Collex Pty Ltd v RTA

[2005] NSWLEC 601

Land and Environment Court

of New South Wales

CITATION:

Collex Pty Ltd v RTA [2005] NSWLEC 601

PARTIES:

APPLICANT
Collex Pty Limited

RESPONDENT
Roads and Traffic Authority of New South Wales

FILE NUMBER(S):

31175 of 2004

CORAM:

Talbot ACJ

KEY ISSUES:

Compulsory Acquisition of Land :- whether effect of deed requiring owner to enter into same agreement with purchaser to develop land in particular way to be taken into account.

LEGISLATION CITED:

Land Acquisition (Just Terms Compensation) Act 1991

CASES CITED:

Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich [2005] NSWCA 350

DATES OF HEARING:

14/10/05

 
DATE OF JUDGMENT: 

10/21/2005

LEGAL REPRESENTATIVES:

APPLICANT
Mr J Webster SC
SOLICITORS
Collex Pty Ltd General Counsel

RESPONDENT
Mr R Lancaster
SOLICITORS
Corrs Chambers Westgarth

JUDGMENT:

THE LAND AND
ENVIRONMENT COURT
OF NEW SOUTH WALES

Talbot ACJ

21 October 2005

31175 of 2004 Collex Pty Limited v Roads and Traffic Authority of New South Wales

JUDGMENT

1 Talbot ACJ: The Applicant Collex Pty Limited was previously the owner of an area of 35.22 ha Lot no 1 DP1052225 having a frontage to Wallgrove Rd at Eastern Creek. On 28 May 2004 the Respondent acquired 4.512 ha being Lot 9 DP 1059698 out of the said Lot 1 for the purposes of the construction of the Western Sydney Orbital Road. The residue of Lot 1 is now Lot 8 in DP 1059698 comprising 30.708 ha. Collex has lodged with the Court an objection to the amount of compensation offered by the Respondent pursuant to section 66 of the Land Acquisition (Just Terms Compensation) Act 1991 (“the Just Terms Act”)

2 On 2 July 2001 Collex and Austral Brick Company Pty Ltd executed a Deed of License and Operations whereby the parties agreed to the licensing and development of Lot 1 as a landfill on the terms set out in the Deed. Austral as the owner of the land at the date of the Deed agreed to sell the land to Collex on terms whereby Collex paid Austral the sum of $3.6 million when Collex obtained all licenses reasonably necessary or advisable for the development and operation of a solid waste landfill on the land and a further sum of $1.15 million on the defined commencement date. Under clause 4.1 of the Deed Collex was required to lodge and prosecute applications for the licenses with all reasonable diligence and at its own cost and Austral was obliged to sign all documents and do all things reasonably necessary or advisable in relation to the preparation, lodgement and prosecution of the applications for the licenses. The Deed recites and imposes obligations on both partiers in regard to the creation of airspace within the land and the construction of landfill cells, haul roads and facilities for landfill operations within the land. There are a number of provisions imposing mutual obligations on the parties.

3 Relevantly in clause 8.1 Austral agrees to use all reasonable endeavours to provide not less than 250,000 cubic metres of airspace for landfilling per calendar year from such part of the land as the parties may agree having regard to an overall obligation under clause 8.4 to provide up to a maximum of 6.8 million cubic metres of airspace for landfilling over the life of the landfill in accordance with a diagram and works plan annexed to the Deed. In considerations for the obligations of and undertakings by Austral to quarry out and create airspace for landfilling Collex is required pursuant to clause 7 of the Deed to pay certain amounts each month subject to a minimum payment of $1 million in any calendar year with an entitlement to carry forward an eligible credit if the annual target of airspace is not achieved.

4 Similarly, if Austral is unable to reasonably provide the airspace required pursuant to clause 8.4 it is required to reimburse to Collex from the purchase price paid for the land sale agreement a calculated amount that is pro rata the number of metres of airspace not able to be provided. There are a number of specifications provided in relation to the dimensions of the airspace and configuration of the entire area to be quarried.

5 Clause 8.2 provides that if Austral cannot provide an area of not less than 250,000 cubic metres of airspace per calendar year it may provide an equivalent amount of reasonably adjacent airspace for landfilling at its other quarries or in default the requirement for Collex to pay the minimum payment pursuant to clause 7 will be reduced in the same proportion which the amount of unavailable airspace bears to 250,000 cubic metres.

6 It is apparent therefore that there is one regime in place that deals with the annual target in respect of which $1 million must be paid subject to adjustment and a second regime which allows for a reduction in the amount of the purchase price paid for the land in the event that the total amount of airspace is not provided over the life of the agreement.

7 Argument has developed between the Applicant and the Respondent in relation to the relevance of the provisions of the Deed for the purpose of the assessment of compensation payable to Collex following the compulsory acquisition of Lot 9.

8 The Respondent raised, as a preliminary issue, whether in circumstances where Austral was obliged to provide alternative airspace at other sites under the Deed there is no loss that accrues to Collex as a consequence of the acquisition. That is because Collex can under the terms of the Deed seek reimbursement directly from Austral for the airspace not able to be provided under clause 8.5 of the Deed rather than through a claim against the RTA. This construction of the effect of the Deed is, according to Mr Lancaster who appears for the Respondent, consistent with the position taken in correspondence between Collex and Austral.

9 On the other hand the Applicant’s counsel, Mr Webster SC, has argued that the Deed has no application in the context of a resumption. In the course of argument he drew a distinction between the effects of clause 8.2 and 8.3 of the Deed which provide for an annual adjustment of the minimum annual payment in the event of a shortfall in the provision of airspace whereas clauses 8.4 and 8.5 represent an adjustment of the purchase price paid by Collex in the event that the expected amount of airspace is not provided over the term of the agreement. It is the Applicant’s argument that there is no obligation upon Austral to provide alternative airspace but in the event that it is not made available the abovementioned financial adjustments are to be made under the terms of the Deed.

10 The operation of the Deed has no consequences for the determination of the market value in accordance with the provisions of section 56 (1) (a) of the Just Terms Act. The effect of that provision, according to the Applicant, which dictates that the resumption for the public purpose must be ignored, is that the Court is precluded from making reference to the effect of Clause 8.5 in the circumstances of compulsory acquisition for a public purpose. Nevertheless Mr Lancaster maintains the position that the Deed in its own terms provides for the compensable amount to be provided by Austral and accordingly it is the terms of the Deed itself that denies the claim. It is the obligation of Austral to provide the deficiency of airspace physically or to afford financial compensation to Collex and therefore there can be no loss by Collex as a consequence of the acquisition.

11 A further point made by Mr Lancaster during argument was that the Applicant’s position appears to be that it is to be assumed that Collex’s loss is represented by the actual loss of potential airspace. This argument ignores the fact that the airspace to be provided by Austral for Collex comes only at a cost to Collex in obtaining approvals and operating expenses. It is the whole of the terms of the Deed that need to be taken into account. Ultimately Mr Webster appeared to agree with this proposition.

12 The following questions were posed for separate determination as preliminary issues on the basis that until the identified issues were resolved, the experts, particularly valuers, could not approach their task as they could not be properly informed as to the effect of the Deed.

13 The questions are as follows:-

1. Is the Deed of Licence and Operation between Collex and Austral Brick Company Pty Limited dated 2 July 2001 (“The Agreement”) to be taken into account in the determination of compensation to the Applicant?

2. Is clause 8.5 of the Agreement to be taken into account in determination of compensation to the Applicant?

3. In the circumstances of and surrounding the acquisition, is Collex entitled to the benefit of clause 8.5 of the Agreement in respect of the acquired land, namely reimbursement of $7.2/6.8 multiplied by the number of metres of Airspace for Landfilling not able to be provided by Austral?

4. Does the assessment of market value of the acquired land include the calculation of the value of:

(a) The “right to fill an excavated area of approximately 1,02,603 m3” referred to in paragraph 10 of the Points of Claim; and/or

(b) The “volume of airspace lost for the purposes of landfill as a result of the Respondent’s acquisition of 1,020,603 m3 referred to in paragraph 22 of the Points of Claim?

14 As the argument developed it became apparent that the abovementioned questions were not necessarily relevant to the issues the Court must decide. Rather than the actual legal effect of the Deed it is a question of how the respective theoretical vendor and purchaser properly advised would have regard to the terms of the Deed in the determination of an agreed purchase price for the subject land in the event of an assumed sale at the date of resumption (see Minister Administering the Environmental Planning and Assessment Act 1979 v Bautovich [2005] NSWCA 350). Following further discussion it became apparent that the parties needed to give further consideration to the form of a relevant question or questions and they were directed to bring in a reformulated statement of the preliminary issue or issues to be resolved.

15 It is the obligation of the Court to focus attention on the advice the hypothetical purchaser would have received on the relevant date and its effect on the price he would be prepared to pay. The Court is not obliged to determine whether a particular construction is the right one but instead it is a question of how the hypothetical purchaser and vendor would have acted upon the advice they received. The Court is bound to determine the market value in accordance with the definition of that expression in s 56 (1) as being the amount that would have been paid for the land if it had been sold at the time of acquisition by a willing but not anxious seller to a willing but not anxious buyer (Bautovich at 47).

16 In Bautovich Tobias JA reflected upon the application of an agreement made by experts, in that case the valuers, under the Expert Witness Practice Direction and made the following observation at [53]:

Obviously, the EWPD is a highly useful document and agreement between experts is to be encouraged. However, it must be constantly kept in mind that the ultimate question- in this case the determination of the market value of the resumed land- is always a matter for the Court and not a matter to be conditionally agreed by the experts where otherwise a dispute as to the market value of the land remains for resolution. This does not mean that the experts cannot agree various issues which would otherwise be required to be resolved as part of the process of the Court determining the ultimate issue, namely, the amount of compensation to be paid for the resumed land and, in particular, the market value thereof. But it does mean that the Court is bound by the valuers’ agreement where it otherwise determines on the evidence advanced by the parties that that agreement and any conditional terms thereof, is or are at odds with what the Court finds to be the proper approach by the hypothetical purchaser as to what he or she will pay as reflecting the market value of the resumed land as defined in accordance with s 56(1) of the Just Terms Act.

17 The specific directions made on 14 October 2005 were:-

1. The valuers meet and provide a joint report to the Court in relation to directions or assistance they require to comply with joint conferencing and reporting directions by 4pm Thursday 20 October 2005.

2. The Applicant and Respondent provide an amended question by way of a preliminary issue framed in terms of what the theoretical purchaser and vendor would have taken into account by 4pm Tuesday 18 October 2005.

18 Although the RTA does not resile from submissions already made that some of the questions may be appropriate for further evidence about the inquiries that a prudent purchaser might have made before purchasing the land and the outcome of those enquiries the parties have reformulated the proposed questions for preliminary determination in the following agreed form:-

1. In a hypothetical sale of the subject land (Lot 9), would the prudent purchaser and vendor have taken into account all of the provisions of the Deed of Licence and Operation between Collex Pty Ltd and Austral Brick Company Pty Ltd dated 2 July 2001 (the Deed)?

2. Would a prudent hypothetical purchaser have obtained a legal opinion on the operation of the Deed so far as it affects Lot 9?

3. Would the prudent hypothetical purchaser and vendor have been advised that Lot 9 had the potential, at the date of acquisition, for the use of that land for the filling of waste after excavation by Austral Brick Company pursuant to the Deed?

4. Would the prudent hypothetical purchaser and vendor have been advised that the proper interpretation of the Deed that had been entered into between Collex and Austral requires the following conclusions:

(a) that any sale of Lot 9 was to be in accordance with the terms of the Deed;

(b) that the purchaser would be required to agree to be bound by the terms of the Deed with Austral;

(c) that clause 8 of the Deed was applicable to the continued operation of the extraction and filling of Lot 9 and of land retained in the ownership of Collex;

(d) that Austral was not required by Clause 8 to replace any land, or airspace, acquired by a public authority at its (Austral’s) expense (or otherwise compensate the owner of Lot 9) either by Clause 8 of the Deed or otherwise; and

(e) that the owner of Lot 9 was bound by the obligations in relation to any future disposal of Lot 9 in accordance with Clause 14.1, 14.2 and other applicable provisions of Clause 14 of the Deed?

19 The reformulation calls to attention the following additional provisions in the Deed:-

14. Disposal of The Land
14.1. Collex may not dispose of the Land except pursuant to clause 14.3:


14.1.1. for a period of five years from the Commencement Date;

14.1.2. at any time to a person whom Austral acting reasonably considers to be a competitor in the clay products market;

14.1.3. to any person who cannot demonstrate to Austral’s reasonable satisfaction that it:


14.1.3.1. has the financial resources to fully discharge Collex’s obligations under this Deed; or

14.1.3.2. is willing and able to procure a reasonably acceptable third party or bank guarantee in respect of those obligations; and

14.1.4. unless Collex first procures a binding agreement from the relevant disponee to be bound by the terms of this Deed, provided that this clause 14.1.4 shall not apply once Collex has paid the Total Minimum Payments.


14.2. Subject to clause 14.5 and 14.6, if Collex Disposes of the Land then Collex must within 7 days of settlement of the Disposal, pay to Austral 66% of the Net Sale Proceeds (which amount shall be increased in accordance with clause 32 to allow for any GST payable by Austral) and provide Austral a written statement setting out the manner in which the same is calculated and any other information which Austral reasonably requires to evidence the terms of the Disposal.

14.3. Collex undertakes to act with reasonable diligence to Dispose of the whole of the Land following filling of the voids on the Land and rehabilitation in accordance with the Approvals of the LEMP.

14.4. Austral must prepare and deliver a tax invoice to Collex in relation to its share of the Net Sale Proceeds, which tax invoice must be issued to Collex no later than 7 days after Austral receives its share of the Net Sale Proceeds in accordance with this clause.

14.5. Subject to the conditions set out in clause 14.1.3 and 14.1.4, Collex shall have the right to dispose of its interest in the Land, without obligation to make payment under clause 14.2, to a reasonably financial third party who takes over the Landfill Operations and the obligations of Collex under this Deed.

14.6. Notwithstanding clause 14.1, Collex may take on a business partner in respect of the Land, without obligation to make payment under this clause, provided that:


14.6.1. before taking on such a partner, Collex provides Austral details about the identity of the proposed partner, the nature of the relationship between Collex and that party and reasonable evidence that Collex will at all times remain the dominant equity (where applicable) and financial partner in the relationship;

14.6.2. the proposed partner is not a person whom Austral acting reasonably considers to be a competitor in the clay products market;

14.6.3. Collex in fact remains the dominant equity (where applicable) and financial partner at all times; and

14.6.4. Collex first procures a binding agreement from the relevant proposed partner to be bound by the terms of this Deed as if it or he was Collex.

14.7. Collex must make available to Austral on request, all documentation reasonably requested by Austral to enable it to establish to its reasonable satisfaction the amount of Net Sale Proceeds and other consideration received by Collex and associated with a Disposal or assignment referred to in this clause 14.

20 Based upon the evidence as it stands and the submissions made to date I answer the questions posed as follows:-

Question 1: Yes

Question 2: Yes

Question 3: The prudent hypothetical purchaser and vendor would have been advised that under the terms of the Deed strictly applied (without any consideration to the physical constraints or consequences about which separate advice would be required by persons having appropriate expertise in that regard) Lot 9 had the potential for use for filling of waste.

Question 4 (a) and (b): Yes, subject in particular to the effect of clause 14 according to the circumstances at the date of sale. Pursuant to the definition of “disposed of” in the Deed a sale includes the whole or any part of the land.

Question 4 (c): Yes.

Question 4 (d): Austral was not required by clause 8 to replace any land or airspace acquired by a public authority but was subject to the effect of clauses 8.2, 8.3, 8.4 and 8.5.

Question 4 (e): Yes.

Directions

21 I confirm the further directions made this morning as follows:-

1. Time for compliance with Order 1 dated 14 October 2005 is extended to 24 October 2005.

2. Time for compliance with Order 6 made 20 September 2005 is extended to 4pm 25 October 2005 and time for filing joint report extended to 4pm 27 October 2005.

3. The matter is listed 9am 26 October 2005 for mention. Valuers to be in attendance.