 at [174].

5.1 History of Valuation Scenarios

129. The Applicants opened their case by reference to the development plan called the Functional Layout Option Plan in Appendix A to the Civil Engineering report of Mr A McLandsborough (CB 52), the staging plan which I earlier identified as “SKC23” ([8]).

130. Further, the parties agreed to employ DCF methodology ([6] above), by which the valuation of Lot 2 is to be calculated by forecasting future revenue, risks and costs, and applying an appropriate discount rate to the cash flow so determined.

131. In this case the identification of the revenue, costs and expenses was also checked against direct comparison of comparable sales for similar businesses and land.

132. The Applicant’s opening address identified the highest and best use of Lot 2, as at the DOA, by reference to SKC23. The area of the whole of Lot 2 is 157,100m².

133. The approach that would be taken by a hypothetical purchaser and vendor of the land, as suggested by the Applicants, was to proceed with development of Lot 2 to confine “waste facilities” to an area of 57,500m² of the site. That development would comprise the following stages:

Stage 1 – immediate development of an area of 27,000m², and construction of an internal road from Albert Street to the area designated “A” in SKC23, with construction to commence on the DOA.

Stage 2 – the construction of the road to occur “within 12 months”, and involve the relocation of the weighbridge to the Canal Road entry/exit.

Stage 3 – the construction of a temporary processing centre, with a lightweight cover, in areas “C” and “D” on SKC23, movement of existing waste operations to areas “C” and “D”, and completion of an/the internal road to Canal Road.

Stage 4 – construction of proposed, more permanent, waste facilities, and removal of the temporary facilities from areas “C” and “D”, so that there would be a “fully operational waste facility on area C” within ten years from the DOA, occupying 28,500m² of Lot 2.

134. The result would be that areas A, B, C, and D would be developed for the purposes of subdivision and staged sale over the period of from one to eight years after the DOA.

135. Following the completion of the expert reports for the Applicant, by Mr McLandsborough and Mr Webster, in November 2016, Mr Webster proposed an “Option 4”, which contemplated the redevelopment of a 5.75ha portion of the acquired Lot 2, following the completion of landfill activities, for a “Resource Recovery and Waste Transfer Facility” (“RRWTF”, sometimes called a/the “resource recovery facility”). This portion of land is identified in SKC23, which shows the remainder of the acquired land as being redeveloped for other “mixed use” (sic), referred to by the engineers as “industrial” purposes. He proposed as “surplus land” an area in the north east portion identified as areas A-D (9.96ha) to be used for industrial development.

34D.   The financial value of such advantages is in addition to the market value of Lot 2.

Methodology

34.   The DCF methodology can be used to quantify the financial value of any advantage, in addition to market value, to which ALF is entitled which is incidental to ALF's use of Lot 2 (including through its agent, DADI).

Special Value of Lot 2

35.   The special value is determined by accounting for adjustments to the DCF methods for market value employed under Scenario 1 and Scenario 2 by:

(a)   eliminating what was otherwise imposed as an internal charge for the transferring of waste to other sites given that ALF could transfer to the Eastern Creek Site without such a charge;

(b)   eliminating what was otherwise imposed as overheads for workshop costs and administrative costs that are not incurred by ALF; and

(c)   accounting for the fact that ALF had all necessary plant and equipment.

36.   The special value for ALF for Lot 2 under Scenario 1 or Scenario 2 Alternative 1 is $60,751,000.

Particulars

36.1   Removal of the notional waste transfer charge is $24,194,000.

36.2   Not deducting for administrative costs is $35,153,000.

36.3   Not needing to purchase plant and equipment is $1,404,000.

37.   The special value for ALF for Lot 2 under Scenario 2 Alternative 2 is $23,451,000.

826. In general terms, there are three components to ALF’s Special Value claim – equipment needed for year 1, various overheads, and profits on waste transfers.

827. In Bronzel v State Planning Authority (1979) 21 SASR 513; (1979) 44 LGRA 34, Wells J, in the Supreme Court of South Australia, said of “Special Value” (at 525, 46), before s 57 was enacted:

... There is no exhaustive definition of what special value is. If it exists, its value must be assessed at what it is worth to the owner at the date of valuation, and not at what it may be worth to him in the future or after due development. It must be something objectively ascertainable derived from the land or some attribute or propery (sic) of it and cannot be recognized if it rests in mere subjective affection or emotional involvement. For the rest, whether it is present and capable of being evaluated depends on all the circumstances of the case.

(Cited with approval by the C of A in Roads and Traffic Authority v Hurstville City Council (2001) 112 LGERA 223; [2001] NSWCA 11, at [46]. See also Mir Bros, at [65].)

828. As the Applicant’s submissions say (par 515):

... The Court’s task is to determine the claim by reference to that statutory definition and not by any gloss to be imposed upon the words of the provision from authorities that predate the [JTC] Act.

829. I gratefully adopt Pepper J’s analysis of the current law on Special Value, in Monti (at [131]-[146]). I will not repeat it in full here, but in what follows, I will emphasize a few of Her Honour’s points and authorities.

830. Her Honour also highlighted (at [126]-[130]) the practice of claimants basically identifying a cost or a loss, and seeking to have it accepted as either special value (i.e. as not being included in market value), or as disturbance, especially in the wake of the decisions in Melino and Moloney, surveyed above.

831. In Boland v Yates, Callinan J said (at [292]-[293]):

292   ... 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. The special quality must be a quality that has an economic significance to the owner. A possible case would be one in which, for example, a blacksmith operates a forge in the vicinity of a racetrack on land zoned for residential purposes as a protected non-conforming use, the right to which might be lost on a transfer of ownership or an interruption of the protected use. Such a property will have a special value for its blacksmith owner, and perhaps another blacksmith who might be able to comply with the relevant requirements to enable him to continue the use but to no one else.

293   The Australian Law Reform Commission report Lands Acquisition and Compensation, with some slight adaptations goes some way towards correctly defining special value as "that additional economic advantage which the owner obtains, by reasons of his ownership … and which is not reflected in the market value". The example which I have given answers this description. ...

832. In Denshire ([21] above), Pain J said (at [86]-[93]), regarding the criteria to be satisfied for a finding of Special Value:

86   Steven Denshire submitted that his claim for special value falls within the definition in s 57 as the benefits to him under the [Put and Call] Option are in addition to market value. It is necessary to construe ss 54(1), 55(b) and 57. Firstly, “to the person” refers to the person entitled to compensation which in this case is Steven, not Warwick, Denshire. Secondly, the “financial value of any advantage” must be to the person entitled to compensation, namely Steven Denshire. Thirdly, that value and that advantage must be in addition to market value. Fourthly, the advantage must be incidental to the person’s use of the land at the date of acquisition.

...

88   The essence of the claim for special value is that Warwick Denshire will act in Steven Denshire’s best interests as his father and attorney and will not let the P&C Option expire. That was submitted to satisfy the requirement in s 57 of any financial advantage.

In addition to market value

89 Fundamental to a successful claim for special value is that the advantage must be additional to market value. Development consent for a residential subdivision was granted in relation to the parent parcel in 2004. The residue land can be subdivided under a modified development consent which the town planners agree is able to be obtained under s 96 of the EPA Act. At the date of acquisition the valuers agreed that use of the land as a rural lifestyle property was a more valuable use than subdivision. Nevertheless, the ability to subdivide land is inherently part of market value.

90   Steven Denshire’s claim does not rely on any attribute of the land. There is nothing “special” about the acquired or residue land. It remains capable of subdivision after acquisition assuming that market conditions are favourable regardless of who is the owner.

91   Boland v Yates a professional negligence claim concerning valuation advice was considering s 124 of the Public Works Act 1912 which did not refer to special value. The special value the subject of the professional negligence claim was recognised as arising at common law. ...

92   In Mir Bros ... the size of the land was rejected as the basis for a special value claim under the [JTC] Act because that was part of its market value. The observations of Spigelman CJ (Handley and Tobias JJA agreeing) in Mir Bros at [84] and [85] are pertinent:

84   …The land was vacant industrial land. The allegedly special position related only to the size of the land. Size is a matter that does affect the market value of the land. Where there is no difference between the value of the land in general, and its value to the owner, there is no special value: Turner v Minister for Public [Instruction] (1956) 95 CLR 245. That principle is now enshrined in the statutory definition of “special value”…

85   In Service Design Pty Limited v Commissioner of Highways (No 2) (1986) 59 LGRA 176 Matheson J held that the potential of land for subdivision is not a matter capable of attracting special value in the hands of the resumed owner, as the potential for subdivisions is one of the inherent characteristics of the land. Similarly, the potential development, or the potential for development of the then holding (which is said to be the special business of the Appellant), is an inherent characteristic of the land. The value created by that potential is included within the market value. The Appellant is not the only developer/investor in the fictional market exchange under s 56(i).

93   Particular reference was made by Handley JA, and the Full Court of the Federal Court, to the case of Baringa Enterprises [Pty Limited] v Manly Municipal Council [(1965) 15 LGRA 201]. That case turned upon its own special facts. By reason of established council policy, the owner of the resumed land in question was the only person who could have expected to be allowed to develop the land to its maximum potential. The highest and best use available to anybody else was of a more restricted nature. Whether or not Hardie J was factually right to conclude that the case was a proper one for allowing special value, that conclusion involved no inconsistency with the assumptions on which market value had been assessed, and there was a reason why it could have been regarded as necessary to assume that any hypothetical purchaser would be able to put the land to a use less profitable than that to which the dispossessed owner might have expected to put it. The case had never been regarded by commentators or judges as a case of head start. It was a case in which there was a difference between the use to which the dispossessed owner might have put the land and the use to which anyone else would have been able to put it. That is the basis upon which the decision has been explained subsequently.

833. Pepper J summarized, in Monti, Pain J’s decision in Denshire, in these terms (at [146]):

... In other words, the financial advantage claimed was not related to any special quality of the land. Put another way, the alleged financial advantage was not incidental to the use of the land as at the date of acquisition. Second, even accepting that the concept of “advantage” contained in s 57 of the [JTC] Act is broad, her Honour nevertheless found that the applicant had no unique capacity to exploit the land given that he possessed no enforceable contractual right at the relevant time. Accordingly, no financial advantage existed (at [100]). Third, the special value claim was “in the nature of an impermissible ‘double dip’ of compensation” insofar as no deduction had been made for the value of the developed residue land (at [105]).

834. Her Honour dismissed the Montis’ claim for special value (at [154]-[160]) for “at least six reasons”.

835. The Applicant in the present case relies heavily on Mr Samuel’s evidence, and is very critical of Dr Ferrier’s approach: DADI already has the equipment needed for year 1 (estimated purchase price $1.4M), and ALF has quantified relevant overheads. The third component (subs par 521) is “the profits that would have been made upon transfer of waste from Lot 2 to Eastern Creek from resource recovery”. The claim is that the use of Lot 2, as part of integrated operations with Eastern Creek, has a “special” economic value to ALF, not covered by market value.

836. The Respondent rejects those three elements of ALF’s claim “out of hand” (subs 1170-1178).

837. The Applicant conceded that the effect in this case of s 57 (especially its express reference to “the person’s use of the land”) is that ALF is entitled to compensation for special value, only if DADI were using the land in Lot 2 as ALF’s agent.

838. This indicated to the Court that ALF accepts that it did not itself “use” the land, and that its claim depends on the use of the land by DADI being attributed to ALF for the purposes of s 57: Applicant subs par 511; Tp2535, LL34-45. On the concept of “actual use”, see discussion by Pain J in GCapital (at [35]-[55]).

839. I have already rejected ALF’s agency claim (see [763] to [771] above).

840. At the DOA, ALF was not itself using the land, and DADI was not using it as ALF’s agent, so ALF cannot establish “any advantage” within the meaning of s 57, nor any element of value, in addition to market value, arising from any special feature of the land, of unique or particular benefit to ALF. None of the “advantages” asserted by ALF are incidental to its “use” of the land, within s 57.

841. The Respondent’s submissions argue that none of the three Special Value claims made by ALF can identify (subs par 1188):

... any special feature of the land, or “something objectively determined from the land or some attribute or property of it” that provides an advantage to ALF in addition to market value. The claim is a speculative and unreasonable assertion of an entitlement to compensation of more than $60 million.

842. The submissions go on to argue, in detail, against each of the three claims, in turn (subs 1189-1203), and I will now summarize those submissions briefly.

843. In respect of plant and equipment, the key submission by RMS (subs par 1192) is that:

ALF cannot claim compensation (as special value of land, or at all) for the value of plant and equipment that DADI or ALF owned and used on Lot 2 and which it continues to own and (presumably) use. It is absurd to suggest that compensation be paid to a person for the value of something they have not lost by virtue of the acquisition (or at all).

844. In respect of overheads (said to be necessary for the hypothetical purchaser to incur), the Respondent submits (pars 1195-1199):

1195.    Again, the respondent submits that the value of saved overheads in the hands of DADI or ALF is not an advantage that is incidental to the use of the land by ALF. It is not an advantage that is “something objectively determined from the land or some attribute or property of it” that provides value to ALF in addition to market value. This claim fundamentally fails to identify any special characteristic of the land, which is a necessary element of the claim. ... [and would] [1196] be better characterised as an assessment of a loss of profit suffered by DADI (i.e. a disturbance cost) rather than an assessment of the special value of land to ALF. ...

1197.    If the Court were to allow this cost as part of the disturbance claim by ALF, it would be an impermissible double recovery (or “double-dip”) [Denshire at [105]] to allow it also to be claimed as compensation for special value.

...

1199.    ... ALF’s claim for compensation in respect of its “overheads” claim ... is a feature of DADI’s business operations, not special value of Lot 2.

845. In respect of the claim for lost profits, the Respondent argues at length that the evidence before the Court (subs 1202):

... provides a clearly inadequate and insufficient basis on which to conclude that owning Lot 2 increased the profitability of DADI’s operations at Eastern Creek – let alone support for the very different proposition that Lot 2 provided a special value to ALF that was in addition to its market value. On the contrary, in 2017 the business operated by DADI was able to generate greater revenue and profit than before the [DOA]. The ownership of Lot 2 is thus demonstrably not critical to the profitable operations of DADI and the applicant. To the extent that the gross profit margin in 2015 and 2016 was somewhat less than 2014, the applicant has not proven that the cause of that lessened profit was connected to the acquisition of Lot 2, as opposed to some other reason like a general downturn in DADI’s business operations.

846. I accept the Respondent’s submissions on the three claims, but, in case they are wrong, I also indicate my clear preference for the very persuasive evidence, and compelling analysis, of Dr Ferrier (see subs 1204-1211), over the work of Mr Samuel.

847. The outcome is, therefore, that I reject the Applicant’s claim(s) for Special Value.

Section 20: Costs

848. In all the material before the Court, the question of the costs of the proceedings was raised only in the suggestion, by the Respondent (par 1742), that costs be reserved.

849. The test to be applied when costs are considered was articulated by the C of A in Dillon v Gosford City Council (2011) 184 LGERA 179; [2011] NSWCA 328, and restated in United CA (at [67] by Basten JA, with whom Preston J agreed (at [167]); see also Sackville AJA, at [122]):

... as a general principle, “a claimant for compensation in respect of a compulsory acquisition should usually be entitled to recover the costs of the proceedings, having acted reasonably in pursuing the proceedings and not having conducted them in a manner which gives rise to unnecessary delay or expense.” Nevertheless, the final outcome remains a relevant consideration, particularly where a claimant has raised a number of issues capable of substantially affecting the compensation awarded, but has failed on all the major points.

850. As I have neither read nor heard any argument on costs – and/or on any question of the reasonableness of the parties’ conduct of the matter – all questions of costs will be reserved, in the hope that the parties can reach agreement.

Section 21: Conclusion

851. Despite some movement in the Respondent’s submissions over the passage of the hearing, they are clearly to be preferred, on the evidence, over those of the Applicants, as I have attempted to explain above.

852. In their supplementary closing submissions, filed on 12 April 2019, counsel for the Respondent correctly relied on United CA as supporting the Respondent’s “hard line” on such of ALF’s claims as were touched by s 59(1)(f), ALF being the holder of only the reversionary interest in the land it leased entirely to Boiling.

853. The Applicant’s submissions to the contrary, filed on 15 April 2019, are rejected.

854. In the Boiling proceedings, there will be an order for payment of $11,000 ([124] above).

855. In ALF’s proceedings there should be orders in its favour for the market value of each of Lot 1 and Lot 2 (see [715] and [681] respectively), and for the legal and valuation fees which the Court was told had been agreed at $424,910.68 (as per replacement page 9 of the Applicant’s closing subs, rather than $426,710.68, as per par 30 of the Respondent’s closing submissions).

856. The figure of $3,920,000 for the market value of Lot 1 is not in doubt ([715]).

857. There are, however, some inconsistencies and/or disparities in some of the “final” figures put before the Court for the market value of Lot 2.

858. The market value of Lot 2 is shown in par 1741 of the Respondent’s closing submissions as $45,762,270, a figure said to have been drawn from the DCF at Appendix A. However, the correct figure is shown as $45,742,467 in par 30 of, and Appendix A to, those submissions, and that figure was repeated in par 27(b) of the FAPOD of 11 April 2019, and accepted by the Court (at [681] above).

859. In deciding on this (slightly lower) figure, which was determined on a DCF basis, I am fortified by the valuation evidence given primarily by Mr Lunney on a direct comparison basis, in Appendix A to the Respondent’s joint report at CB 60, dated 14 November 2017.

Section 22: Determinations and Orders

860. The Determinations and Orders of the Court in the matter of Boiling Pty Limited v Roads and Maritime Services (No 2016/155930) are that the Court:

1. determines total compensation under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 in the total sum of $11,000; and

2. the costs of the proceedings are reserved.

861. The Determinations and Orders of the Court in the matter of Alexandria Landfill Pty Limited v Roads and Maritime Services (No 2016/155678), are that the Court:

1. determines total compensation for market value under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition by the Respondent of Lot 1 DP1010128 being the whole of the land in folio identifier 1/1010128 (Lot 1) in the total sum of $3,920,000.00;

2. determines total compensation for market value under Part 3 Division 4 of the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition by the Respondent of Lot 2 DP1168612 being the whole of the land in folio identifier 2/1168612 (Lot 2) in the total sum of $45,742,270.00;

1. determines compensation for disturbance by way of legal costs and valuation fees under sub-sections 59(1)(a) and (b) of the Land Acquisition (Just Terms Compensation) Act 1991 in the sum of $424,910.68;

2. determines that the Applicant is entitled to no other compensation under the Land Acquisition (Just Terms Compensation) Act 1991 for the acquisition of the land in Lot 1 and Lot 2;

3. Orders the Respondent to pay the compensation determined in Orders [1], [2] and [3] of this paragraph, being a total sum of $50,087,180.68, less any advance payment of compensation made by the Respondent to the Applicant prior to the date of these orders;

4. The costs of these proceedings are reserved; and

5. The exhibits and all USB sticks submitted by the parties may be returned.

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Decision last updated: 18 July 2019